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Precious Deals: Old Jewelers and New Mines Hook Up

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Fabergé, Harry Winston, Tiffany, BHP, Rio Tinto, and more are involved in recent transactions.

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MINYANVILLE ORIGINAL Gemfields (LON:GEM) (PINK:GFLD) announced it will buy Fabergé for $142 million from the Pallinghurst Group. Pallinghurst had purchased the jeweled egg and perfume maker, which traces its roots back to the era of the Russian czars, for $38 million from Unilever (LON:ULVR) (NYSE:UN) in 2006. Brian Gilbertson owns 100% of Pallinghurst, a mining investment group listed on the Johannesburg Stock Exchange, and up to 63% of Gemfields, including shares of investors associated with him, Rox Limited. In 2007 Gemfields acquired a Zambian emerald mine for Rox Limited.

The deal will put Gilbertson's share of Gemfields, which bills itself as the world's foremost colored gemstone producer, under 50% due to the new stock being issued. Gemfields will use Fabergé to market emeralds and rubies it produces from mines in Zambia, Zimbabwe, Mozambique, and Madagascar.

Gilbertson is a former chief executive of BHP Billiton (LON:BLT) (NYSE:BHP) which, coincidentally, last week sold its 80% stake in its Canadian diamond operations to Harry Winston (TSE:HW) (NYSE:HWD). The main mine, Ekati, is said to have only about seven more years of production.

The deal will secure Winston a supply of precious stones, at least for the near future. Harry Winston already owns 40% of Rio Tinto's (LON:RIO) (NYSE:RIO) Diavik mine which is located in the Northwest Territories like Ekati.

Meanwhile, earlier this year Rio Tinto put the rest of its own diamond business on the market, encompassing mines in Australia, Canada, and Zimbabwe.

Tiffany & Co (NYSE:TIF) was one of the first major jewelers to vertically integrate with mining operations. Beginning in 2002, it famously addressed its shortage of rough gem-quality diamonds by financing diamond mines in Sierra Leone and South Africa in exchange for access to the output. In 2011, for instance, it spent $50 million financing projects.

Today the US-based luxury jeweler announced it had made a $6 million loan to South African diamond company DiamondCorp (LON:DCP) through its wholly owned subsidiary Laurelton Diamonds. The deal gives Laurelton first rights over diamond from DiamondCorp's Lace mine.

No positions in stocks mentioned.
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