Vancouver — As mining mega-mergers move forward, the need for bigger, high-growth operations is becoming more and more evident. Even as Australia’s BHP (BHP-N) takes steps to up its interest in Canada’s Ekati diamond mine, the recent merger with London-based Billiton has placed the scale of the operation in question.
According to the Australian newspaper, the Melbourne Age, one of the key executives on the integration team that BHP and Billiton set up to ensure the merged group acts as a unit revealed that BHP’s majority stake in Ekati could be sold for being “sub-scale”.
BHP’s chief strategic officer, Brad Mills stated that one of the key tasks of the integration team is sorting out core assets for the future from the clearly non-core ones. The aim is to sell smaller and lower-growth assets. At present time, North America’s first diamond mine, was “not of a scale” comparable to the group’s other businesses in terms of its ability to grow.
“In our model it is kind of hung up in the middle of the minerals development area, sub-scale at this point of time,” Mills reportedly said at a Melbourne briefing.
Mills stated that it either had to grow into a substantial business, “or we have to harvest the value of that, and capture the value through saying there is a more logical owner to it”.
His comments come as BHP is increasing its stake in Ekati to 80% through a US$585-million bid for Dia Met Minerals’ (DDM-T) 29% stake in the project. Mills further stated that the Ekati management would be given a couple of years to develop the operation before a decision was made.
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