Potential diamond mine buyers few, says Harry Winston boss

TORONTO (miningweekly.com) – There is a “narrowed field” of potential suitors for diamonds mines, owing to the complexities of the market, Canada’s Harry Winston chairperson and CEO Robert Gannicott said on Thursday.

“It’s not easily undertaken by someone who is just a financial investor... I think a role is required, at least a strategic partnership, with someone that has the broader knowledge base,” he said on a conference call.

Anglo-Australian miner BHP Billiton in November last year said it was reviewing its diamond business, and might sell the operations, which include the Ekati mine in Canada’s North West Territories.

Smaller peer Rio Tinto followed suit in March, announcing a similar review for its diamond assets. That company owns 60% of the Diavik mine, located 20 km south-east of Ekati, the Argyle mine near Kimberley, Australia, and the Bunder project in India.

Analysts suggested last week that it might make the most sense for Rio Tinto and BHP Billiton to combine their diamond assets and list the new company. Nomura repeated this on Monday, saying it could be a compelling move.

Prior to that, private equity firms such as KKR and Apollo Global Management had been linked as possible buyers of Ekati, as had Harry Winston.

“The mining part is pretty much the same as it is for anything else, but beyond that – to be able to process the ore properly, to be able to sort and sell and realise the full market price for diamonds is a specialist trade,” commented Gannicott.

“I think a role is required, at least a strategic partnership, with someone that has the broader knowledge base.”

While such firms may require a partner that knows the diamond business, a company such as Harry Winston would likely need the deep pockets of a partner if it were to bid for either Ekati or Diavik, which it has right of first refusal over.

The company had a C$1.17-billion market capitalisation on Thursday, and Nomura analysts valued Rio Tinto’s diamond business at $1.9-billion and BHP Billiton’s at $2.2-billion.

Gannicott has also in the past made comments that his company was more interested in investing in companies with projects that were not yet producing.

Asked if this was still the case, he said: “No, that hasn’t changed, but obviously we’re interested in any assets like that which are relevant to our expertise, with a northern Canadian focus to it.”

“Brownfield projects, greenfield projects, as long as they are well defined, we’re certainly interested,” he said.

A year ago Gannicott told Mining Weekly Online that Harry Winston would be keen to hike its 40% ownership of Diavik if the opportunity arose, but that Rio Tinto was not a likely seller at that stage.