RE: MPV and HW - buy bothljines1; Remember ""
the whole is going to be worth more than the sum of the parts"".
Harry Winstons share price could get a huge boost if they obtained a new source of high end diamonds.
For example, Harry Winston has the ability to market polished diamonds through its luxury retail outlets that come from its own Diavik Mine. Not only does this allow the producer to capture a source premium, but it also gives it a chance to
capture part of the substantial markup between the rough and retail value of a diamond. Unfortunately for Harry Winston, the Diavik pipes only rarely produce the large high value stones required by the high end jewelry in which the Harry Winston retail outlets specialize. Furthermore, who gets the "specials" is decided by a sealed bid process where the partner bidding the highest amount "gets" the diamond while the loser gets the cash. The word is that Rio Tinto has been more aggressive than Harry Winston in this regard, with the result that Rio Tinto has been scooping the specials for its own distribution system.
The Gahcho Kue pipes appear to have the potential to produce very valuable diamonds, as was demonstrated in 2008 when a bulk sample from Tuzo yielded a 25.13 carat gem valued at US $17,500 per carat. Several years ago a bulk sample from the 5034 pipe yielded a 9.9 carat gem valued at $15,000 per carat. These and other large high quality stones have led WWW to state that once commercial production is achieved the value will likely be at the high end of the modeled range, which is 18-24% higher than the official modeled values assigned to the above resource estimate. Although De Beers has resolved all its anti-trust problems in the United States and has opened two De Beers luxury retail outlets, there is no evidence yet that De Beers is ready to accompany its production downstream through the supply chain in the manner that Rio Tinto, Harry Winston and BHP Billiton are able to do with their production. Because De Beers is still committed to its role as a "Supplier of Choice" which sells rough diamonds to wholesalers, it has no incentive to "overpay" for specials. Thus if Harry Winston were to acquire Mountain Province and be in a position to receive its share of Gahcho Kue production in kind, it would probably prevail over De Beers with its sealed bids for the specials. In this scenario Harry Winston would have a strategic reason to acquire Mountain Province, namely a supply of high end stones for its Harry Winston outlets.