Doug Ashbury
Northern News Services
Yellowknife (Apr 04/01) - The number of Canadian companies with a stake in an operating diamond mine is about to drop to zero.
BHP Ltd., the Australian mining giant, has announced it will buy Vancouver-based Dia Met Minerals, which owns 29 per cent of the Ekati diamond mine at Lac de Gras.
The offer price is $687 million, and Dia Met's board unanimously approved the move and is recommending shareholders do the same.
Dia Met put itself up for sale last Oct. 17 after two of the largest shareholders, Marlene Fipke, former wife of geologist Chuck Fipke, and businessman David Mackenzie were looking to sell their shares.
The two shareholders hold about 30 per cent of the company, or, under the deal, about $203 million.
"These shareholders entered into an agreement with the company not to sell their shares privately and to allow the board of directors to supervise a process that would solicit an offer for all outstanding Dia Met shares," Dia Met chairman Peter Atkinson said in a statement.
"It was the objective of the board to ensure that all shareholders would have the same opportunity to sell their shares, if a serious bid emerged."
Graham Nicholls, BHP Diamonds spokesperson, said the purchase will have marketing implications.
"It gives us critical mass to deal with larger players."
BHP currently markets Dia Met's share of production. That agreement expires in late 2002. Dia Met may have decided to go out and market its own diamonds from Ekati.
"(Dia Met) could have gone out one there own and been in competition (with BHP on diamond marketing). This eliminates that risk," Nicholls said.
Owning Dia Met means BHP will have a stronger hold on the Ekati name and solidify its hold on more diamonds under current branding programs.
For the purchase to go ahead, 75 per cent of the shares will need to be deposited. The offer is to be mailed to shareholders in a few weeks. The offer represents a 23.2 per cent and 15.1 per cent premium over the closing market price of Dia Met's class A and class B shares respectively the day before the company announced it was for sale. Dia Met opened down 10 cents at $2.70 Monday morning.
The next NWT diamond property to go into production will be the Diavik mine, 60 per-cent owned by London-based Rio Tinto and 40 per-cent owned by Toronto-based Aber Diamond Corp. Diavik is scheduled to go operational in first-half 2003.
News of the Dia Met sale may have boosted Aber's share price, up 50 cents, or four per cent, in trading Monday morning, at $13.50.
