Thursday, June 9, 2011

Harry Winston boss says diamond demand already outshining supply

Diamond demand is already starting to outstrip supply, and will continue to do so until a major new mine is found and developed, Harry Winston chairperson and CEO Bob Gannicott said on Thursday.

“In a way, we’re already seeing it now and I think it will become more acute,” he told Mining Weekly Online.

“The effect of China really is enormous, but people tend to neglect India, which also has very strong growth.”

China and India have emerged as major diamond markets in the past few years, more than picking up the slack after the biggest consumer, the US, saw a significant drop in demand for luxury products after the financial crisis.

Later on Thursday, Bloomberg quoted De Beers chairperson Nicky Oppenheimer as saying demand for diamonds would be greater than supply for the next five years.

"That is simply because there are no new mines," he told the Council on Foreign Relations in Washington.

Gannicott said that Harry Winston, which owns 40% of the Diavik mine in Canada’s Northwest Territories, is keen on securing additional sources of the precious stones it sells in its ultra-luxury jewellery stores, where a diamond-encrusted watch can retail for over $600 000.

“Exploration is part of that, and reviewing projects that need a partner or want to roll up with us is another,” he commented in an interview.

“And there are several around, but it’s a matter of finding one that offers proper accretive value.”

Gannicott declined to provide further details, citing confidentiality agreements.

Harry Winston has started exploring properties it acquired directly south of the Diavik mine, but it would be at least ten years before any production came from these, assuming the company found economically viable deposits.

It would take a “major discovery” of diamonds somewhere in the world to fill the diamond supply gap, and this too would take at least a decade to bring into production, said Gannicott.

In the meanwhile, prices – which have reached record levels this year – will continue to climb, he added.

Will they reach level where it starts to scare consumers away?

Gannicott doesn’t think so.

He compares the situation to someone buying a house – if prices rise, a buyer might look at a smaller property, or consider moving further away from a city centre.

“I don’t think it’s going to destroy the appetite of the consumer to own diamonds, but obviously, people will buy diamonds according to their budget,” he commented.

Harry Winston on Wednesday night reported its results for the quarter ended April, showing a 51% jump in pretax earnings to $25-million.

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