Gannicott shines on international diamond stage

Instead of simply making diamonds his best friends, Bob Gannicott has forged a marriage of convenience between rough diamond production and the diamond retail business. As the chairman and CEO of Aber Diamond Corporation in Toronto, Gannicott is the man behind one of Canada’s biggest diamond mining and retail operations.

But surprisingly, he did not get his start in the diamond industry. Gannicott immigrated to Canada from the United Kingdom in 1966, working in mining operations in Yellowknife before studying geology at the University of Ottawa. His studies were followed by High Arctic exploration in Canada and Scandinavia. Gannicott plunged into the diamond play in 1991 after Chuck Fipke’s kimberlite discovery near Lac de Gras, NWT.

“Myself and another partner were able to respond quickly to that, knowing how rare it is in this part of the world,” he says. “I became very interested in the diamond industry.”

Gannicott has been a director of Aber since its inception in 1992, and was appointed as the company’s CEO in September 1999. Aber owns a 40% interest in the Diavik diamond mine, in the east end of Lac de Gras, a position that puts the company in control of about 3% by value of the international rough diamond production. The company sold its first rough diamonds from the Diavik mine in April 2003.

Despite the long lead time between the Diavik discovery and production, Gannicott’s company was able to sustain itself. He notes that Aber entered into a 10-year purchase agreement with Tiffany & Co. in 1999, and the sale of its one-third interest in Winspear’s Snap Lake property to De Beers for $173 million gave the company “a pretty large capital.”

And the rest, as they say, is history. Diavik ended 2006 with almost 10 million ct of diamonds production for the year, 40% of which went to Aber.

In recent years, Gannicott’s operations have expanded beyond the mining sector. Aber completed its acquisition of international diamond retail giant Harry Winston in October 2006.

“It’s a marketplace where the mine and the consumer are pretty much joined by an iron bar,” says Gannicott. “It’s not an elastic intermediary, you are exposed to the retail whether you like it or not.”

Gannicott doesn’t think of the acquisition as a move towards vertical integration. Instead, the new setup is more of a strategic “symbiosis.” Aber’s involvement in the retail world allows it to streamline its rough diamonds operation, and vice versa.

“It provides us with pricing information that is unique as a diamond marketer,” he concedes. “We are the only ones who have access to that, and that assists us in selling diamonds.”

Analyst Geoff Stanley of BMO Nesbitt Burns says the transition into retail has given Aber an “intelligence benefit,” allowing it to better market its products on both ends of the diamond spectrum.

“[Harry Winston] has a very good handle on what prices people are paying, and that provides Aber with the ability to sell its raw product more effectively in the market,” notes Stanley. “There is evidence to suggest that it improves their revenue by five or six per cent as a result.”

Goal: Become the best

Regarding the future, Gannicott says he is excited by the prospect of exploring for and mining in other regions of the Northwest Territories and Canada at large. The national diamond mining landscape has been transformed since his first involvement. “It’s certainly slowed down, it has been whittled down to a smaller group of more knowledgeable junior players,” he notes. “In Canada, many of the senior players are not doing exploration any more.”

Far from fearing the competition presented by new mining developments, Gannicott thinks of new projects as opportunities for Aber. As a leader in the industry, Aber is perfectly positioned to forge mutually beneficial deals with smaller firms. “There will be people who find things, and they will look for a bigger company to support them,” he argues.

Gannicott does not plan on bringing another retail brand into the fold. Instead, he will focus on continuing to expand Harry Winston’s global brand, and making the most of Aber’s mining acquisitions. “We really want to be the best diamond company in the world, in terms of being nimble, agile, well-informed and well-operated,” he says.

Umair Abdul is a freelance writer based out of Toronto. He can be reached at Uqadir@bizinfogroup.ca.