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BHP Billiton plans diamond exploration in India

Rumi Dutta in Mumbai

BHP Billiton, the world's largest diversified resource company, has entered into a strategic alliance with the Perth-based Dwyka Diamonds for a major diamond exploration project in India.

The move has been prompted by the new national minerals policy, which has also resulted in interest being shown by other multinationals such as Rio Tinto and De Beers.

India is the world's largest diamond polishing centre - last year it exported diamonds worth $7.7 billion - but insignificant quantities of diamonds are mined here.

According to the agreement, Dwyka will have operational and managerial responsibilities for the exploration.

A steering committee comprising representatives of Dwyka and BHP Billiton will oversee the development of the licences and will provide technical and other support where required.

The alliance will cover 55,000 square kilometres in the Dharwar area in Andhra Pradesh, where the Kohinoor (793 carats) and the Great Moghul (787 carats) stones were found.

The alliance also covers licenced areas which are said to cover four known diamond-bearing veins.

The "pipes" or veins will be the subject of immediate follow-up work by the alliance, with Dwyka in charge. Micro-diamonds have been recovered in abundant numbers from the area in surface sampling.

"India is probably the last great diamond bearing region to remain unexplored," Dwyka said in a statement on its website. The initial investment in the exploration would be up to $5 million.

Mining construction and development costs will be funded 51 per cent by BHP Billiton and 49 per cent by Dwyka, and cash flow from mining will be split on the same basis.

During the exploration and early evaluation stages, BHP Billiton will fund 15 per cent of the exploration costs in India by way of subscription to Dwyka shares.

BHP Billiton has the right to 51 per cent ownership of the target by paying 300 per cent to 500 per cent of Dwyka's historical costs relating to the target's project area.

If BHP Billiton does not exercise its right, Dwyka retains 100 per cent ownership of the licence.

Once BHP Billiton decides to move to 51 per cent of the project, a joint venture between BHP Billiton and Dwyka will be formed under which BHP Billiton will be solely responsible for funding 100 per cent of development through to completion of a bankable feasibility study.

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