Harry Winston Diamond Corporation Announces Agreement to Purchase
Ekati Diamond Mine
TORONTO,
Nov. 13, 2012 /PRNewswire/ - Harry
Winston Diamond Corporation (TSX:HW, NYSE:HWD) ("Harry Winston" or
the "Company") is pleased to announce that it has entered into
share purchase agreements with BHP Billiton Canada Inc., and
various affiliates to purchase all of BHP Billiton's diamond
assets, including its controlling interest in the Ekati Diamond
Mine as well as the associated diamond sorting and sales facilities
in Yellowknife, Northwest
Territories and Antwerp,
Belgium. The Ekati Diamond Mine consists of the Core Zone,
which includes the current operating mine and other permitted
kimberlite pipes, as well as the Buffer Zone, an adjacent area
hosting kimberlite pipes having both development and exploration
potential. The agreed purchase price, payable in cash, is
US$400 million for the Core Zone
interest and US$100 million for the
Buffer Zone interest, subject to adjustments in accordance with the
terms of the share purchase agreements.
The Chairman and Chief Executive Officer of
Harry Winston Diamond Corporation, Robert
A. Gannicott, said, "Completion of this acquisition will
bring the opportunity to marry our Canadian diamond sorting and
marketing skills with an experienced mine operating and development
team, a world class operating asset, and future growth potential.
Together with our existing mining business, these assets will serve
as our platform for sustained, disciplined growth in the upstream
diamond sector."
The Ekati Diamond Mine, which is located
approximately 310 kilometers northeast of Yellowknife in the Northwest Territories of Canada, includes both open pit and underground
operations and is Canada's first,
and largest, diamond producer, having begun production in 1998. It
is located near the Diavik Diamond Mine in which the Company holds
a 40% interest. The Ekati Diamond Mine has produced an average of
approximately three quarters of a billion US dollars of rough
diamonds per year over the last five years. Over that period sales
from the Core Zone represented approximately 6% of world rough
diamond supply by value. The current phase of production at the
Ekati Diamond Mine includes ore sourced primarily from the lower
grade, but high carat value, Fox open pit supplemented by
underground production from the lower portion of the Koala
kimberlite pipe and from the Koala North pipe. Although production
in the next two years is forecast to be lower than the average
achieved over the last five years, it is expected to return to
higher levels as the mine transitions to higher grade, but lower
carat value, ore from the Misery and Pigeon open pits. The current
Ekati mine plan calls for a further seven years of production, but
there are additional resources which could become economic with
increased diamond prices.
Each of the Core Zone and the Buffer Zone is
subject to a separate joint venture agreement. BHP Billiton holds
an 80% interest in the Core Zone and a 58.8% interest in the Buffer
Zone, with the remainder held by the Ekati minority joint venture
parties. Harry Winston has agreed to
purchase BHP Billiton's interests in each of the Core and Buffer
Zones. Pursuant to the joint venture agreements, BHP Billiton will
first separately offer to the joint venture parties its interest in
each of the Core and Buffer Zones on the same terms as those agreed
to by Harry Winston. The joint
venture parties will then have 60 days to elect to acquire either
or both of those interests. Any interests that the joint venture
parties do not elect to acquire within that time period can then be
transferred to the Company in the following 60 days.
The share purchase agreements include typical
closing conditions, including receipt of required regulatory and
Competition Act approvals. If the Core Zone transaction is
not completed because the minority joint venture parties exercise
their pre-emptive rights, the Company will be entitled to be paid a
termination fee of US$30 million by
BHP Billiton. Closing of the transactions is currently
expected to occur before the end of March, 2013.
The purchase price for the acquisitions will be
satisfied from cash resources on hand and from new debt financing
that has been arranged with The Royal Bank of Canada and Standard Chartered Bank. The new
facilities will comprise a US$400
million term loan, a US$100
million revolving credit facility (of which US$50 million will be available for purposes of
funding the Ekati acquisition) and a US$140
million letter of credit facility in support of the Core
Zone environmental reclamation bond.
The new facilities will be secured and will
replace the Company mining segment's current US$125 million facility with Standard Chartered
Bank, which will be repaid and terminated on closing. The new
facilities will include customary covenants, including certain
reporting and financial covenants, and will bear interest at market
rates. The term loan will be an amortizing facility, with
principal repayments beginning 30 months following closing and a
final bullet payment of 50% of the principal amount being due on
the date that is five (5) years after closing. The US$100 million portion of the revolving facility
will be due five (5) years after closing. The letter of credit
facility will expire 364 days after closing. The facilities will be
subject to customary closing conditions, including closing of the
Core Zone acquisition. If the Core Zone acquisition is not
completed but the Buffer Zone acquisition is completed, then the
Company expects to finance the acquisition of the Buffer Zone using
other cash resources available to it.
Harry Winston Diamond Corporation has been
involved in the Canadian diamond industry since the discovery of
the Diavik Diamond Mine in 1994. Its experience and
understanding of the operating environment and the market place for
the diamond products, together with its well-established
relationships with local communities and regional aboriginal
organizations, are expected to serve the Company well when it
assumes operatorship of Ekati. Harry
Winston is enthusiastic about the opportunity to expand and
strengthen these partnerships with a view to extending Ekati's mine
life and building long lasting and sustainable opportunities and
benefits for the people of the Northwest
Territories.
Rothschild has acted as lead financial advisor
and, RBC Capital Markets and Standard Chartered Bank have acted as
co-advisors to Harry Winston in
connection with this Transaction.
Forward-Looking Information
Information included herein that is not current or historical
factual information may constitute forward-looking information or
statements within the meaning of applicable securities laws.
Forward-looking information is based on certain factors and
assumptions regarding, among other things, diamond prices, mining
and production activities, general business and economic
conditions, the ability to obtain the necessary regulatory
approvals to complete the Ekati transactions and the timeframe
required to do so, and the ability to satisfy the conditions to
closing of the Ekati transactions and the mining segment's proposed
new financing facilities. Actual results may vary from the
forward-looking information. While the Company considers these
assumptions to be reasonable based on the information currently
available to it, they may prove to be incorrect.
Forward-looking information is subject to
known and unknown factors, including risks and uncertainties which
could cause actual results to differ materially from what the
Company currently expects. These factors include, among other
things, the uncertain nature of mining activities, fluctuations in
diamond prices and changes in US and world economic conditions,
financing risks, risks relating to the timing of and ability to
obtain necessary regulatory approvals, and risks relating to the
satisfaction of the conditions to closing of the contemplated Ekati
transactions and the mining segment's proposed new financing
facilities. Readers are cautioned not to place undue importance on
forward-looking information, which speaks only as of the date of
this disclosure, and should not rely upon this information as of
any other date. While the Company may elect to, it is under no
obligation and does not undertake to, update or revise any
forward-looking information, whether as a result of new
information, further events or otherwise at any particular time,
except as required by law. Additional information concerning
factors that may cause actual results to materially differ from
those in such forward-looking statements is contained in the
Company's filings with Canadian and United States securities regulatory
authorities and can be found at www.sedar.com and www.sec.gov,
respectively.
About Harry Winston Diamond
Corporation
Harry Winston Diamond Corporation is a diamond enterprise with
premium assets in the mining and retail segments of the diamond
industry. Harry Winston supplies
rough diamonds to the global market from its 40 percent ownership
interest in the Diavik Diamond Mine. The Company's luxury
brand segment is a premier diamond jeweler and luxury timepiece
retailer with salons in key locations, including New York, Paris, London, Beijing, Shanghai, Hong
Kong, Singapore,
Tokyo and Beverly Hills.
The Company focuses on the two most
profitable segments of the diamond industry, mining and retailing,
in which its expertise creates shareholder value. This unique
business model provides key competitive advantages; rough diamond
sales and polished diamond purchases provide market intelligence
that enhances the Company's overall performance.
SOURCE Harry Winston Diamond Corporation