NORTHWEST TERRITORIES – The deal for Harry Winston Diamond Corp. to buy out BHP Billiton‘s interest in the Ekati diamond mine at Lac des Gras has hit a roadblock. Minority owner Chuck Fipke, who along with Stuart Blusson discovered the kimberlite that became Canada’s first diamond mine, has filed documents with the Ontario Superior Court of Justice that may delay the deal.
Fipke’s company, C. Fipke Holdings Ltd. (Fipco), has alleged that the offer made by BHP Billiton to Fipco do not comply with Fipco’s pre-emptive rights under the joint venture agreements for the mine, and that Harry Winston was complicit in the alleged non-compliance. The suit also names 10% owner Stuart Blusson and his company, Archon Minerals Ltd., as well as Harry Winston Diamond Mines Ltd., a subsidiary of Harry Winston.
Last November Harry Winston agreed to purchase from BHP Billiton its 80% interest in the core zone joint venture and a 58.8% interest in the buffer zone joint venture for a total of $500 million. BHP Billiton said it offered its interests in the joint ventures to Fipco, Blusson and Archon, and that the 60-day period for them to act expired last week. The Fipco suit further alleges that the debt financing activities of Harry Winston interfered with Fipco’s own ability to arrange its own financing.
Fipco is also insisting that BHP Billiton make a new offer under which it could buy the larger company’s interest in the mine.
Neither Blusson nor his Archon Minerals are inclined toward a legal remedy. On the contrary, both have indicated that they are satisfied with the original offer and do not intend to pursue purchasing the mine.
Both BHP Billiton and Harry Winston have said publicly that the suit is without merit and they will vigorously defend the action.
All parties have agreed to an expedited trial (and potential appeal) so that the court’s final ruling will be made not later the April 15, 2013. The agreement to fast track the trial provides that if the court rules in favour of BHP Billiton and Harry Winston, the two can complete the sale before May 15 without re-triggering the pre-emptive right provisions of the joint venture agreements.