Aber plans to buy retailer to sell its diamonds
SHIRLEY WON
00:00 EST Thursday, November 13, 2003
Aber Diamond Corp., co-owner of the Diavik diamond mine in the Northwest Territories, plans to boost its bottom line by buying a brand-name jewellery retailer within a year, its chief executive officer says.
"We are looking at some specific targets," Robert Gannicott said yesterday. "We are looking for something that has broad international name recognition linked to diamonds."
The most profitable part of the diamond business is at the beginning, when diamonds are being mined, and at the lucrative retail end, Mr. Gannicott said.
Privately held diamond giant DeBeers is the only other miner involved in the retail business, and has opened a chain of shops in cities such as London and Tokyo under its own name, he said.
But Aber plans to take the "safer" route to acquire a well-established retailer rather than taking the riskier venture of trying to create a brand name, Mr. Gannicott added.
Aber will be financing the acquisition from internal cash flow, and is looking at retailers that have the upscale cachet of names such as Tiffany or Cartier, but those are not among the targets, he said.
Mr. Gannicott made the comments at a news briefing on the last day of a three-day diamond auction -- the first held in Canada -- that has attracted diamond polishers known as "diamantaires" mainly from New York to Aber's Toronto headquarters. The second leg of the auction will be held in Antwerp during the last week of November.
The rough-cut diamonds come from the Diavik mine, which is 40 per cent owned by Aber and the balance by British mining giant Rio Tinto PLC. Mine production began a year ago, and Aber received its first delivery in January. Aber, which focuses mainly on marketing its share of the production, has also established a diamond sorting facility in Toronto -- the first of its kind in North America.
Buyers this week were examining two greyish-silver, 150-carat diamonds -- the size of large grapes -- that have been valued by Canadian government estimators at about $2-million (U.S.) as well as a smaller 80-carat one. The bidding process is a silent auction whereby buyers submit bids in an envelope, and no one knows what others are willing to pay.
Aber sells about 25 per cent of its rough diamonds to New York-based Tiffany & Co., while the balance is sold through Aber's office in Antwerp, which attracts buyers from countries such as India and Israel.
Mr. Gannicott said he was "quite surprised" that Aber has been able to mine larger diamonds that are being sold through a tendering process. "There haven't been many of a reasonable quality like this. We are looking at making some modifications to the processing plant to allow us to recover larger stones."
Security is tight at Aber's head office, which is in a nondescript downtown building. The reception area is surrounded by thick, bullet-proof glass, and there are security cameras. Reporters attending the briefing were asked to sign confidentiality agreements not to disclose the location of Aber's headquarters, while photographers were forbidden to take pictures of the exterior of the building.
Meanwhile, Minister of Indian Affairs and Northern Development Robert Nault, who was on hand for the briefing, said there is a "diamond rush" taking place in this country with more than 2,500 claims already staked in Nunavut since November, 2001.
Mr. Nault said he expects Canada to become the third-largest diamond producer in the world after Botswana and Russia once production comes on stream next year from DeBeers' Snap Lake diamond mine in Nunavut. Canada now ranks sixth in production, and South Africa is in third place.
He said his department recently launched a major study on the future of the diamond industry in Canada. "We have only focused on the North so far, but there are lots of other opportunities in Northern Ontario, Northern Saskatchewan, Northern Manitoba and Northern Quebec."
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