BHP Billiton Breaks Engagement with Diamond Business

PUBLISHED: 14 Nov 2012 @ 10:32 | Comments (0) | More info about Kenneth G. Mondero

The world’s largest mining group, BHP Billiton plc (LSE:BLT) is breaking its engagement with its diamond business after deciding to sell Canada’s first diamond mine to jewellery designer Harry Winston for US$500 million, in line with the miner’s move to transform itself into a “simpler business”.

In a statement, BHP Billiton said it has signed definitive agreements with Harry Winston Diamond Mines Limited disposing its 80% interest in the mining operations and 58.8% in the exploration zones of the Ekati mines and its diamond marketing operations, scheduled to be completed by the first quarter of 2013, subject to regulatory approvals and other conditions, including pre-emptive rights of the firm’s joint venture partners.

According to BHP Billiton’s Non-Ferrous Chief Executive, Andrew Mackenzie, the decision to depart from the mine located in Canada’s Northern Territories reflects the “ongoing pursuit of a simpler business” and “focus on large, long-life, low-cost, expandable, upstream assets.”

Marrying Harry

Harry Winston, through its Chairman and Chief Executive, Robert Gannicott, said it plans to “marry” the diamond business assets it is buying from BHP Billiton to its own Canadian diamond sorting and marketing expertise.

“Together with our existing mining business, these assets will serve as our platform for sustained, disciplined growth in the upstream diamond sector,” Mr. Gannicott said in a statement.

The sale comes after a 32% drop in production during its July to September 2012 period than the year before, to only 313,000 carats, also 24% lower than the previous two quarters that yielded 457,000 carats and 413,000 carats, respectively.

The US$200 Million Dowry

A US$30 million bill is due to BHP Billiton should its partners to the joint venture exercise their pre-emptive rights to acquire the assets being sold.

BHP Billiton is also to charge US$200 million against the value of its assets in its balance sheet following the completion of the sale.

Tim Cutt, President of the firm’s Diamond & Specialty Products, hailed the employees of the mines who will be absorbed into Harry Winston’s workforce for the success of the mines that has created value for the region and BHP’s shareholders.

In London, however, shares dropped a few pence, 3.5 pence to be exact, to £19.50 at by 10:15 AM GMT.

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