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SOMBA K'E/YELLOWKNIFE
International mining giant BHP Billiton Ltd. is selling the Ekati Diamond Mine to Harry Winston Diamond Corporation, part-owner of Diavik Diamond Mine.

An aerial view of the Misery open pit at Ekati Diamond Mine, located about 310 km northeast of Yellowknife. Mining giant BHP Billiton is selling the mine to Harry Winston Diamond Corporation, part-owner of Diavik Diamond Mine. - photo courtesy of BHP Billiton Canada Inc.

BHP and Harry Winston announced the US $500 million purchase agreement yesterday.

In the bid, Harry Winston, which owns 40 per cent of Ekati's neighbouring $2.6 billion Diavik Diamond Mine, will take over all of BHP Billiton's diamond business assets, including its 80 per cent interest in and operations role of Ekati, and its diamonds marketing operations, including diamond sorting and sales facilities in Yellowknife and Antwerp, Belgium.

BHP's divestment of its diamond assets concludes the global mining company's year-long strategic review of its diamonds business.

Ekati has close to 1,400 employees and contractors who had faced uncertainty over the mine's future during BHP's year-long review of its diamond sector. However, the "vast majority" of contracts with local suppliers, and employees are now expected to transfer to buyer Harry Winston when the transaction is closed, BHP spokesperson Bronwyn Wilkinson said.

"Harry Winston is purchasing the business and the employees are part of that success so they're placing quite a high value on the operational knowledge and the experience of the employees," she said. "We will work closely with them to ensure that there is a smooth transition."

Harry Winston is also agreeing to undertake all of BHP's environmental and social obligations and standards for the mine, including impact benefit agreements and strategic engagement agreements.

Although Harry Winston will have ownership interest in the NWT's Ekati Mine and neighbouring Diavik Diamond Mine, it is too early to confirm whether the mines' operations will be merged or streamlined, a Harry Winston representative told Yellowknifer.

The company, which already own retail diamond industry assets, is evaluating Ekati separately from Diavik for the time being on its own merits, according to a spokesperson, and will also be looking to extend the current mine life of Ekati. Canada's first diamond mine, Ekati began production in 1998, with production currently scheduled to 2018.

Ekati produced three million carats of diamonds in 2010-2011. A year earlier, 3.22 million carats were extracted from the site.

Robert Gannicott, chairman and CEO of Harry Winston, stated that the purchase of BHP's diamond assets serves the company's platform for "sustained, disciplined growth in the upstream diamond sector."

"Completion of this acquisition will bring the opportunity to marry our Canadian diamond sorting and marketing skills with an experienced mine operating and development team, a world class operating asset, and future growth potential," Gannicott stated in a news release announcing the share purchase agreement.

The sale, subject to regulatory approvals, is expected to be complete in the first quarter of 2013.

Ekati is also partly owned by Chuck Fipke and Stewart Blusson, the geologists responsible for the discovery of the diamond deposits at Lac de Gras. Fipke and Blusson each own 10 per cent of the mine, and under BHP's definitive purchase agreement with Harry Winston, minority interest parties hold pre-emptive rights to purchase BHP's majority interests in the mine, and have 60 days from the date provided notice to exercise the rights.

Shares of Harry Winston Diamond Corporation (HWD) were trading about 34 cents lower following the announcement Tuesday, at around $13.11 on the New York Stock Exchange.

Shares of BHP Billiton Ltd. were also trading about $0.88 lower following the announcement, at around $70.47 before markets closed Tuesday.

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