Archive

Posts Tagged ‘Debswana’

De Beers appoints new chief executive

May 17, 2011 Comments off

“De Beers has ended a prolonged leadership search by hiring a French engineering executive with no experience in diamonds, mining or South Africa. The South Africa-based diamond miner appointed Philippe Mellier as chief executive on Monday. Mr Mellier pursued a career at Ford Motor and Volvo before becoming president of Alstom Transport, the train-making division of the French engineering group.

Nicky Oppenheimer, De Beers’ chairman and guardian of his family’s 40 per cent stake in the company, told the Financial Times that experience in the diamond industry was not an important part of the selection process. ‘We have plenty of experts at running mines. We have plenty of experts in marketing diamonds,” he said. “The key thing is that Philippe has run world-class operations and substantial capital projects, and has experience dealing with joint venture partners.'”

Source: Financial Times, May 16 2011

Observations:

  • De Beers is the world’s second largest diamond miner, with operations mainly in Botswana and Canada. It mined 33mln carats last year. Anglo American holds 45% of De Beers shares.
  • In Mellier’s previous job he was president of Alstom’s transport division with €5.8bln annual sales. Joining Alstom in 2003 his key activities in the first years were to divest non-core businesses, while the company had to be bailed out by the French government. In later years he achieved success in winning government contracts for transport systems and buying into a Russian producer.

Implications:

  • The fact that an industry-outsider with experience in partnerships has been recruited indicates the board’s strategic priority for the next 5 years: strengthening ties with the Botswana government and probably setting up other partnerships to expand.
  • A key challenge for Mellier and Anglo’s Cynthia Carroll will be to decide on potential simplification of the ownership structure of De Beers. A potential buyout by Anglo American or flotation of the company to provide funds for expansion have been discussed for years. Whatever decision made, it will have to be aligned with Botswana’s government, which holds 15% of the company but receives a large part of the profits.

©2011 | Wilfred Visser | thebusinessofmining.com

Advertisements

Diamond prices help De Beers rediscover its sparkle

February 14, 2011 Comments off

“De Beers returned to profitability last year after a lossmaking 2009, raising fresh questions about the future ownership of the world’s biggest miner and marketer of diamonds. Perennial speculation about a De Beers flotation or buy-out by Anglo American, its largest shareholder, was damped during a downturn that saw the privately held company record a net loss of $743m in 2009.

Last year, however, it rebounded with net profits of $546m (£341m), as consumer demand lifted diamond prices by an average 27 per cent and cost-cutting paid off. Sales rose from $3.8bn to $5.9bn, and pre-tax profits jumped from $93m to $863m. In mining circles diamonds are now being discussed as a commodity with post-crisis attractions similar to those of copper, reflecting rising demand in Asia combined with insufficient supply.”

Source: Financial Times, February 11 2011

Observations:

  • De Beers Société Anonyme (DBsa), has three shareholders: Anglo American (45%), Central Holdings (40% – representing the Oppenheimer family) and the Government of the Republic of Botswana (15%). (Source: debeersgroup.com)
  • Industry analysts expect the increasing demand in Asia to sustain a period in which demand outstrips supply for jewellery-quality diamonds.

Implications:

  • The return to profitability brings new pressure on Anglo American to push for a change of shareholder structure. The government of Botswana currently gains most of the earnings of the Debswana business, although it only holds 15% of the shares of De Beers. Buying out the government might be the only way in which Anglo could gain a larger share of the income, but it is unlikely that the Oppenheimer family will agree with Anglo gaining the majority of the shares.
  • The new CEO will need to lead the company in a new phase of development and capital expenditures, after Penny turned the sustainability performance around and reduced costs. A healthy profit will certainly make this job easier, as the shareholders might be unwilling to pitch in much more capital.

©2011 | Wilfred Visser | thebusinessofmining.com