Kimberley Diamonds fails to get price increase with Tiffany & Co for Ellendale yellow diamonds

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logo kimberlyKimberley Diamonds Limited says the recent negotiations with a subsidiary of global jeweller Tiffany & Co to secure a price increase above the current levels for the supply of premium grade fancy yellow diamonds from the Ellendale Mine have been unsuccessful at this time.

KDL has an exclusive off-take agreement with Laurelton Diamonds Inc., the cutting and polishing arm of Tiffany, for the life-of-mine of Kimberley’s Ellendale Mine in Western Australia, the last price increase was negotiated in September 2012.

“A price increase above current levels was required to sustain the continued economic development of the Ellendale E9 pit, as well as support the reopening of the Ellendale E4 pit later this year,” the company said.

KDL had anticipated securing a price increase in the June quarter of 2014 (Q4/2014) and this expectation was reflected in the earnings guidance provided to the market. The absence of a price increase will therefore impact KDL’s forecast revenue for Q4 and the full-year 2014 results.

It is estimated that revenue for Q4/2014 will now be circa. $20 million and Operating EBITDA for Q4/2014 will now be circa. $1.5million.

As a result of the pricing outcome above, the Board and management will also be reviewing the Company’s strategy and development plans which were previously announced to market.

The expansion strategy which will be reviewed beyond FY2014 includes; the restart of the Ellendale E4 mine, the recommissioning of the Lerala Diamond Mine in Botswana, the commencement of alluvial operations at the Smoke Creek Project in WA, the retreatment of the coarse tailings at Ellendale E9 in financial years 2015-2017 and moving into cutting and polishing its rough diamond production with a view to increasing revenues and improving profit margins through the value-adding activities down the diamond value chain.

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