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SOMBA K'E/YELLOWKNIFE
The NWT's diamond mines may see more ownership shakeup than expected this year, as Diavik Diamond Mine owner Rio Tinto has announced it is considering the sale of Diavik as part of a strategic review of its global diamonds business.

An aerial view of the Diavik diamond mine, located 300 km northeast of Yellowknife. - photo courtesy Diavik Diamond Mines Inc.

"We can't speculate on the outcome of the review at this stage," said Niels Kristensen, president and chief operating officer of Diavik Diamond Mines Inc. "I think Rio is looking at all options including (a) potential sale and many different possible ownership structures, but it's really premature to try and speculate on any of those at this point."

BHP Billiton announced a similar operations review last November, putting the future of its Ekati Diamond Mine in question.

Diavik, located 300 km northeast of Yellowknife, is one of three diamond mines operated by Rio Tinto, which also operates its wholly-owned Argyle mine in Australia, and the Murowa mine in Zimbabwe, in which Rio Tinto holds 78 per cent interest.

As the London-based mining company has expanded, its diamond assets have become an increasingly smaller part of its portfolio, Kristensen told Yellowknifer on Tuesday.

"Rio has grown tremendously over the last few years in iron ore, and copper, and coal internationally," Kristensen said, noting diamonds normally account for around five percent of Rio Tinto's earnings. "The diamonds business is now a relatively small part of its portfolio."

Harry Kenyon-Slaney, Rio Tinto's chief executive of diamonds and minerals, said the company regularly reviews its businesses to ensure they remain aligned with Rio Tinto's strategy of operating "large, long-life, expandable assets."

Even with more than 1,100 employees at Diavik last year, and a mine life expected to extend into 2020, the mine is still considered small scale for Rio Tinto, which owns 60 per cent of Diavik through subsidiary Diavik Diamond Mines Inc.

The company has not specified when a decision might be reached about the fate of its diamond assets.

"Rio is not under any pressure to rush this, it wants to explore all options," Kristensen said. "But in the meantime, it's business as usual and we've been spending a lot of time reassuring our people, employees, reassuring our community partners, business partners in the North here that it's business as usual. The ownership might change going forward but what's not changing is our values and who we are, and how we do business."

Kristensen said the review is not related to BHP's review of its Ekati ownership.

Harry Winston Diamond Corp., which holds the remaining 40 per cent interest in Diavik, has been named among the companies rumoured to be in talks to buy Ekati from BHP, a Melbourne, Australia-based mining giant.

Also said to be in talks with BHP Billiton to buy the mine are groups led by New York-based global investment firms Apollo Global Management LLC, and KKR and Co., according to a report by American financial news corporation Bloomberg L.P. The sale of Ekati, which has close to 1,400 workers, is estimated to be worth between US$500 million and US$750 million, the report added.

Laura Kiernan, Harry Winston director of investor relations, said the company has no comment on the potential sales of either Ekati or Diavik.

Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, said the possible ownership changes are not a reflection of the territory or the diamond industry, which is currently very solid, he said.

"I think (the diamond industry) is very much alive and well," Hoefer said. "Diamond prices are supposed to rise; there's just such a big hunger for diamonds and not enough supply in the world."

The territory is currently third in the world for diamond production, Hoefer said.

"It's more these big companies having another look at how these operations fit into their core business, and diamonds isn't their core business," he said.

Possible changes in ownership could also rejuvenate the diamond mining industry in the territory, Hoefer added.

"I think it's going to be an exciting year for us, this year for diamonds to see what emerges," he said. "Because if they do sell (the mines), any companies that are interested are going to be very aggressive at making money from these operations and extending their mine lives, too, so they have even more valuable assets."

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