De Beers Group has entered into a definitive agreement to sell its iron ore royalty rights related to the Onslow Iron project in West Pilbara, Australia.
This move aligns with De Beers’ Origins strategy, focusing on streamlining operations and divesting non-core assets. The royalty right will be acquired by Taurus Funds Management for a total consideration of up to $150 million.
Details of the Sale
Under the terms of the agreement, Taurus Funds Management will acquire De Beers Exploration Australia, the subsidiary that owns the iron ore royalty, for an upfront cash payment of $125 million. An additional $25 million in deferred consideration is also part of the deal. The transaction is expected to close in the fourth quarter of 2024, pending customary closing conditions.
Background of the Royalty Right
De Beers’ ownership of the iron ore royalty stems from its historical exploration activities in Australia. While the company’s exploration programme did not yield economically viable diamond deposits, it uncovered an iron ore deposit on the exploration ground. This ground was subsequently sold for cash and a royalty right. With the development of the iron ore deposit now complete, De Beers is taking the opportunity to monetise its royalty right.
Strategic Implications
De Beers’ CEO Al Cook emphasised the strategic significance of this divestment in a statement:
“As part of our Origins Strategy we committed to streamlining the De Beers business. We have already seen significant progress in reducing our overhead costs by reshaping our workforce in support of the new strategy, and the sale of this royalty right continues the process of business streamlining as we exit this non-core asset at the right time and for value. With a more efficient corporate structure, we will focus on our core business of producing natural diamonds and bringing them to market.”
In a LinkedIn post, Cook further highlighted the company’s focus on its core diamond business:
“When we announced our Origins strategy on May 31, we promised to streamline De Beers. This means that we can focus our people, our resources and our capital on what we do best: diamonds.”
Industry Context
This sale continues De Beers’ efforts to optimise its business structure and focus on core competencies. The company has made significant progress in reducing overhead costs and reshaping its workforce. This move reflects a broader industry trend of divesting non-core assets to concentrate on primary business areas.
