In view of BHP Billiton’s intent to withdraw from the diamond mining industry Rough&Polished asked its London office to explain the reasons for such a decision. Ruban Yogarajah, the company’s spokesman answered our questions.
On November 29, BHP Billiton announced it was going to put up some of its diamond operations for sale since the company intended to focus on larger projects. In what way these larger projects are better than diamond mining?
BHP Billiton’s strategy is to own and operate large, long-life, low-cost, expandable upstream assets but a lack of suitable opportunities in the diamond industry limits the division’s ability to make a substantial contribution to the group over the long term.
Just recently BHP agreed to sell its stake in Richards Bay Minerals to Rio Tinto Group, exiting the titanium minerals industry. The reason to abandon titanium is said to be similar to the decision on diamonds – is it so?
RBM is the sole mineral sands asset currently held by BHP Billiton and is not operated by the company. The titanium minerals industry is also one of the smallest markets in which BHP Billiton participates and is unlikely to make a significant contribution to the company’s future profitability.
BHP Billiton attempted to grow in the industry following the acquisition of WMC in 2005 through the Corridor Sands project in Mozambique. This project was halted in 2009 when studies failed to identify a value adding development alternative. There are few other known quality, large scale resources and it is unlikely that BHP Billiton could build a material position in this industry.
BHP’s major diamond asset, Ekati has about seven years of mining life left and is not at all considered to be inefficient as a mining asset. Why did you come to view it as a lame duck in your operations?
Ekati is a world class diamond mine with a superb safety record and a proud legacy among communities in the North. The review may conclude that BHP Billiton remains the best owner of Ekati or that another company could take the asset further.
Rio Tinto operates the Diavik Mine to the south of Ekati in the North West Territories of Canada. De Beers is planning to develop a new mine at Gahcho Kue in the same area. BHP’s Chidliak Project now overtaken by Peregrine Diamonds is located in Canada’s Nunavut Territory adjacent to the North West Territories. Do you think it’s futile to explore this obviously diamondiferous area for new deposits?
BHP Billiton’s strategy is to invest in large, long life, upstream and expandable assets while remaining a simple and scalable organisation. However, many years of extensive exploration suggest there are few options to develop new diamond mines that are consistent with this approach.
Since BHP Billiton is still considered one of the world’s major diamond miners, what is your long-term forecast for this industry?
We do not offer market forecasts.
Alex Shishlo, Editor in Chief of the European Bureau, Rough&Polished
