TORONTO (miningweekly.com) – Diamond-miner and high-end jewellery retailer Harry Winston is confident it will find itself in “much better shape” at the end of the current year than the one just past, CEO Robert Gannicott told shareholders on Thursday.

After the worst of the financial crisis hit in late 2008, the diamond market “disappeared”, he said at the company's annual meeting in Toronto.

For both rough and polished diamonds "there was simply no demand", Gannicott said.

Now, however, the firm, which owns a stake in the Diavik mine, in Canada's Northwest Territories, is optimistic that the recent uptick in prices and demand for rough diamonds will be sustained.

The company markets its own share of rough diamonds from Diavik, and buys polished diamonds separately for its high-end jewellery and watch business.

After posting a first quarter loss for the period ended April 30, and significantly weaker sales compared with a year earlier, Harry Winston is expecting improved numbers when it reports on the second quarter, as rough diamond prices creep back and customers return to the firm's retail stores.

Diamond processing and jewellery manufacturers froze purchases and emptied stocks last year, but are now returning to the market as positive demand from Asia coupled with the first signs of activity from the US market have encouraged manufacturers to begin restocking.

Since March this year, there has been a “different sentiment” in the diamond market, compared with the November to January period, Gannicott reported.

“And I think that there is a reasonable expectation that diamond prices will continue to recover.”

Any economic improvements in the US will inevitably be good news for the diamond sector, he added.

“America is far more important to the world of diamonds, for instance, than it is to the world of copper or iron-ore.

“Fifty per cent of the world's offtake of diamonds was going into America, before this crisis hit, whereas China was already the biggest consumer of copper, and by far the biggest consumer of iron-ore.”

DIAVIK

Diversified miner Rio Tinto, which owns 60% of Diavik and is the mine's operator, said earlier this year that it will shut the mine for two periods this year - first for six weeks from July 14, and then again in winter for the same period – because of weak market conditions.

But Gannicott said on Thursday that, while the July shutdown will definitely be implemented, the mid-December to end-January stoppage could be scrapped if demand continues to recover.

“Personally, I think the second shutdown is unlikely to occur, but there has been no real decision on that yet.”

Although it will delay a project to develop an underground mine at Diavik, Rio Tinto has drawn up a mine plan that will enable it to adjust carat production by varying the mix of ore that comes from the A-418 kimberlite pipe and the higher grades from the A-154 South pit.

This year, the base case plan would result in production of 5,4-million carats, including assuming both shutdowns are implemented.

However, if diamond demand and prices improve, additional carats can be produced by shifting the mix of ore from A-418 to the higher-grade A-154 South.

For the quarter ended April 30, Harry Winston reported rough diamond sales of $57,7-million, compared with $81,4-million a year earlier.

Rough diamond prices were at their lowest level since Diavik began operation, and the company's achieved prices were particularly low in the first quarter because the sales mix contained a significant proportion of lower-value goods carried in inventory from January, the firm said.

Harry Winston, formerly known as Aber Diamonds, bought high-end jewellery retailer Harry Winston in 2006.

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 transaction allowed Harry Winston to repay all the senior debt it had in place related to its mining division.

Shares in the company rose 1,8% on Thursday, to C$7,40 apiece by 12:22 in Toronto.