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Dominion Diamond Corp. to Launch Contract Sales in July
Jun 2, 2014 12:38 AM
By Avi Krawitz
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RAPAPORT... Dominion Diamond Corporation will soon sell its diamonds via long term contracts, company executives told Rapaport News.
“Manufacturers want the consistency of supply and now we have the volume and the mix of goods to provide that consistency,” James Pounds, president of Dominion Diamond Marketing Corporation, said in an interview at the JCK Las Vegas show this week. “We’re going to put the contracts out in the next month and open up discussions about the amounts that will be part of the contracts.”
Pounds said the company plans to shift to the contract sales from July and is looking to supply approximately 30 companies within that framework. Similar to the De Beers sight system, Dominion will hold 10 contract sales per year.
While Pounds explained that some goods will still be sold via tender in order to assure customers and shareholders that they’re selling at fair market price, about 90 percent of Dominion’s production will be sold to global contract customers. The remaining 10 percent will be supplied to manufacturers based in Canada’s Northwestern Territories, according to the guidelines provided by the local provincial government.
Dominion bought the Ekati mine from BHP Billiton in April 2013 for $553 million. As part of the deal, Dominion owns 80 percent of the Ekati mine and 58.8 percent of the surrounding buffer zone, where future expansion is expected to occur. The company also owns 40 percent of the Diavik mine.
Pounds explained that Dominion will sort the Ekati and Diavik production separately so that the Northwestern government can exercise its rights to royalties, but will then mix the goods to supply its contract customers.
Dominion expects sales to exceed $800 million in the current fiscal year compared with $751.9 million reported for the fiscal year that ended January 31, 2014. He added that growth is anticipated to be driven by higher volume rather price increases as production shifts to lower grade areas of the Ekati mine.
Currently, operations at Ekati are concentrated on the Fox open pit and the Koala underground pipes, while the Misery pipe is being prepared for commercial production from early 2016. However, production at Ekati will shift to the lower value Jay and Cardinal pipes situated in the Buffer zone from 2019.
Pounds stressed that the combination of these pipes at Ekati and Dominion’s share of production at Diavik will allow the company to supply a wide range of rough to its customers. The company recently reported that Ekati production reached 1.324 million carats for the period April to the end of the year, while its Diavik production was flat at 2.9 million carats for the full year. Pounds did not say how many carats are expected to be mined this year.
He noted, however, that Dominion continues to look at further growth opportunities and potential acquisitions in Canada. “We’ll have a lot more carats so volume will be driving growth,” Pounds said. “We’re very happy that the number of mines in Canada is growing and that there are opportunities for us.”
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Tags:
Avi Krawitz, BHP Billiton, Canada, Diavik, Dominion, ekati, Rio Tinto
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