Kinross (NYSE:KGC) Selling Diavik Diamond Mine Back to Harry Winston (NYSE:HWD)

No matter how you look at it, Kinross Gold (NYSE:KGC) (TSE:K) made a super deal with Harry Winston (NYSE:HWD) for the Diavik Diamond Mine, when they acquired from them in March 2009 for $150 million, and now are turning around and selling it back to them for $220 million.

Kinross, which also owns a 19.9 percent stake in Harry Winston, will sell that as well to an unnamed consortium of financial institutions.

The diamond industry was slammed hard during the harder parts of the recession, and Winston need the influx of capital to shore up its balance sheet, which Kinross wisely offered them.

Since it began operations in 2003, Diavik has produced over 50 million carats of rough diamonds.

The industry seems to be turning around now, as demand has surged from Asia, specifically India and China.

Major competitor De Beers increased sales by over 80 percent in the last half, and believes things will continue to improve.

Assuming the diamond industry has in fact turned around, it would make sense to Harry Winston to re-acquire the mine, even though they had to pay a premium to do it.

Although terms weren't disclosed, based on the closing on Thursday, the 15.2 million shares exchanging hands are valued at approximately C$200 million.

Kinross closed in New York at $16.43, gaining $0.10, or 0.61 percent.

SHORE GOLD (TSE:SGF) Entering Diamond Business

Struggling miner Shore Gold (TSE:SGF) is about to enter the diamond business, as it has the goal of developing the first diamond mine in Saskatchewan, Canada.

Shore and others interested in the prospect had been waiting for a decision concerning putting a royalty system in place in order to project revenue and earnings.

That has now been done, as the Canadian province will take a one percent cut of the value of the annual diamond production at a mine.

The royalty cut doesn't kick in until after a five-year period where the miner can recoup investments made in the mine. There is also another royalty on the profits, which also kicks in at a 10 percent rate once investments are recovered.

Shore Gold senior vice-president George Read said, "It's very much a royalty regime that promotes the development of the diamond deposits in Saskatchewan. It's another milestone crossed. Until today, the province did not have a diamond royalty regime."

Read added the production decision will probably come in 2011, and once that is made, commercial production should start in 2016 once the mine is built.