Diamond jeweller targets BHP mine

Posted March 20, 2012 | By Aaron Weinman

Luxury jeweler Harry Winston Diamonds is one of several suitors eyeing BHP Billiton’s majority stake in Canada’s Ekati diamond mine.

Already a partner of Rio Tinto’s Diavik diamond mine in Canada, Harry Winston entered the diamond mining business in an attempt to ensure further access to rough diamonds. After BHP signaled its intention to shift focus to larger assets last year, many suitors have popped up in contention for the miner’s 80 per cent stake.

According to a Bloomberg report published last week, Harry Winston was top of the suitors list after enjoying a recent surge in income.

“You’d expect to see someone like Harry Winston, who has previously bought into projects, to be one of the more likely buyers of Ekati,” resources analyst Hayden Bairstow of Sydney-based CLSA Asia-Pacific Markets said. “You really need to have a pretty big downstream presence, because it’s such an opaque market in terms of pricing, which BHP doesn’t really have.”

As previously reported by Jeweller, a $1 billion price tag was calculated on BHP’s Ekati stake, but with production in rapid decline the deal may now close at USD$500-$750 million according to the Bloomberg report.

Despite considering pulling out of diamond mining, BHP announced it would make its decision by the end of June, indicating it could hold onto the Ekati stake until 2019, the estimated end of the mine’s production lifespan.

The Ekati diamond mine currently has annual sales representing 11 per cent of global diamond supply by value.

Russian diamond miner Alrosa, originally a potential suitor for BHP’s stake, pulled out of contention due to a wealth of resources in Russia’s mines and heavy Canadian regulations as a negative factor for investment. Other suitors are wary to invest in Ekati due to the mine’s age, with many preferring to look for younger mines.

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