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Jeweller’s profits, explorer/developer’s financing swelled by growing global diamond demand

by Greg Klein | November 26, 2013

Jeweller’s profits, explorer/developer’s financing swelled by growing global diamond demand

The Mountain Province/De Beers JV prepares to build the Gahcho Kué
diamond mine, which would help meet continually growing demand.

Optimistic as they were, forecasts fell short of predicting Tiffany & Co’s NYE:TIF Q3 performance. The news comes as Mountain Province Diamonds TSX:MPV launches large-scale financing efforts for a new Northwest Territories diamond mine while observers foresee a continuing increase in diamond demand and prices.

Announced November 26, Tiffany’s net earnings for the quarter came to $94.61 million or $0.73 a share, up from $63.18 million or $0.49 a share last year. Bloomberg attributed the numbers to wealthy, confident consumers snapping up jewelry and other discretionary goods. The company operates 283 stores worldwide, 11 more than last year, including 120 in the Americas, 68 in the Asia-Pacific region, 54 in Japan, 36 in Europe and five in the United Arab Emirates.

[Bain & Co’s annual report] predicted global rough diamond demand will rise at a compound annual rate of 5.1% to $26 billion by 2023, while global rough diamond supply will increase at an annual rate of 2%.—Bloomberg

Tiffany’s news follows reports that Irish billionaire Dermot Desmond has backed a $125-million rights offering for Mountain Province. Already the company’s biggest shareholder with a 24% interest, Desmond will buy rights not taken up by other investors, according to a November 24 Bloomberg story. The news agency said the offering comes “amid renewed investor interest in diamond projects as a recovering global economy boosts demand for engagement rings and other jewelry in the U.S. and emerging market countries such as China and India.”

Bank of Montreal analyst Edward Sterck told Bloomberg that investor interest in diamond stocks “has increased markedly.” He sees rough diamond prices rising 5% to 7% annually beginning next year, “driven by good demand growth and highly constrained supply,” the article stated.

Bloomberg added that an annual report on the global diamond industry issued by Bain & Co in August “predicted global rough diamond demand will rise at a compound annual rate of 5.1% to $26 billion by 2023, while global rough diamond supply will increase at an annual rate of 2%.”

Mountain Province has a number of strategies to raise its approximately $400-million initial portion of building the Gahcho Kué mine, a 49%/51% joint venture with De Beers 300 kilometres northeast of Yellowknife. Apart from the $125-million rights offering, and a $29.1-million private placement announced November 18, the company plans a $250-million debt facility in early 2014, according to Bloomberg.

The press agency added that financing and offtake might also come from Tiffany or Hong Kong’s Chow Tai Fook Jewellery Group.

Read more about Canadian diamond exploration and mining.

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