[miningmx.com] — DIAMOND miner De Beers is prepared for its new
chapter under the management of Anglo American, but will be treated “differently’
than any of the diversified miner’s other commodity divisions, according to CEO
Philippe Mellier.
Speaking at the Gordon Institute of Business Science on Tuesday, Mellier said it
would be business as usual for the diamond miner once Anglo American’s $5.1bn
take-out of the Oppenheimer family’s 40% stake in the company has been finalised; a
transaction that would also bring the firm under the management control of Anglo.
The changeover is expected to be completed in the third quarter.
“It’s an issue we’ve discussed a lot internally,’ Mellier said. “Anglo American has been
clear from the very beginning that we are not a commodity and cannot be treated or
managed like an iron ore division, or copper division, or platinum division.
“We are diamonds. We are in the luxury business.’
He said the company’s board structure would remain in place to accommodate the
government of Botswana’s 15% shareholding in De Beers. Botswana has an option to
increase this stake to 25% once the Oppenheimer deal closes.
“Obviously we’ll share some support functions with Anglo that will lower our costs,
which is good,’ said Mellier.
“We’re going to tap on their mining expertise, and their exploration expertise,
because they’re very strong and much bigger than us in mining.
“But for the rest of the business – luxury [sales], polished diamonds, marketing,
distribution of rough diamonds – we are totally different.’
Mellier said De Beers has been working with Anglo’s management for the past six
months and described the relationship as “excellent’.
“The first thing we hear when we meet is we’re not a commodity; we are different.
“We need to do well, for sure. But Anglo will take good care of us. And they have a
very deep pocket, which is also good.’
HOST COUNTRY PRESSURE
Mellier said De Beers has identified six growing challenges for which it would need
solutions in future, of which the first one was the increase in pressure from producing
countries to retain as much as possible of the value-adding processes for themselves.
“One of these aspects is the move of the Diamond Trading Company to Botswana,’ he
said. “But we also see it in South Africa, for example, where we have much more
pressure from the government to polish a bigger percentage of rough diamonds inside
the country.’
He said the scarcity of significant new diamond deposits would also force miners to
go deeper at existing mines and mine smaller deposits, adding to the cost pressures
of mining diamonds.
Another challenge was the changing dynamics of the market. Mellier said that where
the US accounted for more than 70% of the market a decade ago, India and China
have now emerged as a new buying force, representing 25% of today’s market,
although the US was still leading with 38%.
“We clearly need to adapt to this because [different markets] do not always want the
same kind of jewellery, or the same kind of diamonds,’ said Mellier. “It may
potentially change the way we manage our resource at the mines.’
He said transparency would continue to be a growing requirement and that diamond
producers have to become more involved to keep the industry “clean’.
“De Beers want to stay true to its values,’ he said. “We have to change and work
even more transparently with other stakeholders to make sure we’re the cleanest
industry possible.’
