Diavik powers Aber’s earnings

As the newly constructed Diavik diamond mine continues to ramp-up, Aber Diamond (ABZ-T) sold US$19.2 million worth of rough gems over the 6-month period ended July 31, 2003, resulting in net earnings of $15.7 million (or 29 per share) for the first half of the year.

By the end of July, Aber had received 481,000 carats of diamonds from Diavik, representing its 40% share of production since the first diamonds were produced in January 2003. London’s Rio Tinto (RTP-N) is the mine operator, with a 60% interest held by its wholly owned subsidiary, Diavik Diamond Mines.

Since start-up, the Diavik mine has recovered 1.26 million carats from the processing of 505,000 tonnes of material for the 6-month fiscal period. Operating costs were $60 per carat. The diamonds recovered were mined predominantly from the mud-rich overburden that lies on top of the main reserve of the A-154 South pipe. Current production is now mainly from the kimberlite ore reserve.

For commercial reasons, Aber has elected not to disclose on a sale-by-sale basis the average price per carat sold. Aber does note that the prices realized continue to be substantially above feasibility study estimates. In April, Aber reported that its first parcel of rough diamonds, comprising 42,619 carats, had sold for an average price of US$96 per carat, well above the US$79-per-carat valuation used in the 2000 independent feasibility study.

During the second calendar quarter, the processing plant improved to 62% of design capacity, compared to 38% experienced in the first quarter.

Aber is currently estimating that its share of diamond sales for the current fiscal year will be approximately 1.3 million carats. The Diavik operation is expected to generate in the range of US$65 million of restricted net cash flow for Aber by the end of the year. The company’s long-term debt, net of $63.2 million in cash resources, was $221 million at July 31. Aber has 54.9 million shares outstanding.