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RAPAPORT... Dominion Diamond Corporation reported that revenue fell 1.2 percent year on year to $108.8 million for the first quarter that ended on April 30. Cost of sales rose 3.2 percent to $81.5 million and gross margin slipped to 25.1 percent of sales compared with 28.2 percent one year ago. The mining company's profit benefited from the sale of retailer Harry Winston Inc., which was completed on March 26 for $746 million to the Swatch Group and resulted in a net gain of $497.6 million. Dominion Diamond also purchased the Ekati diamond mine for $553 million from BHP Billiton on April 10 and the mine held cash on hand of about $65 million. The company recorded first quarter profit attributable to shareholders of $500.2 million or $5.89 per share, compared with $11.6 million or 14 cents per share one year ago. Consolidated rough diamond sales during the first quarter included $88.9 million worth of diamonds from the Diavik mine, reflecting an average price of $114 per carat. Diavik's diamond production in the first quarter rose 21 percent to 1.9 million carats. Dominion Diamond sold $19.9 million worth of high-quality rough diamonds from the Ekati mine for $1,620 per carat during a 10 day period following the acquisition. Dominion Diamond recorded unrestricted cash and cash equivalents of $231.2 million and restricted cash of $125.7 million as of April 30. The restricted cash is being used to support letters of credit to Canada in the aggregate amount of $126 million in support of the reclamation obligations for Ekati. In connection with Ekati, Dominion Diamond arranged new secured credit facilities consisting of a $400 million term loan, a $100 million revolving credit facility and a $140 million letter of credit facility, which is expandable to $265 million. Dominion Diamond concluded that the rough diamond market was stable during the first quarter and that strong polished diamond sales encouraged manufacturers to increase their purchases of rough at a time of reduced supply, pushing rough diamond prices higher. Rough diamond supplies were impacted by delivery problems at certain diamond mines combined with lower than expected Russian rough diamond supplies, according to Dominion Diamond. However, with the exception of high demand in the lower-priced ranges, polished diamond prices remained flat, restricting the upward movement in rough diamond prices at the end of the quarter, the company stated. Robert Gannicott, the chairman of Dominion Diamond, said, "Diavik is performing well and we are pleased with what we see at Ekati. We have strengthened the senior management team in a focused effort to deliver value through both extended mine life and enhanced operating efficiencies."
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