Tiffancy & Company like Arctic diamonds
Alliance gives jeweller chunk of Diavik production
NNSL (July 21/99) - Aber Resources, 40 per cent owner of the Diavik diamond project, has agreed to sell a "substantial portion" of its share of rough diamonds from the proposed mine to one of the world's most prestigious jewelry retailers.
In a deal announced Monday, New York-based Tiffany & Co. will pay $104 million for eight million new Aber shares.
The deal will give Tiffany & Co. a 14.3 per cent stake in the Vancouver-based junior mining company.
Aber is entitled to 40 per cent of diamonds produced from the proposed Diavik diamond mine at Lac de Gras. It is also responsible for raising 40 per cent of the cash needed to build the mine, estimated to cost $875 million.
"This is a fantastic deal for two reasons," TD Evergreen investment analyst Todd Ferguson said Tuesday afternoon.
"First, the deal with Tiffany & Co. assures a market for mine output. Second, it provides Aber with capital for its share of costs associated with building the mine, should they get permits to go ahead," he said.
"This is a significant and positive event for Aber shareholders."
Aber has the right to market its 40 per cent share of diamonds from the proposed mine while Rio Tinto will market its 60 per cent share.
With the completion of this transaction, Aber will have $214 million of working capital and anticipates raising the balance of its share of the capital cost without equity financing, Aber said in a release.
Aber's share of the cost of building the proposed Diavik mine is about $350 million.
Investors gave the deal the thumbs up. Aber's stock rose to a 52-week high in the wake of the announcement. Tiffany & Co.'s stock also gained.
Aber spokesperson Alan Bayless could not be reached for comment.
The deal also means Tiffany's top accountant will join the Aber board of directors.
James Fernandez, executive vice-president and chief financial officer will be appointed to the board immediately following Aber's annual general meeting July 30, 1999.
Diavik's owners, Aber and Rio Tinto, expect regulatory approvals this year. With permits and shareholder approval, construction of the mine could begin next year with production starting in 2002.