Under the deal, BHP Billiton's employees working at Ekati, in Yellowknife and in diamonds marketing in Antwerp, Belgium, will join Harry Winston, a Toronto-based mining and retail company.
"The mine's success is a credit to the people who work there, at Yellowknife and with the marketing team in Antwerp," said Tim Cutt, BHP Billiton Diamonds & Specialty Products president.
"Harry Winston has long experience in the Canadian diamond industry and their commitment to study further development at Ekati could help extend the mine's contribution to Northern Canada for many years to come."
Harry Winston already owns a 40 per cent stake in the nearby Diavik mine, also in the Northwest Territories, in a joint venture with Rio Tinto.
"Completion of this acquisition will bring the opportunity to marry our Canadian diamond sorting and marketing skills with an experienced mine operating and development team, a world class operating asset, and future growth potential," said Robert Gannicott, Harry Winston's chairman and chief executive.
"Together with our existing mining business, these assets will serve as our platform for sustained, disciplined growth in the upstream diamond sector."
The Ekati mine — Canada's first diamond mine — is 310 kilometres northeast of Yellowknife and 200 kilometres south of the Arctic Circle.
Harry Winston said the current Ekati mine plan calls for another seven years of production, but noted there are additional resources which could become economic with increased diamond prices.
The company said current production at Ekati includes lower grade ore, but high carat value.
"Production in the next two years is forecast to be lower than the average achieved over the last five years," Harry Winston said. "It is expected to return to higher levels as the mine transitions to higher grade but lower carat value ore from the Misery and Pigeon open pits."
BHP Billiton, a diversified mining company involved in a wide range of commodities, launched a review of its ownership in the project last year.
The company said the sale will see it take a $200-million charge related to the carrying value of the assets.
BHP Billiton's stake in the project includes an 80 per cent interest in the existing operations and a 58.8 per cent interest in the buffer zone joint venture, primarily focusing on exploration.
BMO Capital Markets analyst Edward Sterck called the deal positive for Harry Winston, but noted there were risks involved with the acquisition.
"Harry Winston is not a mine operator and success may be contingent on the team at Ekati moving over with the transaction," Sterck wrote in a report to clients.
He also noted that investors who own Harry Winston stock for exposure to the retail division which sells high end jewellery and watches around the world "may be put off by an expansion of the mining division and could reduce positions."
Last month, Harry Winston said it has received "various indications of interest" regarding the possible purchase of its luxury retail business, but said it was not in active talks.
The company cut its 2012 production target for the Diavik mine to 7.4 million carats in October as operations shifted their efforts to concentrate on processing higher-valued diamonds.
As recently as the company's second-quarter financial report issued in September, the 2012 production target for Diavik had been eight million carats.
Harry Winston said Tuesday the purchase will be financed from cash on hand and new debt financing.
The new borrowing will include a US$400-million term loan, a US$100-million revolving credit facility of which US$50 million will be available for the Ekati acquisition and a US$140-million letter of credit.
The new agreements will be secured and will replace the company's current US$125-million facility with Standard Chartered Bank, which will be repaid and terminated on closing.
Harry Winston (TSX:HW) shares closed down 30 cents at $13.15 on the Toronto Stock Exchange on Tuesday.