De Beers valuation slashed by $2.9BN on weak diamond demand

Anglo American has slashed its valuation of De Beers by $2.9billion as it seeks to offload the iconic diamond brand amid lacklustre demand for the precious stones.  

The mining giant blamed ‘adverse macroeconomic conditions and industry-specific challenges’ for cutting De Beers’ valuation for the second successive year, following a $1.6billion write-down in 2023.

It recently cut its rough diamond output forecasts owing to subdued demand and elevated inventory levels after De Beers’ total production shrank by 26 per cent to 24.7 million carats last year.

Anglo announced its intentions to sell the South African corporation last May as part of a broader restructuring of the business. 

The group plans to simplify its operations to focus primarily on copper and iron ore production.

Duncan Wanblad, chief executive of Anglo, said the demerger was ‘well underway’ while actions were taking place to boost near-term cash flow to ‘position De Beers for long-term success and value realisation.’

As a consequence of the write-down, Anglo plummeted to a $3.1billion loss in 2024, from a $283million profit the previous year, while its underlying earnings before nasties fell by 15 per cent to $8.5billion.

However, the FTSE 100 firm’s results were also impacted by lower prices of iron ore, platinum group metals, and steelmaking coal.

Earnings from iron ore plunged by over a third to $2.7billion as the mineral’s average realised price declined by 22 per cent to $89 per tonne.

However, the London-based business stemmed the drop in overall profitability by keeping unit costs flat and achieving $1.3billion of run-rate savings.

‘We are fast transforming Anglo American into a far higher margin and more valuable mining company,’ said Wanblad.

Earlier this week, Anglo agreed to sell its nickel arm to MMG Singapore Resources for up to $500million, which comes after nickel prices hit a four-year low partly due to production oversupply from Indonesia and China.

It has already completed the partial sale of its steelmaking coal operation to Jellinbah Group, while US-based Peabody Energy is set to buy the remainder of the business by the third quarter of 2025.

Anglo’s restructuring plan followed a failed £39billion takeover bid by BHP for the group last year.

Had BHP succeeded, it would have created the world’s largest producer of copper, an element considered key to the green transition because of its use in technologies like solar panels, power cables, and tidal stream generators.

‘After fending off BHP’s takeover attempt last year, Anglo will hope it’s a decision they don’t come to regret,’ said Mark Crouch, market analyst at eToro.

He added: ‘The radical change in direction does make strategic sense, however, with demand for copper near all-time highs and expected to rise, while the rapidly growing synthetic diamond industry makes light work of their mining competitors.’

Anglo American shares were 3.4 per cent higher at £24.50 on Thursday morning, taking their gains over the past year to around 42 per cent.