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Saturday, July 24, 2010

Kinross (NYSE:KGC) Selling Diavik Diamond Mine Back to Harry Winston (NYSE:HWD)

No matter how you look at it, Kinross Gold (NYSE:KGC) (TSE:K) made a super deal with Harry Winston (NYSE:HWD) for the Diavik Diamond Mine, when they acquired from them in March 2009 for $150 million, and now are turning around and selling it back to them for $220 million.

Kinross, which also owns a 19.9 percent stake in Harry Winston, will sell that as well to an unnamed consortium of financial institutions.

The diamond industry was slammed hard during the harder parts of the recession, and Winston need the influx of capital to shore up its balance sheet, which Kinross wisely offered them.

Since it began operations in 2003, Diavik has produced over 50 million carats of rough diamonds.

The industry seems to be turning around now, as demand has surged from Asia, specifically India and China.

Major competitor De Beers increased sales by over 80 percent in the last half, and believes things will continue to improve.

Assuming the diamond industry has in fact turned around, it would make sense to Harry Winston to re-acquire the mine, even though they had to pay a premium to do it.

Although terms weren't disclosed, based on the closing on Thursday, the 15.2 million shares exchanging hands are valued at approximately C$200 million.

Kinross closed in New York at $16.43, gaining $0.10, or 0.61 percent.

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