BHP Billiton is selling its diamonds business, including its stake in the Ekati diamond mine in the Northwest Territories, to Harry Winston Diamond Mines for $500 million US in cash.
Under the deal, BHP Billiton's employees working at Ekati, in Yellowknife and in diamonds marketing in Antwerp, Belgium, will join Harry Winston, a Toronto-based mining and retail company.
"The mine's success is a credit to the people who work there, at Yellowknife and with the marketing team in Antwerp," said Tim Cutt, BHP Billiton Diamonds and Specialty Products president.
"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."
Harry Winston already owns a 40 per cent stake in the nearby Diavik mine, also in the Northwest Territories, in a joint venture with Rio Tinto.
"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," said Robert Gan-nicott, Harry Winston's chairman and CEO.
"Together with our existing mining business, these assets will serve as our platform for sustained, disciplined growth in the upstream diamond sector."
The Ekati mine - Canada's first diamond mine - is 310 kilometres northeast of Yellowknife and 200 kilometres south of the Arctic Circle.
Harry Winston said the current Ekati mine plan calls for another seven years of production, but noted there are additional resources that could become economic with increased diamond prices.
The company said current production at Ekati includes lower-grade ore, but high carat value. "Production in the next two years is forecast to be lower than the average achieved over the last five years," Harry Winston said. "It is expected to return to higher levels as the mine transitions to higher grade but lower carat value ore from the Misery and Pigeon open pits."
BHP Billiton, a mining company involved in a range of commodities, launched a review of its ownership in the project last year. The company said the sale will see it take a $200-million charge related to the carrying value of the assets.
BHP Billiton's stake in the project includes an 80 per cent interest in the existing operations and a 58.8 per cent interest in the buffer-zone joint venture, focusing on exploration.
BMO Capital Markets analyst Edward Sterck called the deal positive for Harry Winston, but noted there were risks involved with the acquisition. "Harry Winston is not a mine operator and success may be contingent on the team at Ekati moving over with the transaction," Sterck said.
