TORONTO STAR ARTICLEJul. 19, 2003. 01:00 AM
Aber Diamond testing 20,000-tonne sample
Results could mean new mine in Canadian Arctic
Billion-dollar payoff possible for Toronto company
RICK WESTHEAD
BUSINESS REPORTER
Toronto-based Aber Diamond Corp., which has a 40 per cent stake in one of two diamond mines that are in operation in Canada's Arctic, is within weeks of what may turn out to be a billion-dollar payoff.
Aber chief executive officer Robert Gannicott said he expects to learn within two weeks whether a 20,000-tonne sample taken from a location known as A-154 North on the Diavik Diamond Mine site, which is near Lac de Gras in the Northwest Territories, indicates enough rough-cut diamonds to turn out a profit from mining the location.
While the financial benefit to Aber and London-based Rio Tinto PLC, which owns a 60 per cent stake in Diavik, is tied to how the ore sample is appraised, a go-ahead to mine A-154 North would probably add as much as 23 million carats to the mine's proven reserves.
WWW International Diamond Consultants Ltd. has been hired to estimate the dollar per carat value in the sample.
Aber has sold diamonds for as much as $96.22 (U.S.) per carat, more than the $79 price projected in an earlier feasibility study, from the A-154 South mine, which has reserves of 61.2 million carats.
"There is the potential for A-154 North to be similar," Gannicott said in an interview at Aber's annual general meeting in Toronto yesterday.
Asked about whether Aber is a prospective takeover target, given the company is about to generate earnings for the first time, Gannicott said "it's a public company; it's always open to that challenge."
Aber sells 25 per cent of its diamonds to Tiffany & Co.
The balance is sold through Aber's office in Antwerp, Belgium, to customers in India, Israel and Belgium.
The company said it plans to reduce its $170 million (Canadian) net debt to $130 million by the end of the year, and retire the debt completely next year. Aber, which has a $1.6 billion market capitalization and 50 million shares outstanding, also reiterated plans to develop a plan to pay a dividend when debt is retired.
Separately, Aber named Noranda Inc. chief financial officer Lars-Eric Johansson to the board.
Diavik is Canada's second operating diamond mine.
Ekati, which is owned by BHP Billiton PLC, started production in 1998.
Plans have called for the Diavik Diamond Mine to produce as many as 8 million carats of diamonds a year.
That would be about 5 per cent of the world's diamond production.