Loaded for Bear: Amplats set to sail from Anglo on its own, but De Beers may sink

17 Feb 2025

The contrast with Anglo’s unloading of its platinum group metals (PGMs) and diamond assets is quite stark. PGMs are in a rough patch at the moment but have a future, while diamond miners face an existential crisis from gems grown in the lab.

Anglo American’s restructuring pivot to leaner, greener pastures has so far gone smoothly.

In November of last year, Anglo announced that it would generate up to $4.9-billion from the sale of its steelmaking coal business, and the demerger of Anglo American Platinum (Amplats) is proceeding apace.

But the planned sale of De Beers presents a far bigger challenge as diamond sales plunge in the face of far cheaper lab-grown alternatives and demographic trends such as falling Chinese marriage rates.

The contrast with Amplats is stark. It is set to sail from Anglo on its own and while it faces rough seas ahead, there are rays of light on the horizon for PGM producers. For diamond producers, the storm clouds are still gathering and threaten to sweep the sector with hurricane-force gales.

Unveiling its annual results on Monday, Amplats said its demerger with Anglo was on track for completion in June, along with a name change that would be announced in due course. Anglo will retain a 19.9% stake in Amplats when the demerger is completed.

As a farewell gift to the mother ship Anglo – which still holds a 67% stake in the PGM producer – Amplats said it would pay a special dividend of R15.7-billion. This is in addition to the R800-million it is paying out as part of its dividend policy of 40% of headline earnings.

That almost triples its dividend per share for 2024 to R71.55 from R21.30 despite a 40% fall in headline earnings.

Amplats CEO Craig Miller said that this move was “... supported by our net cash position at year end. This also reflects our confidence in the ongoing ability to generate cash flow through a combination of our world-class integrated value chain and operational excellence.”

The net cash position at the end of 2024 was R17.6-billion, so Amplats will pay almost all of that out in its dividend – a liquidity boost for Anglo that will leave Amplats with a net cash position of R1.1-billion.

Grounds for PGM optimism

But there are grounds for Miller’s optimism that Amplats can continue to generate cash despite the current downturn in PGM prices, which have collapsed in a heap from record highs four years ago.

A range of factors have undermined PGM prices over this time frame: the fragile global economic recovery, hype about the switch to battery electric vehicles (BEVs), and moves by Chinese fibreglass makers to substitute super-priced rhodium with platinum in their alloy mix.

Read more: On the sly, Chinese chemists have eroded SA’s PGM industry

The Chinese move, cooked up in chemistry labs, barely moved the needle on platinum while bringing the rhodium price – which almost reached $30,000 an ounce – crashing back to Earth. It is currently fetching around $4,650 an ounce.

But these trends are not set in stone and can be reversed.

The global economy is beset by surging levels of uncertainty with the onset of Trump 2.0 and while the pace of growth is seen below recent historical averages over the next couple of years, it will in all likelihood eventually recover.

There are also signs that BEV sales growth is slowing while hybrid vehicles – which use PGMs – are moving into a faster sales lane.

The demise of the internal combustion engine (ICE) – which uses PGMs for emissions-capping catalysts – is also not happening as quickly as expected.

“If you just consider the fact that over the last 12 months you have seen a number of analysts and car companies downgrading their forecasts around BEV penetration,” Miller told Daily Maverick in an interview.

“This time last year, the average penetration was 40%. Now it’s below 35% and continues to fall. This means we are either going to drive an ICE for longer or we are going to drive a hybrid and we saw last year that hybrid sales increased 35% year on year.”

PGMs are also crucial for emerging low-carbon hydrogen power initiatives and chemists are busy mixing and matching the metals for new industrial uses, including medical applications.

Read more: Hope springs eternal on the platinum group metals front — with reason

Not forever

The allure of diamonds, by contrast, is not forever. De Beers’ fortunes seem to be sinking fast – and the storm that is engulfing it may not be reversed.

The big one has been soaring sales for lab-grown diamonds, which were initially used for industrial purposes such as drill heads.

The discount on lab-grown diamonds (LDGs) compared with natural stones has widened to 80% from just 20% in 2018, according to a report by McKinsey & Company.

The report said that lab-grown diamonds “... could take over the majority of the market outside niche luxury segments, similar to collecting classic cars or luxury vintage items.”

Other trends bode ill for the diamond industry.

Marriages in China fell 20% in 2024 to a record low – a trend that is undermining a key market that just a few years ago diamond producers saw as one with vast growth potential

De Beers has reportedly amassed a stockpile of $2-billion worth of diamonds — its largest since the global financial crisis of 2008 — as rough diamond sales have tanked.

Is that stockpile a coveted asset for a potential buyer, or a store of wealth that is set to lose further value?

Anglo is exiting diamonds and PGMs as it focuses on a few core commodities, notably copper, which is widely seen as absolutely critical to the green energy transition.

As it bids farewell to Amplats and its steelmaking coal assets, it is getting some cash in the process. But a De Beers transaction will be more difficult to execute and may wind up being a fire sale.

Anglo announces its annual results on Wednesday, 19 February and it may provide an update on that front. It will certainly be high on the radar of investors and analysts. DM

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Grounds for PGM optimism

Not forever