Ekati talk peaks De Beers interest

Vancouver — Signals from BHP (BHP-N) that it may sell its stake in Canada’s first (and only) diamond mine have peaked the interest of mining giant De Beers Consolidated Mines (DBRSY-Q).

The De Beers diamond group says it will monitor any proposed shareholding changes pertaining to the exceptionally rich Ekati diamond mine. The company has an agreement with BHP to sell 35% of Ekati’s rough diamonds through its London marketing unit, Diamond Trading Co. The deal expires at the start of 2003.

Talk of the sale of BHP’s stake in Ekati has been circulating for a number of weeks as the major begins to digest its mega-merger with London-based Billiton. Due to the size of the new entity, the scale and growth prospects for Ekati have been brought into question.

Brad Mills, BHP’s chief strategic officer, says one of the key tasks of the integration team is to sort out core assets from the non-core ones. The aim is to sell smaller and lower-growth assets.

In terms of its ability to grow, Ekati is not of a scale comparable to the group’s other businesses. Mills says it has 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,” he says.

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. He says Ekati’s management would be given a couple of years to develop the operation before a decision is made.

In the calendar first quarter, diamond production from Ekati hit 375,000 carats, up 27% from the previous quarter.

Meanwhile, De Beers is developing the nearby $300-million Snap Lake deposit. Scheduled to be completed in 2004, it will be the company’s first underground mine outside southern Africa.

It is anticipated that Canada will be one of the world’s top diamond producers by 2008, accounting for some 13% of the total global output.