04/14 2:58A BHP To Explore Marketing Ekati Diamonds On Internet >BHP
MELBOURNE (Dow Jones)--Broken Hill Proprietary Co. (BHP), an Australian
minerals, energy and steel company, Friday said it is looking into retailing
branded diamonds from its 51%-owned Ekati mine in Canada via the Internet.
Online retailing is part of a broader company strategy to explore the
possibility of capturing higher sales margins by retailing polished diamonds
rather than just selling rough diamonds mostly to the wholesale market.
"We are investigating how we might be able to realize an enhanced value for
our product and participate further downstream in the industry," Graham
Nicholls, Ekati's vice president of external affairs told a briefing of
reporters.
Nicholls ruled out direct involvement for BHP in operations such as cutting
and polishing. The company could instead seek partners to manufacture the
diamonds and provide retail customer services, he said.
"There are aspects to this kind of a business that really don't fit
obviously with the kind of businesses that BHP is primarily in," he said.
Whatever downstream moves BHP makes, Nicholls said the company doesn't want
to upset its existing marketing relationships. BHP sells the bulk of its Ekati
production to traders in Antwerp but it also sells about 35% of mine output to
De Beers Centenary AG's Central Selling Organization, under a long term
contract.
De Beers Centenary AG's Central Selling Organization, under a long term
contract.
De Beers Centenary is the Swiss-based marketing division of South
Africa-based De Beers Consolidated Mines Ltd. (DBRSY).
BHP's partners in Ekati are Dia Met Minerals Ltd. (DMMA) with 29% and two
geologists, Charles Fipke and Stewart Blusson, each holding 10%.
Ekati is producing about 3 million carats a year but BHP expects annual
production to average between 3.5 million and 4.5 million over the twenty-five
year life of the mine.
The company expects to have the nearby Misery deposit in operation from
mid-2001, adding almost 500,000 carats to annual output. But the lower value
of the diamonds from Misery means revenues won't necessarily rise
significantly.
Jim Excell, President of Ekati, said operating costs at the mine are running
in line with forecasts.
Commenting on diamond market conditions Excell said "the market still
remains strong with no sign of weakness."
-By Andrew Trounson; 61-3-9614-2664; andrew.trounson@dowjones.com
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