BHP Billiton, Rio Tinto may merge Canadian diamond operations

Former rivals, Anglo Australian mining giants BHP Billiton and Rio Tinto are mulling merging their $ 850-million Canadian diamond operations, as the miners look for more collaborations following their proposed iron ore joint venture in Western Australia's Pilbara mines in June.

The Australian said that BHP has sent some of its employees to Canada to find out how the two companies could merge their respective diamond mines located next to each other.

The two mines are located northeast of Yellowknife, where Rio Tinto, operating through its subsidiary Diavik Diamond Mines Inc, holds 60 per cent of the Diavik mine in Canada and Canadian company Harry Winston Diamond Mines Ltd holds the remaining 40 per cent.

BHP holds 80 per cent of the Ekati mine, while two geologists who discovered the site, Charles Fipke and Dr. Stewart Blusson, each hold a 10-per cent stake in the mine.

Both the diamond mines are minor operations for  two mining giants- BHP's Ekati mine has an annual EBIT of $59 million and Rio's Diavik posted a first-half loss of $56 million.

But both the diamond mines account for a majority of Canada's diamond output with 2008 production at Rio's Diavik reaching 5.535 million carats, and at BHP's Ekati to 3.221 million carats.