Jewellery retailers cut out the middle men

Posted November 19, 2012 | By Coleby Nicholson

Upmarket diamond jeweller Harry Winston has acquired BHP Billiton’s 80 per cent stake in the Canada-based Ekati mine while a Hong Kong retailer has signed a two-year contract to source rough diamonds directly from Russian producer Alrosa.

BHP is unloading its diamond business to Harry Winston for $500 million, which is looking to increase its supply of rough diamonds. During the past five years, the Ekati mine has produced around $750 million of the gems.

BHP is also selling its associated diamond sorting and sales facilities located 310km northwest of Ekati at Yellowknife (Canada) and Antwerp (Belgium).

Harry Winston will add the Ekati purchase to the 40 per cent stake it has in Rio Tinto’s diamond mine located in the same region. The sale should be finalised early in 2013.

In Hong Kong, the behemoth jewellery retailer Chow Tai Fook Jewellery Group has gone straight to the source for its rough diamonds, signing a two-year deal with Russian producer Alrosa.

Chow Tai Fook was already an Alrosa customer, albeit on a spot term basis.

The company, controlled by the Cheng family, has more than 1,600 outlets in Hong Kong and mainland China and a company spokesperson announced in June that the retailer aimed to have 2,000 stores by 2014.

Chow Tai Fook’s executive director, Conroy Cheng, was reported in Rapaport as saying: “The greatest challenge for all diamond industry players is the scarcity of authentic natural diamonds. The agreement with Alrosa enables us to secure more reliable supplies of rough diamonds, particularly those specifications that are in greatest demand from our customers.”