news- kinross takes 20% @ $3.00 p/shI may have picked a good day to pick up shares today at $2.29 - as long as Kinross was right by taking 20% of the company at $3.00 per share. I had already picked up some shares when it fell below $3.00 a few weeks back. It looked like a mistake when it traded down to $2.19 and I almost took a large position that day at $2.20 but didn't pull the trigger in time and kicked myself repeatedly when it got over $3.00 the following week.
I didn't want to make the same mistake today so I jumped in right before the close at $2.29. I guess it won't take long to see if it was a mistake or not - but judging by the price Kinross just paid it looks like it will mean some easy money and I will probably be kicking myself for not taking a larger position. We'll find out in the morning.
I can't understand why the shares in this company have been so severly punished over the last few years. I have been a holder on and off for many years but thankfully I sold all my shares at around $46.00 (not a misprint) a few years back. I originally bought in before the mine even opened and had 4000 shares at $8.00 p/sh. I sold at a profit in the teens and didn't buy again til it moved off it's all-time high of $51 or 52 p/sh. It started to nose-dive right after I bought back in in the mid-forties and I was fortunate that it recovered to the high forties again when I exited the stock until today.
The shares took a pounding when they purchased Harry Winston although there was a brief recovery to the mid forties its been all down hill from there. The fact is that the Diavik mine is a world class asset and has been producing millions of carats of gem quality diamonds since the start of mining. I just don't understand why it has been beaten down as low as it is now. It was trading north of $8.00 before the mine even opened.
Regardless of the fact that they are ramping up for the higher cost underground mining, mining a pipe with lower grade and are faced with a decline in rough diamond prices it just doesn't justify the current share price. Trading at less than 1 years earnings for a long-life world-class asset like Diavik is completely irrational. The Harry Winston acquisition hurt the company because it was no longer a miner but it wasn't a retailer either - it became a hybrid and being a one-of-a-kind it was not properly understood by the analysts. So rather then try to understand it - it was shunned. It was usually compared with Tiffany's but it had a mine. I called BNN MarketCall frequently for opinions on "Aber Diamond" but most analysts wouldn't even take the call. When they did comment on the stock they admitted that they didn't know how to value a company with the asset mix that it had.
I believe that the purchase of Harry Winston was a form of "poison pill" because it was rumoured that Rio Tinto was loking at taking out Aber's 40% share of the mine and by taking on Harry Winston it blocked any take-over attempt because Rio Tinto would not want a diamond retailer. That was management's way of preserving their jobs but a complete disaster for shareholders because any take-out would have likely been north of $50.
This company has a large piece of ground staked out in the vicinity of the mine and I had always hoped that there would be further discoveries on their lands. The opening of the mine distracted their attention away from further exploration but I still feel that there may well be more pipes waiting to be discovered on their claims. With the infrastructure already in place they are in a good position to take advantage of any further discoveries on their claims or even farm-ins on any other discoveries within trucking distance.
There was a show made about the construction of the mine which aired on the discovery channel. It was quite an engineering marvel because the pipes being mined are at the bottom of a lake so they had to dam off that portion of the lake then pump it out before the mining could commence.
As far as the economic slow-down goes and the effect on jewelry sales - Harry Winston is a well known and well respected name that caters to the elite class of the world and while there will surely be some loss of business in the jewelry industry the spending habits of the elite will be impacted to a lesser degree then most others. The royals, barons, sheiks etc will still be able to spoil their loved ones with plenty of sparkly trinkets so I don't believe that sales at Harry Winston salons will dry up.
There was a request by a previous poster on this board for any long time holders of this stock to post a comment which is what motivated me to respond. I think most of the other long time holders from back to the Aber days are not feeling too good about their investment in this company and likely embarassed to admit that they have held on all this time. It has been a disasterous holding for many I'm sure. I don't know if it will ever regain it's past value - $50+ does not seem possible from here but I feel like I have made a solid investment at this level and in my opinion it has nowhere to go but up.
OceanRanger