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De Beers hopes to expose some new facets
Gary Ralfe gives JULIE WALKER the De Beers perspective on Anglo American's new international structure
"As prices were last week when the terms were being finalised, De Beers Consolidated's 38% stake in Anglo American Corporation was worth R16-billion, the holdings in Anglogold, Amplats, Mondi, Samancor, Namakwa Sands and Gamsberg amounted to another R5-billion and the De Beers Centenary holding in Minorco was worth $500-million. A few unlisted assets at directors' valuations brought the total to about R25-billion. So with the De Beers share price at R78 last week, it was valued at R30-billion, valuing De Beers' diamond interests at a ridiculously low R5-billion. "This is a sorry indication of the enormous gap between the share price and the value. I hope that this is partly unlocked by the restructure."
The restructured groupings leave De Beers holding 40% of Anglo plc, which in turn speaks for a total of 58% of Anamint, the owner of 26% of De Beers. This love triangle appears insoluble: De Beers chairman Nicky Oppenheimer says although the operational focus is purely in diamonds, he wants to keep a second string to De Beers, and Anglo chairman Julian Ogilvie Thompson wants Anglo to stay in diamonds.
Delisting De Beers is unthinkable, just as Anglo will not take out the minorities in Anglogold and Anglo American Platinum because they are cherished players in those commodities. The minorities in Amcoal and Anglo American Industrial Corporation will be bought out, and a partnership to buy out the Samancor minorities has been entered into with Billiton. Agreement has also been reached for the Oppenheimer family to sell its holdings in Namakwa Sands, Gamsberg and Mondi to Anglo plc. Ralfe comments that most of the value trap is in Anglo American. "If some of it can be ironed out it will benefit De Beers." He says the net effect of the restructure is positive for his group: both earnings and cash flow should improve, the former through dividend income from companies such as Mondi, which is yet to start paying, and the removal of funding calls for developments such as Gamsberg. "We will still stand our corner in Anglo itself," he notes. "There should be an immediate improvement in the level of De Beers' attributable income." Ralfe says there is no reason to sever the link between De Beers Consolidated and De Beers Centenary, which was established in 1990 partly to lessen country risk and partly to effect easier access to capital. Even though the price looks cheap, De Beers shares are unlikely to rally much in the current climate. Ralfe reports continued fragility in the major markets, turmoil in Russia has not helped and the American market might not be quite as good as had been expected. "Recovery is slow," he observes.
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