BHP exits diamonds with sale to Harry Winston

Tue Nov 13, 2012 2:56pm EST
 

By Clara Ferreira-Marques

LONDON (Reuters) - BHP Billiton (BLT.L: Quote) has agreed to sell its Canadian EKATI diamond operation to Harry Winston HW.TO for $500 million, as the luxury jeweler bets on rising prices that could extend the life of Canada's oldest diamond mine.

Miner BHP - which has been narrowing its portfolio to focus on larger, long-life assets - announced the sale almost a year after it first said it planned to pull out of diamonds and would sell assets including its 80 percent stake in EKATI, the cornerstone of its diamond business.

One of several jewelers that have gone into mining to secure access to diamonds, Harry Winston has long been named as a potential suitor for EKATI - it already partners rival Rio Tinto (RIO.L: Quote) at nearby Diavik, with a 40 percent stake.

The luxury jeweler had been expected to focus its attention on Diavik after Rio said earlier this year it was following BHP's lead and would consider the sale of its diamond assets. Harry Winston has a right of first refusal on Diavik.

Harry Winston's decision to buy EKATI in a debt-funded deal, after months of negotiations, is expected by industry sources to put off any deal for Diavik, given the company's modest $1.1 billion market value - but not necessarily for good.

"It would make sense to consolidate mining assets in the region, and Harry Winston are best placed," Charles Stanley analyst Kieron Hodgson said.

"Rio have to come to a conclusion on what they want to do with their mining assets globally. (If they sell Diavik), Harry Winston knows the assets well, but there is no need to rush. EKATI, meanwhile, is a good addition to their stable."

Harry Winston said in a statement that it would fund the cash deal with existing resources and debt, including a $400 million term loan and a $100 million revolving credit facility.   Continued...