CEO Interview: Harry Winston Diamond Corporation (HWD) - Robert Gannicott
December 20, 2010 - The Wall Street Transcript has just published Metals and Mining Report offering a timely review of the sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Robert Gannicott is the CEO of Harry Winston Diamond Corporation (formerly Aber Diamond Corporation), and he has been one of the Directors since its inception in 1992. He is a leading Geologist and began his career focusing on mining projects in the Arctic regions of Canada and Scandinavia. Following a career in a broad variety of Arctic mineral exploration programs, Mr. Gannicott became involved with Canadian diamond exploration in 1991, immediately following the initial discovery of diamonds made by Dia Met Minerals Ltd. in the Lac de Gras area of the Northwest Territories in Canada. Mr. Gannicott studied geology at the University of Ottawa and graduated in 1975.
TWST: Your mining revenues for the quarter ending July 31 were up 89%. What factors contributed to that increase and what portion was due to price increases?
Mr. Gannicott: Our mining revenues for the quarter were up due to a combination of factors. Rough diamond prices increased more than 60%, and an increase in volume of carats sold was the balance. Rough diamond production was higher this quarter because in the equivalent quarter of the prior year we had a partial shut down. That effect comes through to the comparable for the upcoming third quarter that we are about to report pretty soon as well. Nonetheless, viewing the production quarter by quarter is always somewhat erratic, but I'm viewing it year over year.
TWST: To what extent can investors look to that quarter's result as an indication of the future? There seems to be variation from quarter to quarter, but a positive trend year over year.
Mr. Gannicott: Yes, absolutely. We are starting to mine from underground now, but we are still in the very early stages. Most of our production is coming from the top of a new open pit, which is called the A418 pit. These kimberlite pipes that we're mining are the tops of the pipes which were formed under shallow lakes and therefore have a lot of mud in the upper parts of the pipes. So as we mine through that upper portion, which we're doing at the moment, we do get some erratic grades. For example, the grade will be good one quarter or ahead of the ore reserve one quarter, and it will be bit behind ore reserve the next quarter - that kind of thing.
We are experiencing that kind of fluctuation in the pipe. It should be pretty smooth going forward from here as we complete the open-pit mining and then transition into underground mining completely.On the retail side of our business, it is becoming an increasing driver now. We're beginning to see big improvements in our retail performance, and we expect that to continue. Although the economic recovery is not particularly obvious to those of us sitting here in the U.S., the world is a much more exciting place if you are over in the Far East, and that's where a lot of the improvements in diamond markets have come from in the last year or so.
TWST: Would you tell us more about the trends you are observing in diamond demand?
Mr. Gannicott: The U.S. is still weak. Before we went into the recession, the U.S. was 50% of the world's off-take of diamond jewelry - so a very important place, of course, and it remains an important place. But thank goodness, as this horrible collapse that we've all experienced over the last year or so took place, the Far East came in to pick up the slack. Even though the pace of recovery in the U.S. is still pretty muted, viewed from the point of view of our own businesses, the diamond business has traditionally been a late-cycle performer, if you like. So in the U.S., it's still a struggle, it's improving, but it's still nowhere near where it was in the pre-crisis times. On the other hand, sales in Asia have been nothing short of spectacular. So obviously, we would expect that when the U.S. economy does get back on its feet again properly, and assuming that nothing goes wrong to seriously interrupt the flow of improvement in the Far East, then it should be a very exciting diamond market indeed.
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