BHP said on Tuesday it had begun a review to examine whether a continued presence in the diamond industry was consistent with its strategy of investing in expandable assets. The review is due to be completed by the end of January 2012.
EKATI is a world class operation and Chidliak is a promising exploration opportunity, but many years of extensive exploration suggest there are few options to develop new diamond mines that are consistent with this approach, the miner said.
Diamonds represent only a fraction of BHP's global portfolio. The diamonds and speciality products division -- which includes its titanium minerals and potash projects as well as diamond mining -- accounted for roughly 2.5 percent of 2010 operating profit.
News of BHP's review comes less than a month after rival Anglo American
But analysts said the move did not come as a surprise, given BHP's relatively small footprint in diamonds and the tens of billions of dollars of investments BHP has already made or plans in large, tier-one assets including shale gas, potash and the expansion of the Olymic Dam copper uranium mine in Australia.
The diamond business is 2 or 3 percent of the total of BHP, and is not growing, analyst Des Kilalea at RBC in London said.
It is not a comment from BHP on diamonds, it is a comment on how difficult it is to grow in diamonds. I am not surprised to see this review is happening -- the bigger surprise is that it didn't come earlier.
BHP shares were trading down 0.5 percent at 1,823 pence on the London market at around 3:50 p.m., in line with the sector.
BHP has an 80 percent stake in EKATI, the cornerstone of its diamond business. The mine, in the Northwest Territories, has produced an average of over 3 million carats of rough diamonds per year over the last three years, with annual sales representing around 10 percent of global diamond supply by value.
It also owns a 51 percent stake in Chidliak, a venture with Peregrine Diamonds
Most of BHP's diamonds are sold to buyers through its Antwerp sales office.
(Editing by Ben Hirschler and David Cowell)