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Harry Winston's Diavik diamonds have a twinkle

The entry point for Diavik diamond mine in the North West Territories.


Harry Winston Diamond Corp.'s Diavik mine has been a source of controversy. Despite being the company's flagship asset, the miner had to sell a piece of it to Kinross in 2009 simply to survive the economic downturn.

Since then things have turned around, and Kinross exited the mine at a profit. Fast forward a few months and the project looks to be in even better shape, exemplified by a new report that bumps up the mine's valuation.

The increase stems from a new mining strategy, which is complicated and probably only something that miners fully understand. But in simple terms, it increases the likelihood of higher production volumes, and that gives RBC analyst Irene Nattel enough confidence to extract a higher value from Diavik.

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Initially analysts were worried that Diavik's production would slow as operations moved underground, but "with the adoption of the new method, we think throughput should be at or near capacity over the foreseeable future, resulting in carat production of about 7 million carats per annum... for the next few years."

Before the boost, production was expected to fall to between about 4 million to 5 million tonnes starting in 2015. Factoring in the added production, Ms. Nattel boosted her share price target for the company's mining segment from $12 to $14.

That value is still much lower than the unit's all-time highs, and at $16.56 the stock is still a far cry from its $40 level before the financial crisis. But at least the company has a reason to smile again.

The Diavik Mine in the Northwest Territories is developed as a joint venture between Harry Winston and Diavik Diamond Mines Inc., which is a subsidiary of Rio Tinto PLC. It is Canada's second diamond mine and started producing in 2003. Harry Winston holds a 40 per cent stake.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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