Jan. 6 (Bloomberg) -- BHP Billiton Ltd., the world’s largest mining company, may receive less than $500 million for its Ekati diamond mine in Canada because of its limited asset life and declining earnings, Investec Securities Ltd. said.
The mine in Northwest Territories in which BHP owns 80 percent is valued between $300 million and $500 million, Tim Gerrard, a Sydney-based analyst at Investec, said today in a phone interview. The stake is worth about $2.7 billion, BMO Capital Markets analyst Edward Sterck said on Nov. 30.
“It’s a short-life mine, its best years are well and truly behind it,” Gerrard said, predicting the mine will cease production by 2020. “Its profit will be a lot lower” than the $537 million in pretax earnings posted in the year ended June 30, he said.
BHP said on Nov. 30 its diamond interests may no longer fit the company’s strategy of investing in “large, long-life” assets with potential for expansion. The Ekati unit may be sold after a review of the diamond business is completed by the end of January, Melbourne-based BHP said.
The company agreed to sell its 51 percent stake in the Chidliak diamond exploration project in Canada’s Baffin Island for C$9 million ($8.8 million) on Dec. 20.
BHP spokeswoman Fiona Martin declined to comment today on the company’s review of its diamond interests.
Credit Suisse Group valued BHP’s diamond business, including Ekati and Chidliak, at about $2 billion in a Dec. 2 report.
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