TORONTO (miningweekly.com) – The owners of the Diavik diamond mine, in Canada's Northwest Territories, are considering changes to the mine plan once again, this time to ramp up output in response to a firming rough diamond market, Harry Winston CEO Robert Gannicott revealed on Friday.

Harry Winston, with Kinross Gold, owns 40% of the mine and diversified miner Rio Tinto holds the balance and is the mine's operator.

“Our July rough diamond sale realised prices a full 50% higher than those seen in March as the diamond pipeline regained its poise after the near-collapse of the previous six months,” he commented.

The industry is “clearly both pleased and surprised” by the strength of demand from the Asian markets and India, even though these do not fully compensate for the decline for the more discretionary part of the US market.

Further, even though diamond giants De Beers and Russia's Alrosa have both returned production and sales to the market, there is no sign yet of over-supply weakness, he said.

A six-week winter shutdown that was being contemplated earlier in the year will probably be cancelled, and the new mine plan, if adopted, would result in production ramping up to some 7,5-million carats or more next year, assuming the market continues to tighten, Gannicott said.

He also confirmed that there is an initiative in the pipeline to examine potential “synergies” through cooperation with the nearby Ekati mine, owned by BHP Billiton.

In fact, there has been some speculation this week in the Australian press that BHP and Rio could be considering a merger of their Canadian diamond operations, after the resources giants agreed on a joint venture for their Pilbara iron-ore activities.

Speaking on a conference call, Gannicott said it is too early to speculate on what synergies could be achieved, but commented that “it is all on the table”.

Options could include simply coordinating procurement and transporting operations for the two mines.

“But, there are also two large power plants, both of which have got to have stand-by generators that are actually physically spinning all the time. Obviously a connection between the two has some charm, to say the least,” he said.

“And, going down to the far end of the scale, I suppose there is the possibility that one uses a common processing plant.”

In March, Harry Winston agreed to sell 19,9% of itself, plus an effective 15% interest of the Diavik diamond mine, to Canadian gold-miner Kinross, for $150-million.

The mine closed for a summer shutdown between July 14 and August 24, but is now fully up and running, Gannicott confirmed.

Diavik is expected to produce between five-million and six-million carats this year, from 1,3-million tons of openpit ore.

Next year, the partners plan to start limited underground production and from there will increase output from the underground operations to an eventual 1,5-million tons a year, with openpit production expected to decline to around 0,5-million tons.

Shares in Harry Winston, which also sells high-end jewellery and watches in a separate business unit, slid 2% on Friday, to C$8,10 apiece by 15:59 in Toronto.

The company reported a consolidated net loss of $24,5-million for the quarter ended July 31.

The loss included a net foreign exchange loss, primarily on future income tax liabilities, of $25,3-million, compared with a net gain of $5,3-million a year earlier.

However, Harry Winston also said consolidated sales for the quarter plunged to $94,8-million, from $186,1-million in the same period of last year, because of weak demand for its products.

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