The owners of De Beers, the world’s largest diamond company, have responded to a cash call by the company by agreeing to participate in a $1 billion rights issue. De Beers only has three shareholders: Anglo American (which owns 45 percent), the Oppenheimer family (40 percent) and the Government of Botswana (15 percent).
The company needs to raise funds after sales were hit last year by the recession, which has also affected other companies operating in the luxury goods market. The fall in demand was most telling in the United States, which accounts for a substantial proportion of diamond retail sales. De Beers revenues fell by 44% from $6.8 billion to $3.8 billion. De Beers said that the rights issue will “enable a reduction in overall debt and strengthen the De Beers Group balance sheet”. De Beers has also been in talks with its banks to refinance over a billion dollars worth of debt.
But the troubled times for De Beers affect more than just the company’s balance sheet and dealings with bankers. Botswana is the world’s biggest producer of diamonds, thus bad news for De Beers means bad news for the country. De Beers has laid off 25% of its employees (some 4,000 workers) and shut down some of its mines. And the outlook is not particularly bright. As Botswana’s Finance Minister Kenneth Matambo recently said in his annual budget speech: “Full recovery of the diamond market is expected only in 2012-13”.
Please enter your username or e-mail address.
You will receive a new password via e-mail.
Share