Harry Winston Buys Back Part of Kinross’ Holding in Diavik

Harry Winston Diamond Corporation will purchase from Kinross Gold Corporation its 9 percent indirect interest in the Diavik Joint Venture for $220 million, a year an a half after Kinross invested $150 million in the company for a 22.5 percent interest in the limited partnership.

According to the Friday announcement, Harry Winston will pay $50 million in cash and issue to Kinross of approximately 7.1 million treasury Harry Winston common shares and a promissory note of $70 million, maturing 12 months from the date of closing. The note will bear an annual interest rate of 5 percent.

In April 2009, Kinross made what it called a “strategic investment in Harry Winston Diamond.” This was an investment gave the gold miner a 19.9 percent holding in Harry Winston, a 9 percent indirect holding in Diavik and a seat on Harry Winston's board.

Coinciding with Harry Winston’s announcement, Kinross announced that it had agreed to sell its holding of approximately 15 million common shares of Harry Winston to a group of financial institutions. Kinross' resulting direct ownership in Harry Winston will be approximately 8.5 percent.

“The transaction represents an opportunity for Harry Winston to consolidate its interest in the Diavik mine,” said Harry Winston CEO Robert Gannicott.

Kinross did not provide an explanation to the move. The markets seemed to feel that the transaction was not a positive sign for the diamond firm. Following the announcement Harry Winston’s shares fell 11 percent while Kinross’ shares moved up $0.83 on Friday.