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SOMBA K'E/YELLOWKNIFE - Mammoth mining company Kinross Gold made a big - and surprising - play on Northern diamonds last week, paying US$150 million for stakes in the Diavik diamond mine and diamond retailer Harry Winston.

Kinross Gold, the third largest gold producer in Canada, recently purchased an indirect share of the Diavik diamond mine, making it an investor in the Northern mine's operations, including this A154 open pit kimberlite pipe, one of three Diavik mines. - Guy Quenneville/NNSL photo

Toronto-based Kinross recently announced it will shell out US$104.4 million for 22.5 per cent of Harry Winston's 40 per cent stake in the Diavik partnership with Rio Tinto.

The company will also drop US$45.6 million for a 20 per cent interest in Harry Winston through purchase of 15.2 million shares at US$3 a pop - nearly double the $1.88 closing price on the New York Stock Exchange the day of the announcement.

Kinross is the third largest primary gold producer in North America, by reserves, with mines in the US, Russia, Brazil and Chile. Diavik 300 km by air northeast of Yellowknife on a 20 square kilometre, in Lac de Gras.

While the Kinross's move comes as gold remains stable and diamond markets continue to take a beating - Harry Winston will use the $150 million to repay mounting debt - for Kinross it's all about the silver-lining.

"We saw this as a unique opportunity to get a stake in Diavik and to acquire a share of a very high quality asset at a significant discount to its intrinsic value. It was a very good opportunity," said Steve Mitchell, vice-president of corporate communications for Kinross.

Mitchell added the move is a vote of confidence in Diavik and the North's diamond industry at large.

"We see this strategic investment as a vote of confidence in the long term fundamentals of the diamond market and also we see it as a chance to get a stake in one of the best diamond mines in the world," he said.

Kinross shares (TSE:K) went up $1.26 to $23.14 on the day the agreement was announced, March 19, from the previous day.

Doug Ashbury, Diavik acting spokesperson, declined to comment on how the Kinross deal could affect Diavik.

This is a announcement by Harry Winston selling a piece of itself to Kinross

"It's an arrangement between Harry Winston and Kinross and because I'm not with either of those company's I can't really speak to it," he said. "We will still operate as a joint venture owned 60 per cent by Rio Tinto and 40 per cent by Harry Winston," he added.