Harry Winston may consolidate Ekati and Diavik

Harry Winston may consolidate Ekati and Diavik

As originally reported in The Northern Journal July 17, there’s a chance that Ekati and Diavik may come under one ownership structure.

The Financial Times is reporting that diamond retailer Harry Winston is in protracted talks with BHP over the sale of Ekati, while at the same time considering its first option of refusal to buy out Rio Tinto’s stake in Diavik.

Harry Winston has secured bank financing for the deal to buy Ekati, but the negotiations have become protracted and the process, which was expected to be complete by mid-year, is moving slowly and could fail as a result, the Times reports.

Industry analysts also state that Harry Winston, which has a market value of $1.1 billion, is unlikely to have the bankroll for both sales. Other groups have not distanced themselves from the process. KKR and Apollo, private equity groups, struggled to get comfortable with the investment needed to extend Ekati’s mine life.

Jack Caldwell, who worked for several years at the Ekati tailings facility, wrote in his blog, “I Think Mining,” that it makes sense to have both mines under one corporate umbrella.

“Mining is not easy or cheap in the North. It is cold most of the time. Access is by plane most of the time. Only in deep winter are there ice roads along which to transport heavy equipment. And some say that global warming may cut into the period of durability of such roads. Costs will increase if global warming reduces the period that ice roads are usable,” Caldwell stated.

“But the two mines are, relatively speaking, close. And many of the issues and challenges are similar. I understand there are even opportunities for interaction and mining of ‘common’ resources,” Caldwell reported.

Mining.com is also following the story: “The diamond business may simply be too small for the mining giants. Rio Tinto’s diamond mines contribute less than two per cent to its earnings and it’s a small proportion of BHP’s income as well.”

The web page notes profit margins on diamonds are not in the same league as iron, which sits at 70 per cent.

Anglo American finalizes deal to buy De Beers

On July 31, Anglo American announced it has finalized its deal to buy the Oppenheimer family out of the company it spent three generations building.

The deal became final after the government of Botswana refused to exercise pre-emptive options to increase its stake in De Beers from 15 to 25 per cent.

As a result, Anglo American now owns an additional 40 per cent of the company, bringing its total ownership of shares to 85 per cent. Anglo American acquired the additional 40 per cent interest in De Beers for a total cash consideration of US $5.1 billion.

Cynthia Carroll, chief executive of Anglo American, said: “The innovative partnership between Anglo American and the government of the Republic of Botswana (GRB), as the shareholders in De Beers, is a clear demonstration of the level of commitment of the GRB to the long-term prosperity of the world’s leading diamond company.”

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