Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Harry Winston may cancel Diavik winter shutdown Add to ...

Harry Winston Diamond Corp. says a new operating plan for the Diavik diamond mine in Canada's Far North would see a winter shutdown cancelled and 2010 delivery ramped up to 7.5 million carats of diamonds or more.

"Since the market has improved substantially and consistently since the beginning of the first quarter, there is now a new mine plan under consideration," chairman and chief executive officer Robert Gannicott said on a conference call Friday.

The Diavik mine in the Northwest Territories is jointly owned by Harry Winston and global mining giant Rio Tinto PLC . Kinross Gold Corp. also gained an indirect share of Diavik when it recently bought a 20 per cent stake in Harry Winston, a company formerly known as Aber Diamond.

Diavik, Canada's second producing diamond mine, is back to full production after a summer shutdown, and Mr. Gannicott said a winter shutdown planned from Dec. 1 to Jan. 11 could be cancelled.

If the new mine plan is implemented and production is increased to 7.5 million carats, this would represent a 28 per cent increase from forecast 2009 calendar-year production of 5.4 million carats.

Harry Winston and Rio Tinto are also looking at reducing Diavik's operating costs by finding "operating synergies" with BHP Billiton Ltd. 's Ekati mine nearby, Mr. Gannicott said.

Ekati was Canada's first diamond mine and began operating a decade ago.

Mr. Gannicott said it's too soon to say what will happen, but "it's all on the table," from connecting generators between the two companies' power plants to sharing a processing plant.

Mr. Gannicott said the consideration of a new operating plan for Diavik is in response to a marked improvement in diamond sales in the second quarter of fiscal 2010.

"Our July rough diamond sale realized price is a full 50 per cent higher than those seen in March, [showing]that the diamond pipeline regained its poise after the near collapse of the previous six months," he said.

He added strong demand from Asia and India has boosted prices and sales, although it hasn't been enough to make up for the slump in the United States.

The worldwide recession is still hurting high-end diamond sales, but sales of "more accessible items" under $25,000 (U.S.) are improving, particularly in Asia.

"Although our retail business has remained unprofitable during the quarter, we have seen transactions grow in number as we've introduced more product and more accessible price points into the Asian market," Mr. Gannicott said.

"It is the large ticket sales that have been missed during this period as the world struggles to find its economic feet again."

The Toronto-based company's retail division sells jewellery and luxury watches through 18 high-end stores in the U.S., Britain, France, China, Hong Kong, Singapore, Japan, Taiwan and Dubai.

With a new salon in Singapore and eight others in Asia, Mr. Gannicott said Harry Winston is well positioned to profit from "a sector of the world economy that is expected to drive new growth."

Harry Winston chief financial officer Alan Mayne said rough diamond sales for the second quarter fell "considerably" from a year earlier due to a 36 per cent decrease in prices and a 31 per cent decrease in carats sold, due mainly to weakness in the U.S. market.

Late Wednesday, the diamond producer and retailer reported a loss of $24.5-million in its most recent quarter, hurt by a $25.3-million foreign exchange charge.

The company said the loss amounted to 32 cents per diluted share for the quarter ended July 31 compared with a profit of $49.9-million, or 81 cents per diluted share, a year ago.

Sales in the quarter totalled $94.8-million, down from $186.1-million.

The company said its mining segment recorded sales of $46-million, down from $105-million a year ago, while its retail operations saw sales drop 40 per cent to $48.8-million.

Follow us on Twitter: @GlobeInvestor

In the know

Most popular videos »

Highlights

More from The Globe and Mail

Most popular