KKR’s interest in BHP diamond mine fades

KKR has backed away from the sale of a BHP Billiton diamond mine, raising questions about demand for such assets, just as peer Rio Tinto starts work on a potential sale of its diamond division, the Financial Times reported.
Rio has appointed Morgan Stanley to assess options for its diamond business, which includes mines in Australia, Canada and Zimbabwe and could be worth as much as $2bn.
Its move comes as KKR cools on the idea of buying BHP’s Ekati mine in Canada, people familiar with the matter said. Ekati, which BHP said it was reviewing last November, could be worth between $750m and $1.2bn, people in the industry said.
While KKR could revive its interest, mining experts have questioned whether Ekati – which has a nine-year mine life and requires further investment – would work for a private equity owner, the Financial Times says.
The sale had also attracted initial interest from private equity firm Apollo Global Management.
Rio is open to a range of options, including selling its mines piecemeal or merging the business with BHP’s. But the latter is unlikely, say some in the industry, given the limited savings from a combination and the complexities of such a move.
BHP has said that it could hold on to Ekati. But those following the process said the auction was ongoing, with no announcement likely for a few weeks.
Some of these observers said De Beers had shown renewed interest in recent days, despite concerns that the world’s biggest seller of diamonds might face antitrust problems in buying the mine.