Sunday, November 6, 2011

Diamonds aren't forever for Oppenheimers

South Africa’s Oppenheimer dynasty has ended a century in the diamond business which shaped the region, selling its 40 per cent of De Beers to global miner Anglo American for $US5.1 billion ($4.9 billion) on Friday.

The historic deal will end the involvement of the Oppenheimer family in De Beers, and will take Anglo American’s stake to up to 85 per cent.

The government of Botswana owns the remaining 15 per cent of De Beers and has an option to lift this to 25 per cent.

‘‘This transaction is a unique opportunity for Anglo American to consolidate control of the world’s leading diamond company - De Beers,’’ chief executive Cynthia Carroll said. ‘‘Today’s announcement marks our commitment to an industry with highly attractive long term supply and demand fundamentals.’’

Nicky Oppenheimer, representing the Oppenheimer interests, said that the agreement had been ‘‘difficult’’ for the family to reach.

‘‘This has been a momentous and difficult decision as my family has been in the diamond industry for more than 100 years and part of De Beers for over 80 years,’’ Nicky Oppenheimer said in the statement. ‘‘After careful and deliberate consideration of the offer, and what is in the best interests of the family, we unanimously agreed to accept Anglo American’s offer.

Nicky Oppenheimer heads South Africa’s richest family, whose $US7-billion fortune makes him the 136th richest person in the world, according to Forbes magazine.

De Beers is a global leader in the exploration, mining and marketing of diamonds. Cecil Rhodes, the colonial-era politician and mining tycoon, founded De Beers in 1888. His fortune financed his imperial adventures for Britain, founding the state of Rhodesia which later became modern Zambia and Zimbabwe.

In the early 1900s, Ernest Oppenheimer began buying up mining interests in neighbouring Namibia (then still South West Africa), with American backing.

In 1917 he formed the Anglo American Corporation and by 1920 his Consolidated Diamond Mines had become a force in the mining industry.

By the end of that decade, he had taken control of De Beers Consolidated Mines, and his control of the diamond industry had begun.

His shrewdest move was to establish a central selling organisation that would stabilise sales and keep prices at a premium - a system which exists to this day and which has allowed De Beers to maintain its tight grip on the precious gem business.

Ernest’s successor Harry Oppenheimer became a prominent opponent of South African apartheid, before handing the reins to Nicky.Carroll said: ‘‘Anglo American is the natural home for our stake as they have been major shareholders in De Beers since 1926 and have a deep knowledge of the diamond business.

She noted that De Beers’ management had steered the group through the global financial crisis, adding it was in a ‘‘stable position’’ and was ‘‘well placed’’ for future growth.

Officially headquartered in Luxembourg, the firm, the world’s biggest diamond company, is run from London and Johannesburg. The company still has a major mining operation at Kimberley, South Africa, where the first discoveries were made more than a century ago.

Last year the company had profits of $546 million on sales of $5.9 billion dollars in 2010.

In September, De Beers signed a 10-year deal with Botswana - the world’s biggest diamond producer - that will move the company’s rough stone sorting and trading division from London to Gaborone.

The agreement is the longest sales contract ever agreed between the two partners, giving a security of supply that Carroll cited as a key element behind the deal.

1 comment:

  1. De Beers is in safe hands, say Surat diamantaires

    Diamantaires here are surprised that the Oppenheimer family has sold its stake in De Beers, the world's largest diamond mining company, but they don't feel that there is anything to fear as new owner Anglo American Plc is an equally competent player in the diamond business.

    The Oppenheimers ended the family's 80-year ownership by selling 40 per cent of their stake, worth $ 5.1 billion, to London-based Anglo American.

    "We are surprised, but at the same time pleased that De Beers is in safe hands. Anglo American Plc is one of the largest mining companies and leader in platinum and diamond headquartered in UK. They will continue the diamond legacy for the coming decades," chairman of Gems and Jewellery Export Promotion Council (GJEPC) Rajiv Jain said.

    Asked whether there will be any immediate effects on the Indian diamond industry, Jain said, "India is the ultimate consumer of rough diamonds and Anglo American has to sell its product. There may be some changes in the diamond supply business, but it will not affect us." Analysts say that with China, India and the Gulf expected to equal the biggest present diamond consumer - the US, with a 40 per cent global share - by 2015, it is quite clear where Anglo American's attentions will lie.

    De Beers was established in 1888 in South Africa. The Oppenheimers have been involved at De Beers since 1927, when Ernst Oppenheimer, who founded Anglo American a decade earlier, wrested control of the group. Its corporate slogan, 'a diamond is forever', was created in 1947 and is considered the greatest advertising line of 20th century.

    Anglo American has a deep knowledge and understanding of De Beers and an appreciation for the unique nature of diamonds, having been the company's largest shareholder since De Beers became a private company in 2001 and as a longstanding shareholder in De Beers prior to that.

    Vice-chairman of GJEPC Sanjay Kothari said, "We hope that the present system of diamond distribution is not changed. Anglo American is well positioned to enhance the value of De Beers through its expertise and scale in such areas as technical, supply chain and financial management functions as part of a simplified and more integrated ownership structure."

    Chairman Ashit Mehta of Blue Star Group, a Diamond Trading Compay (DTC) sightholder, said, "DTC is the rough diamond marketing arm of De Beers. Anglo is equally competent in the diamond exploration and marketing business. DTC sigholders need not have to worry as we are in safe hands."


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