AFR Street Talk: Mining guru O’Keeffe seeks $231m equity for Burgundy Diamond play

Michael O’Keeffe, of Riversdale Mining and more recently Champion Iron fame, has unveiled an ambitious plan to create the largest ASX-listed diamond company and one of the largest pure play listed diamond groups globally.

O’Keeffe’s Burgundy Diamond Mines has signed a $US136 million ($209 million) deal to acquire the Ekati Diamond Mine in Canada and is seeking to fund it with a $US150 million ($231 million) equity raising.

The miner, known for his counter-cyclical resources plays, had stockbrokers Aitken Mount and Bell Potter start drumming up interest in the raising on Tuesday morning. There was no price and terms in front of fund managers, rather an explanation of the company’s plans.

At about $US200 million EBITDA last year, Ekati is the third diamond company in the world by earnings after Russia’s Alrosa and De Beers.

The mine was developed by BHP in the late 1990s and has had various owners, including the current group of US debt funds who are taking $US21 million equity and keeping $US69 million of debt in the business.

Buying it should put Burgundy on the map, and would be another counter-cyclical move from O’Keeffe, who is Burgundy’s executive chairman and a substantial shareholder.

The former Glencore Australia boss is well known for creating huge value in Riversdale Mining (there were two, one sold to Rio Tinto and the other to Gina Rinehart), and Champion Iron, where he bought the Bloom Lake iron ore mine in Canada in 2015 for $C11 million and turned it into a company now trading with a $3.9 billion market capitalisation.

Burgundy’s brokers are expected to price and underwrite the deal following a global roadshow, to take place in coming weeks.

The company’s shares last traded in December, when it had about a $100 million market capitalisation.