Diamond industry

Forever can wait

FP Magazine March 23, 2009

Average rough diamond prices fell by 40% in the last quarter of 2008 as cash-strapped consumers stopped buying luxuries – and prices are still dropping. That means hard times for Canada’s much-celebrated diamond industry


At BHP Billiton’s Ekati – Canada’s first diamond mine, which it opened to much fanfare in the Northwest Territories in 1998 – production was down 30% in the fourth quarter of 2008 over the previous year. Meanwhile at Diavik, Canada’s second diamond mine, also in the N.W.T., production was down 23%. Some analysts speculate the mine may be sold as its majority owner, Rio Tinto, attempts to pay off debt (US$39 billion at the end of 2008). Diavik has scaled back exploration and delayed new production. The new kid on the block, De Beers’s Snap Lake mine, isn’t faring any better: In February, it laid off nearly a quarter of its 550 employees.


Created as a spin-off industry to spread the wealth from the North’s diamond mines, Yellowknife’s polishing industry has been hard hit by reduced sales. Tiffany & Co.’s Laurelton plant closed in February, laying off 25 workers. Arslanian Cutting Works laid off five of its 50 employees and shut down operations for a week in February.


Canada’s largest diamond retailer, Harry Winston Diamond Corp., has seen its shares dive 90% in the past six months. Ironically, the company, which also has a 40% stake in the Diavik mine, saw its retail sales rise 8%, to $57.9 million, in the last quarter of 2008. But the sinking price of diamonds, the company’s heavy debt load and the poor outlook for luxury goods during the recession has dragged down the shares. Pawn brokers, on the other hand, are reporting that they expect diamond sales to keep rising as women snap up discount jewellery, hoping to trade up for better rings when they can afford it.

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