Reuters reported that BHP Billiton is considering selling all or part of its diamond assets which include the EKATI mine in northern Canada as it focuses on large long life scalable assets.
BHP said that it had begun a review to examine whether a continued presence in the diamond industry was consistent with its strategy of investing in expandable assets. The review is due to be completed by the end of January 2012.
The miner said that EKATI is a world class operation and Chidliak is a promising exploration opportunity, but many years of extensive exploration suggest there are few options to develop new diamond mines that are consistent with this approach.
Diamonds represent only a fraction of BHP's global portfolio. The diamonds and specialty products division which includes its titanium minerals and potash projects as well as diamond mining accounted for roughly 2.5% of 2010 operating profit.
Analysts at BMO Capital Markets value BHP's 80% stake in the EKATI mine at USD 2.7 billion just over 1% of the company's value. News of BHP's review comes less than a month after rival Anglo American took USD 5.1 billion bet on diamonds buying the Oppenheimer family out of De Beers.
But analysts said that the move did not come as a surprise given BHP's relatively small footprint in diamonds and the tens of billions of dollars of investments BHP has already made or plans in large, tier one assets including shale gas, potash and the expansion of the Olympic Dam copper uranium mine in Australia.
Mr Des Kilalea analyst at RBC in London said that "The diamond business is 2% or 3% of the total of BHP and is not growing. It is not a comment from BHP on diamonds it is a comment on how difficult it is to grow in diamonds. I am not surprised to see this review is happening the bigger surprise is that it didn't come earlier."
EKATI, the cornerstone of BHP's diamond business has produced an average of over 3 million carats of rough diamonds per year over the last three years with annual sales representing around 10% of global diamond supply by value.
It also owns 51% stake in Chidliak, a venture with Peregrine Diamonds on Baffin Island. The project is operated by Peregrine. It is unclear who would be interested in either of the two stakes, though some analysts said De Beers which has two producing mines and an advanced exploration project in northern Canada could be among the suitors.
(Sourced from Reuters)
