Message #3 From:
Stock News Bot Date: April 27, 2005 10:11:45 AM
ABER Aber Diamond Corporation Reports Results, Updates Mineral Reserves, and Declares Dividend
Aber Diamond Corporation Reports Results, Updates Mineral Reserves, and Declares Dividend
TORONTO, March 9 /CNW/ - ABER DIAMOND CORPORATION (TSX-ABZ, NASDAQ-ABER),
the specialist diamond company, today announced its financial results for the
fourth quarter and year ended January 31, 2005.
HIGHLIGHTS FOR THE YEAR ENDED JANUARY 31, 2005
- Earnings per share of $0.92 and cash earnings per share(1) of $2.96 ;
- Rough diamond sales revenue increased by $157 million over the prior
year;
- Diamond production doubled over the prior year to 3 million carats,
being Aber's share;
- Credit facility refinanced from project loan to a combined secured
term loan and revolving credit facility;
- Acquired a 51% controlling interest in Harry Winston Inc.; and
- Dividend policy implemented and share repurchase plan approved.
Robert Gannicott, Aber's Chairman and Chief Executive Officer commented,
"The past year has seen Aber achieve definitive goals on its path to become
the world's premier publicly traded diamond company. We completed the purchase
of a controlling interest in Harry Winston and we have begun to capture the
synergy of linking the two most profitable bookends of the diamond industry.
The Diavik Mine continues to outperform design capacity and Harry Winston has
exceeded our early expectations with sales of both diamonds and jewelry
supported by a robust diamond market."
Thomas O'Neill, President of Aber and Chief Executive Officer of Harry
Winston added, "We are pleased that the initiatives the new management has
taken in the areas of merchandising, marketing and store development have had
an impact on Harry Winston sales and customer traffic. We look forward to
building on these first steps and to establishing a robust business over the
next several years."
<<
SUMMARY OF FINANCIAL RESULTS
Consolidated Results:
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Expressed in millions Three Three Twelve Twelve
of dollars, except months months months months
per share amounts ended ended ended ended
January 31, January 31, January 31, January 31,
2005 2004 2005(2) 2004
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Sales 144.6 41.6 385.4 95.6
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Earnings from operations 39.3 11.8 121.8 35.5
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Net Earnings 29.5 3.2 53.1 27.7
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Earnings per share $0.51 $0.06 $0.92 $0.50
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Cash earnings per share(1) $1.20 $0.29 $2.96 $0.79
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(1) Cash earnings per share is not a recognized measure under Canadian
GAAP and does not have a standardized meaning prescribed by Canadian
GAAP and is therefore unlikely to be comparable to similar measure
presented by other issuers. Cash earnings per share are earnings
before non-cash income tax expense, non-cash foreign exchange gains
(loss), and depreciation and amortization on a per share basis.
Management believes that cash earnings per share are a useful
supplemental measure in evaluating the performance of Aber.
(2) Results for the twelve months ended January 31, 2005 include results
from Harry Winston for the period from April 1, 2004, the date of
acquisition, to January 31, 2005.
Reconciliation of Earnings to Cash Earnings:
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Expressed in millions Three Three Twelve Twelve
of dollars, except months months months months
per share amounts ended ended ended ended
January 31, January 31, January 31, January 31,
2005 2004 2005 2004
-------------------------------------------------------------------------
Net Earnings 29.5 3.2 53.1 27.7
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Non-cash income tax 11.9 0.2 52.3 7.8
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Non-cash foreign exchange
loss (gain) (1.5) 0.6 6.6 (13.3)
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Depreciation and amortization 29.4 12.5 58.3 22.1
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Cash earnings 69.3 16.5 170.3 44.3
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Cash earnings per share $1.20 $0.29 $2.96 $0.79
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Commenting on the year, Alice Murphy, Aber's Chief Financial Officer
stated that "The financial results demonstrate the significant cash flow of
the Company both from a mining and retail perspective. The Company had a
strong year capped by a successful holiday season and three rough diamond
sales in the fourth quarter. Harry Winston contributed to the Company's
earnings from operations and had a neutral impact to earnings per share. Aber
paid its first quarterly dividend, and renegotiated a more favourable credit
facility while maintaining a healthy working capital ratio."
Aber's net earnings for the fiscal year ended January 31, 2005 totaled
$53.1 million or $0.92 per share, compared to net earnings of $27.7 million or
$0.50 per share for the preceding year. The Company's cash earnings per share
for the fiscal year were $2.96 compared to cash earnings per share of $0.79
for the preceding year.
Aber recorded sales for the fiscal year of $385.4 million compared to
sales of $95.6 million for the preceding year. Sales prior to August 1, 2003
(commencement of commercial production) were credited against deferred mineral
property costs. Sales for the fiscal year included $252.7 million from the
sales of rough diamonds and $132.7 million from jewelry sales at Harry Winston
for the period from the date of acquisition, being April 1, 2004, to January
31, 2005. The Company completed nine rough diamond sales during the fiscal
year versus the plan of ten.
The Company recorded $189.3 million as cost of sales during the fiscal
year compared to $46.4 million in the preceding year due to increased
production at the Diavik Mine and the inclusion of Harry Winston in cost of
sales.
Aber incurred selling, general and administrative ("SG&A") of
$74.3 million compared to $13.7 million for the preceding year. Included in
SG&A expense are $58.3 million of expenses related to Harry Winston.
Interest and financing expenses of $15.6 million were incurred during the
fiscal year compared to $12.6 million for the preceding year. The current
year's interest and financing expenses are attributable to both Aber's and
Harry Winston's credit facilities. Prior to commencement of commercial
production (August 1, 2003) at the Diavik Mine, all interest and financing
costs were capitalized to deferred mineral property costs with the exception
of interest and financing on Aber's first mortgage on real property.
Included in other income was a $7.0 million transaction fee related to
the sale of Aber shares owned by Tiffany.
A foreign exchange loss of $5.3 million was recognized during the fiscal
year compared with a gain of $13.3 million recognized during the preceding
year. The current year's loss was primarily the result of an unrealized
foreign exchange loss on the revaluation of the Company's Canadian dollar
denominated future income tax liability as the Canadian dollar strengthened.
The prior year gain was substantially recorded on Aber's U.S. dollar
denominated net debt position and reflected a strengthened Canadian dollar
prior to the adoption of the United States dollar as the functional and
reporting currency on August 1, 2003.
OPERATIONAL UPDATE
Operating Results by Segment:
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Three Three Twelve Twelve
months months months months
ended ended ended ended
January 31, January 31, January 31, January 31,
2005 2005 2005 2005(1)
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Expressed in millions Mining Retail Mining Retail
of dollars Segment Segment Segment Segment
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Sales $85.3 $59.3 $252.7 $132.7
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Cost of Sales 46.4 31.4 119.3 70.0
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Selling, general and
administrative expenses 3.8 23.7 16.0 58.3
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Earnings from operations $35.1 $4.2 $117.3 $4.5
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(1) Results for the twelve months ended January 31, 2005 include results
from Harry Winston for the period from April 1, 2004, the date of
acquisition, to January 31, 2005.
The operating segments of the Company comprise mining and retail. The
mining segment includes the production and sale of rough diamonds. The
retail segment includes sales from Harry Winston's eight salons which are
located in New York, Beverly Hills, Las Vegas, Paris, Geneva, Tokyo,
Osaka and Taipei.
Mining Segment
Aber's 40% share of Diavik Mine production:
-------------------------------------------------------------------------
Three Three Twelve Twelve
months months months months
ended ended ended ended
December December December December
31, 31, 31, 31,
2004(1) 2003(1) 2004(1) 2003(1)
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Diamond recovered
(000s carats) 601 440 3,030 1,533
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Grade (carats/tonne) 3.30 3.67 3.88 3.21
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Operating costs, cash
($ millions) $20.1 $14.8 $70.0 $48.0
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Operating costs per carat,
cash ($) $33 $34 $23 $31
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(1) The Diavik Joint Venture's fiscal year end is December 31, 2004, and
their financial statements are proportionately consolidated into the
Company's financial statements with a one month lag.
Operations at the Diavik Mine continued to progress to full capacity
ahead of the time frame originally envisaged in the feasibility study. Diavik
produced 7.575 million carats, on a 100% basis, in the twelve months ending
December 31, 2004, a 98% increase over the prior year. Processing rates
exceeded expectations by handling 1.95 million tonnes of ore. During the year
the plant operated at annualized production rates in excess of 2.0 million
tonnes per annum. Processing of the low-grade mud unit encountered while
mining the A154 South pipe affected the reported grades through most of the
year but, as mining continued to successively deeper benches, the impact
diminished and was negligible by year end. In the fourth quarter of the
calendar year, mining at the Diavik Mine focused on the development of the
A154 North pipe and the mining of its upper benches, with the production split
between higher grade ore from A154 South and lower grade ore from the top of
A154 North. The annualized production rate during the quarter was 1.85 million
tonnes per annum, a drop from prior calendar quarters, as inclement weather,
plant maintenance, and stripping of A154 North waste material reduced the
availability of ore.
Cash operating costs, incurred primarily in Canadian dollars, increased
over the prior year as operations sustained a higher level of through-put. The
higher processing rate resulted in increased fuel consumption and labour
charges. Cash operating costs per carat decreased over the prior year as the
number of carats produced rose. The decrease was partially offset by a
strengthened Canadian dollar relative to the U.S. dollar. Cash operating costs
per carat for the fourth quarter were in line with the same period in the
prior year as higher costs were offset by increased production.
This year, Diavik was awarded the John T. Ryan Regional Trophy for Select
Mines in Western Canada. The award recognizes Diavik's safety performance in
2003 and is the first time that a diamond mine in Canada has won the award.
Diavik has been recognized as a leader in Aboriginal relations by the Canadian
Council for Aboriginal Business. Only two other Canadian mines have been
similarly recognized, and Diavik is the first in northern Canada.
Retail Segment
During the year, a new management team of experienced industry
professionals was established under the leadership of Mr. Thomas J. O'Neill as
Chief Executive Officer of Harry Winston. The management team has focused on
building a future growth plan for Harry Winston through the introduction of
several initiatives in the merchandising, marketing and store development
areas.
The existing high-end jewelry range was expanded with the introduction,
during the Holiday season, of a coherent collection of diamond jewelry at a
broader range of price points. This was combined with a remodelling of the New
York flagship store. Customer traffic doubled in the month of December
compared to the previous year as sales for this important period increased by
50%.
To reinforce Harry Winston's pre-eminent position, a new advertising
campaign, featuring a variety of celebrities, was launched in the fall
utilizing both magazine and newsprint formats.
UPDATED RESERVE AND RESOURCE STATEMENT
Aber Diamond Corporation has been provided with an updated mineral
reserve and mineral resource statement, which has an effective date of
December 31, 2004, for the Diavik Mine by Diavik Diamond Mines, Inc. operator
of the Diavik Mine. Aber's prior reserve and resource estimates were prepared
for its Feasibility Study in May 2000. Since that time, the Diavik Mine has
produced 11.4 million carats principally from the A154 South pipe.
Delineation drilling was completed during 2004 on the A154 South,
A154 North and A418 kimberlite pipes in order to further define resources at
depth. Drilling and a new valuation of A154 North diamonds have supported the
addition of substantial new mineral reserves, principally from the deeper part
of A154 North. This has more than offset the reclassification of the
mineralization contained in the A21 pipe from reserve to resource status. The
A21 resource will be reassessed once a sample of diamonds that is large enough
to provide a more reliable valuation has been obtained.
Proven and probable reserves
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Open Pit and Proven
Underground Mining Proven Probable and Probable
------------------------------------------------------
Mt Ct/t Mcts Mt Ct/t Mcts Mt Ct/t Mcts
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A154 South 6.4 4.6 29.4 4.1 4.2 17.3 10.5 4.5 46.7
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A154 North(1) 4.8 2.2 10.7 5.8 1.8 10.3 10.6 2.0 21.0
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A418 5.0 3.2 15.9 3.7 3.2 12.1 8.7 3.2 27.9
-------------------------------------------------------------------------
A21(2) - - - - - - - - -
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Total 16.2 3.5 56.0 13.6 2.9 39.7 29.8 3.2 95.6
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Note: Totals may not add up due to rounding
(1) The previous reserve estimate prepared for Aber Diamond Corporation
on A154N included 1.3 Mt of proven and probable reserves at a grade
of 3.5 ct/t containing 4.5 Mcts of diamonds.
(2) The previous reserve estimate prepared for Aber Diamond Corporation
on A21 included 4.0 Mt of probable reserves at a grade of 3.0 ct/t
containing 11.7 Mcts of diamonds.
Additional inferred resources
----------------------------------------------------
Inferred resources
----------------------------------------------------
Kimberlite Millions Carats Millions
Pipe of tonnes per tonne of carats
A154 South 0.6 4.4 2.6
A154 North 1.6 2.5 4.0
A418 0.6 3.8 2.2
A21 4.8 3.0 14.6
Total 7.6 3.1 23.4
----------------------------------------------------
Totals may not add up due to rounding.
The above mineral reserve and mineral resource estimates were prepared by
Diavik Diamond Mines, Inc. operator of the Diavik Mine. William E. Roscoe,
Ph.D., P.Eng, of Roscoe Postle Associates Inc. is acting as the Company's
independent Qualified Person in compliance with National Instrument 43-101
with respect to this Reserve and Resource Statement and has reviewed its
contents for verification purposes. The above estimates are currently being
reviewed by the Qualified Person and the Company expects to file a Technical
Report on SEDAR by April 8, 2005.
OUTLOOK
Growth in the diamond industry is expected to continue through 2005 as
retail sales of diamond jewelry expand through marketing initiatives. Further
increases in demand are seen to be coming from South Asia and China as an
emerging middle class expand their appetite for diamond jewelry.
The diamond pipeline is believed to be at working stock levels with no
significant inventories of polished or rough diamonds. This scenario is likely
to persist in the coming years, although some short-term cyclicality in
pricing for individual items is expected as the diamond market evolves.
In the upcoming fiscal year 2006, Aber's sales cycle will continue to be
based on the traditional five week rotation. Aber expects to have three sales
in the first quarter, followed by two sales in the second and third quarters,
and three in the fourth quarter. Seasonal variations in Diavik's production
profile are also expected with lower production in the winter season being
compensated by increases in the summer months.
Harry Winston projects increased sales in fiscal 2006 though existing
stores and new locations. The company plans to open two to three additional
stores in 2005 and has already signed a lease for a flagship store in London
that is planned to open in 2006. Harry Winston will leverage its association
with Aber, especially in the Indian and Israeli diamond markets, to
competitively source the polished diamonds that are the essential raw material
of its expansion plans.
DIVIDEND DECLARATION
Aber has declared the second of its quarterly dividend payments of
US$0.15 per share. Shareholders of record at the close of business on March
31, 2005 will be entitled to receive payment of this dividend on April 15,
2005.
ABER DIAMOND CORPORATION
Consolidated Balance Sheets
(expressed in thousands of United States dollars)
AS AT JANUARY 31,
2005 2004
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 123,596 $ 23,628
Cash collateral 13,786 100,091
Accounts receivable 17,403 3,549
Inventory and supplies 138,927 22,177
Advances and prepaid expenses 10,748 2,130
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304,460 151,575
Deferred mineral property costs 200,029 206,073
Capital assets 260,616 263,442
Intangible assets, net 43,597 -
Goodwill 41,966 -
Future income tax asset 20,264 7,360
Deferred charges and other assets 23,899 11,678
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$ 894,831 $ 640,128
---------- ----------
---------- ----------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 58,746 $ 18,478
Promissory note 50,902 -
Bank advances 5,791 -
Current portion of long-term debt 20,352 72,805
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135,791 91,283
Long-term debt 130,458 150,270
Future income tax liability 172,347 74,852
Due to Parent
Minimum Pension Liability 4,863 -
Future site restoration cost 13,855 12,065
Minority interest 18,045 -
Shareholders' equity:
Share capital 292,119 232,897
Stock options 9,260 6,096
Retained earnings 101,460 57,031
Cumulative translation adjustment 16,633 15,634
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419,472 311,658
---------- ----------
$ 894,831 $ 640,128
---------- ----------
---------- ----------
ABER DIAMOND CORPORATION
Consolidated Statements of Earnings and Retained Earnings
(expressed in thousands of United States dollars,
except per share amounts)
YEARS ENDED JANUARY 31,
2005 2004 2003
Sales $ 385,402 $ 95,596 $ -
Cost of sales 189,311 46,404 -
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196,091 49,192 -
Selling, general and administrative
expenses 74,298 13,655 8,245
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Earnings (loss) from operations 121,793 35,537 (8,245)
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Interest and financing expenses (15,597) (12,610) -
Other income 9,668 841 1,056
Gain (loss) on sale of other assets (30) 985 -
Foreign exchange gain (loss) (5,295) 13,283 3,177
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Earnings (loss) before income taxes 110,539 38,036 (4,012)
Income taxes - Current 4,743 2,076 1,045
Income taxes (recovery) - Future 51,593 8,253 (1,200)
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Earnings (loss) before minority
interest 54,203 27,707 (3,857)
Minority interest 1,119 - -
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Net earnings (loss) $ 53,084 $ 27,707 $ (3,857)
-----------------------------------
-----------------------------------
Earnings (loss) per share
Basic $ 0.92 $ 0.50 $ (0.07)
-----------------------------------
-----------------------------------
Fully diluted $ 0.90 $ 0.49 $ (0.07)
-----------------------------------
-----------------------------------
Weighted average number of shares
outstanding 57,568,733 55,136,766 54,594,547
-----------------------------------
ABER DIAMOND CORPORATION
Consolidated Statements of Cash Flows
(expressed in thousands of United States dollars)
AS AT JANUARY 31,
2005 2004 2003
Cash provided by (used in):
Operating:
Net earnings for the period $ 53,084 $ 27,707 $ (3,857)
Items not involving cash:
Amortization and accretion 58,281 22,062 250
Future income taxes 52,228 8,253 (1,200)
Stock-based compensation 3,164 2,868 2,465
Foreign exchange 6,610 (13,283) (3,177)
Minority interest 1,119 - -
Gain on sale of other assets - (985) -
Change in non-cash operating working
capital (24,091) 4,607 762
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150,395 51,229 (4,757)
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Financing:
Repayment of long-term debt (134,796) 28,000 194,019
Increase/(decrease) in revolver 27,550 (264) -
Deferred financing (4,286) (868) (10,973)
Dividends paid (8,655) - -
Issue of common shares 59,222 11,013 387
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(60,965) 37,881 183,433
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Investing:
Cash collateral and cash reserve 86,305 (55,091) (28,000)
Deferred mineral property costs (11,853) (19,339) (142,112)
Capital assets (20,699) (19,618) (18,782)
Deferred charges (15,025) (2,127) (1,067)
Purchase of Harry Winston
(net of opening cash) (29,598) - -
Proceeds on sale of other assets - 3,961 -
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9,130 (92,214) (189,961)
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Foreign exchange effect on cash
balances 1,408 2,282 (2,214)
Increase in cash and cash equivalents 99,968 (822) (13,499)
Cash and cash equivalents,
beginning of period 23,628 24,450 37,949
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Cash and cash equivalents,
end of period $ 123,596 $ 23,628 $ 24,450
-----------------------------------
-----------------------------------
Change in non-cash operating
working capital:
Accounts receivable (4,079) (3,673) $ (82)
Prepaid expenses (2,331) (1,196) (745)
Inventory (24,093) 5,474 -
Accounts payable and accrued
liabilities 6,412 4,002 1,589
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$ (24,091) $ 4,607 $ 762
-----------------------------------
-----------------------------------
This news release contains "forward looking statements" within the
meaning of the US Private Securities Litigation Reform Act of 1995. When used
in this release, words such as "estimate", "expect", "anticipate",
"projected", "planned", "forecasted" and similar expressions are intended to
identify forward-looking statements -- which are, by their very nature, not
guarantees of Aber's future operational or financial performance, and are
subject to risks and uncertainties. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this release. Due to risks and uncertainties, actual events may differ
materially from current expectations. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
Aber will host a webcast today at 8:30 a.m. (EST) to review these results
and its outlook. Interested parties may listen to the broadcast on the
Internet at www.aber.ca.
About Aber
Aber Diamond Corporation is a specialist diamond company focusing on the
mining and retail segments of the diamond industry. The Company supplies rough
diamonds to the global market through its 40% ownership in the Diavik Diamond
Mine, located off Lac de Gras in Canada's Northwest Territories. Aber also
holds a 51% interest in Harry Winston Inc., the premier retailer of diamond
jewelry.
