The sale of De Beers is the diamond industry's largest ever, but has become more difficult with the news that De Beers has an inventory of unsold gems worth $2 billion.
London-listed Anglo American holds an 85% stake in De Beers, one of the businesses being sold to fend off a takeover attempt by arch-rival BHP.
Diamonds are getting harder and harder to sell. (STR/AFP via Getty Images)
Anglo American has sold coal mines and is preparing to sell nickel and platinum assets.
But the crown jewel of the stable of assets Anglo American has amassed over the past 120 years is De Beers, which rose to dominate the diamond industry but has since lost much of its pricing power.
The latest problem facing De Beers is that the creation of near-perfect lab-grown gemstones has led to lower prices for the natural (mined) gemstones that dominate De Beers’ products, compounded by a drop in overall jewelry demand due to the coronavirus pandemic.
Now comes news about the stockpiles, which have not been previously reported but were mentioned in a report published yesterday by London's Financial Times.
There are too many diamonds. D'Agostini via Getty Images)
According to the Financial Times, the inventory accumulated by De Beers is the largest since the 2008 financial crisis, when demand for diamonds dried up and De Beers stepped in as a buyer of last resort to clear excess material from the market with the aim of supporting price.
De Beers, which has long viewed itself as the guardian of the diamond industry, has made similar moves in the past.
But with the entry of new miners such as Rio Tinto, and the huge advancements in synthetic gemstones, the era when De Beers was able to dominate diamond mining, processing and marketing has passed, and even skilled jewelers have difficulty distinguishing synthetic gemstones from natural gemstones. differentiate.
Slowing demand for diamonds in China, where excessive consumption runs counter to government policy, has exacerbated the industry's overall problems.
De Beers CEO Al Cook speaks at the opening day of Invest in African Mining … [+]
The Financial Times quoted De Beers CEO Al Cook as saying: “This has been a bad year for rough diamond sales.”
Tough trading conditions and a build-up of inventory will also become problems for Anglo American as it attempts to price De Beers either for an outright sale or a spin-off into a separate stock exchange-listed company.
De Beers' total diamond sales fell to $2.2 billion in the first half of this year from $2.8 billion in the first six months of 2023.
Anglo American chief executive Duncan Wanblad admitted that soft conditions in the diamond market would complicate De Beers' sake production process.
more stores
But it is understood that the sale of De Beers will go ahead in some way, as will a plan to expand the retail side of the business by opening more stores, with the goal of growing from the current 40 De Beers stores. 100 worldwide.
Cook told the Financial Times that as De Beers becomes an independent business it will focus on marketing as it has traditionally focused on mining.
“In my opinion, this is the perfect time to drive marketing and support our brand and retail, even as we cut back on capital expenditures on the mining side,” Cook said.
