Monday, July 9, 2012

Anglo gets nod for De Beers deal

Purchase of Oppenheimer family’s 40% stake in De Beers nearer with Department of Mineral Resources approval, but peer BHP Billiton selling diamond assets

Anglo American’s $5,1bn purchase of the Oppenheimer family’s 40% stake in De Beers drew nearer on Friday after the Department of Mineral Resources approved the sale.

Anglo, unlike its peers, Rio Tinto and BHP Billiton , has opted to grow aggressively in diamonds whereas the other two companies are seeking buyers for their diamond assets.

The transaction is expected to close before the end of the year and the Botswana government, which holds a 15% stake in De Beers has the option to lift its holding to 25%, buying part of the Oppenheimer stake.

The Botswana government has not yet indicated whether it will do so. If it does, Anglo will pay proportionately less and will hold 75% of the world’s largest producer of rough diamonds by value.

Botswana is the largest contributor to De Beers’ production. De Beers has two major capital projects. The first is an expansion of Jwaneng mine in Botswana, enlarging the opencast mine.

The second, which has yet to be approved, is developing an underground mine at the Venetia mine in SA, which could cost R15bn.

RBC Capital Markets has forecast a difficult period for diamond producers for at least the rest of this year, with soft prices for rough diamonds being the main feature. De Beers CEO Philippe Mellier has said the longer-term outlook for diamonds is strong, with production falling as mines stopped production during the global financial crisis and strong demand from China and India for diamond jewellery.

The department has consented to Anglo buying the De Beers stake, which was a key condition for the transaction to proceed, Anglo said on Friday.

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