Dominion Diamond Corp, formerly Harry Winston Diamond Corp, has the financial ability to buy Rio Tinto's majority stake in the Diavik diamond mine in northern Canada if the price is right, said Chairman and Chief Executive Officer Robert Gannicott .
Rio Tinto may pull out of the diamond business, while Dominion already owns 40 percent of Diavik, in Canada's Northwest Territories.
"I think we have certainly got the head room to undertake a transaction with Rio on Diavik, should that be available at the right price," Gannicott said on a conference call with analysts and investors about its financial results.
He made the comments in response to a question about whether Dominion had the wherewithal to buy Rio's 60-percent share in the mine.
Dominion agreed in January to sell its luxury jewelry business to Switzerland's Swatch Group for around $1 billion and to focus on mining, as well as changing its name to Dominion Diamond.
That followed a separate deal to buy BHP Billiton's 80-percent stake in the Ekati diamond mine as well as diamond sorting and other operations for $500 million
Sales for the 2013 fiscal year increased 19 percent to $345.4 million, compared to $290.1 million for the prior year, Dominion reported.
The increase in sales resulted from a 49 percent increase in volume of carats sold during the year, offset by a 20 percent decrease in achieved rough diamond prices.
Rough diamond production for the calendar year 2012 increased 8 percent to 7.2 million carats compared to 6.7 million carats in the prior calendar year. The increase was due primarily to improved grades in each of the kimberlite pipes.
The 49 percent increase in the quantity of carats sold was primarily the result of the decision by the company to hold back some lower priced goods at October 31, 2011 due to an oversupply in the market at that time and the subsequent sale of almost all of these lower priced carryover goods during fiscal 2013.
The 20 percent decrease in the company's achieved average rough diamond prices during the fiscal year resulted from a combination of two factors: the sale of the lower priced goods originally held back in inventory by the company at October 31, 2011; and a decrease in the market price for rough diamonds from the peak achieved in the prior year.
Operating profit increased 27 percent to $47.7 million compared to an operating profit of $37.6 million in the prior year.
The company recorded a consolidated net profit attributable to shareholders of $34.7 million, compared to a net profit attributable to shareholders of $25.5 million in the prior year
For the fourth quarter ending January 31, the firm posted an 8-percent rise on the year in diamond sales to $110.1 million. The increase in sales resulted from an 11 percent increase in achieved rough diamond prices due to an improved sales mix, partially offset by a 3-percent decrease in volume of carats sold during the quarter.
Rough diamond production during the fourth calendar quarter increased 19 percent to 1.9 million carats, compared to 1.6 million carats for the fourth calendar quarter of last year. The increase was primarily due to improved grades in each of the kimberlite pipes.
The company had 500,000 carats of rough diamond inventory with an estimated current market value of approximately $65 million at January 31, of which approximately $25 million represents was available for sale, with the remaining US$40 million still being sorted.
However, net profit slumped by 10 percent to $14.8 million from $16.6 million a year before.
Dominion said that during the fourth quarter of fiscal 2013, the retail jewelry market improved in almost all areas, led by Diwali and the wedding season in India, followed closely by a positive U.S. year-end holiday season and improved consumer demand in China, which regained momentum in advance of the Lunar New Year.
Rough diamond supply was impacted by delivery problems at certain diamond mines combined with lower than expected Russian rough diamond supply. The tight supply coupled with a more active polished market helped improve rough prices during the quarter, the firm said.
A new mine plan and budget for calendar 2013 calls for Diavik diamond mine production of approximately six million carats from the mining and processing of approximately 1.6 million tonnes of ore with a further 200,000 tonnes processed from stockpile ore.
Gannicott said: "The last year, and this first quarter, has been a time of great positive change for the company, including changing its very identity to "Dominion Diamond Corporation". This change reflects a focus on the production, sorting and sale of diamonds from Northern Canada, a region that we know and understand well."