De Beers IPO moves closer for Anglo American as Botswana eyes bigger stake

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Anglo American’s spinout of De Beers has moved a step closer after Botswana said it may raise its stake in the world’s most valuable diamond producer.

The London-listed miner plans to float or sell De Beers as part of a reorganisation it launched last year in defence against Australian rival BHP’s failed £39bn takeover bid.

Anglo has an 85 per cent stake in De Beers, which analysts estimate is worth about $2.5bn. Botswana, which inked a 30-year sales and licensing deal with the diamonds company this week, owns the remaining 15 per cent.

Al Cook, the chief executive of De Beers, told the Financial Times the Botswana government “has expressed an interest to increase its stake” in the group.

“There will now be an intense period of engagement to make sure separation doesn’t just work for Anglo American, but also works for the future of the government of Botswana,” he said.

Bogolo Kenewendo, Botswana’s minister of mines, said it was “absolutely” the right time for the government to discuss raising its stake, given Anglo’s move to offload parts of its business.

Anglo has said it would consider an outright sale of De Beers, but no buyers have emerged © Monirul Bhuiyan/AFP via Getty Images

Anglo also plans to separate its coal, nickel and platinum units, leaving the group focused on copper and iron ore. After the separation it will earn about 60 per cent of its revenue from copper.

The Botswana government’s 30-year deal with De Beers ended a six-year stalemate that will ease the way for the diamond unit to be spun out.

Anglo chief executive Duncan Wanblad this week said his company’s unbundling of its unwanted assets would be “substantively complete” by the end of the year.

But he added that separating De Beers had proven more complicated because of the slump in diamond prices driven by the surge in lab-grown stones and poor demand from China, which has hit revenues.

“It is not impossible that we’ll still have De Beers early next year, just in terms of when we’re expecting markets to recover,” he said.

Anglo’s announcement on Thursday that it was “likely” to write down the value of De Beers, which is valued at $7.6bn in its accounts, raised questions about what price it can secure if it moves to sell down its stake.

The company, which wrote down the value of De Beers by $1.6bn last year, is due to publish its annual results later this month.

As well as preparing for an initial public offering, Anglo has said it would consider an outright sale of De Beers, although no buyers have emerged.

Kenewendo said it remained a “possibility” that the Botswana government could take a majority stake in De Beers.

“We care about the sustainability of the business, so we want to make sure that whatever decision is made on De Beers, we are part and parcel of it,” she said.

The centrepiece of this week’s agreement between De Beers and Botswana is a new development fund in the country, which will operate like a sovereign wealth fund and receive $75mn in initial capital from the diamonds group.

The fund will also receive a portion of the revenues of Debswana, a 50:50 joint venture between the government and De Beers that owns the country’s diamond mines.

Cook said: “The idea will be to invest in businesses, initiatives, education and energy beyond diamonds that grows the economy of Botswana and grows thousands of jobs.”

Analysts say streamlining De Beers’ ownership structure would make it more attractive for an IPO.

“If Botswana owns a larger stake in the whole of De Beers, it would help bring greater transparency, it tidies up the structure,” said Ben Davis, analyst at RBC.

One option would be to convert Botswana’s stake in Debswana into a stake in the De Beers parent company, Davis added.

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