BHP Billiton Warns of Ekati Decline in Production

BHP Billiton, which produces seven percent of the world's diamonds, said earnings from its Ekati mine in Canada are set to decline this year as it mines lower grade ore.

 

Ekati, which is 80 percent owned by BHP, posted a 66 percent increase in earnings before interest and tax to $352 million for the year ended June 30, but earnings will decline to “historic levels”, said Marcus Randolph, president of the company's diamonds and specialty products unit.

“We will have a good first-half because of the hold-over of some of the higher grade products for sale, but the second half will be weak,” Randolph said. BHP’s diamond business posted earnings before interest and taxes of $212 million in fiscal 2003 and $179 million in fiscal 2002.

The firm is investing $146 million in developing its Panda underground mine at Ekati, which is due to start production early next year, to spur profit at its only diamond mine. The company made a 56 cents profit from every $1 of sales from the mine last fiscal year.

Once the new production begins, the unit will get a”boost in diamond values and carats produced,'' said Randolph.

Diamond prices will “stay at high levels” due to limited supplies and depleting old mines globally, he said.