Octea Diamonds may raise up to $1 billion by going public in Hong Kong.
Israeli billionaire and proprietor of the Geneva based Steinmetz Diamond Group Octea, Beny Steinmetz, is looking to possibly raise as much as $1 billion by taking the company public. This is the second time in the last three years that he has considered an IPO for his company.
Two years ago Steinmetz attempted a public offering of his mining company’s Sierra Leone diamond unit in Hong Kong, but changed his mind. Other companies, such as Graff Diamonds, also dropped IPO plans for Hong Kong at the same time due to Europe’s financial crisis.
Beny Steinmetz Group Resources, the parent company of Octea Ltd, is expected to decide on an IPO plan by early next year. This according to statements made recently by its CEO Brett Richards. He said, “We will consider our options for project financing and there will be benefit in having access to capital markets.”
The company reportedly expects to raise $500 million through the sales of 50% of its value in stock, giving it a $1 billion total valuation. Octea expects its valuation to be about 5 to 6 times its annual earnings.
Octea currently owns the Koidu diamond mine in Sierra Leone that supplies the stones to Tiffany & Co. Octea wants to raise capital to expand its mining operations in order to meet growing demand in Asia for diamonds. Diamond producers around the world want to increase supply as diamond prices grow.
According to International Diamond Consultants Ltd., the value of rough, uncut diamonds has increased by 10 percent so far this year. This growth in value comes after they more than doubled in price over the past five years. The surges are credited to a greater demand by China’s increasingly wealthier middle class and a recovery in the U.S. economy.
As it expects the world diamond output to double by 2017, BSGR predicts that Octea will produce up to 6000, 000 carats of diamonds this year alone.
Octea was aided by Tiffany in its expansion of the Koidu mine in 2011 as part of a supply agreement between the two companies. Sierra Leone is renowned for its high quality diamonds, such as the third largest diamond ever found, the 969.8 carat Star of Sierra Leone discovered in 1972.
BSGR may also need to raise funds due to its recent problems in its other mining operations. Both Steinmetz and his company have been the targets of controversies and corruption charges regarding their business practices in the African nation of Guinea. The American Justice Department has been investigating BSGR’s acquisition of the rights to extract half of the iron ore deposits at Simandou, Guinea, which may have resulted from corruption and bribery.
In April the government of Guinea stripped BSGR of all of its mining rights, which it had received from the country’s previous ruler free of charge.
With an estimated net worth of $3 billion, Beny Steinmetz was born in Netanya Israel and inherited his diamond empire from his father, Rubin. He founded the Beny Steinmetz Group Resources.
Steinmetz is currently listed as the sixth wealthiest Israeli in the world.