Anglo’s diamond migraine

Stubbornly low diamond prices have made the sale of De Beers “complex”, said Duncan Wanblad, CEO of Anglo American, its 85% shareholder.

“It’s complex mainly because of the state of the markets at this particular point in time and the very specialist nature of the business,” he said in an interview on Monday.

Anglo announced in a production update last week that it may impair its stake in De Beers as diamond prices continue to languish. If it does, it will be the third time in the past three years. De Beers is currently valued on Anglo’s books at $4.8bn.

Despite the decline in De Beers’ value, Wanblad said that no entity identified in its second phase auction process, now under way, is large enough to buy the company outright.

But Botswana would be a key future owner owing to its existing 15% stake and as its mines underpin De Beers’ value, he said. “Ultimately, we will come up with the right structure and the right ownership,” Wanblad added.

The sale of De Beers is part of a restructuring unveiled by Wanblad in May 2024. At the time, he said he expected the process would take 18 to 24 months to complete. In addition to De Beers, Anglo is yet to finalise the disposal of its metallurgical coal assets in Australia.

Last year it successfully completed the demerger of its majority stake in its platinum unit, Anglo Platinum. The sale of its nickel assets is currently going through regulatory approval.

Teck deal

Wanblad also said that “material” operational synergies with Teck Resources was the main reason the companies were able to conclude a merger. “You’ve got to have a financial rationale for doing the deal. In our case, there were some material physical synergies that we were able to liberate,” he said.

On February 5, Glencore and Rio Tinto called off talks to potentially combine the companies amid speculation the parties couldn’t agree on valuation and management control. It is one of several failed mega M&A attempts in the past three years that has seen Glencore bid for Teck and BHP bid twice for Anglo.

“Big mergers and acquisitions is tough to do. In any M&A deal, I think the value of the deal is paramount,” said Wanblad.

On December 16, Canada approved the $60bn merger of Teck with Anglo to create the world’s fifth-largest producer of copper with output of 1.4-million tons a year by 2030 and a further 25% in short-term growth potential.

“There were some very, very good marketing synergies, given the breadth of the portfolio that we have,” said Wanblad. “And then there were the usual SG&A-type [selling, general and administrative] and procurement-type synergies. They totted up to a pretty material number from a valuation point of view.

“But none of that could have happened if there wasn’t a like-minded culture in terms of the way you think about mining, how you think about doing things, and a very pragmatic approach to getting things done,” he said.

Said Citi in a recent report: “We upgrade Anglo American to Buy with a £45 target price, reflecting a potential 30% upside. The proposed merger with Teck to form AngloTeck is transformative, creating a top-tier copper producer with an 80% copper earnings exposure.”

Other analysts expect Anglo to rerate on the merger.

David McKay, a veteran mining journalist, is the editor of Miningmx.

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_{Top image: Anglo American CEO Duncan Wanblad. Picture: supplied; Rawpixel/Currency collage.}