By Nick Webb

Sunday August 28 2011

A €300m-valued listed Canadian diamond company backed by billionaire financier Dermot Desmond has rebuffed a buyout approach.

Last week, Mountain Province Diamonds, which is listed on the Canadian Stockmarket, announced "after receiving unsolicited expressions of interest from third parties, the company has decided to cease discussions and other engagement with those third parties". The suitor has not been named.

"It's inevitable that we've attracted the interest of other participants in the diamond industry," the company said, adding that it was focused on advancing the financing and the licensing of its mine.

"Under the circumstances, the board is of the view that further engagement with third parties might be premature before the results of these exploration programmes have been announced."

Mr Desmond owns a 20 per cent stake in the company, which is developing the world's biggest diamond mine in northern Canada with its partner De Beers. It is thought that his initial stake in the firm -- formed through a merger in 2000 -- was worth close to €7m. Last week, the stake was worth close to €60m. Scottish mining magnate Harry Dobson is also involved with Mountain Province. Mr Desmond and Mr Dobson were both shareholders in Man Utd (before it was bought by the Glazers) and were backers of an ambitious scheme to build a vast oil refinery in Newfoundland.

The Gahcho Kue mine --which produced Canada's biggest ever diamond -- may contain as much as €3.5bn worth of diamonds when fully operational. Last November, investors, including Mr Desmond, ploughed almost €20m into the company.

Mountain Province is in talks with a major Canadian bank to finance its share of the development costs for the mine, CEO Patrick Evans said two weeks ago. Mountain Province and De Beers are looking for €280m in project financing with a further €70m likely to come from the issue of new equity or other debt.

- Nick Webb