TORONTO (miningweekly.com) – Mining heavyweight BHP Billiton on Tuesday confirmed rumours that it was considering selling its Canadian diamond assets, which include the Ekati mine in the Northwest Territories (NWT), and an exploration joint venture on Baffin Island.

The company said exploration suggested the assets did not fit its strategy of owning big, long-life and expandable mines, and that the review of its diamond business would reach completion in January 2012.

Ekati, which opened in 1998 as Canada’s first diamond mine, is a “world class” operation, and the Chidliak joint venture with TSX-listed Peregrine Diamonds is a “promising” exploration opportunity, BHP Billiton said in a statement.

"This review will, therefore, examine whether a continued presence in the diamonds industry is consistent with BHP Billiton’s strategy and evaluate the potential sale of all or part of the diamonds business," the Anglo-Australian miner said.

Rumours emerged earlier this year that Russia’s Alrosa, the biggest diamond producer by volume, was interested in buying BHP Billiton’s 80% stake in Ekati.

RBC Capital Markets analyst Des Kilalea said the diamond business review should come as no surprise.

"The obvious potential buyers would be De Beers, Alrosa and Rio Tinto," he said in a note, adding that De De Beers was not a likely buyer.

Kilalea said that Alrosa also had its own big spending plans in Russia, and that Rio Tinto would probably only show interest if it could purchase Ekati at a discount to the residual cash flow, given the exploration spending the project requires.

Rio Tinto already owns 60% of the Diavik mine, located around 20 km south of Ekati, with Toronto-based Harry Winston holding the rest.

De Beers owns the Victor mine in northern Ontario, and the Snap Lake mine in the NWT.

While Ekati produces 3% of current world rough diamond supply by weight and 11% by value, the mine makes up only 2% to 3% of RBC's forecast 2012 pretax earnings for BHP Billiton.

If BHP Billiton were to sell Ekati, it would be the second major divestment in the diamond industry, after South Africa's Oppenheimer family announced earlier this month it agreed to sell its 40% ownership of De Beers to Anglo American for $5.1-billion. The family had headed up the daimond giant since 1926.

A BHP Billiton spokesperson declined to comment on whether the company had received much interest in its diamond assets, or the timing of any potential sale.