Harry Winston Diamond Corporation. 9th Annual Deutsche Bank Global Consumer Conference June 2012

Transcription

1 Harry Winston Diamond Corporation 9th Annual Deutsche Bank Global Consumer Conference June 2012

2 Forward-Looking Information Certain information included in this presentation that is not current or historical factual information may constitute forward-looking information or statements within the meaning of applicable securities laws. Forward-looking information is based on certain factors and assumptions regarding, among other things, mining, production, grade and tonnage, construction and exploration activities at the Diavik Diamond Mine, world and US economic conditions, the worldwide demand for luxury goods and the level of worldwide diamond production. Specifically, in making statements regarding expected diamond prices and expectations concerning the diamond industry and expected sales trends, margins, profitability and market conditions in the luxury brand segment, Harry Winston Diamond Corporation (the Company ) has made assumptions regarding, among other things, world and US economic conditions, diamond supply and demand for luxury goods. Forwardlooking information may relate to management s future outlook and anticipated events or results, and may include statements or information regarding plans, timelines and targets for construction, mining, development, production and exploration activities at the Diavik Diamond Mine, future mining activities and processing at the Diavik Diamond Mine, projected capital expenditure requirements and the funding thereof, liquidity and working capital requirements and sources, estimated reserves and resources at, and production from, the Diavik Diamond Mine, the number and timing of expected rough diamond sales, demand for rough diamonds, expected diamond prices and expectations concerning the diamond industry and the demand for luxury goods, expected cost of sales and gross margin trends in the mining segment, target for compound annual growth rates of sales and operating income in the luxury brand segments, plans for expansion of the luxury brand salon and wholesale network, and expected sales trends and market conditions in the luxury brand segment. Actual results may vary from the forwardlooking information. While the Company considers these assumptions to be reasonable based on the information currently available to it, they may prove to be incorrect. Forward-looking information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what we currently expect. These factors include, among other things, the uncertain nature of mining activities, including risks associated with underground construction and mining operations, risks associated with joint venture operations, risks associated with the remote location of and harsh climate at the Diavik Diamond Mine site, risks associated with regulatory requirements, fluctuations in diamond prices and changes in US and world economic conditions, risks resulting from the Euro zone financial crisis, the risk of fluctuations in the Canadian/US dollar exchange rate, cash flow and liquidity risks, risks relating to the Company s expansion strategy and of competition in the luxury jewelry business as well as changes in demand for high-end luxury goods. Readers/viewers are cautioned not to place undue importance on forward-looking information, which speaks only as of the date of this disclosure, and should not rely upon this information as of any other date. While the Company may elect to, it is under no obligation and does not undertake to update or revise any forward-looking information, whether as a result of new information, further events or otherwise at any particular time, except as required by law. Additional information concerning factors that may cause actual results to materially differ from those in such forward-looking statements is contained in the Company s filings with Canadian and United States securities regulatory authorities and can be found at and respectively. Deutsche Bank Conference June 2012 Page 2

3 Company Overview Fiscal Year Results and Evolution Fiscal 2011& 2012 are reported under IFRS. Fiscal 2010 is reported under Canadian GAAP (in million s of US dollars) Sales EBITDA 1 $450 $400 $350 $300 $250 $200 $150 $100 $50 $ $140 $120 $100 $80 $60 $40 $20 $0 -$ (8) (11) (3) Mining Segment Luxury Brand Segment Mining Segment Luxury Brand Segment Corporate Segment 1 See Appendix, which sets out the Company s computation of EBITDA as operating profit before depreciation and amortization. Corporate segment activities (negative EBITDA) have only been reported during fiscal 2011 and fiscal 2012, prior to that corporate segment activities were not separately broken out. Deutsche Bank Conference June 2012 Page 3

4 Company Overview We are a Diamond Company High Level Flow of Goods HWDC Business Model Diavik 40% 60% Rio Tinto Harry Winston Diamond Corporation Segments Diavik Diamond Mine (40% ownership) Harry Winston, Inc Luxury Quality Presently NOT vertically integrated HWDC Sorting Toronto Direct Sales Gem Quality Antwerp Open Market Purchased Diamonds Polished Diamonds for Watches Workshops Watch Manufacture Luxury Brand Finished Products Near Gem Quality India Deutsche Bank Conference June 2012 Page 4

5 Diamond Supply / Demand Even with most moderate demand forecast of Rio Tinto, significant gap opening short-/mid-term Rough diamond supply and demand Sources: Rio Tinto, November 2010, very similar projections: BHP Billiton 2007 and De Beers 2009 Note: Forecast is based on a conservative CAGR of 4.7%. Most recent Anglo American forecasts (2011) are based on a CAGR of 7%. Deutsche Bank Conference June 2012 Page 5

6 Fiscal Year 2013 First Quarter Results - Consolidated Fiscal Period Ending April 30 (in millions of United States dollars) FISCAL YEAR Q Q YOY Change Consolidated Sales $144 $ % Operating Profit $5 $ % EBITDA 1 $25 $44 +77% 1 See Appendix, which sets out the Company s computation of EBITDA as operating profit before depreciation and amortization. Deutsche Bank Conference June 2012 Page 6

7 Fiscal Year 2013 First Quarter Results By Segment Fiscal Period Ending April 30 (in millions of United States dollars except carat amounts, which are in millions of carats) FISCAL YEAR Mining Segment Q Q YOY Change Sales $62 $89 +43% Operating Profit $4 $ % EBITDA 1 $39 $21 +83% Carats Recovered 2 0.5M 0.6M +19% Carats Sold 0.5M 1.0M +116% Luxury Brand Segment Sales $82 3 $ % Operating Profit $4 $7 +68% EBITDA 1 $7 $10 +42% Corporate Operating Profit (Loss) ($4) ($5) +38% EBITDA 1 (loss) ($5) ($3) +40% 1 See Appendix, which sets out the Company s computation of EBITDA as operating profit before depreciation and amortization 2 Represents 40% share of the Diavik Production on a calendar quarter basis 3 The first quarter of the prior year included a $5 mm high-value transaction in North America which was not repeated in the current quarter Deutsche Bank Conference June 2012 Page 7

8 HWDC Strategy enables both sides of the business to enhance each other Deutsche Bank Conference June 2012 Page 8

9 Mining Segment Deutsche Bank Conference June 2012 Page 9

10 Global Diamond Mines US$ per tonne Diavik is One of the Worlds Highest Value Per Tonne Mine Source: De Beers, Alrosa, Public Company Reports and Presentations, Bain &Co Industry Report and HW estimates Deutsche Bank Conference June 2012 Page 10

11 Fiscal Year 2013 First Quarter Mining Results Fiscal Period Ending April 30 (in millions of United States dollars) Q Q YOY Change Sales $62 $89 +43% Gross Margin $9 $ % Gross Margin % 13.9% 21.2% +730bp Operating Profit $4 $ % EBITDA 1 $39 $21 +83% Carats Recovered 2 0.5M 0.6M +19% Carats Sold 0.5M 1.0M +116% 1 See Appendix, which sets out the Company s computation of EBITDA as operating profit before depreciation and amortization 2 Represents 40% share of the Diavik Production on a calendar quarter basis Deutsche Bank Conference June 2012 Page 11

12 How Harry Winston Sorts and Sells Rough Diamonds Deutsche Bank Conference June 2012 Page 12

13 Diavik Diamond Ore Mix and Average Price 1 100% and Calendar Year Basis. Prices based on March/April Sales Prices. 1 Expected ore mix amounts based on calendar year 2012 plan and Company estimates for further years. Average price based on the Company s most recent sales prices for March/April Prices do not include Reprocessed Plant Rejects (RPR) and small diamond recoveries which are not included on the Company s Reserve and Resources Statement and are therefore incremental to production. Deutsche Bank Conference June 2012 Page 13

14 Luxury Brand Segment Deutsche Bank Conference June 2012 Page 14

15 Harry Winston Authentic Luxury and Only the Exceptional Extreme Diamond Quality and Craftsmanship The Ultimate Refined Design Exceptional Craftsmanship Deutsche Bank Conference June 2012 Page 15

16 During Past Two Years Increased Sales 83% in value and 68% in Quantity Fiscal Years F F F F2012 vs. F2010 Sales $225M $345M $412M +187M Operating Profit (loss) (-$16M) +$15M +$19M +35M Directly Operated Salons Licensed Salons Quantity of Units Sold +22% +37% +68% 1 Reported under Canadian GAAP 2 Reported under IFRS Deutsche Bank Conference June 2012 Page 16

17 Fiscal Year 2013 First Quarter - Luxury Brand Results Fiscal Period Ending April 30 (in millions of United States dollars) Q Q YOY Change YOY Change at Constant FX Rate United States $35 $32-9% -9% Europe $17 $30 +72% +73% Asia ex. Japan $14 $20 +42% +39% Japan $15 $21 +42% +43% Sales Total $82 1 $ % +26% Gross Margin $39 $54 +40% Gross Margin % 47.5% 52.6% +510bp Operating Profit $4 $7 +68% Operating Profit % 5.2% 6.9% +170bp 1 The first quarter of the prior year included a $5 mm high-value transaction in North America which was not repeated in the current quarter. Deutsche Bank Conference June 2012 Page 17

18 Luxury Brand Segment Financial Objectives 1 Table is for Fiscal Year ending January 31 (in millions of US dollars) FY 2011 FY Sales $345 $412 CAGR in the mid teens Gross Margin % 47.2% 45.7% Low 50% range Operating Profit % 4.3% 4.7% Low to mid teens 1 Objectives for internal planning and measurement purposes. This is not a forecast of actual results. Deutsche Bank Conference June 2012 Page 18

19 Balancing Top & Bottom Line Top Line Bottom Line Worldwide Network Expansion Retail and Wholesale Discount Reduction Program Expansion of Timepiece Sales at Retail Broadening of Product Offer Adding at All Levels Change of Product Mix Toward Core & Access Product Gain Control of Wholesale Distribution Take Over Wholesale Distribution (Asia/LATAM/Switzerland) Deutsche Bank Conference June 2012 Page 19

20 Luxury Brand Retail High-Level Product Mix FY 2012 at FY 2012 actual rate Deutsche Bank Conference June 2012 Page 20

21 Luxury Brand Sales Growth Drivers Geographic Market Long Term Goals Grow Asia, Europe and Middle-East at faster rate than US and Japan Expand Distribution Network Grow wholesale network faster than retail network Deutsche Bank Conference June 2012 Page 21

22 Luxury Brand Growth Strategy Growth of Access and Core to Outpace Growth of High Jewelry Timepieces Bridal Jewelry Collections Deutsche Bank Conference June 2012 Page 22

23 Jewelry: A Broader Offer High Jewelry Core Access Deutsche Bank Conference June 2012 Page 23

24 Reinstating HW as a Bridal Destination with a New Bridal Collection: Belle by Harry Winston Deutsche Bank Conference June 2012 Page 24

25 Harry Winston Bridal Strategy Capture a Younger Client and Maintain for Life New Bridal Collection supported by strong PR & Media plan, positioning Harry Winston as the authority on bridal Core + Access bridal up >40% in fiscal 2012 versus prior year driven by growth in US and Japan New products - Belle high design bridal to drive growth Introduce / reinforce Best Practices: Bridal Committee Bridal Training for all Sales Executives worldwide Enhance the Bridal Experience in our Salons & Host Bridal Events Develop and implement CRM initiatives to build brand loyalty Maintain a consistent and appropriate bridal assortment Deutsche Bank Conference June 2012 Page 25

26 Percent of First Time Brides who Receive a Diamond Only Engagement Ring Year USA Japan China 50 Years to Peak CAGR 4.2% 30 Years to Peak CAGR 9.5% Only 16 years developing with 23.0% CAGR Not yet reached peak % % % % % % 20?? Peak Year Peak % Source: DeBeers November 2011 Deutsche Bank Conference June 2012 Page 26

27 Jewelry Collections Drive Interest and New Purchase Occasions To capture a new audience: year old women More profitable and accessible lines Deutsche Bank Conference June 2012 Page 27

28 New High Jewelry Collection Ultimate Adornments Strengthened Designed High Jewelry Offer Deutsche Bank Conference June 2012 Page 28

29 High Profile Events Court of Jewels, Paris Biennale des Antiquaires Deutsche Bank Conference June 2012 Page 29

30 Timepieces: A More Balanced Offer HIGH JEWELRY HIGH HOROLOGY Ultimate Premier Brilliants Premier Baguettes Ultimate Adornment Opus 12 Ocean Tourbillon Big Date Histoire de Tourbillon 3 NEW PREMIER LADIES NEW PREMIER MEN MIDNIGHT OCEAN Core Premier Feathers Premier 36mm Premier Timezone Midnight Skeleton Diver Dual Time Black OCEAN SPORT LADIES MIDNIGHT LADIES MIDNIGHT MEN OCEAN SPORT MEN Access Ocean Sport Quartz Midnight Automatic Midnight Moon Phase Midnight Automatic Ocean Sport Limited Edition Deutsche Bank Conference June 2012 Page 30

31 New Watch Collections Classical & Feminine Timepieces THE OCEAN SPORT THE MIDNIGHT Starting at $12k Starting at $14k Deutsche Bank Conference June 2012 Page 31

32 Keep Reinventing Time with the Opus Series Emmanuel Bouchet An out of this world masterpiece - Perpetuelle Opus 12 Deutsche Bank Conference June 2012 Page 32

33 Increase Watch Production and Leverage Scalable Manufacturing Historically produced less than 5,000 watches but has the capacity to produce 15,000 watches. Produced nearly 6,000 in fiscal Goal is to produce more than 7,000 in fiscal Deutsche Bank Conference June 2012 Page 33

34 Expand Distribution Objectives 1 For Fiscal Year ending January Last Year Directly Operated Salons 20 ~35 Licensed Salons 4 ~15 Wholesale Doors (watches only) 194 ~300 Retail Network in fiscal year 2012 Targeted Retail Network by fiscal year 2016 North America 8 Salons Europe 2 Salons Japan 5 Salons Asia (ex-japan) 5 Salons North America 9 Salons Europe 6 Salons Japan Asia (Ex-Japan) 7 Salons 13 Salons 1 Objectives for internal planning and measurement purposes. This is not a forecast of actual results. Deutsche Bank Conference June 2012 Page 34

35 Strengthening our Retail Presence FY11 21 Salons 19 Direct / 2 Licensed FY12 24 Salons 20 Direct / 4 Licensed FY13 Target 28 Salons 22 Direct /6 Licensed North America 8 Direct Salons Europe & Russia +1 Direct & 1 Lic. = 5 Salons Middle East +1 Lic. = 3 Salons Asia excl. Japan +1 Direct = 7 Salons Japan 5 Direct Salons Deutsche Bank Conference June 2012 Page 35

36 Strengthening our Wholesale Presence FY11 ~170 Doors FY12 ~190 Doors +14% +16% FY13 Target ~220 Doors North North America America 41 Doors % 33 Doors +3% Latin America America 12 9 Doors 8 Doors +33% +13% Caribbean Doors +36% -11% Europe Greater & Europe Africa Europe & 58 Africa Doors % Doors +17% Middle Middle East & India 39 East Doors 35-3% Doors Asia Asia incl. incl. Japan Japan Asia incl. Doors Doors +21% Japan +33% 36 Doors Deutsche Bank Conference June 2012 Page 36

37 Opening our First Pavilion: Shanghai March 2012 Deutsche Bank Conference June 2012 Page 37

38 Strengthening Our Retail Presence Worldwide: FY13 Target Shanghai Peninsula Direct January 2012 Shanghai Xintiandi Direct March 2012 Moscow Tretyakovsky Licensed May 2012 London Harrods Direct July 2012 Kuwait Avenues Mall Licensed Late 2012 Deutsche Bank Conference June 2012 Page 38

39 Strengthening Our Retail Presence Worldwide: FY 13/14 Target Kobe Japan Direct U.A.E. Abu Dhabi Licensed Macau Direct Hong Kong Direct Qatar Villagio Licensed Moscow Tsum Licensed Deutsche Bank Conference June 2012 Page 39

40 Summary Our business makes the best use of its positioning at both ends of the complex but rewarding diamond business We have seen growth in diamond demand, which has had a positive effect on both segments of our business We have a very clear vision for the luxury brand and we stand behind the long-term vision and strategy that we presented to the world in June We are well on track to deliver Growth of luxury in emerging markets is outpacing traditional markets - driving our luxury brand expansion plans Our mining business is implementing more efficient and lower cost underground mining methods Our rough diamond sorting and sales will capture price increases in a rising market Despite the uncertainties and challenges facing the world, we see a robust diamond market ahead Deutsche Bank Conference June 2012 Page 40

41 Appendix

42 EBITDA Non-GAAP Measure The term EBITDA (earnings before interest, taxes, depreciation and amortization) does not have a standardized meaning according to International Financial Reporting Standards ( IFRS ). The Company defines EBITDA as sales minus cost of sales and selling, general and administrative expenses, meaning it represents operating profit before depreciation and amortization. EBITDA is a measure commonly reported and widely used by investors an d analysts as an indicator of the Company s operating performance and ability to incur and service debt and as a valuation metric. EBITDA margin is defined as the ratio obtained by dividing EBITDA by sales. CONSOLIDATED (expressed in thousands of United States dollars) (quarterly results are unaudited) CORPORATE SEGMENT (expressed in thousands of United States dollars) (quarterly results are unaudited) Deutsche Bank Conference June 2012 Page 42

43 EBITDA Non-GAAP Measure MINING SEGMENT (expressed in thousands of United States dollars) (quarterly results are unaudited) LUXURY BRAND SEGMENT (expressed in thousands of United States dollars) (quarterly results are unaudited) Deutsche Bank Conference June 2012 Page 43

44 Number of Billionaires At the Very Top Top Countries with Billionaires in Increase 2011 vs U.S. China Russia India Germany Turkey Hong Kong United Kingdom Brazil Japan +2% +80% +63% +12% -2% +36% +44% +10% +67% +18% Sources: Forbes, 2011 Deutsche Bank Conference June 2012 Page 44

45 2011 and 2016 Consumer Diamond Demand Forecasts Percent of Demand by Region Based on US$ Polished Wholesale Prices China and India to drive growth in demand relative to US, Japan and ROW USA 2011: 38% 2016: 34% Gulf/TK 2011: 9% 2016: 8% India 2011: 10% 2016: 15% China : 15% 2016: 20% Japan 2011: 10% 2016: 8% Rest of World 2011: 18% 2016: 15% Source: DeBeers 1 Includes Taiwan and Hong Kong Deutsche Bank Conference June 2012 Page 45

46 Luxury Goods Long-Term Growing Demand The global luxury goods industry is projected to grow to a trillion dollar market by This is expected to be largely driven by the BRIC economies, particularly China. Increasing jewelry sales will fuel demand for diamonds, an important component of many pieces. Deutsche Bank Conference June 2012 Page 46

47 Luxury Brand Segment Overview Only global diamond luxury brand Iconic American brand name built by Harry Winston with 80 years of history Recognized as the King of Diamonds and Jeweler to the Stars Luxury brand strategy and positioning Build sales and increase margins through new products and sales mix Capture clientele at a younger age and keep for life start with bridal and collections, later in life buy high jewelry Scale product and supply chain development of our own timepiece movement, securing strategic supply Expand retail network, wholesale watch distribution and develop licensed salons Strategic investments in brand building Deutsche Bank Conference June 2012 Page 47

48 Luxury Brand Segment Financial Strategy Optimized WC Marketing resources & systems Sales Support Team Resources New Bridal Offer New Jewelry Offer New Watch Offer Re-engineered supply chain & production Product & Production Historical clientele Rejuvenated clientele Client CAPEX Termination of selected agent contract SG&A Retail Network Expansion Organic Retail Growth Licensed Salon Wholesale Network Expansion Resources Top Line growth Watch in Retail more profitable jewelry mix Margin & profit Growth Limited discount Improved Terms & conditions Deutsche Bank Conference June 2012 Page 48

49 Harry Winston The Ultimate in Fine Watchmaking Histoire Tourbillon 2 20 pieces US$665,000 Rosebud US$82,000 Prices in US dollars are subject to exchange rate fluctuations of the Swiss Franc Opus pieces US$252,000 Deutsche Bank Conference June 2012 Page 49

50 We Gained More Recognition OPUS 11 AWARDS: Revolution 2011 New Technology Award Tourbillon Magazine s Baselworld TOP TEN Award Best Design Watch at the Middle East Premier Awards HARRY WINSTON RENDEZ-VOUS AWARD: Jewellery Watch of the Year at the Watch World Awards HARRY WINSTON ROSEBUD AWARD: Fashion Watch of the Year at the Watch World Awards Deutsche Bank Conference June 2012 Page 50

51 A New Store Concept Less Intimidating Las Vegas Crystals at CityCentre Deutsche Bank Conference June 2012 Page 51

52 Diavik Kimberlite Pipes Deutsche Bank Conference June 2012 Page 52

53 Diavik Underground Deutsche Bank Conference June 2012 Page 53

54 Diavik Underground Deutsche Bank Conference June 2012 Page 54

55 Fiscal Year 2013 First Quarter Mining Results Fiscal Period Ending April 30 Rough diamond sales for the quarter rose 43% The increase is due to a 116% increase in the quantity of carats sold, which was primarily the result of the sale of almost all of the remaining lower priced goods originally held back in inventory by the Company at October 31, 2011, as well as higher production in the first calendar quarter compared to the comparable quarter of the prior year. The Company sold approximately 1.0 million carats for an average price of $88 per carat compared to 0.5 million carats for an average price per carat of $132 in the comparable quarter of the prior year The 34% decrease in the Company s achieved average rough diamond prices in the first quarter resulted from a combination of three factors: 1. The sale of the lower priced goods originally held back in inventory by the Company at October 31, The Company s decision to hold back some higher priced goods in the first quarter of fiscal 2013 due to an observed imbalance in the rough and polished diamond prices for these goods. 3. The Company s January 2012 sale straddled the fiscal 2012 year-end, with the lower priced portion of the sale, which occurs in India, pushed into the first quarter. Had the Company sold only the last production shipped for the first quarter, the estimated achieved price would have been approximately $125 per carat based on the prices achieved in the March/April 2012 sale. Deutsche Bank Conference June 2012 Page 55

56 Diavik Diamond Mine First Quarter Production Calendar Year Q Q YOY Change Carats Recovered 1.4M 1.6M +19% (100% Basis) Rough diamond production was 19% higher than the comparable calendar quarter of the prior year due to a combination of higher average grade and an increase in ore processed during the quarter Calendar 2012 production plan remains at ~8.3M carats (100% basis) Forecast includes ~1.0M carats from Reprocessed Plant Rejects (RPR) and ~0.1M carats from the implementation of improved recovery process for small diamonds. RPR and small diamonds are not included in the Company s reserve and resource statement and are incremental to production Deutsche Bank Conference June 2012 Page 56

57 Average Price per Carat (US$) by Ore Type 2011 & 2012 MODELED SALES PRICES 1 (in United States dollars) 2011 March April May June July Dec 2012 Feb Mar/Apr A-154 South $140 $160 $165 $180 $200 $165 $160 $160 A-154 North $180 $205 $215 $230 $260 $215 $205 $205 A-418 A Type Ore A-418 B Type Ore Reprocessed Plant Rejects ( RPR ) $130 $150 $150 $165 $185 $150 $145 $145 $90 $105 $105 $110 $120 $100 $100 $100 $65 $55 $55 $55 1 Approximate rough diamond price per carat based on the Company s rough diamond sales prices and the current recovery profile at the Diavik processing plant Deutsche Bank Conference June 2012 Page 57

58 Diamond Prices Past and Present Harry Winston rough sales and polished purchases indexed to January 2008 Deutsche Bank Conference June 2012 Page 58

59 Diavik Diamond Mine Reserve and Resource Statement Update 1 Total reserves increased from 52.9M carats at Dec 31, 2010 to 58.9M carats at Dec 31, M tonnes of ore was added to the reserve base The grade increased from 2.9 carats per tonne at Dec 31, 2010 to 3.1 carats per tonne at Dec 31, 2011 Approximately 20% of the new reserves added at Dec 31, 2011 was an upgrade of existing resources but majority is new material at depth An ambitious deep drilling and sampling program in 2011 focused on A-154 North and A-418 resulted in a significant addition of new reserves The majority of the increase came from the A-418 kimberlite pipe Processing of the A-154 North samples is planned for 2012 with results expected to be incorporated in the Dec 31, 2012 reserve and resource statement 1 On a calendar year basis for 100% of the Diavik Diamond Mine Deutsche Bank Conference June 2012 Page 59

60 Diavik Diamond Mine Reserve and Resource Statement Update A-418 Reserve Growth A418 Proven Reserve 190m 190m 30m 0m A418 Probable Reserve A418 Inferred Resource Exploratory -180m m Deutsche Bank Conference June 2012 Page 60

61 Diavik Mine Mineral Reserves and Resources Statement As of December 31, 2011 (100% basis) PROVEN RESERVES PROBABLE RESERVES PROVEN and PROBABLE M t ct/t M ct M t ct/t M ct M t ct/t M ct A154S A154N A TOTAL Open Pit (A-418) Underground Total Reserves MEASURED INDICATED INFERRED M t ct/t M ct M t ct/t M ct M t ct/t M ct A154S A154N A A Total Resource Note: Totals may not add up due to rounding. As of December 31, The values shown are for 100% of the Diavik Mine The above mineral reserve and mineral resource statement was prepared by Diavik Diamond Mines Inc., operator of the Diavik Diamond Mine, under the supervision of Calvin Yip, P.Eng., Principal Advisor, Strategic Planning of Diavik Diamond Mines Inc., a Qualified Person within the meaning of National Instrument of the Canadian Securities Administrators. For further details and information concerning Harry Winston Diamond Corporation's Mineral Reserves and Resources, readers should reference Harry Winston Diamond Corporation's Annual Information Form available through and Deutsche Bank Conference June 2012 Page 61

62 Exploration Potential More than 240,000 hectares (2,400 square kilometers) on the remaining joint venture holdings Harry Winston has staked 226,000 acres (915 square kilometers) southwest of the existing mine site Diavik Claim Known Kimberlite Pipes Regional Known Kimberlite Pipes Drill Hole Kimberlite Intersection Deutsche Bank Conference June 2012 Page 62

63 Diamond Fund Overview An exclusive arrangement with Diamond Asset Advisors, Zurich Limited partnership of up to $250 million The fund will be independently managed Harry Winston will source polished diamonds for the fund to purchase Portfolio: 75% in 0.50 to 5.99 carats, and 25% in fancy colors or larger stones Diamonds will be consigned to Harry Winston who will act as custodian and use the diamonds in its products 1 When Harry Winston sells jewelry it pays the fund the current wholesale replacement price On going replacement of the diamonds used creates a mark-to-market for the fund 1 Subject to certain exceptions, Harry Winston will source polished diamonds exclusively from the Fund. Deutsche Bank Conference June 2012 Page 63

64 Diamond Fund What it does for Harry Winston A new source of diamond inventory available to an expanding salon network without making additional demands on working capital Supports expanding bridal business where clients prefer to view a wide range of diamonds at each salon Reduce inventory financing costs and improve returns on capital The fund will be independently managed Deutsche Bank Conference June 2012 Page 64