Dominion Diamond Completes $553 million Acquisition of Ekati Diamond Mine

Ekati Diamond Mine

Dominion Diamond Corp., formerly known as Harry Winston Diamond Corp., said Wednesday it has completed its acquisition of the Ekati Diamond Mine in Canada’s Northwest Territories and related diamond sorting and sales facilities in Yellowknife, Canada, and Antwerp, Belgium. The Canadian subsidiary of mining company BHP Billiton was the majority owner of the mine and the other facilities. BHP is exiting the diamond business to concentrate on other mining activities.

The purchase price was $500 million plus price adjustments of $53 million for items that include interest, tax and capital expenditures bringing the total amount paid to $553 million. On the date of closing Ekati had cash on hand of approximately $65 million and two sales cycles (10 weeks) of diamond inventory either in the process of being sorted and valued or available for sale. Dominion Diamond said the inventory will be valued against its rough diamond sales assortments.

Dominion Diamond also provided letters of credit to the Government of Canada of approximately CAD$127 million, in support of reclamation obligations for the Core Zone. The purchase price and the letters of credit were satisfied from or secured by cash on hand.

The Ekati Diamond Mine consists of the Core Zone, which includes the current operating mine and other permitted kimberlite pipes, as well as the Buffer Zone, an adjacent area hosting kimberlite pipes having both development and exploration potential.

Dominion Diamond funded the acquisition through its recent $1 billion sale of the Harry Winston luxury retail brand to Swatch Group. The company also owns a 40 percent stake in the Diavik Diamond Mine, also in the Northwest Territories of Canada. The acquisition of Ekati has made the company the largest supplier of Canadian diamonds.

Dominion Diamond is still flush with cash and the speculation is it will use the money to buy the remaining 60 percent interest in the Diavik Diamond Mine from mining company Rio Tinto, which has, like BHP, stated a desire to pull out of the diamond business to focus on other mining activities.

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Harry Winston May Purchase Second Canadian Diamond Mine

Ekati diamond mine. Photo credit: Jason Pineau, through Wikipedia

Harry Winston is in talks to purchase an important asset of BHP Billiton’s diamond business, according to published reports.

The Toronto-based company, which describes itself as a diamond enterprise with premium assets in the mining and retail segments of the diamond industry, has secured bank financing for a possible deal to buy the Ekati diamond mine in Northwest Territories of Canada, according to the Financial Times. However, the deal, which was to be completed by mid year is going slower than expected and could even break down.

Harry Winston, best known as a luxury jewelry and watch retailer, already owns a 40 percent share in the Diavik diamond mine in the same area with Rio Tinto, which owns a 60 percent stake.

Both BHP Billiton and Rio Tinto announced in November 2011 that they are looking to get out of the diamond business to focus on larger, more-profitable assets from their vast mining businesses.

It’s a complicated matter, according to the report, because if Rio Tinto agreed to sell Diavik to Harry Winston, it would make it more difficult for the mining giant to sell the rest of its diamond assets.

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Harry Winston Says Retail Sales Sparkle While Mining is Ahead of Plan

Robert Gannicott, Harry Winstion Chairman and CEO

Harry Winston Diamond Corp., in an interim trading update, said the first two months of the third quarter have seen the jewelry and watch sales continue to increase. Sales have been particularly strong in the U.S. and Japan. Chinese customers represent a growing share of the clientele in all sales regions. Strong advertising of new product lines, such as Midnight watches, bridal and designer jewelry, has delivered particularly strong increases while sales continue in high jewelry, Harry Winston's traditional business.

The Toronto-based company, which does business as a luxury retailer and a diamond miner, said it released its update in response to recent market volatility surrounding the Euro sovereign debt crisis.

The company said its mining business, which consists of 40 percent ownership of the Diavik Diamond Mine in northwest Canada, is modestly ahead of its production plan while joint venture cash calls have been below budget in Canadian dollars which, combined with the fall in the Canadian dollar against the company's reporting and sales currency of US dollars, gives an 11 percent reduction in joint venture operating costs for the first two months of the quarter against plan.

The company said it has approximately $ 112 million of rough diamond inventory at June sales prices (prices peaked at the July sale) and a further $75 million of capacity in its mining debt facility. The jewelry and watch business has its own credit facility secured by its inventory.

Having increased in price by around 25 percent over the past year up to the end of July, the polished round diamonds that form the core of its jewelry sales, and polished diamond inventory, have since declined in price by about 10 percent. The price changes are not uniform with some items, such as fancy shapes, not declining at all. Over the same periods rough diamond prices increased by around 50 percent, but are now correcting against polished prices.

The credit facilities essential to the diamond polishing industry are largely underwritten by European banks that are currently under stress with European sovereign debt issues, the company said. Credit hasn’t been withdrawn or reduced, but neither have they been increased against higher unit prices. The processing industry is now selling polished and reducing rough purchases to increase liquidity even as jewelry retail consumption continues at levels higher than last year.

“The credit crisis of 2008/9 was centered on consumer credit and the banks that were supporting it. This had a dramatic effect on the consumer. The current crisis is centered on sovereign debt and the largely European banks that are its holders, while consumer off-take remains resilient,” said Robert Gannicott, Harry Winstion Chairman and CEO.

“Although we continue to make small sales of specific rough diamond assortments to specialist clients, we have elected not to make broader rough diamond sales into an unstable market that seeks bargains. As a result, significant rough sales revenues from this period will be deferred into the fourth quarter, and possibly subsequent periods. This time of the year is traditionally quiet in the rough diamond market being the Jewish and Indian holiday periods. We expect a return to normality in November as demand increases in the lead-up to the Christmas, Indian wedding and Chinese New Year seasons.”

William and Kate Receive Canadian Diamond Jewelry

Diamond cufflinks and brooch that were given to the Duke and Duchess of Cambridge.

While visiting the Canadian Northwest Territories Tuesday, the Duke and Duchess of Cambridge received a brooch and cufflinks made of locally mined diamonds.

The gift for the royal couple is appropriate from this most remote part of Canada because the area is known for diamond mining and it currently supplies 10 percent of the world’s diamonds by value. The brooch and the cufflinks are in the shape of polar bears and contain 302 stones and 390 stones respectively. The pieces were made by the Harry Winston Diamond Corp.

The diamonds were mined in Diavik Diamond Mine, about 190 miles north of Yellowknife, the capital of the Northwest Territories. Harry Winston, known internationally as a luxury jeweler, co-owns the diamond mine with mining giant, Rio Tinto Group.

Read more about the gift at Forbes.com.

Harry Winston Q3 Sales Up 88%

Harry Winston, said that third quarter consolidated sales increased 88 percent year-over-year to $140.9 million, led by a two-fold increase in rough diamond sales from its Canadian mine and a 50 percent increase in its luxury jewelry retail operation.

Consolidated earnings totaled $13.7 million for the period, ended October 31, compared to a loss of $4.9 million for the third quarter of 2009. Consolidated net income for the third quarter was $3.9 million.

Rough diamond sales for the quarter rose 192 percent year-over-year to $60.7 million. The Toronto based company supplies rough diamonds to the global market from its 40 percent interest in the Diavik Diamond Mine, located in Canada’s Northwest Territories. Mining giant Rio Tinto owns the remaining 60-percent share of the mine. The increase in sales resulted primarily from a 182 percent increase in volume of carats sold.

Meanwhile, retail sales increased 48 percent for the quarter to $80.2 million. The company’s retail division, Harry Winston Inc., is a premier diamond jeweler and luxury timepiece retailer with salons in key locations including New York, Paris, London, Beijing, Tokyo and Beverly Hills.

Robert Gannicott, Harry Winston chairman and CEO said the insatiable appetite for hard luxury goods in China and other emerging countries is the main reason for Harry Winston’s strong third-quarter performance.

“Diamond demand in the Far East continues to propel rough diamond prices as the Diavik mine transitions to underground production,” Gannicott said. “Marketing efforts and store openings are successfully burnishing the Harry Winston brand to capture the branded luxury appetites of the emerging wealth of the newly developing parts of the world.”

Harry Winston Reports Strong Retail and Rough Diamond Sales

Harry Winston Diamond Corp. reported Wednesday that consolidated sales increased 62 percent to $153.7 million for the second quarter in a year-over-year comparison. Earnings for the period, ended July 31, were $28.9 million, compared to a loss of $3.9 million for the same quarter of the prior year.

Rough diamond sales rose 89 percent to $86.8 million for the quarter, year-over-year, according to the vertically integrated company with assets in a diamond mine along with luxury retail stores. The increase in sales was a result of a combination of a 62 percent increase in rough diamond prices and a 17 percent increase in volume of carats sold during the quarter.

Retail sales increased 37 percent to $66.9 million for the second quarter. U.S. sales increased 31 percent to $19.6 million, sales in Europe increased 40 percent to $24.7 million, and sales in Asia increased 40 percent to $22.6 million. Earnings from operations of $2.3 million for the quarter compare favorably to a loss of of $5.6 million, in the same quarter of the prior year.

Rough diamond production for the three months ended June 30, was 0.65 million carats, which was 14 percent higher than the comparable quarter of the prior, the company said. Production in the same quarter last year was unusually low, due to the planned lower volume of ore mined that reflected the softness in the rough diamond market last year.

Consolidated net income for the second quarter was $16.5 million, compared to a net loss of $24.5 million in the second quarter of the prior year.

“This quarter has demonstrated the continued recovery in the international diamond business and it has also shown additional improvement from our own business segments,” said Robert Gannicott, Harry Winston chairman and CEO. “Both mine production and rough diamond sales increased in parallel with the growth in retail sales from our network of international stores particularly at the high end. We expect further growth in retail sales supported by renewed marketing efforts as customers seek out true craftsmanship.”

The company also announced Wednesday that it appointed David Carey, president of Hearst Magazines, to its board of directors. Prior to joining Hearst, Carey was group president at Condé Nast, where he served as a member of the company's executive committee and co-lead on all business development efforts, and in other positions at Condé Nast since 1995.

Harry Winston Diamond Corp. has assets in the mining and retail segments of the diamond industry. It supplies rough diamonds to the global market from its 40 percent ownership interest in the Diavik Diamond Mine. The company's retail division is a diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo, and Beverly Hills.

Harry Winston Closes Diavik Mine Deal

Harry Winston Diamond Corp. said Wednesday that it has paid $200 million to purchase a 9 percent interest in the Diavik Joint Venture from Kinross Gold Corp. With the transaction complete, Harry Winston now owns 40 percent of the Diavik Diamond Mine in the Northwest Territories of Canada. Rio Tinto owns the remaining interest.

Kinross received $50 million in cash, $70 million in debt securities and 7.1 million shares of Harry Winston. The promissory note will bear interest at a rate of 5 percent annually with a maturity date of August 25, 2011.

The deal was first announced between the two Toronto-based companies on July 23.

Harry Winston Diamond Corp. is a specialist diamond enterprise with assets in the mining and retail segments of the diamond industry. Harry Winston supplies rough diamonds to the global market from its 40 per cent ownership interest in the Diavik Diamond Mine. The company's retail division is a premier diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo, and Beverly Hills.

Kinross Gold Corp. is a gold mining company with mines and projects in Canada, the United States, Brazil, Chile, Ecuador and Russia.

Harry Winston Increases Stake in Canadian Diamond Mine

Harry Winston Diamond Corp. said Friday it has struck a deal to purchase an additional 9 percent stake in Diavik Diamond Mine for $220 million from Kinross Gold Corp. When the purchase is finalized, Harry Winston will own 40 percent of the mine in Canada’s Northwest Territories of Canada.

Toronto-based Harry Winston will pay Kinross $50 million in cash, 7.1 million in stock and $70 million in debt securities, according to a company statement.

In a related development, Toronto-based Kinross said Friday that it has reached an agreement to sell approximately 15 million common shares of Harry Winston to a group of financial institutions. Kinross' direct ownership interest in Harry Winston following closing of the transaction will be approximately 8.5 percent. Kinross originally acquired the interest in Diavik in March 2009, as part of a deal that saw the company also gain a 19.9 percent stake in Harry Winston for $150 million.

“The transaction represents an opportunity for Harry Winston to consolidate its interest in the Diavik mine, Canada's largest diamond producer and one of the most profitable diamond mines in the world,” Robert Gannicott, Harry Winston chairman and CEO, said in a statement.

Harry Winston Diamond Corp. has assets in the mining and retail segments of the diamond industry. Harry Winston supplies rough diamonds to the global market and the company's retail division is a diamond jeweler and luxury timepiece retailer with salons in key locations, including New York, Paris, London, Beijing, Tokyo and Beverly Hills.