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BHP Billiton mulls sale of Ekati Owner of diamond mine reviewing its diamond businessThandie Vela Northern News Services Published Wednesday, November 30, 2011
The international resource development company shocked the city's mining industry with the Tuesday morning announcement, that it is reviewing its diamond business. Ekati - Canada's first diamond mine - and the Chidliak diamond exploration project in Nunavut - which BHP Billiton is also considering its interest in - are the company's only diamond operations in the world. "We are doing a strategic review of whether a continued presence in the diamond industry is consistent with our overall group strategy," BHP Billiton spokesman Bronwyn Wilkinson said, declining to disclose details of the review or whether any requests for proposals have been made. "One of the possible outcomes that we would evaluate is a potential sale of all or part of our business, but it is early in the process and we can't speculate about what the outcome of that process will be at this stage." BHP will only pursue options that will preserve Ekati's safety and environmental standards, and protect the benefits the mine has contributed to communities and aboriginal groups, Bronwyn added. "And, if we could not meet those criteria, obviously one of the options during this review is that BHP Billiton continues to retain Ekati and continues to operate it," she said. "This review process actually has the potential to begin a new chapter for Ekati and it has the potential to rejuvenate the operation and to solidify its legacy in the North, whether we continue to operate it or not." The surface and underground mine, located about 310 km northeast of Yellowknife, officially opened in Oct. 1998, with a forecast mine life of about 20 years. Closure and reclamation has been forecast for 2018, with the possibility of extending the mine life. About 1,400 people work at the mine, including employees and contractors. Last year, the mine produced 3.51 million carats with a total value of more than $1.2 billion - 10 per cent of the world's rough diamonds by value, BHP reported. Production at Ekati has been declining, with 689,000 carats recovered in the first quarter of this year - marking the lowest level since the third quarter of 2006. Production dropped again in the third quarter to 457,000 carats, a 35 per cent drop from the same period last year. Multi-millionaire Stewart Blusson, who co-discovered Ekati, continues to own a 10 per cent interest in the mine. He said Ekati could see even greater success operated by a mid-tier company, as opposed to BHP, which is focused on several other major resource developments around the world. Ekati's earnings before interest and taxes made up just USD$537 million of BHP Billiton Group's USD$31.9 billion in earnings for the year ending June 30, 2011. The multi-commodity business has major petroleum, coal, base metal and copper assets, has been increasingly involved in potash exploration in Saskatchewan, and holds major iron ore assets in western Australia. Its iron ore earnings before interest and taxes total USD$13.3 billion. Blusson's partner Charles Fipke also owns a 10 per cent interest in Ekati, with the remaining 80 per cent interest held by BHP. A decision on whether BHP Billiton will sell its diamond assets is hoped for by the end of January 2012, when the review of its diamond portfolio is expected to be complete. Shares of Melbourne, Australia-based BHP Billiton Ltd. closed at USD$69.67 Tuesday on the New York Stock Exchange.
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