South African giant went from crown jewel to problem child
De Beers has fallen from being one of the most dominant companies in the world to a business that no major mining giant wants to own.
The company faced a difficult few years, with declining diamond prices and subdued sales, seeing its revenue and profit plunge.
This has been coupled with the rise of manmade alternatives to diamonds in recent years, which have taken over the industrial market and are increasingly competitive in the luxury segment.
De Beers’ 2024 was an extremely challenging year for the company, cutting its diamonds’ price by 10% to boost demand after it completely halted supply in the latter half of 2023.
In February 2024, Anglo American slashed the value of De Beers by R30 billion on the back of lower diamond sales.
Diamond miners face a perfect storm. Demand for their product is declining, while supply is increasing due to manmade alternatives entering the market.
For the first time in 100 years, diamond miners, led by De Beers, do not have a stranglehold on the supply of the precious gem.
Historically, miners have been able to increase their prices in line with the rising cost of mining diamonds by artificially limiting supply. This is not the case anymore.
This is a far cry from the De Beers of old, which used to be able to dictate to diamond traders how much its gems would go for at its exclusive auctions.
The company originated in Kimberley, where Sir Ernest Oppenheimer began buying stakes in various mines to build up a stockpile of diamonds to sell to cutters in Europe and the US.
The most lucrative of these would be De Beers Consolidated Mines, which Anglo bought in 1926 and started the century-long partnership between the companies.
De Beers would provide Anglo with the cash to create a commercial empire that would straddle nearly every sector of the South African economy.
By creating the Centralised Selling Organisation (CSO), Anglo and De Beers would have a stranglehold on the global diamond trade. By the 1980s, De Beers would have a stake in every single pipe diamond mine worldwide.
Under the leadership of Ernest’s son, Harry, De Beers would produce 21.4 million carats of diamonds and generate R1.7 billion in revenue annually from 1957 to 1982.

The Oppenheimers no longer hold any stakes in Anglo American or De Beers. Harry’s son Nicky led the family’s sale of its $5.1 billion holding in the diamond miner in 2011.
Soon, Anglo American may not hold any shares in the diamond miner as it looks to dispose of De Beers as part of its restructuring.
To ward off a takeover from the world’s largest miner, BHP, Anglo American announced a wide-ranging overhaul of its business.
This included the sale or demerger of De Beers alongside its platinum business and coal mines in Australia.
The company’s willingness to dump De Beers may signal its desperation to effect a successful turnaround, but it is more likely to reflect the rapidly declining demand for natural diamonds.
This spells potential doom for De Beers, not only will the Anglo American egg have to be unscrambled, but mining expert Peter Major warned that it would not be able to survive as a standalone company.
Consulting firm McKinsey & Company recently released a research note on the global diamond industry and why natural diamond miners struggle to survive.
After prices surged during the Covid-19 pandemic as consumers spent billions on self-care gifts, diamond prices have hit near all-time lows.
McKinsey said that the success of lab-grown diamonds has reduced prices for natural stones well beyond what was expected.
Whereas natural diamonds are mined, lab-grown diamonds are created by methods such as chemical vapor deposition or high-pressure high temperature.
Once they are produced, they have essentially the same physical properties and undergo the same midstream (cutting and polishing) and downstream (distribution) steps as natural diamonds.
Demand and prices for natural diamonds have historically been balanced by mining supply, but this link appears to be broken.
As consumers search for more affordable options, lab-grown alternatives have soared in demand while more expensive natural diamonds have plummeted.
These factors are playing out in an environment of limited growth for natural diamond supply, other geopolitical tensions, and shifts in financing – creating a perfect storm for diamond miners.

McKinsey estimates that natural diamond production is only expected to grow at 1% to 2% annually until 2027, below the historical average of 3% to 4%.
Growth will likely be constrained by a combination of major mine closures, production ramp-ups for existing mines, and price volatility.
Further, any major new mines could take more than ten years to come online, and increased geopolitical tension and government intervention could limit access to diamonds.
With prices dropping and open-pit resources depleted and becoming more expensive to maintain, several companies are looking to increase the lifetimes of their existing mines by moving to underground operations.
De Beers spent $1 billion to expand its Jwaneng mine in Botswana and $2.3 billion to expand the underground portion of the Venetia mine in South Africa, increasing its operational life to 2045.
However, even these mines are under threat as lab-grown alternatives take off.
Major said last year that manmade diamonds are the largest threat diamond mining has faced in the past century since oversupply from South Africa threatened to flood the market.
The increased price volatility has also become too much for large miners, encumbered by bureaucratic processes, to stomach, he said.
“On the corporate side, this may mean the business is too risky to hang on to. If BHP or Glencore take over Anglo, they may get rid of the diamond business as its future is not good,” Major said.
Other commodities are rapidly increasing in value due to the green transition, making diamonds an unwise bet in a future with manmade alternatives.
“It is scary to think about it, but if you look at diamonds and how far they have fallen in price, barely any of the miners are self-sustaining.”
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