BHP to review Canadian diamond business – by Brenda Bouw (Globe and Mail – November 30, 2011)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

VANCOUVER— The mine that helped put Canada on the global diamond map could soon be for sale, put in play by the industry’s shifting economics and an inexorable drop in production.

The Ekati mine in the Northwest Territories, which is nearing the end of its life in 2019, is under review by mining giant BHP Billiton Ltd., which said Tuesday that it could quit the diamond mining business in Canada. BHP owns 80 per cent of Ekati, the country’s first diamond mine, and 51 per cent of the Chidliak project on Baffin Island.

It’s studying whether diamonds, which represent less than 2 per cent of its annual profit, should still be part of a business dominated by much larger industrial commodities such as iron ore, coal and base metals, and its foray into potash. Its strategy is to invest in bigger, long-term assets as it ramps up production to meet growing demand for metals, largely from China.

The move is the latest in what is becoming a major shift in the diamond business, in terms of both ownership and demand. Earlier this month, the legendary Oppenheimer family sold its stake in DeBeers to Anglo American, while Russian giant Alrosa is said to be considering going public.

At the same time, global demand is rising, particularly in emerging economies such as China, where there are an estimated 12 million marriages a year, and the number of jewellery-worthy stones to slip on fingers is sliding. Diamond prices have topped pre-recession highs as demand outstrips supply.

Most rough diamonds from Ekati are sold to international diamond buyers through BHP’s sales office in Antwerp, Belgium, as well as Canadian manufacturers based in the Northwest Territories.

Ekati, about 200 kilometres south of the Arctic Circle, helped make Canada a major player in the global gem business. With average annual production of more than three million carats of rough diamonds over the past three years, its sales account for about 10 per cent of global supply.

Canada has become a top player in the industry since the discovery of Ekati, and as consumers turned their back on so-called “blood diamonds” produced in war zones in regions such as Africa, where much of the world’s diamonds are produced.

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