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Anglo American is “likely” to write down the value of its De Beers diamond business for the second time in a year because of poor market conditions, underscoring the challenges of a potential public listing of the unit.
The announcement on Thursday comes as the London-listed miner prepares to spin out or sell the diamond business as part of a radical restructuring programme launched last year during its defence against a £39bn takeover offer from rival BHP.
Anglo said it was carrying out an “impairment review” to assess the value of the De Beers business.
The group said it was “assessing the impact of diamond market conditions and general fall in demand in China” and was “likely to lead to an impairment at the full year result”, which will be published on February 20.
The company did not indicate the size of the potential writedown, but the news is likely to heighten shareholder concerns that Anglo risks selling its diamond business at the bottom of the market.
It would be the second writedown of De Beers in 12 months. Anglo announced a $1.6bn writedown on the value of the business in its annual results last year, bringing the carrying value to $7.6bn in Anglo’s accounts.
Anglo owns 85 per cent of De Beers, a stake that analysts at RBC have valued at about $2.5bn, far lower than the valuation in Anglo’s books. The government of Botswana owns the remaining 15 per cent.
The global diamond market has been in turmoil as cheap lab-grown diamonds, which cost one-twentieth the price of a mined diamond, have flooded the market, and as demand has failed to recover after the Covid-19 pandemic.
The average selling price of De Beers diamonds dropped 20 per cent in 2024, compared with the prior year, even though the company also cut production by 22 per cent last year in an effort to stabilise the market, according to production figures published on Thursday.
The company slashed its diamond production guidance for this year by 31 per cent, and for next year by 18 per cent. It is seeking to reduce its large diamond inventory, currently worth about $2bn.
Anglo’s chief executive Duncan Wanblad has insisted that he will try to maximise the amount the company receives for De Beers, which will be either sold or listed as a public offering.
Other production figures published on Thursday were largely in line with analysts’ expectations — including a 6 per cent drop in copper output last year compared with 2023. Shares in the company rose almost 5 per cent in early trading in London.
Anglo said the planned shutdown of a plant at the Los Bronces mine, and lower grades at Collahuasi, both in Chile, contributed to the decline in copper output.
After its planned restructuring, Anglo will mainly produce copper and iron ore, as well as owning a large fertiliser mine that is still in development.
The company last year successfully sold its steelmaking coal assets for a price of up to $4.9bn. It also reduced its stake in Anglo American Platinum, which it is preparing to spin out as a standalone listed company this year.
