Harry Winston Diamond Corporation (HWD): Are These Two Diamonds in the Rough or an Investor’s Best Friend?

Harry Winston Diamond Corporation (NYSE:HWD) is a diamond company with premium assets in the diamond industry’s mining and retail segments. They supply rough diamonds to the world market from their 40 percent ownership interest in the Diavik Diamond Mine. Their luxury brand segment is a premier diamond jeweler/luxury timepiece retailer.

In December 2012, Harry Winston Diamond announced their third quarter fiscal 2013 results for the quarter ending Oct. 31, 2012. Consolidated sales increased 51 percent to $180.4 million for the third quarter. This is in comparison to $119.7 million for the comparable quarter of the prior year.

Consolidated net profit attributable to shareholders for the third quarter was $3.4 million or $0.04 per share. This is compared to a net loss attributable to shareholders of $4.7 million, or $0.06 per share in the comparable quarter of the prior year.

For the Mining segment, rough diamond sales increased 134 percent to $84.8 million, versus $36.2 million in the comparable quarter of the prior year. This sales increase resulted from a 286 percent increase in volume of carats sold during the quarter. Luxury brand segment sales increased 14 percent (17 percent at constant exchange rates) to $95.6 million, compared to $83.5 million in the comparable quarter of the prior year. Total number of units sold increased by 8 percent over the comparable quarter of the prior year.

Significant for investors is last month’s article in MarketWatch (Jan. 18, 2013), which related that analysts at Nomura said that diamond shortfalls are continuing and probably won’t end in the short-term. Moreover, there are not many diamond exploration projects on the table. Nomura analysts expect demand to be greater than supply from 2015 and beyond. They say this should lead to improved margins for strong producers. Additionally, they believe this should launch a new diamond exploration cycle.

Further key information for investors is that Harry Winston announced in January 2013 their agreement to sell their luxury goods segment to The Swatch Group in a $750-million deal. This would allow the company to concentrate on their mining activities. Harry Winston and JV partner Rio Tinto plc (NYSE:RIO) expect the Diavik mine to produce approximately six-million carats this year from processing approximately 1.6-million tons of ore, and processing 200 000 t of stockpiled ore. Rio Tinto owns a 60 percent stake in the mine. Rio Tinto’s Diamonds & Minerals group consists of mining, refining and marketing operations across the diamonds and the minerals sectors.

“Diamonds,” by name, can be quite continental… offshore and onshore… and an investor’s best friend. It all depends on your investing proclivity. Is it deepwater daring, a mining mindset – or maybe a bit of both?

The article Are These Two Diamonds in the Rough or an Investor’s Best Friend? originally appeared on Fool.com and is written by Michael Ugulini.

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