Canadian Peregrine Diamonds (TSX:PGD) said Monday it has completed an option and subscription agreement with De Beers Canada, in which the De Beers has the exclusive right, until Dec. 31, 2013, to enter into an earn-in and joint venture agreement with Peregrine on a 50.1% De Beers / 49.9% Peregrine ownership basis for the Chidliak diamond project located on Baffin Island, Nunavut, Canada.
The world of diamond mining is undergoing fundamental changes.
Last week, a bullish plan to revitalize Nunavut’s Jericho diamond mine, which last functioned from 2006 to 2008, was put on hold as Canadian-based Shear Diamonds (CVE:SRM) decided to halt production at the site, only months after it restarted operations.
BHP, the globe’s biggest mining company, launched a review of its diamond operations late last year with an eye to sell most or all of its assets. BHP has already off-loaded its Chidliak exploration project in Canada to Peregrine Diamonds.
Rio Tinto followed in March saying that it was reviewing its gem business, potentially selling it all off.
It seems like the diamond business may simply be too small for the mining giants. Rio Tinto’s diamond mines contribute less than 2% to its earnings and it’s a small proportion of BHP’s income as well.
Apart from the changing strategy of BHP and Rio, the founding family of De Beers recently sold out completely from the company synonymous with diamonds after three generations steering the business. The $5.1 billion deal, announced in November, was completed in early August.
Russia’s Alrosa overtook De Beers in 2009 as the world’s number one supplier of rough gems after decades of being a secretive, state-owned organization in the process of readying for a global public offer.