BHP Billiton Sells Diamond Business to Harry Winston for $500M

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By Esther Tanquintic-Misa | November 14, 2012 12:30 PM EST

After months of searching for a potential taker, BHP Billiton has finally divested its diamond business unit for a bargain $500 million price to diamond-miner and jewelry-retailer Harry Winston Diamond Mines Ltd.

Just like with rival Rio Tinto Group, BHP Billiton believed the diamond industry, although an interesting and healthy sector, only gives off a measly contribution to the miner's overall bottom line earnings.

Harry Winston Diamond Mines Ltd. acquired the EKATI diamond mine in Canada along with its marketing operations for $500 million cash. The sale is expected to be completed in the first quarter of 2013, BHP Billiton said in a statement.

Located 200 kilometers or 124 miles south of the Arctic Circle in Canada's Northwest Territories, BHP Billiton, the world's biggest mining company, holds 80 per cent of the mine. Its sales and sorting operations are located in Yellowknife, Canada, and Antwerp, Belgium.

"The sale brings to a close BHP's interests in the diamonds sector and is in line with its stated focus on long- term, low-cost, expandable assets," analyst Tony Robson said in a note to clients. "The impact of the sale to the company's valuation and earnings is negligible."

The EKATI diamond mine produces more than three million carats of rough diamonds annually.

"We are very proud of EKATI's track record and the substantial value it has created for the region and our shareholders," Tim Cutt, BHP Billiton Diamonds president, said in a statement.

"Harry Winston has long experience in the Canadian diamond industry and their commitment to study further development at EKATI could help extend the mine's contribution to northern Canada for many years to come."

In a statement, Harry Winston said it would finance the cash deal with present resources and debt. This included a $100 million revolving credit facility as well as a $400 million term loan.

Harry Winston Diamond Mines Ltd. is also a serious contender for Rio Tinto Group's Diavik diamond mine, but analysts believed it may no longer have enough cash to pursue the transaction. Harry Winston Diamond Mines Ltd. controls 40 per cent of the Diavik diamond mine.

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