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Harry Winston Diamond Corporation HWD



NYSE:HWD - Post by User

Post by Marine2on Jan 10, 2010 11:29am
621 Views
Post# 16660771

HW resigned to depleting income trust ??

HW resigned to depleting income trust ??Harry Winston is a 36% owner of the Diavik diamond mine in the Northwest Territories, the second major diamond mine after Ekati to be developed in Canada. 

The main Diavik deposits will be depleted within 20 years and efforts to find promising new pipes on the 36% owned Lac de Gras land holdings have not been successful. 

The long term problem for Harry Winston is to secure a supply of diamonds above and beyond the Diavik supply or resign itself to a role as some sort of depleting income trust. Because Harry Winston is a Canadian and publicly traded company it has the capacity to act as an aggregator of other juniors which discover significant diamond deposits. Harry Winston's advantage is that it has the ability to offer stock to North American shareholders which allows capital gains deferral. The big diamond producers, BHP, Rio Tinto and De Beers cannot do this because as foreign companies any stock they issue to North Americans has the same tax status as cash. De Beers does not even have the option of offering paper because it is privately held. 

As Diavik achieves payback in the coming years and Harry Winston develops a financial warchest (stock price) it will be in an excellent position to make takeover bids for any juniors which do make major diamond discoveries. Most juniors are now retaining diamond marketing rights so any major discoveries are up for grabs to the highest bidder. There will be a limit as to how much cash De Beers would offer for Mountain Province, and that limit will likely be lower than the value of the paper Harry Winston might be willing to offer, paper that defers capital gains consequences and allows Mountain Province shareholders to participate in some degree in any hidden value that commercial production later unleashes.

My little birdy tells me as Harry Winston stock moves up they will make a bid for MPV, before their feasibilty study is compleated !

Marine2
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