Yellowknife (Feb 04/05) - Billionaire Lev Leviev has pulled out of negotiations to purchase Sirius Diamonds and its Yellowknife-based diamond manufacturing plant for a minimum of $6.5 million.

Territorial Finance Minister Floyd Roland confirmed Leviev dropped out of negotiations because mines - Ekati and Diavik - would not supply more rough diamonds for cutting and polishing in the North.

Diamond mines in the area are currently supplying between 2.5 per cent to three per cent of their rough diamonds to Yellowknife cutters and polishers, said Roland. 10 per cent

The territorial minister added 10 per cent of the stones produced by the mines are supposed to go to Northern cutting and polishing plants.

Denise Burlingame, spokesperson for BHP Billiton, which owns the Ekati mine, however, disputed the volume of rough diamonds the mines agreed to supply to local cutters and polishers. "There's nothing in our socio-economic agreement that says that," she said.

Roland said the mines were offering Leviev what they had in place with Sirius prior to the government becoming involved and placing the operation in receivership.

"Our hope was to get an operator in here to deal with more rough (diamonds) - someone who could look at accessing the whole 10 per cent," said Roland.

Sirius founder Stephen Ben-Oliel said Leviev's decision to walk away proves the territorial government has no control over mining operations in its own backyard.

"Leviev has pulled out of negotiations with the mines in the Yellowknife region because the mines were intransigent," he said. "The government of the NWT set us up to do competition against the mines," he said, adding that is what led to Sirius being placed in temporary receivership in May when the territorial government moved to protect a loan guarantee. The company was placed in full receivership Aug. 16 and has been operating that way ever since.

Roland said the government has now lost more than $3 million since Sirius was forced into receivership.

Ben-Oliel said he was never behind on any payments owed to the territorial government. "I have been done a huge injustice," Ben-Oliel said.

Prior to making his Sept. 14 offer to purchase Sirius, Leviev had amassed a long resume on the global business stage. His net worth is estimated by Forbes Magazine at approximately $2 billion.

Along with worldwide real estate holdings, he owns 1,700 gas stations, 173 7-Eleven stores, a gold mine in Kazakhstan and parts of two diamond mines in Angola.

Leviev is also a shareholder in Southern Era Resources Ltd., which is exploring property near the BHP Ekati Mine and the Diavik Diamond Mine.