* Company sees eventual sale or spin off of retail arm
* Luxury brand is still growing, needs investment
* Shares fall 2.6 pct to C$13.90 on TSX
By Julie Gordon
TORONTO, Dec 7 Harry Winston Diamond Corp
has no plans to sell or spin off its watch and jewelry
division from its mining division in the next year, though the
retail arm will eventually stand on its own, the company's chief
executive said on Friday.
"In the fullness of time, it will certainly either become
separated or be sold to someone that can do better with it than
we would be able to," Chief Executive Robert Gannicott said in a
conference call with investors.
"But clearly that time is not now," he said. "It still
requires further investment and it still needs to get through at
least another year."
Harry Winston's shares fell more than 2 percent on Friday,
the day after the diamond miner and retailer revised down its
full-year diamond production targets.
A source close to the matter said in October that the
company had looked to sell its watch and jewelry business to
concentrate on mining and that it had approached potential
buyers. The company later said it was not in active talks
regarding any such transaction.
Harry Winston then agreed in November to buy BHP Billiton's
Ekati diamond mine in northern Canada for $500 million.
It said it would fund the cash deal with existing resources and
debt, including a $400 million term loan and a $100 million
revolving credit facility.
"In order to purchase Ekati we have taken on a debt
facility," said Gannicott. "We don't have any great pressure to
dispose of the diamond luxury retail business."
The luxury business, which includes retail salons around the
world, functions as an information base for Harry Winston by
providing insight into consumer trends, allowing the miner to
better anticipate rough diamond demand and pricing.
There is also opportunity for more vertical integration
between the mining and retail segment, especially after the
Ekati deal closes in early 2013. The Ekati mine produces some 6
percent of the world's diamond supply by value.
Founded by its namesake in 1932, Harry Winston was the first
jeweler to lend million-dollar baubles to Hollywood stars to
wear on the red carpet. The company owns a 40 percent stake in
the Diavik diamond mine in Canada's Northwest Territories, a
joint venture with Rio Tinto Plc.
Harry Winston's stock was down 2.6 percent to C$13.90 on
Friday on the Toronto Stock Exchange.
After a long slump in rough diamond prices, the company said
that things are looking up in the United States, the world's top
"We do not expect rapid near-term rises in rough diamond
prices," said Gannicott. "But we do believe the corner has been
turned in an industry where demand is clearly poised to outstrip
Rough diamond sales in the fiscal third quarter more than
doubled to $84.8 million, up from $36.2 million in the
year-earlier period, as an increase in the volume of carats sold
outweighed a drop in the average price per carat.
Luxury brand sales rose 14 percent to $95.6 million, up from
$83.5 million in the same quarter of 2011, and the company said
that it expects to continue to increase its market share in the
jewelry and watch sectors.
"We've seen strong sales in Japan and an improvement in
America, the two most important diamond markets, while Chinese
tourists are having a big impact on sales in other centers,"
The company has opened retail salons in China as it looks to
tap into the fastest-growing luxury market in the world. It also
opened a salon at Harrods department store in London in August
and a salon in Geneva, Switzerland, is due to open early next