DIAMONDS

'Fundamental shortage' of rough diamonds to underpin prices – Harry Winston

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TORONTO (miningweekly.com) – Rough diamond prices will continue strong, and increase further, as supply loses ground to global demand, Harry Winston Diamonds CEO Bob Gannicott said on Thursday.

Harry Winston owns 40% of the Diavik diamond mine in Canada, and also sells high-end jewellery and diamonds in a separate retail division.

"We expect rough diamond pricing to continue to be strong," Gannicott said at the company's annual shareholders meeting in Toronto.

"There is a fundamental shortage of rough diamond production in the world now...and so we think these prices are sustainable."

Gannicott's statements echoed comments made earlier this week by executives at Rockwell Diamonds, a Vancouver-based company that operates three mines in South Africa, while Eastern Platinum, another Canadian firm with diamond operations in South Africa, said on Thursday it is implementing plans to expand production.

During the first quarter, Harry Winston, which markets its own share of rough diamonds from Diavik, realised prices 98% higher than in the same period a year earlier.

However, results were affected by lower production volumes, as the mine began its shift towards underground production.

Output from underground is expected to ramp up over the rest of the year though, CFO Alan Mayne said.

This, together with "favourable" rough diamond market conditions and improving costs at Diavik, should result in improved profitability for Harry Winston's mining segment, he commented.

Rio Tinto, which owns 60% of Diavik, is also the operator of the mine.

Underground production started in March, and the operation will transition to a solely underground mine by 2012.

Gannicott commented that the Diavik underground mine, if viewed as a standalone project, is one of very few significant new sources of diamond production on the horizon.

"Because production is tailing off, there is an implication for a price rise, as the surge in diamond buying in China, for instance, meets a lack of production from the diamond production areas of the world," he commented.

Also at the annual meeting, Harry Winston's new jewellery unit CEO, Frédéric de Narp, unveiled his strategy to grow that part of the business, which includes almost doubling the number of salons around the world, to 35 from the current 19, by 2016.

Edited by: Liezel