Lower Quality Diamond Production Hurts BHPB Results

Lower grade diamond production at BHP Billiton’s Ekati mine in July - December 2005 resulted in a 19.6 decrease in diamond prices and a 35.7 percent drop in pre-tax earnings. However, the group saw record first half year results, with pre tax results jumping 43 percent to $6.7 billion.

BHP Billiton’s Diamonds and Specialty Products segment (Ekati diamond mine and titanium operations) yielded underlying EBIT (Earnings Before Interest and Tax) of $261 million during the six month period, a decrease of $145 million or 35.7 percent. The miner noted lower rough diamond prices because of lower carat quality, higher costs in relation to the processing of lower grade material, and lower diamond sales volumes.

Diamond sales decreased 3.1 percent compared to the corresponding prior year period. In addition, the prior year period included earnings from Integris Metals (US), which was sold in January 2005.

Half yearly Ekati (Canada) diamond production decreased by 21.1 percent, mainly reflecting the processing of lower grade ore. “The second half of the financial year will continue to be negatively impacted by the processing of lower grade and lower value material at Ekati,” the company said in a release this morning.

Despite the negative news in this segment, BHP Billiton enjoyed record half year financial results, with underlying EBITDA (Earnings Before Interest and Tax Depreciation and Amortization) up 42 percent to $8 billion and underlying EBIT up 43 percent to $6.7 billion.

The diversified miner says attributable profit is up 48 percent to $4.4 billion. This was helped by record half year production volumes for aluminum, copper, and nickel.

The company announced an interim dividend of 17.5 US cents per share, an increase of 30 percent on the prior period interim dividend.