Aber Diamond Corporation Reports Results, Updates Mineral Reserves,
and Declares Dividend TORONTO, March 9 /PRNewswire-FirstCall/ --
ABER DIAMOND CORPORATION (TSX-ABZ, NASDAQ-ABER), the specialist
diamond company, today announced its financial results for the
fourth quarter and year ended January 31, 2005. HIGHLIGHTS FOR THE
YEAR ENDED JANUARY 31, 2005 - Earnings per share of $0.92 and cash
earnings per share(1) of $2.96 ; - Rough diamond sales revenue
increased by $157 million over the prior year; - Diamond production
doubled over the prior year to 3 million carats, being Aber's
share; - Credit facility refinanced from project loan to a combined
secured term loan and revolving credit facility; - Acquired a 51%
controlling interest in Harry Winston Inc.; and - Dividend policy
implemented and share repurchase plan approved. Robert Gannicott,
Aber's Chairman and Chief Executive Officer commented, "The past
year has seen Aber achieve definitive goals on its path to become
the world's premier publicly traded diamond company. We completed
the purchase of a controlling interest in Harry Winston and we have
begun to capture the synergy of linking the two most profitable
bookends of the diamond industry. The Diavik Mine continues to
outperform design capacity and Harry Winston has exceeded our early
expectations with sales of both diamonds and jewelry supported by a
robust diamond market." Thomas O'Neill, President of Aber and Chief
Executive Officer of Harry Winston added, "We are pleased that the
initiatives the new management has taken in the areas of
merchandising, marketing and store development have had an impact
on Harry Winston sales and customer traffic. We look forward to
building on these first steps and to establishing a robust business
over the next several years." SUMMARY OF FINANCIAL RESULTS
Consolidated Results:
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Expressed in millions Three Three Twelve Twelve of dollars, except
months months months months per share amounts ended ended ended
ended January 31, January 31, January 31, January 31, 2005 2004
2005(2) 2004
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Sales 144.6 41.6 385.4 95.6
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Earnings from operations 39.3 11.8 121.8 35.5
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Net Earnings 29.5 3.2 53.1 27.7
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Earnings per share $0.51 $0.06 $0.92 $0.50
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Cash earnings per share(1) $1.20 $0.29 $2.96 $0.79
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(1) Cash earnings per share is not a recognized measure under
Canadian GAAP and does not have a standardized meaning prescribed
by Canadian GAAP and is therefore unlikely to be comparable to
similar measure presented by other issuers. Cash earnings per share
are earnings before non-cash income tax expense, non-cash foreign
exchange gains (loss), and depreciation and amortization on a per
share basis. Management believes that cash earnings per share are a
useful supplemental measure in evaluating the performance of Aber.
(2) Results for the twelve months ended January 31, 2005 include
results from Harry Winston for the period from April 1, 2004, the
date of acquisition, to January 31, 2005. Reconciliation of
Earnings to Cash Earnings:
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Expressed in millions Three Three Twelve Twelve of dollars, except
months months months months per share amounts ended ended ended
ended January 31, January 31, January 31, January 31, 2005 2004
2005 2004
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Net Earnings 29.5 3.2 53.1 27.7
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Non-cash income tax 11.9 0.2 52.3 7.8
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Non-cash foreign exchange loss (gain) (1.5) 0.6 6.6 (13.3)
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Depreciation and amortization 29.4 12.5 58.3 22.1
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Cash earnings 69.3 16.5 170.3 44.3
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Cash earnings per share $1.20 $0.29 $2.96 $0.79
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Commenting on the year, Alice Murphy, Aber's Chief Financial
Officer stated that "The financial results demonstrate the
significant cash flow of the Company both from a mining and retail
perspective. The Company had a strong year capped by a successful
holiday season and three rough diamond sales in the fourth quarter.
Harry Winston contributed to the Company's earnings from operations
and had a neutral impact to earnings per share. Aber paid its first
quarterly dividend, and renegotiated a more favourable credit
facility while maintaining a healthy working capital ratio." Aber's
net earnings for the fiscal year ended January 31, 2005 totaled
$53.1 million or $0.92 per share, compared to net earnings of $27.7
million or $0.50 per share for the preceding year. The Company's
cash earnings per share for the fiscal year were $2.96 compared to
cash earnings per share of $0.79 for the preceding year. Aber
recorded sales for the fiscal year of $385.4 million compared to
sales of $95.6 million for the preceding year. Sales prior to
August 1, 2003 (commencement of commercial production) were
credited against deferred mineral property costs. Sales for the
fiscal year included $252.7 million from the sales of rough
diamonds and $132.7 million from jewelry sales at Harry Winston for
the period from the date of acquisition, being April 1, 2004, to
January 31, 2005. The Company completed nine rough diamond sales
during the fiscal year versus the plan of ten. The Company recorded
$189.3 million as cost of sales during the fiscal year compared to
$46.4 million in the preceding year due to increased production at
the Diavik Mine and the inclusion of Harry Winston in cost of
sales. Aber incurred selling, general and administrative
("SG&A") of $74.3 million compared to $13.7 million for the
preceding year. Included in SG&A expense are $58.3 million of
expenses related to Harry Winston. Interest and financing expenses
of $15.6 million were incurred during the fiscal year compared to
$12.6 million for the preceding year. The current year's interest
and financing expenses are attributable to both Aber's and Harry
Winston's credit facilities. Prior to commencement of commercial
production (August 1, 2003) at the Diavik Mine, all interest and
financing costs were capitalized to deferred mineral property costs
with the exception of interest and financing on Aber's first
mortgage on real property. Included in other income was a $7.0
million transaction fee related to the sale of Aber shares owned by
Tiffany. A foreign exchange loss of $5.3 million was recognized
during the fiscal year compared with a gain of $13.3 million
recognized during the preceding year. The current year's loss was
primarily the result of an unrealized foreign exchange loss on the
revaluation of the Company's Canadian dollar denominated future
income tax liability as the Canadian dollar strengthened. The prior
year gain was substantially recorded on Aber's U.S. dollar
denominated net debt position and reflected a strengthened Canadian
dollar prior to the adoption of the United States dollar as the
functional and reporting currency on August 1, 2003. OPERATIONAL
UPDATE Operating Results by Segment:
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Three Three Twelve Twelve months months months months ended ended
ended ended January 31, January 31, January 31, January 31, 2005
2005 2005 2005(1)
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Expressed in millions Mining Retail Mining Retail of dollars
Segment Segment Segment Segment
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Sales $85.3 $59.3 $252.7 $132.7
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Cost of Sales 46.4 31.4 119.3 70.0
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Selling, general and administrative expenses 3.8 23.7 16.0 58.3
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Earnings from operations $35.1 $4.2 $117.3 $4.5
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(1) Results for the twelve months ended January 31, 2005 include
results from Harry Winston for the period from April 1, 2004, the
date of acquisition, to January 31, 2005. The operating segments of
the Company comprise mining and retail. The mining segment includes
the production and sale of rough diamonds. The retail segment
includes sales from Harry Winston's eight salons which are located
in New York, Beverly Hills, Las Vegas, Paris, Geneva, Tokyo, Osaka
and Taipei. Mining Segment Aber's 40% share of Diavik Mine
production:
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Three Three Twelve Twelve months months months months ended ended
ended ended December December December December 31, 31, 31, 31,
2004(1) 2003(1) 2004(1) 2003(1)
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Diamond recovered (000s carats) 601 440 3,030 1,533
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Grade (carats/tonne) 3.30 3.67 3.88 3.21
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Operating costs, cash ($ millions) $20.1 $14.8 $70.0 $48.0
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Operating costs per carat, cash ($) $33 $34 $23 $31
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(1) The Diavik Joint Venture's fiscal year end is December 31,
2004, and their financial statements are proportionately
consolidated into the Company's financial statements with a one
month lag. Operations at the Diavik Mine continued to progress to
full capacity ahead of the time frame originally envisaged in the
feasibility study. Diavik produced 7.575 million carats, on a 100%
basis, in the twelve months ending December 31, 2004, a 98%
increase over the prior year. Processing rates exceeded
expectations by handling 1.95 million tonnes of ore. During the
year the plant operated at annualized production rates in excess of
2.0 million tonnes per annum. Processing of the low-grade mud unit
encountered while mining the A154 South pipe affected the reported
grades through most of the year but, as mining continued to
successively deeper benches, the impact diminished and was
negligible by year end. In the fourth quarter of the calendar year,
mining at the Diavik Mine focused on the development of the A154
North pipe and the mining of its upper benches, with the production
split between higher grade ore from A154 South and lower grade ore
from the top of A154 North. The annualized production rate during
the quarter was 1.85 million tonnes per annum, a drop from prior
calendar quarters, as inclement weather, plant maintenance, and
stripping of A154 North waste material reduced the availability of
ore. Cash operating costs, incurred primarily in Canadian dollars,
increased over the prior year as operations sustained a higher
level of through-put. The higher processing rate resulted in
increased fuel consumption and labour charges. Cash operating costs
per carat decreased over the prior year as the number of carats
produced rose. The decrease was partially offset by a strengthened
Canadian dollar relative to the U.S. dollar. Cash operating costs
per carat for the fourth quarter were in line with the same period
in the prior year as higher costs were offset by increased
production. This year, Diavik was awarded the John T. Ryan Regional
Trophy for Select Mines in Western Canada. The award recognizes
Diavik's safety performance in 2003 and is the first time that a
diamond mine in Canada has won the award. Diavik has been
recognized as a leader in Aboriginal relations by the Canadian
Council for Aboriginal Business. Only two other Canadian mines have
been similarly recognized, and Diavik is the first in northern
Canada. Retail Segment During the year, a new management team of
experienced industry professionals was established under the
leadership of Mr. Thomas J. O'Neill as Chief Executive Officer of
Harry Winston. The management team has focused on building a future
growth plan for Harry Winston through the introduction of several
initiatives in the merchandising, marketing and store development
areas. The existing high-end jewelry range was expanded with the
introduction, during the Holiday season, of a coherent collection
of diamond jewelry at a broader range of price points. This was
combined with a remodelling of the New York flagship store.
Customer traffic doubled in the month of December compared to the
previous year as sales for this important period increased by 50%.
To reinforce Harry Winston's pre-eminent position, a new
advertising campaign, featuring a variety of celebrities, was
launched in the fall utilizing both magazine and newsprint formats.
UPDATED RESERVE AND RESOURCE STATEMENT Aber Diamond Corporation has
been provided with an updated mineral reserve and mineral resource
statement, which has an effective date of December 31, 2004, for
the Diavik Mine by Diavik Diamond Mines, Inc. operator of the
Diavik Mine. Aber's prior reserve and resource estimates were
prepared for its Feasibility Study in May 2000. Since that time,
the Diavik Mine has produced 11.4 million carats principally from
the A154 South pipe. Delineation drilling was completed during 2004
on the A154 South, A154 North and A418 kimberlite pipes in order to
further define resources at depth. Drilling and a new valuation of
A154 North diamonds have supported the addition of substantial new
mineral reserves, principally from the deeper part of A154 North.
This has more than offset the reclassification of the
mineralization contained in the A21 pipe from reserve to resource
status. The A21 resource will be reassessed once a sample of
diamonds that is large enough to provide a more reliable valuation
has been obtained. Proven and probable reserves
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Open Pit and Proven Underground Mining Proven Probable and Probable
------------------------------------------------------ Mt Ct/t Mcts
Mt Ct/t Mcts Mt Ct/t Mcts
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A154 South 6.4 4.6 29.4 4.1 4.2 17.3 10.5 4.5 46.7
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A154 North(1) 4.8 2.2 10.7 5.8 1.8 10.3 10.6 2.0 21.0
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A418 5.0 3.2 15.9 3.7 3.2 12.1 8.7 3.2 27.9
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A21(2) - - - - - - - - -
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Total 16.2 3.5 56.0 13.6 2.9 39.7 29.8 3.2 95.6
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Note: Totals may not add up due to rounding (1) The previous
reserve estimate prepared for Aber Diamond Corporation on A154N
included 1.3 Mt of proven and probable reserves at a grade of 3.5
ct/t containing 4.5 Mcts of diamonds. (2) The previous reserve
estimate prepared for Aber Diamond Corporation on A21 included 4.0
Mt of probable reserves at a grade of 3.0 ct/t containing 11.7 Mcts
of diamonds. Additional inferred resources
---------------------------------------------------- Inferred
resources ----------------------------------------------------
Kimberlite Millions Carats Millions Pipe of tonnes per tonne of
carats A154 South 0.6 4.4 2.6 A154 North 1.6 2.5 4.0 A418 0.6 3.8
2.2 A21 4.8 3.0 14.6 Total 7.6 3.1 23.4
---------------------------------------------------- Totals may not
add up due to rounding. The above mineral reserve and mineral
resource estimates were prepared by Diavik Diamond Mines, Inc.
operator of the Diavik Mine. William E. Roscoe, Ph.D., P.Eng, of
Roscoe Postle Associates Inc. is acting as the Company's
independent Qualified Person in compliance with National Instrument
43-101 with respect to this Reserve and Resource Statement and has
reviewed its contents for verification purposes. The above
estimates are currently being reviewed by the Qualified Person and
the Company expects to file a Technical Report on SEDAR by April 8,
2005. OUTLOOK Growth in the diamond industry is expected to
continue through 2005 as retail sales of diamond jewelry expand
through marketing initiatives. Further increases in demand are seen
to be coming from South Asia and China as an emerging middle class
expand their appetite for diamond jewelry. The diamond pipeline is
believed to be at working stock levels with no significant
inventories of polished or rough diamonds. This scenario is likely
to persist in the coming years, although some short-term
cyclicality in pricing for individual items is expected as the
diamond market evolves. In the upcoming fiscal year 2006, Aber's
sales cycle will continue to be based on the traditional five week
rotation. Aber expects to have three sales in the first quarter,
followed by two sales in the second and third quarters, and three
in the fourth quarter. Seasonal variations in Diavik's production
profile are also expected with lower production in the winter
season being compensated by increases in the summer months. Harry
Winston projects increased sales in fiscal 2006 though existing
stores and new locations. The company plans to open two to three
additional stores in 2005 and has already signed a lease for a
flagship store in London that is planned to open in 2006. Harry
Winston will leverage its association with Aber, especially in the
Indian and Israeli diamond markets, to competitively source the
polished diamonds that are the essential raw material of its
expansion plans. DIVIDEND DECLARATION Aber has declared the second
of its quarterly dividend payments of US$0.15 per share.
Shareholders of record at the close of business on March 31, 2005
will be entitled to receive payment of this dividend on April 15,
2005. ABER DIAMOND CORPORATION Consolidated Balance Sheets
(expressed in thousands of United States dollars) AS AT JANUARY 31,
2005 2004 ---------- ---------- Assets Current assets: Cash and
cash equivalents $ 123,596 $ 23,628 Cash collateral 13,786 100,091
Accounts receivable 17,403 3,549 Inventory and supplies 138,927
22,177 Advances and prepaid expenses 10,748 2,130
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304,460 151,575 Deferred mineral property costs 200,029 206,073
Capital assets 260,616 263,442 Intangible assets, net 43,597 -
Goodwill 41,966 - Future income tax asset 20,264 7,360 Deferred
charges and other assets 23,899 11,678
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$ 894,831 $ 640,128 ---------- ---------- ---------- ----------
Liabilities and Shareholders' Equity Current liabilities: Accounts
payable and accrued liabilities $ 58,746 $ 18,478 Promissory note
50,902 - Bank advances 5,791 - Current portion of long-term debt
20,352 72,805
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135,791 91,283 Long-term debt 130,458 150,270 Future income tax
liability 172,347 74,852 Due to Parent Minimum Pension Liability
4,863 - Future site restoration cost 13,855 12,065 Minority
interest 18,045 - Shareholders' equity: Share capital 292,119
232,897 Stock options 9,260 6,096 Retained earnings 101,460 57,031
Cumulative translation adjustment 16,633 15,634
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419,472 311,658 ---------- ---------- $ 894,831 $ 640,128
---------- ---------- ---------- ---------- ABER DIAMOND
CORPORATION Consolidated Statements of Earnings and Retained
Earnings (expressed in thousands of United States dollars, except
per share amounts) YEARS ENDED JANUARY 31, 2005 2004 2003 Sales $
385,402 $ 95,596 $ - Cost of sales 189,311 46,404 -
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196,091 49,192 - Selling, general and administrative expenses
74,298 13,655 8,245
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Earnings (loss) from operations 121,793 35,537 (8,245)
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Interest and financing expenses (15,597) (12,610) - Other income
9,668 841 1,056 Gain (loss) on sale of other assets (30) 985 -
Foreign exchange gain (loss) (5,295) 13,283 3,177
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Earnings (loss) before income taxes 110,539 38,036 (4,012) Income
taxes - Current 4,743 2,076 1,045 Income taxes (recovery) - Future
51,593 8,253 (1,200)
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Earnings (loss) before minority interest 54,203 27,707 (3,857)
Minority interest 1,119 - -
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Net earnings (loss) $ 53,084 $ 27,707 $ (3,857)
-----------------------------------
----------------------------------- Earnings (loss) per share Basic
$ 0.92 $ 0.50 $ (0.07) -----------------------------------
----------------------------------- Fully diluted $ 0.90 $ 0.49 $
(0.07) -----------------------------------
----------------------------------- Weighted average number of
shares outstanding 57,568,733 55,136,766 54,594,547
----------------------------------- ABER DIAMOND CORPORATION
Consolidated Statements of Cash Flows (expressed in thousands of
United States dollars) AS AT JANUARY 31, 2005 2004 2003 Cash
provided by (used in): Operating: Net earnings for the period $
53,084 $ 27,707 $ (3,857) Items not involving cash: Amortization
and accretion 58,281 22,062 250 Future income taxes 52,228 8,253
(1,200) Stock-based compensation 3,164 2,868 2,465 Foreign exchange
6,610 (13,283) (3,177) Minority interest 1,119 - - Gain on sale of
other assets - (985) - Change in non-cash operating working capital
(24,091) 4,607 762
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150,395 51,229 (4,757)
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Financing: Repayment of long-term debt (134,796) 28,000 194,019
Increase/(decrease) in revolver 27,550 (264) - Deferred financing
(4,286) (868) (10,973) Dividends paid (8,655) - - Issue of common
shares 59,222 11,013 387
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(60,965) 37,881 183,433
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Investing: Cash collateral and cash reserve 86,305 (55,091)
(28,000) Deferred mineral property costs (11,853) (19,339)
(142,112) Capital assets (20,699) (19,618) (18,782) Deferred
charges (15,025) (2,127) (1,067) Purchase of Harry Winston (net of
opening cash) (29,598) - - Proceeds on sale of other assets - 3,961
-
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9,130 (92,214) (189,961)
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Foreign exchange effect on cash balances 1,408 2,282 (2,214)
Increase in cash and cash equivalents 99,968 (822) (13,499) Cash
and cash equivalents, beginning of period 23,628 24,450 37,949
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Cash and cash equivalents, end of period $ 123,596 $ 23,628 $
24,450 -----------------------------------
----------------------------------- Change in non-cash operating
working capital: Accounts receivable (4,079) (3,673) $ (82) Prepaid
expenses (2,331) (1,196) (745) Inventory (24,093) 5,474 - Accounts
payable and accrued liabilities 6,412 4,002 1,589
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$ (24,091) $ 4,607 $ 762 -----------------------------------
----------------------------------- This news release contains
"forward looking statements" within the meaning of the US Private
Securities Litigation Reform Act of 1995. When used in this
release, words such as "estimate", "expect", "anticipate",
"projected", "planned", "forecasted" and similar expressions are
intended to identify forward-looking statements -- which are, by
their very nature, not guarantees of Aber's future operational or
financial performance, and are subject to risks and uncertainties.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
release. Due to risks and uncertainties, actual events may differ
materially from current expectations. The Company disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Aber will host a webcast today at 8:30 a.m. (EST) to
review these results and its outlook. Interested parties may listen
to the broadcast on the Internet at http://www.aber.ca/. About Aber
Aber Diamond Corporation is a specialist diamond company focusing
on the mining and retail segments of the diamond industry. The
Company supplies rough diamonds to the global market through its
40% ownership in the Diavik Diamond Mine, located off Lac de Gras
in Canada's Northwest Territories. Aber also holds a 51% interest
in Harry Winston Inc., the premier retailer of diamond jewelry.
DATASOURCE: Aber Diamond Corporation CONTACT: Robert A. Gannicott,
Chairman and Chief Executive Officer, (416) 362-2237; Amir Kalman,
Manager, Investor Relations, (416) 362-2237 (ext. 244)
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