JOHANNESBURG (miningweekly.com) – Anglo American has agreed in principle to invest another $450-million in diamond company De Beers, Anglo spokesperson James Wyatt-Tilby told Mining Weekly Online on Tuesday.

"Yes, Anglo American has agreed in principle to invest up to $450-million to follow its rights in a De Beers rights issue of up to $1-billion," Wyatt-Tilby said, in response to a Mining Weekly Online question.

"I should add that discussions between De Beers and its banks are ongoing, hence no definitive agreements at this stage," Wyatt-Tilby said.

This follows the $500-million loan that Anglo, which owns 45% of the shares of De Beers, as well as the Oppenheimer family with 40%, and the Botswana government with 15%, provided to the meltdown-hit diamond-mining company in April, in what De Beers MD Gareth Penny described as "additional subordinated loan funding".

Asked in July whether De Beers would need to negotiate any further funding in addition to a $1,5-billion facility that the diamond company was renegotiating well ahead of its March 2010 due date, Penny said he did not anticipate that the company would have to arrange any further funding.

Now De Beers spokesperson Lynette Gould informs Mining Weekly Online all three shareholders have in principle agreed to invest in De Beers again, this time by way of a rights issue, to raise a further $1-billion.

Gould pointed out, however, that the new capital raising would lower De Beers' level of external debt, improve the company's capital structure, and place it in a position to take advantage of any new opportunities that might arise, as the diamond market moved out of recession and into recovery mode.

Gould added, however, that the in-principle decision of the three shareholders to follow their rights would be subject to De Beers' gaining satisfactory refinancing terms for its existing debt.

In following their rights, the Oppenheimer family would be required to invest $400-million and the Botswana government $150-million.

Gould described as "positive and productive" De Beers' process of renegotiating its $1,5-billion standby debt facility that falls due in four months. De Beers' other debt facility of $1,7-billion falls due only in 2012.

In July, Penny said that De Beers had still not dipped into the $500-million loan that its three shareholders had given it in the first six months of this year.

Penny told a "town hall" diamond meeting in Johannesburg last Wednesday that, although the global diamond market had improved, it was still some way from being "out of the woods".

He reported, however, that all De Beers' South African mines had been reopened, bar Namaqualand.

In Botswana, operations at the two big mines, Orapa and Jwaneng, had resumed, and only the small Damtshaa mine remained closed. Production was also under way in Namibia and Canada.

"We are probably now at 80% of our total mining capacity," he said.

Penny also revealed that De Beers and US diamond retailers had financed the new Love Knot diamond advertising campaign, which was expected to boost diamond sales during the Thanksgiving-to-Christmas period.

It was estimated that 100 million Americans would see the advertisement, which features a song that one in ten American brides are said to choose to dance to at their wedding celebrations.

In July, Penny reported De Beers net cash position to be $622-million, more than four times its net cash of $147-million in December.

Anglo American CFO Rene Medori in February revealed that Anglo, as one of the three big shareholders in De Beers, had participated, along with the Oppenheimer family and the Botswana government, in providing the $500-million loan, and that Anglo's share was $225-million.

Medori said that Anglo's loan to De Beers would be interest free for the first two years and subject to market pricing thereafter.

Penny later revealed that the R500-million shareholder loan remained unutilised, and was providing the company with financial headroom in uncertain times.

"We are happy that we have got that headroom. The shareholders have put it in on the basis that it is staying in the company, certainly for the foreseeable future.

"So, it's not a case of having to repay that now or not utilising it. It's there to make sure that De Beers is in a robust position and is able to face the future with confidence," Penny added at the time.

Mining Weekly Online was, however, unable to establish whether this was still the case, or whether all or part of the $500-million had since been used up.

Founded in 1888 and delisted in 2001, De Beers mines and markets 40% of the value of the world's rough diamonds.

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