TORONTO (miningweekly.com) – Canadian gold-miner Kinross Gold has agreed in principle to sell its interest in the Diavik diamond mine, in Canada's Northwest Territories, to partner Harry Winston for $220-million in cash, shares and debt, the companies announced on Friday.

Kinross also said it will sell its 19,9% interest in Harry Winston itself to a group of financial institutions on an underwritten block basis.

Kinross agreed to buy the 15,2-million shares, as well as a stake in its holding in the Diavik mine, from Harry Winston in March 2009 for $150-million.

Harry Winston will now own 40% of the mine again, while Rio Tinto owns the balance and is the operator.

In exchange for the Diavik stake, Kinross will receive $50-million cash, approximately 7,1-million Harry Winston common shares with a value of around S$100-million, and a note payable in the amount of $70-million.

After both transactions close, Kinross will own about 8,5% of Harry Winston.

"The transaction represents an opportunity for Harry Winston to consolidate its interest in the Diavik mine, Canada's largest diamond producer and one of the most profitable diamond mines in the world," CEO Robert Gannicott commented in a statement.

Harry Winston sold the mine stake and shares in itself to Kinross for cash to help pay off debt and fund its share of capital spending at Diavik, as the company battled weak demand and prices for rough diamonds, as well as difficult conditions in its high-end jewellery retail business.

The company also suspended dividend payments at around the same time.

Shares in Kinross Gold rose 1,12% on Friday morning, to C$17,18 apiece by 10:59 in Toronto, while Harry Winston dropped 10% on the news, to C$13,10 a share.

The Diavik diamond mine started openpit mining in 2003, and is now transitioning towards underground operations.

Toronto-based Kinross owns mines in the US, Russia, Brazil and Chile.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.