Kinross Gold Corp. is selling its stake in the Diavik diamond mine and reducing its equity interest in the operation's part-owner, Harry Winston Diamond Corp. , after a near tripling of its investment within 16 months.
Toronto-based Kinross said it will use the money made from the initial $150-million (U.S.) investment to advance its gold projects in places such as Russia and South America.
Harry Winston, which did the deal under financial duress during the recession, is taking back full control of its 40-per-cent interest in the Diavik mine partnership, the rest of which is owned by London-based Rio Tinto, the mine's operator.
In March, 2009, Kinross paid $104.4-million for a 22.5-per-cent interest in Harry Winston's portion of the Diavik operation in the Northwest Territories. Kinross also paid $45.6-million, or $3 a share, for 15.2 million shares of Harry Winston, or a 19.9-per-cent stake.
On Friday, Kinross said it would return the Diavik mine stake to Harry Winston for $220-million (U.S.), which includes $50-million cash, a $70-million promissory note and 7.1 million Harry Winston shares valued at about $100-million.
Separately, Kinross will also sell the 19.9-per-cent interest it bought in Harry Winston last year to a group of financial institutions for $13.10-(Canadian) per share. That does not includes fees and discounts, which weren't disclosed.
Harry Winston shares fell almost 11 per cent on the news Friday, while Kinross shares rose about 1 per cent.
Kinross will be left with an 8.5-per-cent stake in Harry Winston, while earning about $400 million from its $150 million investment.
"We think that is a pretty good return for our investors in a short period of time," Kinross chief executive Tye Burt said in an interview on Friday.
He said the money will help pay for exploration rights purchased this week in Russia, where the company already has operations, as well as other deals made previously in the country.
Late Wednesday, Kinross said it will pay $33-million to buy exploration rights in the Kupol licence areas from B2Gold Corp, a deal that also ends a requirement for the two companies to do a joint-venture.
Earlier this year, Kinross agreed to pay $368-million for the Dvoinoye gold deposit and another gold property in eastern Russia, both near its huge Kupol mine. That deal is expected to close in the coming weeks.
Kinross is also considering increasing its stake in, or taking over, Red Back Mining, after paying $600-million for a 9.4-per-cent interest in the Africa-focused miner in May.
"We are happy with our stake right now ... and are monitoring the situation closely," Mr. Burt said.
The deal with Harry Winston also sees Kinross give up its right to a board seat with the diamond miner and retailer.
Harry Winston had been looking at regaining its position in Diavik after the recent recovery of the diamond business from a near collapse during the global financial meltdown.
"We view this as being able to have full control of our life back again," chairman Robert Gannicott said in an interview.
Mr. Gannicott said the company would consider boosting its Diavik stake beyond 40 per cent, but Rio Tinto hasn't expressed an interest in selling down its portion of the joint-venture.
Diavik, Canada's second diamond mine, began producing in January 2003.