Burgundy Diamond Mines has elected not to exercise a contractual option deed with Gibb River Diamonds to acquire 100 per cent ownership of the Ellendale diamond project.
Burgundy will immediately cease development of the project, which is located in the Kimberley region in WA.
Accordingly, 100 per cent ownership of the project has returned to Gibb.
The Ellendale project has historically been a significant diamond producer, with past production of roughly 1.3 million carats. This included the annual supply of over 50 per cent of the world’s fancy yellow diamonds.
As reason for its decision, Burgundy cited its intention to focus on the acquisition of Ekati diamond mine in Canada.
Burgundy chief executive officer, Kim Truter, said the decision was in the best interested of shareholders.
In a statement, Gibb has indicated that it is excited by the outcome, as the company believes the Ellendale project has great potential.
Gibb also holds nine million shares in Burgundy, so the company’s success at Ekati is in the best interest of both parties.
This week, Burgundy announced that it was in the process of acquiring the world-class Ekati diamond mine from Arctic Canadian Holdings for a cold $209 million.
Ekati is Canada’s first surface and underground diamond mine, which sits about 200km south of the Arctic Circle.
In 2022 alone, the Canadian mine sold 4.2 million carats, delivering revenue of over $742 million.
The purchase amount includes $32 million in Burgundy shares and a deferred payment by Burgundy of $23 million in cash. Additionally, Burgundy will front the majority of the seller’s outstanding debt, roughly $154 million.
According to Burgundy, global demand and supply trends support a favourable long-term pricing outlook for rough diamonds.
As a result of the acquisition, Burgundy will become the largest diamond company on the ASX.