Diamond sales fall for the Dominion Diamond Corporation. The corporation reported a 21% decrease in sales during the year ending on January 31. The diamond sales decline was a result of two of its lower quality diamond mines located in Canada. Despite the lackluster sales from the previous year, the company expressed a positive outlook for the next fiscal year. Furthermore, Dominion Diamond Corporation vowed to continue to undergo a strategic internal review of its holdings. The result of this study intends to figure out and prevent further diamond sales decline. Additionally, this review could lead to a sale of the company.
For the fiscal 2017 year, Dominion's Ekati and Diavik mines produced a large volume of lower quality diamond materials. This was not a positive development. Also, lower quality materials offset the recovery of higher quality diamonds. The result was a net loss as diamond sales decline due to the quality. Furthermore, resulting in sales falling to $570.9 million from the previous year’s $720.6 million. The average price dropped to $87 per carat from $117, a dramatic change. Additionally, the company noted that overall rough sales declined 7% in the fourth quarter alone. The blame is being placed squarely on the Indian government. Certainly, the slowdown in demand is a result of their new demonetization policy.
Dominion Diamond Corporation claimed to have lost a total of 56.6 million in operating losses. Compared to its previous year when there was a net gain of $8 million in profit. Impacted by gains from the sale of an office building and income tax recovery their net loss has from $38.8 million negative to 12.8 million negative.
Nevertheless, Jim Gowans the chairman of Dominion Diamond Corporation said that the uptick of high-quality materials at Ekati, coupled together with steady performance at Diavik, was a significant factor for growth in gross margins and earnings. He also noted that the diamond market conditions had improved towards the end of the year. He also mentioned that the company had recovered somewhat as the diamond market conditions improved toward the end of the year. High-quality, larger diamond goods were responsible for compensating for the relatively cheaper diamonds.
Furthermore, Dominion withheld a large quantity of their lower-value materials in the fourth quarter as diamond sales decline steadily. Despite the weak market the company expects to sell their excess inventory as market conditions in India start to improve.
At the same time, experts predict diamond sales decline to reverse as materials are projected to rise to between $875 million and $975 million in fiscal 2018. Additionally, the company expects to sell from their cleaner diamond material processed from Ekati’s Misery Main and Koala underground pipes.
Earnings from diamond sales are projected to be from $475 million to $560 million, up $182.2 million from the previous year. Dominion maintained a “robust” forecast for diamond sales and EBITDA through 2020. This is because of its planned increase in production at Ekati and Diavik. Furthermore, the projected amount being from 7.8 million carats to between 9.1 and 10 million carats. By 2020 the company plans to scale down production to approximately 8 million carats by 2020.
Dominion's focus remains primarily on its development programs. While paying particular interest specifically to the Ekati mine. Meanwhile, the company increased its exploration budget to $9 million for the year.
Diamond Sales Decline in the jewelry industry.
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