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| Ekati Diamond Mine |
Dominion Diamond Corp., formerly known as Harry Winston Diamond Corp., said Wednesday it has completed its acquisition of the Ekati Diamond Mine in Canada’s Northwest Territories and related diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium. The Canadian subsidiary of mining company BHP Billiton was the majority owner of the mine and the other facilities. BHP is exiting the diamond business to concentrate on other mining activities.
The purchase price was $500 million plus price adjustments of $53 million for items that include interest, tax and capital expenditures bringing the total amount paid to $553 million. On the date of closing Ekati had cash on hand of approximately $65 million and two sales cycles (10 weeks) of diamond inventory either in the process of being sorted and valued or available for sale. Dominion Diamond said the inventory will be valued against its rough diamond sales assortments.
Dominion Diamond also provided letters of credit to the Government of Canada of approximately CAD$127 million, in support of reclamation obligations for the Core Zone. The purchase price and the letters of credit were satisfied from or secured by cash on hand.
The Ekati Diamond Mine consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential.
Dominion Diamond funded the acquisition through its recent $1 billion sale of the Harry Winston luxury retail brand to Swatch Group. The company also owns a 40 percent stake in the Diavik Diamond Mine, also in the Northwest Territories of Canada. The acquisition of Ekati has made the company the largest supplier of Canadian diamonds.
Dominion Diamond is still flush with cash and the speculation is it will use the money to buy the remaining 60 percent interest in the Diavik Diamond Mine from mining company Rio Tinto, which has, like BHP, stated a desire to pull out of the diamond business to focus on other mining activities.
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