Update on Diavik Mine Plan: Flexible Production to Adapt to Changing Market
May 04 2009 - 8:40PM
PR Newswire (US)
TORONTO, May 4 /PRNewswire-FirstCall/ -- Harry Winston Diamond
Corporation (TSX: HW, NYSE: HWD) (the "Company") is pleased to
provide an update to the Diavik Diamond Mine plan as a result of a
revised budget for calendar 2009 that was recently approved by both
Rio Tinto plc, the operator of the Diavik Diamond Mine, and the
Company. The updated plan incorporates various production options
that will enable the operation to adapt to changes in the diamond
market. The plan allows for changes to carat production by varying
the mix of ore that comes from the A-418 kimberlite pipe and the
higher grade A-154 South pit. The base plan for calendar year 2009
foresees Diavik production of 5.4 million carats from the
processing of 1.3 million tonnes of ore, and contemplates two
6-week shutdown periods in mid-summer and at year-end. A new mining
technique is under consideration for the potential mining of the
A-21 resource and exploration work has identified extensions at
depth to the A-418 and A-154 North kimberlite pipes. Production In
calendar 2009, it is estimated that 1.3 million tonnes of open pit
ore will be mined, the majority of which will come from the A-418
kimberlite pipe, with the remaining production coming from the
A-154 South open pit. However, if market conditions improve,
additional carats can be produced by shifting the mix of ore from
A-418 to the higher grade A-154 South. Total carat production is
expected to be between 5 and 6 million carats on a 100% basis. In
calendar 2010, the A-418 kimberlite open pit is expected to be the
primary ore source supplemented by A-154 South, where open pit
mining is planned to be complete by the second quarter. Total open
pit ore mined is expected to be 1.5 million tonnes. In addition,
underground mining is scheduled to commence on a limited scale with
approximately 0.5 million tonnes of ore during the year, sourced
mainly from the A-154 North pipe. In calendar 2011, underground
mining is expected to ramp up to 0.9 million tonnes a year,
principally from the A-154 North and South pipes. Production from
the A-418 open pit is expected to peak at 1.5 million tonnes as the
strip ratio is reduced during the later phases of open pit mining.
In the absence of production from A-21, calendar 2012 is expected
to be the final year of open pit mining. An amended pit plan for
A-418 is expected to allow the open pit depth to be extended by 10
meters to 9200 elevation, reallocating 240,000 tonnes of A-418 ore
from underground to open pit for a total of 0.3 million tonnes from
open pit in calendar 2012. Underground mining in 2012 is expected
to reach approximately 1.0 million tonnes. By 2013, underground
mining is expected to reach its ongoing capacity of 1.5 million
tonnes a year with a blend of ore from A-154 North, A-154 South,
and A-418. Additional production capacity beyond 1.5 million tonnes
a year or to extend production beyond 2022 will be dependent on,
among other things, bringing resources and exploratory tonnages in
to reserves. Cost of Sales The summer and winter production
shutdowns are planned to last six weeks each, during which time
diamond production will temporarily cease and the mine will be
placed on a short-term care and maintenance schedule. The summer
shutdown is scheduled for July 14, 2009 to August 24, 2009
inclusive and would reduce goods available for sale by the Company
in the third quarter of fiscal 2010. The winter shutdown is
scheduled for December 1, 2009 to January 11, 2010 inclusive, and
can be reversed at short notice should market conditions improve.
If this shutdown were to go ahead it would reduce availability of
goods for sale in the first quarter of fiscal 2011. Cost of sales
for the mining segment for fiscal 2009 included proceeds of an
insurance settlement related to a Diavik Diamond Mine shovel fire
and significant costs attributable to development activity versus
production activity during the A-418 pre-production period. After
adjusting for these factors, the Company expects cost of sales for
the mining segment to increase in fiscal 2010 by an estimated 10%
to approximately $185 million. The 10% increase is due in part to
year-end operating costs that would normally be carried over as
cost of sales in the next fiscal year being expensed in the current
year due to the planned winter shutdown, and costs associated with
unsold inventory at the end of fiscal 2009. The expected increase
in cost of sales for fiscal 2010 is specific to the Company's
mining segment and is not indicative of the trend in operating
costs at the Diavik Diamond Mine. On a Canadian dollar basis cash
operating costs at the mine are expected to be slightly lower in
calendar 2009 compared with calendar 2008. Capital Expenditures
During the next three years, the Company's portion of the planned
capital expenditure is expected to be approximately U.S.$130
million at an assumed Canadian/US dollar average exchange rate of
Canadian $1.00 = U.S.$0.86. The Company's portion of capital
expenditure for the fiscal year ending January, 31, 2010 is
expected to be U.S.$47 million at an assumed Canadian/US dollar
average exchange rate of Canadian $1.00 = U.S.$0.85, the majority
of which is related to underground development. By August 2009, the
underground development is expected to be at a stage when limited
production could commence, although further development work that
will allow for optimum production levels by use of different mining
methods will be deferred until calendar 2010 and 2011. The Company
expects to contribute U.S.$53 million over the following two years,
assuming a Canadian/US dollar average exchange rate of Canadian
$1.00 = U.S.$0.86, in support of this stage of underground
development. The balance of capital expenditures during this period
represents sustaining requirements. The Diavik Diamond Mine is one
of the highest operating margin diamond mines in the world. Even in
these distressed and uncertain times it delivers a significant cash
margin as a producer of a premium diamond product in a secure
political environment. It has a reserve and resource base to take
it well into a future of improved demand as world economic recovery
meets a fundamentally undersupplied diamond market. Conference Call
and Webcast Harry Winston Diamond Corporation will host a
conference call for analysts, investors and other interested
parties on Tuesday, May 5, beginning at 10:30AM (EST). Listeners
may access a live broadcast of the conference call on the company's
investor relations web site at http://investor.harrywinston.com/ or
by dialing 800-901-5248 within North America or 617-786-4512 from
international locations and entering passcode 73640767.
Forward-Looking Statements Information in this news release that is
not current or historical factual information may constitute
forward-looking information or statements within the meaning of
applicable securities laws. Implicit in this information,
particularly in respect of statements as to the updated Diavik
Diamond Mine plan, the estimated capital expenditures that will be
required to be made by the Company, the timing and nature of future
mining activities and production levels at the Diavik Diamond Mine
or the future operating results and economic performance of Harry
Winston Diamond Corporation, are factors and assumptions regarding,
among other things, mining, production, construction and
exploration activities at the Diavik Diamond Mine, world economic
conditions, projected revenue and expenses, diamond prices,
construction timelines and mine operating plans and budgets, ore
grades and the Canadian/US dollar exchange rate. These assumptions,
although considered reasonable by Harry Winston Diamond Corporation
at the time of preparation, may prove to be incorrect.
Forward-looking information is subject to certain factors,
including risks and uncertainties, which could cause actual results
to differ materially from what we currently expect. These factors
include, among other things, the uncertain nature of mining and
mine development activities, risks associated with underground
construction activities, risks associated with joint venture
operations, risks associated with the remote location of the Diavik
Diamond Mine site, risks associated with regulatory and financing
requirements, fluctuations in diamond prices, changes in world
economic conditions, increased competition from other luxury goods
retailers, changes in consumer preferences and tastes in jewelry,
and the risk of continued fluctuations in the Canadian/US dollar
exchange rate. About Harry Winston Diamond Corporation Harry
Winston Diamond Corporation is a specialist diamond enterprise with
assets in the mining and retail segments of the diamond industry.
Harry Winston supplies rough diamonds to the global market from its
40 per cent ownership interest in the Diavik Diamond Mine (economic
ownership of 31%). The company's retail division is a premier
diamond jeweler and luxury timepiece retailer with salons in key
locations, including New York, Paris, London, Beijing, Tokyo, and
Beverly Hills. The Company focuses on the two most profitable
segments of the diamond industry, mining and retail, in which its
expertise creates shareholder value. This unique business model
provides key competitive advantages; rough diamond sales and
polished diamond purchases provide market intelligence that
enhances the Company's overall performance. Harry Winston sells its
diamonds into the global rough diamond market following strict
corporate governance and chain of custody guidelines. Harry
Winston's policy is to purchase polished diamonds from legitimate
sources that subscribe to an international system of certification
and warranties, known as the Kimberley Process Certification Scheme
and the System of Warranties. DATASOURCE: Harry Winston Diamond
Corporation CONTACT: Investor Relations - (416) 362-2237 ext 290 or
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