BHP Billiton JV partner sues over sale of Canadian diamond mine

17th January 2013 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO ( – A joint venture (JV) partner is suing BHP Billiton over its plan to sell its stake in the Ekati diamond mine and surrounding exploration properties, in Canada, to miner and luxury goods manufacturer Harry Winston Diamond.

C Fipke Holdings (Fipco) has started an action in the Ontario Superior Court of Justice against BHP Billiton Canada and certain of its affiliates, Harry Winston and its subsidiary Harry Winston Diamond Mines, as well as against Dr Stewart Blusson (Blusson) and Archon Minerals, alleging that the offers made by BHP Billiton to Fipco do not comply with Fipco's pre-emptive rights under the JV agreements for the Ekati mine.

Harry Winston in November 2012 said it had agreed to buy from BHP Billiton an 80% interest in the Core Zone JV and a 58.8% interest in the Buffer Zone JV for about $500-million.

Under the purchase agreement, BHP Billiton offered its interests in the JVs to Fipco, Blusson and Archon, the minority JV parties. Fipco, which holds a 10% interest in each of the Core Zone and Buffer Zone JVs, also alleges in its statement of claim that, among other things, Harry Winston’s debt financing arrangements for the acquisition have interfered with Fipco's ability to arrange its own financing.

The claim seeks an order of the court prohibiting Harry Winston from buying BHP Billiton's interests unless and until BHP Billiton provides Fipco with revised offers. Blusson, who holds a 10% interest in the Core zone, and Archon, which holds a 31.2% interest in the Buffer zone, have not issued a claim against BHP Billiton or Harry Winston with regard to this issue, and have advised that they do not intend to do so.

Harry Winston said the parties to the litigation have entered into an agreement which provides for the trial and any appeal to be conducted on an expedited basis, with a view to obtaining a final ruling no later than April 15, 2013.

The agreement provides that, if such a ruling is in favour of Harry Winston and BHP Billiton, Harry Winston’s purchase of BHP Billiton's JV interests in the Ekati mine may be completed before May 15, without retriggering the pre-emptive right provisions of the JV agreements.

“The company and BHP Billiton believe that the claim by Fipco is entirely without merit, and intend to vigorously defend the action in order to proceed with the purchase and sale of the Ekati mine,” Harry Winston said in a statement.

The parties are continuing with the regulatory approval process, and expect to complete the transaction following resolution of the litigation.