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RAPAPORT... Dominion Diamond Corporation reported that rough diamond sales rose 78.8 percent year on year to $151.64 million for the third quarter that ended on October 31. One year ago, before the mining company sold Harry Winston Inc., sales from rough diamonds and the retail segment combined totaled $180.4 million. Dominion Diamond recorded a loss of $4 million in the third quarter compared with a profit of $4 million one year ago. The company's loss attributable to shareholders was $2.9 million compared with a profit of $3.4 million. By mining segment, sales from the Diavik mine totaled $52.9 million, or $118 per carat, while Ekati's sales reached $98.7 million or $271 per carat. Gross margin as a percentage of sales was 24.4 percent at Diavik and 5.2 percent at Ekati, producing a group gross margin total of 11.9 percent. Robert Gannicott, the CEO of Dominion Diamond, said, "We continue to progress all of our operational and strategic objectives at Ekati while Diavik also continues to trim both capital and operating costs. The modest loss this quarter reflects expenditures on the Jay project and a decision to hold inventory of some diamond parcels during the Diwali holiday season in India. The diamond market is generally stable, with a few items increasing in price, while a few others are down, in a market that is focused on cash generation to decrease debt through inventory sales into robust retail demand." Although retail demand in the key markets of the U.S., China and Japan remained firm during the period, tightened credit terms available to the polishing industry have led to softer prices for rough diamonds recently, according to Gannicott. Dominion Diamond held back $95 million of rough diamond inventory in anticipation of improved demand in coming quarters. Diamond market sentiment in the third quarter was mixed with liquidity tight for diamond manufacturers in India, combined with a weakened rupee. Conversely, retail markets outside India remained buoyant, especially in the U.S., as expectations for a positive Christmas season remained high, he concluded. The Chinese market has shown increased activity and is competing with the U.S. for mid-range polished diamonds. The market for higher-end polished diamonds in China remains subdued but there is evidence that Chinese consumers continue to purchase these ranges overseas. Dominion Diamond anticipates that the rough and polished diamond markets will be focused on restocking in the current quarter; however, jewelry manufacturers are hesitant to accumulate diamond stock and are relying on real time replenishment.
Dominion Diamond expects that Diavik's full-year production will be approximately 7.1 million carats, representing an 18 percent increase from its earlier forecast. Given the decision to hold back some inventory from sale in the third quarter, the company expects rough diamond sales for fiscal 2014 from the Diavik mine to be in the range of $320 million to $365 million. The company purchased majority stake in Ekati in April. Dominion Diamond has sold approximately 970,000 carats from the Ekati mine since April 10 for a total of $289.2 million for an average price per carat of $299. Had the company sold only the last production shipped in the third quarter, the estimated achieved price would have been approximately $200 per carat based on the prices achieved in the September and October sale. Production for the third calendar quarter at the Ekati was 600,000 carats. In a project update statement, Dominion Diamond confirmed that the development of the Misery pipe is continuing and has recovered approximately 240,000 carats of diamonds from waste stripping material. An updated mine plan and budget for the Ekati mine foresees production reaching approximately 1 million carats this fiscal year. The company currently expects rough diamond sales for fiscal 2014 to be in the range of $385 million to $455 million. Dominion Diamond held working capital of $509.5 million on October 31, including unrestricted cash and cash equivalents of $195.8 million and restricted cash of $121.9 million. Rough diamond inventory reached 1.5 million carats with an estimated market value of approximately $250 million, approximately $95 million of which represented inventory available for sale, with the remaining $155 million being sorted.
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