Botswana in talks to raise stake in De Beers

Botswana confirmed on Monday market rumours that it plans to increase its shareholding in De Beers, as parent company Anglo American (LSE: AAL) prepares to spin off or sell the diamond producer, Bloomberg has reported. 

Botswana currently holds a 15% stake in De Beers, the world’s largest diamond miner by value. 

President Mokgweetsi Masisi told Bloomberg the government would increase its interest. He also said the government will play a central role in selecting a new investor to replace Anglo at De Beers. The focus will be on finding an investor who understands the cyclical nature of the diamond industry, he noted.

Botswana accounts for 70% of the company’s annual rough diamond supply.

Anglo American announced last month its intention to either sell or spin off its 85% stake in De Beers to fend off an unsolicited takeover bid from BHP (ASX: BHP). Anglo acquired the diamond giant in 2011, buying the Oppenheimer family’s 40% stake for US$5.1 billion.

De Beers is key to Botswana’s economy. In January, the company committed to spend US$1 billion to increase the life of its flagship Jwaneng mine by moving operations underground. Extending the productive life of Jwaneng, the world’s richest mine in term of diamonds value, has been in the cards since 2010. 

Debswana, the local company jointly owned by the government and De Beers, makes up a fifth of the country’s GDP.  It is also critical to De Beers as it contributes nearly half the carats the company produces each year. 

Ditching lab-made stones

In preparation for the split from Anglo, the diamond giant — which coined the slogan “Diamonds are Forever”— is also ditching man-made stones. This means it would end a six-year experiment to sell lab-grown diamond jewellery through its own brand, Lightbox, created in 2018.

While the miner is not halting the sale of its Lightbox stones right away, it will begin thinking of what to do with the unit once it depletes current inventory, which will take about a year.

De Beers is targeting annual core profits of US$1.5 billion by 2028. Last year, the business made just US$72 million, though traditionally its profits have ranged between US$500 million and US$1.5 billion as the diamond industry swings from boom to bust.

The diamond miner seems ready to fly alone as it did for 124 of its 136 years of existence. Anglo American acquired a majority stake in De Beers only 13 years ago. The government of Botswana holds the remaining shares.