BHP Billiton, the worlds biggest miner, will exit the diamond mining business after selling its stake in the Ekati diamond mine in Canada and Diamonds Marketing operations to Harry Winston Diamond for $500 million.

The sale of the Ekati mine,  which produces about 11 per cent of the world's diamonds by value, is part of the London and Melbourne-based company's strategy to exit the diamond mining business that accounts for around 2.5 per cent of its annual operating profit.

In November 2011, the Anglo-Australian miner had said that it would review its diamond assets and examine whether its presence in the diamond industry is consistent with its strategy of investing in expandable assets.

A month later, it sold its entire 51-per cent stake in the Chidliak exploration project in northern Canada to joint venture partner Peregrine Diamonds, for $8.7 million.

Private equity firm  Kohlberg Kravis Roberts, which had earlier shown an interest in buying Ekati, backed out from the bidding process while De Beers, the world's largest diamond miner, which was also considering to bid, pulled out fearing anti-trust issues.

Private equity firm Apollo Global Management, Harry Winston and diamond exploration company Stornoway Diamond Corp were in the bidding process.

Melbourne-based BHP Billiton holds an 80-per cent stake in the Ekati mine, its only operating diamond mine. The remaining 20-per cent is held by geologists Charles Fipke and Dr. Stewart Blusson with 10 per cent each.

The Ekati diamond mine located in Canada's Northwest Territories includes open pit and underground operations. Between 1998 and 2009, the mine has produced 45 million carats (8,000 kg) of diamonds.

BHP Billiton sells most of the production to international diamond buyers through its  Antwerp sales office. The Antwerp marketing and sales office is also part of the sale.

Harry Winston already owns a 40 per cent stake in the nearby Diavik mine while the remaining is held by BHP Billiton's rival Rio Tinto. The two mines are located northeast of Yellowknife in Canada's Northwest Territories.

For the past six months, Harry Winston has also been talking to Rio Tinto for buying out its 60-per cent stake in Diavik mine. (See: Harry Winston in talks to buy Rio Tinto's stake in Canada's Diavik Mine: report)

In April, private equity firm Kohlberg Kravis Roberts & Co was considering to bid for Rio Tinto's stake in the Diavik mine and BHP Billiton's Ekati mine and merge both operations to achieve synergies.

The Diavik Mine has 16.1 million carats of proven reserves and 42.8 million carats of probable reserves and nearly 59 million carats of total proven and probable reserves.

Diavik's superior grades make it one of the most valuable and profitable diamond mines in the world. Both companies have plans to extend the mines life to least 2022.

Harry Winston receives and markets a 40-per cent share of the mine's rough diamond production and sells about 25 per cent of the diamonds in its share to Tiffany & Co. and the remainder on the Antwerp open diamond market through its subsidiary, Aber International.

Harry Winston also has a luxury brand segment, Harry Winston Inc, a diamond jeweller and luxury timepiece retailer with stores in New York, Paris, London, Beijing, Shanghai, Tokyo, Hong Kong and Beverly Hills.

Harry Winston said that it will fund the acquisition through cash on hand and new debt financing, which includes new $400-million term loan, a $100-million revolving credit facility of which $50 million will be available for the Ekati acquisition and a $140-million letter of credit.