Chow Tai Fook Exploring Diamond Mine Acquisitions

Chow Tai Fook Jewellery Group Ltd. is considering acquiring stakes in diamond mines to secure long-term supply of the gems as it targets growing demand for diamond jewelry in China.

Several mines around the world have asked Chow Tai Fook to invest, and the company has looked at some Canadian ones, Executive Director Adrian Cheng said in an interview in Shanghai yesterday. The world’s largest listed jeweler currently has diamond processing and cutting factories, and doesn’t own any mines, he said.

“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 said about the mines. “We need to measure the political risks, economic risks, deployment of staff -- it’s not an easy decision.”

Chow Tai Fook, whose name partly means “big blessing” in Chinese, is expanding into the diamond business as rising incomes boost demand for precious gems in China. The jeweler plans to open five stores of the newly acquired Hearts on Fire diamond brand in the Asian nation by March and expand to more than 300 stores in Greater China by fiscal 2019.

Chow Tai Fook is very cautious with mergers and acquisitions, and is only exploring the mine purchases, Cheng said. Any investment decisions would depend on the location and quality of the diamonds, and it would be difficult to pin down a price for acquisitions, he said.

Hearts on Fire

The Hong Kong-based maker of gold chains and pearl earrings bought diamond jewelery seller Hearts on Fire for $150 million in August to expand its product offerings. The U.S. company will open its first mainland China stores in Shanghai, Nanjing city and Hainan Island, Glenn Rothman, chief executive officer of Hearts on Fire, said Nov. 27.

The American company plans to 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 this week reported first-half profit fell 23 percent to HK$2.69 billion ($346 million) after sales of gold products declined 41 percent to HK$14.5 billion from a year earlier.

Sales of gem-set jewelery, which contributed almost 30 percent to the group’s total, grew 25 percent to HK$8.29 billion during the period.

Founded in 1929 in the southern Chinese city of Guangzhou, Chow Tai Fook is celebrating its 85th anniversary this year. It had 2,191 points of sale as of September.

Chow Tai Fook plans to expand outside China and will open stores in duty-free areas in Korea and the Middle East to tap demand from affluent Chinese tourists, Cheng said. The jewelry chain opened a point of sale in South Korea’s Jeju Island, according to its earnings statement.