Chow Tai Fook Jewellery Group Ltd., the world’s largest publicly traded jeweler, is checking out the purchase of stakes in diamond mines in order to secure long-term supply of gems as demand in China for diamond jewelry grows.
Chow Tai Fook Executive Director Adrian Cheng said that several mines have asked the firm to invest, and the company has looked at some Canadian mines.
“There are a lot of opportunities, but it is not very easy because it is always in a foreign country, somewhere in Africa or Botswana, or anywhere around the world,” Cheng told Bloomberg News. “We need to measure the political risks, economic risks, deployment of staff – it’s not an easy decision.” The jeweler has diamond processing and cutting factories as well as jewelry manufacturing facilities.
In response to growing Chinese demand for jewelry, the jeweler plans to open five stores of the newly acquired Hearts on Fire diamond brand in China by March and expand to more than 300 stores in Greater China by fiscal year 2019.
Cheng said that Chow Tai Fook is cautious regarding mergers and acquisitions, and currently is only exploring the possibility of investing in mines. Any investment decisions would depend on the location and quality of the diamonds, and it would be difficult to decide a price for acquisitions, he said.
Hong Kong-based Chow Tai Fook acquired Hearts on Fire for $150 million in August to expand its product offerings, with the first mainland China stores in Shanghai, Nanjing city and Hainan Island.
Hearts on Fire will target female consumers, mostly between the ages of 25 and 45, Cheng said. The stores will run workshops and have specialists on hand to explain more about diamond selection to its customers, he said.
Chow Tai Fook last week reported that sales in the first-half of the year ending September 30 fell 22 percent on the year to $3.8 billion, while net profit dropped by 24 percent to $443 million.
The company has 2,191 points of sale in China, and plans to expand outside China with stores in duty-free areas in Korea and the Middle East to tap demand from affluent Chinese tourists, Cheng said.