Harry Winston Diamond Corporation HWD

national bank target cut to 3.50$$$$$$$$$$$$$$$$$$

[greatemailslob]

It is important to note that currently, there is no guidance for either the mine plan

(production, capital or costs) for Diavik or the retail segment. Management expects to

provide some guidance for 2009 operating estimates as it pertains to Diavik by the end

of April. As such, our forecasts for the company as a whole are based very much on our

internal estimates at this point.

We have made changes to our model to reflect Q4 financials, the weakness experienced in the

retail environment and diamond prices. In addition, we have incorporated the Kinross

transaction including the reduction in HW’s share of Diavik to 31% from 40%, the equity issue

and cash injection for K’s share of the newly created Diavik partnership, the cancellation of the

HW dividend and we have estimated our own production level for 2009, which involves

processing pipe A418 at 3.4 cts/tonne for production of about 5.5 Mcts (100% basis). As a

result, our EPS and CFPS for f2010 change to $0.03/sh and $0.91/sh (from $1.04/sh and

$2.15/sh), respectively, and we are introducing our f2011 EPS and CFPS of $0.14/sh and

$0.90/sh, respectively. Our NAV falls to $7.00/sh from $13.00/sh. We maintain our multiple of

0.5x as the decreased solvency risk is mitigated by the lack of guidance and visibility. Our target

falls to $3.50/sh from $6.00/sh. We maintain our Sector Perform rating.