DBCM Purchase Empowers South Africa’s Ponahalo Holdings

(IDEX Online) – De Beers Consolidated Mines (DBCM) has bought De Beers Sightholder Sales South Africa (DBSSSA) based in Kimberley for around $233 million from De Beers.

The deal gives South African black economic empowerment (BEE) company Ponahalo Holdings Ltd., the owner of 26 percent of DBCM, a 26-percent holding in DBSSSA.

The acquisition was announced five months before a 10-year government-mandated deadline to include South Africans in ownership of the country's mines and associated assets, and enables DBCM to meet its BEE commitment. 

South Africa’s 2004 Mining Charter called for companies to sell 26 percent of their domestically held assets to black South Africans by the end of 2014.

The transaction is expected to increase cash flow into DBCM and Ponahalo strengthening the balance sheet of Ponahalo and funding De Beers' growth plans, said Manne Dipico, Chairman of Ponahalo Holdings and DBCM's Deputy Chairman, as cited by miningmx.com.

"Our clients in the diamond cutting industry will also benefit as they will be transacting with an empowered mining and trading company going forward," added Barend Petersen, DBCM Executive Chairman, as quoted by the news source.

Ponahalo bought its stake in DBCM in 2006. According to Petersen, the current deal had been initiated eight years ago but was delayed due to the market decline after the 2008 global financial crisis and because Ponahalo had been part of DBCM's 2013 US$2 billion (R20 billion) investment in the Venetia diamond mine underground project, notes miningweekly.com.

DBCM produced around five million carats last year, which are all sorted, valued and sold in Kimberley. The company holds 10 diamond sales a year supplying South Africa’s leading diamond cutting factories with diamonds, over 40 percent by value.

DBCM Executive Chairman Barend Petersen said: “This major deal is good for broad based empowerment in South Africa and for the resource based sector which though mature is still delivering livelihoods after 150 years. De Beers is bringing the largest diamond trading business in South Africa into the empowerment circle by ensuring that the financing of this transaction is one of realistic benefit to all parties. Our clients in the diamond cutting industry will also benefit as they will be transacting with an empowered mining and trading company going forward.”

Addressing the strength of the consumer market for diamonds Petersen noted: “There is reason to be optimistic about diamond demand continuing. Economic recovery is underway in the US where demand for diamond jewelry rose 7 percent last year and diamond consumption continued rising in emerging markets such as China. Luxury brands are driving demand notably amongst young western consumers and consumers of all ages in emerging markets. We believe De Beers with its legendary and credible association with diamonds has a strong foundation to be the world’s leading diamond brand.”

Ponahalo Holdings Chairman and Deputy Chairman of DBCM Manne Dipico commented: “The transaction will increase cash flows into DBCM and therefore into Ponahalo Holdings funding both the growth plans of De Beers in South Africa and strengthening the balance sheet of Ponahalo. Over time, as the debt is repaid, the beneficiaries of Ponahalo Trusts, who include employees and retirees, will benefit as well as community projects based where we operate which have already received $2.6 million since 2006.”