Diamonds Are Forever Changing Hands

Written by Adam Selway Ryan

Finders are not always keepers, especially when what they find is diamonds.

BHP Billiton has negotiated a deal that will hand over a 51 per cent share in its diamond exploration project in Baffin Island to Peregrine Diamonds, a Canadian company.

The newly discovered diamond cache, called Chidliak, is part of Nunavut, a recognized Inuit territory of Canada’s arctic.

“We are pleased to sell our interest in Chidliak to its natural owner,” said Tim Cutt, BHP Billiton Diamonds and Special Products President, in a statement about the newly minted agreement.

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In exchange, BHP Billiton will receive a payout of $9 million over three years and a two percent royalty on Chidliak’s future production.  Peregrine will now assume 100 per cent ownership and continue to handle operations.

Sustainability initiatives have led BHP Billiton to analyze its mining processes in detail before going forward with new plans.  Rigorous environment and safety standards must be upheld before the company is willing to pursue a project.

Its current stake in the Canadian diamond mine EKATI is under continuous review, and strategists remain committed to protecting the operation’s benefits to local communities.

Before the deal, ownership went to BHP, 51-49.  Given that the Canadian company has been managing the project since 2006, it’s a welcome buyout for many of the folks on the ground.

For BHP Billiton, the deal is part of an ongoing effort to streamline its investments into long-term, high-yield, expandable profits – which prompted a review of its diamond mining operations worldwide.  If the company cannot be convinced that the operations fit into its broader model, it’s going to restructure – and that may have begun this week.