Rising diamond prices lift Harry Winston

Harry Winston Diamond Corp. (HW-T, HWD-N) says it is on track to produce 6.9 million carats this year, up from 6.5 million in 2010, at the Diavik mine.

The diamonds will be recovered from the mining of 2 million tonnes of ore and in the second half of the year the company says its A-154 South pipe will be mined using a “recently approved higher velocity and lower cost mining method.”

In the first quarter Diavik produced 1.35 million carats from 0.5 million tonnes of ore, lower than the fourth quarter of 2010 due to maintenance at the processing plant and a shift in ore mix from the higher grade A-154 South underground to the lower grade A-154 North underground and A-418 open pit.

Brian MacArthur of UBS Investment Research has hiked his earnings per share estimates for the next three years to reflect increases in diamond prices. EPS estimates have moved from 23¢ to 26¢ in 2011, from 1.08 to $1.09 in 2012, and from $1.23 to $1.25 in 2013.

“Rough and polished diamond prices have continued their upward trend albeit at a slower pace than earlier this year,” he wrote in a note to clients on May 18.

MacArthur holds a buy on the stock and has a 12-month target price of $17.75 per share, up from his earlier target price of $16.50. At presstime in Toronto Harry Winston was trading at $15.14 per share and over the last year has traded between a low of $10.21 per share (Aug. 25 2010) and a high of $17.36 (Apr. 6 2011). The company has about 84.5 million shares outstanding.

In the first quarter Harry Winston held two sales of rough diamonds and reported on Apr. 13 that prices have increased from March to April.

The average price per carat for rough diamonds from A-154 South, for instance, rose from US$140 per carat in March to US$160 per carat in April, it said. Prices also jumped from US$180 per carat to US$205 per carat at A-154 North; US$130 per carat to US$150 per carat at A-418 (A Type Ore); and from US$90 per carat to US$105 per carat at A-418 (B Type Ore).