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Gold/Mining/Energy : Canadian Diamond Play Cafi -- Ignore unavailable to you. Want to Upgrade?

To: E. Charters who wrote (850)	5/27/2003 12:54:19 PM
From: rdww	Read Replies (1) \| Respond to of 16205

DB looking at Ekati? an interseting way to get a tax writeoff for thier exploration work in canada for the next few years <http://www.minesite.com/images/b-print-off.gif> [email page] Date : May 27, 2003 Scoop ?.De Beers May Make An Offer For BHP Billiton?s Ekati Diamond Mine in Canada. Do not be surprised if the privatised De Beers diamond giant acquires the Ekati diamond mine in the Northwest Territories of Canada from BHP Billiton. Since Brian Gilbertson was pushed somewhat unceremoniously from his position of CEO early this year the Australian oriented board has reduced the priority placed on diamond production. Naturally BHP Biliton would want to be seen to be getting top dollar for the mine, but De Beers need for such a mine is great as it has no production to show for 40 years of exploration in Canada. Anglo American recently showed the way to strengthen a balance sheet with its bond issue and De Beers could follow suit having already made strenuous efforts to reduce its huge stockpile of diamonds. Funds should therefore be available for an acquisition without too much effort. For this De Beers will have a diamond mine producing 4 per cent of world production by weight and 5 per cent by value. Just as important, its exploration activities in Canada will become tax efficient as it will be able to offset expenditure against diamond sales. Also worth bearing in mind are the problems De Beers faces in mining its two advanced projects, the Knife Pipe and Snap Lake. Surface drainage and the building of a wall could cost zillions at Knife and the shape and structure of Snap Lake brings many mining difficulties. De Beers has another reason to want to buy the mine. In late 2002, BHP Billiton ended the agreement by which De Beers bought 35 per cent of Ekati?s output From then onwards BHP Billiton marketed all Ekati's output with mine production sorted and valued at Yellowknife prior to shipment for sale. If De Beers does buy Ekati it will be interesting to see how it deals with the Canadian government and whether it will be able to agree on the valuations carried out by WWW International Diamond Consultants, the government?s diamond valuator. In Angola recently De Bees played hard ball with the government over its acceptance of diamond valuations based on the De Beers price book which has some 15,000 categories all of which, inevitably, seem to work out in favour of De Beers. . The Angolan government stuck out for open market prices in the realistic hope that these would be better and the result was that De Beers announced that all mining, exploration and marketing rights had been stopped Doubtless the South Africans will be rather more circumspect in North America as they still have an outstanding problem about access into the US. When BHP Billiton acquired Dia Met Minerals back in 2001 it paid C$687 million in shares. For this it got 80 per cent of the Ekati mine with the remaining 20 per cent held equally by Chuck Fipke and Stewart Busson who were originally involved in its discovery. In the 12 months ended January 31 2001 Ekati had produced 2,629,000 carats of diamonds during the year and sold them at an average price of US$172.50/carat. The recent 9 month results from BHP Billiton to end March show a fall in earnings from diamond production though the actual carats produced rose from 2.627 million carats to 3.04 million carats. The fall in average prices was due to a change in product mix with a higher percentage of diamonds from the Misery kimberlite pipe, and a to a lesser extent from the Koala pipe. Since treatment of Misery material started in late 2001 BHP Billiton has seen the average price fall to around US$100 per carat. The kimberlite pipes at Ekati are similar to those of South Africa and Russia, but they are overlain by small lakes. Five of these pipes - Panda, Koala, Misery, Fox and Leslie - are being developed in the core zone and three more will follow. As of June 2000, Ekati had proven reserves of 40.2 million tonnes at an average grade of 1.0 carats/tonne and probable reserves of 20.1 million tonnes at an average grade of 0.8 carats/tonne This gives a total reserve of 60.3 million tonnes at 0.9 carats/tonne. The main mine is an open pit operation but there are additional underground-mineable resources and a trial underground operation is underway at Koala North. Plenty to work on, and the word is that a price of between US$600 million and US$700 million may be agreed.