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Rapaport Weekly Market Comment July 18, 2014



Mumbai IIJS show opens with mixed expectations for domestic diamond and jewelry demand. Some Indian manufacturers reducing prices for better-quality carat and larger sizes. Global diamond markets are quiet with cutters frustrated by high rough prices during sight week. De Beers 2Q production +7% to 8.5M Cts. Rio Tinto 2Q diamond production -7% to 3.8M cts. Belgium’s June polished exports flat at $1.4B, rough imports +20% to $1.3B. Christie’s 1H jewelry, watch and wine sales +11% to $456M. Sotheby's appoints Daryl Wickstrom as managing director of new global jewelry and watch division.


RapNet Data: July 17

Diamonds 1,155,857
Value $7,386,745,252
Carats 1,284,542
Average Discount -27.03%

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Aug-Sep 27-4 Wed-Thu


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QUOTE OF THE WEEK
I think new technology is going to be very disruptive...retailing, in particular, is facing major threats.

Charlie Munger | Berkshire Hathaway


The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.


INDUSTRY

De Beers Production +7%

De Beers production rose 7% year on year to 8.515 million carats in the second quarter, an increase that was largely due to higher output at the company's Venetia mine, where production more than tripled to 834,000 carats. Production at the Kimberley mine dropped 31% to 154,000 carats, while production at the Voorspoed mine rose 18% to 186,000 carats.

In total, output from De Beers Consolidated Mines in South Africa grew 84% to 1.174 million carats. Production at De Beers Debswana joint venture in Botswana, which includes the Orapa, Letlhakane, Damtshaa and Jwaneng mines, fell 2% to 6.266 million carats. The decrease was due to lower-grades mined at the Jwaneng mine. Production at Namdeb, which includes both terrestrial and marine mining in Namibia, rose 20% to 509,000 carats. De Beers Canada production from the Snap Lake and Victor mines rose 13% to 566,000 carats.

In other news, De Beers Consolidated Mines appointed Nompumelo (Mpumi) Zikalala to its board of directors. Zikalala joined De Beers in 1996 as a bursar and has filled a number of senior roles in the organization, in both the mining and diamond trading divisions.


Rio Tinto Production -7%

Rio Tinto’s diamond production fell 7% year on year to 3.832 million carats in the second quarter that ended on June 30. Diamond production from the company's Argyle mine in Australia fell 21% to 2.459 million carats due to mining operations moving from open pit to underground and from the processing of lower-grade tailings.

However, production from the Diavik mine in Canada surged 38% year on year to 1.29 million carats due to improvements in mining rates, with all three pipes in full production, as well as due to processing plant improvements that were implemented over the past six months. Rio Tinto owns a 60% stake in the Diavik mine with Dominion Diamond holding a 40% share. Diamond production from the Murowa mine in Zimbabwe increased 21% to 83,000 carats due to improved throughput and processing previously stockpiled rough diamond material. Rio Tinto owns a 78% stake in Murowa.

In other news, Rio Tinto's Bunder project, in partnership with the Maruti driving school, has implemented a driver training program as a part of a skills development plan in Madhya Pradesh. In Mumbai, Rio Tinto Diamonds celebrated the 25th anniversary of its office with the launch of seven new collections under their flagship diamond jewelry initiative, Nazraana.


RETAIL & WHOLESALE
U.S. Jewelry Store Sales +6%

U.S. jewelry store sales rose 6% year on year to $3.12 billion in May. As reported earlier on Rapaport News, jewelry and watch sales from all retail sources increased 5.6% to $7.192 billion in May, although that wider industry sales measure is subject to revisions. Jewelry store sales for the first five months of 2014 have risen 4.6% year on year to $12.951 billion, while total jewelry and watch sales have increased 3.4% to $29.95 billion, according to preliminary calculations.

Meanwhile, advanced sales estimates for department stores in June fell 0.9% to $13.233 billion. The sector experienced a sales decline of 1.1% in May to $13.894 billion. U.S. consumer spending on non-essential items continues to be mixed with middle- and lower-incomes holding wallets tight, while upper income households are showing signs of pulling back.

Hong Kong’s Jewelry Sales Drop

Hong Kong's retail sales of jewelry, watches, clocks and other valuable luxury gifts plunged 24.6% year on year to $1.03 billion (HKD 7.944 billion) in May, according to provisional figures from Hong Kong's Census and Statistics Department. However, sales of jewelry, watches and valuable gifts just at department stores actually improved 20.5% in May to $37 million. By volume, sales of goods for the jewelry and watches category slipped 22.7%. Hong Kong recorded total retail sales in May of $5 billion, a decrease of 4.1%.

Additionally, Hong Kong revised the estimate of retail sales for April lower, to a decline of 9.9%, while calendar year to data retail sales were down 0.2%.







Christie's Jewelry Auction Total Rises

Christie’s auction total jumped 12% year on year to $4.47 billion (GBP 2.69 billion) for the first six months of 2014. The sales increase by dollar value rose 22% as the British pound strengthened during the period. Christie’s strong results were primarily driven by higher values for artwork. Digital engagement and new buyers coming into the market have continued to drive growth for the company with new clients representing 24% of all buyers and 15% of the sales total during the first half. Christie’s sales from the jewelry, watch and wine category jumped 11% to $455.5 million.


Sotheby's, eBay Partner for Live Auctions

Sotheby’s will offer live auctions from New York online through eBay's technology, accessing 145 million active buyers, in a new partnership. The deal unites eBay's online shopping expertise with Sotheby's auction business and together the two are developing an innovative online platform that will make it easier for global bidders to acquire art, antiques and collectibles.

The first offerings will tap into a newly-designed auction experience that eBay will launch on its website, tailored for collectors of rare, unique and premium art and collectibles as well as for first-time buyers. Sotheby’s will become the preeminent anchor tenant in the new design. Both companies intend to focus on growing the market at price points where they expect their collectors to converge in the future – particularly in the segments such as jewelry, watches, prints, wine, photographs and 20th century design.

In a separate announcement, Sotheby's appointed Daryl Wickstrom to a newly created role as international managing director of worldwide jewelry and watch divisions. Wickstrom joined Sotheby’s in 1996 and was appointed executive vice president and deputy chairman of Asia in July 2008. During his tenure in that position, Wickstrom was instrumental in developing the growth strategy in Asia and particularly Sotheby’s expansion in China.

Sotheby’s jewelry and watch sale activities set new highs in 2013, with jewelry sales achieving $529 million and watch sales reaching $97 million.

Movado Appoints Quintero as President

Movado Group Inc. hired and appointed Ricardo Quintero as company president to direct the brands, marketing and international expansion efforts, reporting to Efraim Grinberg, the company's chairman and CEO. Quintero most recently served at The Estée Lauder Companies as Clinique’s senior vice president; global general manager of market development. Additionally, Movado promoted Rick Coté, who has been serving as president and chief operating officer since 2010, to vice chairman and chief operating officer.

Forevermark Expands in U.K.

De Beers will expand its Forevermark diamond brand in the U.K. and Ireland in the third and fourth quarter, marking the brand's first entry into the Western European market. Forevermark appointed Crossworks Manufacturing Ltd. of Canada as its only licensee partner and will work with a select number of retailers to bring Forevermark diamonds to the region.

De Beers launched Forevermark six years ago and currently has 1,300 high-end retail stores in 29 markets worldwide across Asia, North America, the Middle East, Australia and Turkey. Crossworks previously worked with Forevermark to launch the brand in Australia and Canada.

GENERAL

HRD Adjusts Cut Grade

HRD Antwerp adjusted the proportion parameters of its cut grade to encompass a revision of the proportion parameter. Whereas, previously a diamond was graded "very good" on proportion, it is now possible for certain diamonds to achieve "excellent," increasing the possibility to obtain an overall triple excellent grade. The new cut update means clients may recheck diamonds to possibly obtain a better grading.

New U.S. Trademarks Approved

This month, the U.S. Patent & Trademark Office (USPTO) awarded the trademark "Love Remembered, Love Today, Love Forever" to Columbia Insurance Company of Omaha, Nebraska, which handles trademarks on behalf of Berkshire Hathaway. The trademark references jewelry, diamonds, engagement rings and wedding bands.

Fred Meyer Jewelers Inc. of Oregon received trademark approval for "Locked in Love," which refers to jewelry and Gems One Corporation of New York received the trademark "Powered By Her Heartbeat" for diamonds. J.S.N. Jewellery Inc. of Canada was granted the U.S. trademark "Canadian Ice" to refer to diamonds and jewelry as well as colored gemstones and semi-precious stones.

The trademark "M. Christoff" was awarded to Michael Christoff Diamond & Jewelry Inc. of Los Angeles, California in reference to jewelry, diamonds, watches, and precious metals and precious stones. The USPTO issued the trademark "The Diamond Family" to Diamond & Jewelry Brokers Inc. of Missouri to refer to online and retail store services that feature diamond jewelry.

Myanmar's Jade Exports Surge

Myanmar earned $1.1 billion from jade exports in the 2014 fiscal year, which ended on March 30, according to the Ministry of National Planning and Economic Development. Jade exports for the previous year totaled $297.9 million. Top exports markets were China, Hong Kong and India, where jade is clearly in high demand. However, while these record earnings represent the legal jade trading, illegal trading is also flourishing despite increased security. The U.S. does not permit gemstone imports from Myanmar.


WDC Seeks New Executive

The World Diamond Council (WDC) initiated a search for an executive director to head the organization, under the president and the executive committee. It is the first time that the WDC will employ a salaried administrator. Responsibilities will include day-to-day management of the organization, providing strategic development, liaising with the governments and representing the WDC in the Kimberley Process and its various committees.

Dealers Face Loss From Tanzanite Scam

Nearly one dozen Gujarati diamond merchants who also deal in tanzanite gemstones fell victims to fraud by a Chinese diamond merchant and three Rajasthani merchants, according to the Times of India. The dealers lost approximately $10 million in the deal when the buyers failed to pay on consignment. The gemstones were later sold or smuggled out of Hong Kong into China and other countries for prices far below market value. Hong Kong authorities have vowed to investigate and Indian authorities claimed that arrests were likely soon.

Winsome Approves Delisting Shares

Winsome Diamonds & Jewellery informed that Bombay Stock Exchange (BSE) that its board of directors agreed to delist the company's equity shares from the National Stock Exchange of India Limited in accordance with regulation 6 of SEBI (Delisting of Equity Shares) Regulations, 2009. Delisting is anticipated shortly.


LVMH, eBay Drop Litigation to Cooperate

Luxury retailer LVMH and online auction portal eBay announced a cooperative effort to protect intellectual property rights and combat counterfeit goods in online commerce. Given this cooperative measure and additional commitments, the companies have settled ongoing litigation. In a joint statement, senior executives of LVMH and eBay stated that their joint efforts ultimately will ensure that consumers have a safer digital environment globally.

MINING

Lucara Tender Achieves $40M

Lucara Diamond Corp.'s second exceptional tender of large stones from its Karowe mine in Botswana achieved $40.1 million on July 16. Sixteen lots of 1,445 carats were offered and sold, with 13 lots achieving over $1 million each and four stones selling in excess of $4 million each. The top lots were a 109.40-carat diamond that sold for $6.2 million or an average $56,615 per carat and a 118.40-carat diamond that fetched $5.36 million or $45,225 per carat.

Gem Upgrades Letseng Reserves

Gem Diamonds reported that probable reserves at Letšeng increased by 64% to 2.26 million carats, while the average price estimates grew 19% to $2,045 per carat, reflecting improved recovery of large, high-value, type IIa diamonds. By tonnage, reserves at Letšeng rose by 67% to 131.9 million tonnes of ore. The company explained that the increase in reserves stemmed from extending the depth from the current pit bottom of 100 meters to new depths of approximately 350 meters below the current mine pits, on both the satellite and main pipe ore bodies.

Letšeng's indicated resources increased in carat terms by 127% to a total of 3.23 million carats.


Rockwell Returns a Profit

Rockwell Diamonds Inc. reported a profit of $345,000 in the first quarter that ended on May 31 compared with a loss of $1.2 million one year ago. Revenue rose 67% year on year to $15.1 million, with $9.7 million in direct diamond sales and an additional $5.4 million from its beneficiation partners. As reported earlier, production jumped 90% to 9,162 carats, with 4,800 carats derived from the company's royalty mining contractors. Inventory at the close of the first quarter totaled 5,237 carats carried forward, including 2,271 carats on royalty mining contracts.


Kennady Beings Drill Program

Kennady Diamonds Inc. began its summer drilling program at the Kennady North diamond project in Canada's Northwest Territories with plans to complete drilling a minimum of 5,000 meters, focusing on delineation drilling at the Kelvin and Faraday kimberlites. Additionally, Kennady Diamonds expects to complete exploration drilling at the MZ and Doyle kimberlites and at four new exploration targets. Analysis of the Kelvin 25 tonne mini-bulk sample that was recovered during the first and second quarter is completed, with results expected early in the fourth quarter.

STATS

Belgium

June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,363 0% $7,567 6%
Polished imports $1,509 5% $7,400 6%
Net exports ($146) $167 19%

Rough imports $1,301 20% $7,860 12%
Rough exports $1,325 5% $8,143 8%
Net imports ($24) ($283)

Net diamond account ($122) $450 -36%


ECONWATCH
Diamond Industry Stock Report

Investors sense a problem with U.S. retailers: Consumers are not spending enough. Every industry share, save Birks (+9%), fell this week. Meanwhile, Hong Kong shares were mostly higher led by Chow Sang Sang (+3%) and Europe was basically flat but Damiani (+3%) pulled ahead. Indian shares mostly lower led by Classic Diamond (-17%) and Winsome (-19%) as it prepares to delist. Mining shares mainly higher, with double-digit increases for Rockwell, Gem Diamonds and Petra Diamonds. View the extended stock report.
July 17 July 10 Chng.
$1 = Euro 0.739 0.734 0.005
$1 = Rupee 60.61 60.07 0.5
$1 = Israel Shekel 3.43 3.43 0.00
$1 = Rand 10.76 10.69 0.07
$1 = Canadian Dollar 1.08 1.06 0.02

Precious Metals
Gold $1,318.50 $1,335.70 -$17.20
Platinum $1,497.00 $1,510.00 -$13.00

Stock Indexes Chng.
BSE 25,561.16 25,372.75 188.41 0.7%
Dow Jones 16,976.88 16,915.77 61.11 0.4%
FTSE 6,738.32 6,672.37 65.95 1.0%
Hang Seng 23,520.87 23,238.99 281.88 1.2%
S&P 500 1,958.13 1,964.70 -6.57 -0.3%
Yahoo! Jewelry 984.27 992.65 -8.38 -0.8%

Rapaport Weekly Market Comment July 25, 2014



Polished trading sluggish as weak Mumbai IIJS show loses appeal for diamond traders. Indian market hopeful new Modi government will boost economic growth and Diwali jewelry sales. Manufacturer margins and liquidity under pressure as rough prices increase in spite of declining polished prices. July De Beers sight estimated at $775M with 1%-2% price rise. ALROSA 1H production -7% to 15.9M cts., sales +13% to $2.7B, prices +6%. Global 2013 rough production +11% to $14.1B, volume +2% to 130.5M cts., average price +9% to $108/ct. India’s June polished exports -1% to $1.5B, rough imports +16% to $1.6B. Frederic Cumenal to replace Michael Kowalski as Tiffany CEO in April 2015.


RapNet Data: July 24

Diamonds 1,149,517
Value $7,406,137,696
Carats 1,286,225
Average Discount -27.09%

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RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed
Rapaport Melee Auction

New York & Dubai

www.rapaportauctions.com

Aug-Sep 27-4 Wed-Thu


Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon

RapNet Symposium: CONNECT 2014

The Diamond Business is Changing
Are You Ready?

W Hotel | Ft. Lauderdale, Florida

Register Now.

QUOTE OF THE WEEK
The digital transformation is a significant movement where daring business leaders venture into tomorrow's markets today. It isn't an initiative owned by a particular role or department in the organization; instead, it is a cross-enterprise realignment of resources to unify and enhance the digital customer experience at every touch point in order to be competitive in today's era of connected markets.

Brian Solis | Altimeter Group

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INDUSTRY

Global Diamond Production By Value +11%

Global diamond production by value rose 11% year on year to $14.09 billion in 2013 as the average price of rough diamonds rose, according to annual data published by the Kimberley Process Certification Scheme. By volume, global production increased 2% to 130.48 million carats, while the average price grew 9% to $107.95 per carat.

The value of Botswana’s production rose 22% to $3.63 billion with volume up 13% to 23.19 million carats. Russia ranked second place with production up 8% to $3.11 billion and output up 8% to 37.884 million carats. Canada’s diamond production fell 5% to $1.91 billion but output rose 1% to 10.56 million carats. Namibia’s production rose 15% to $1.36 billion from 1.689 million carats and Angola's value of production jumped 15% to $1.28 billion from 9.36 million carats. Other trends noted that Zimbabwe's production fell 14% to $538.5 million for 10.41 million carats and that total rough exports by all member states increased 11% to $55.59 billion, while rough imports rose 6% to $53.76 billion.

IIJS Reports Minimal Diamond Trading

The India International Jewellery Show (IIJS) ended with diamond suppliers reporting relatively low volume of trading and some softening of prices for select goods. There was relatively small inventory of diamonds so the show often just focuses on building clientele.

Diamond suppliers noted that there were fewer international buyers at the show than in previous years and success really depends upon market research for local trends in the various regions of the country. Buyers from the north primarily sought lower-color goods, while those from the south focused on better color and clarity diamonds. Jewelry wholesalers reported steady sales at the show, but observed that retailers are still cautious, many are overstocked and so they are purchasing less than usual. The trade anticipates a stronger second half as the Diwali festive season approaches.
U.S. Jewelry CPI -5%

The U.S. consumer price index (CPI) for jewelry declined 4.5% year on year to 170.83 points in June. However, the reading was a touch higher than the index for both May and April. The CPI for watches, meanwhile, was down 0.8% year on year to 122.71 points. Somewhat stable to slightly lower prices for jewelry industry commodities have contributed to a declining CPI in the past several months.

The average price of gold in June was about 3% lower, while platinum was about 3% higher compared with June 2013. The RapNet Diamond Index (RAPI), the global benchmark for polished diamond prices, fell 3.2% year on year for 1-carat diamonds, while RAPI for 3-carat diamonds dropped 2.8% in June. However, RAPI for 0.30-carat diamonds jumped 10.2% and the index increased 6.2% for 0.50-carat stones.

Swiss Watch Exports +1%

Swiss watch exports rose 1.4% year on year to $2.065 billion (CHF 1.863 billion) in June, according to the Federation of the Swiss ‎Watch Industry.‎ Growth was spurred by stronger demand for watches with precious metals. Wristwatch exports rose 1.2% to $1.952 billion, while the number of units shipped grew by 4.8%. The value of other products increased by 9.2% to $50.6 million. Exports to Hong Kong fell 2.2% to $359.8 million, while exports to the U.S. dropped 0.5% to $206.3 million. Exports to Italy were up 14.5% to $132.8 million, while exports to Japan increased 20.4% to $130.6 million. Exports to China fell 6.8% to $128.5 million. Meanwhile, exports to Germany recorded a slight downturn and fell 1% to $114.3 million
RETAIL & WHOLESALE

LVMH's Profit -4%

LVMH reported that revenue improved 3% year on year to $18.9 billion (EUR 14 billion) in the first half of the year, while the luxury group's share of profit slipped 4% to $2 billion. LVMH's same-store sales increased 5%. The retailer observed good sales resilience in Europe and continued growth in Asia and the U.S.

Sales across the company's jewelry and watches division fell 1% to $1.7 billion, while same-store sales rose 3% and operating profit dropped 31% to $144 million. Economic uncertainties continued to make multi-brand retailers prudent in their inventory replenishment. The performance in the brands’ own boutiques exhibited significant growth. Bulgari benefited from positive momentum in jewelry. TAG Heuer focused on the development of its iconic lines. The decrease in profit from recurring operations was principally explained by a negative exchange rate effect.

Swatch's Profit -12%

Swatch Group's sales increased 8.5% year on year to $5 billion (CHF 4.535 billion) at constant exchange rates in the first half year that ended on June 30. An overvalued Swiss franc strengthened further against currencies in all of the group’s important sales regions, negatively impacting revenue by $200 million or 4.5 percentage points. Swatch Group's profit fell 11.5% year on year to $754 million.

In the watches and jewelry segment, Swatch Group recorded sales growth of 8.8% at constant rates and 4.3% at current rates. Harry Winston made further significant investments in a wider product range and an increased availability of high-end jewelry, as well as in the new watch collection which was presented at Baselworld 2014 and which will be available in its retail stores in the second half of 2014. The brand also invested in renovation of its retail stores.


Retail Survival Requires Culture Change

High performance digital retailers are not only investing cash to improve the customer experience but the entire enterprise has bought into the digital revolution with every breath and passing thought. Retail executives who hold back their digital transformation -- for whatever reason -- severely risk their company's survival, according to Accenture.

The business consulting firm found that successful brands today have reversed their marketing culture to no longer focus on sales transactions, but instead they delight and invite consumers. Successful brands "empathize" with consumers rather than target them with constant product messages; so, engage, share and help customers without expecting an immediate return. Create dialog, stay on consumers’ radar and treat them as a continuous relationship that covers the spectrum of sales, service, retention and loyalty.

Accenture's research found that a winning strategy for digital performance empowers human cooperation across the enterprise, implements a full omnichannel customer experience, monitors real-time analytics for the purpose of immediate reaction on those insights, uses agile technologies and cloud-based services, re-orients marketing plans to harness digital trends on the fly and, finally, tests, learns and “fail fast” but recovers even faster.



Speed, Agility Drive Digital Transformation

Transforming a brand's digital landscape is not just an investment, but it requires the retailer to "put digital first" in the forefront of its entire staff, according to the Altimeter Group. Successful digital transformation initiatives lifted customer engagement 75%, improved customer satisfaction 63%, drove digital traffic 53% higher and increased lead generation and sales by 49%, according to Altimeter.

The group observed that the most successful digital transformation initiatives today embrace speed, human collaboration and company-wide participation. Digital transformation resistance, or lack of culture change, (especially at the top) was cited by 63% of enterprises as the reason their digital transformation failed. Other issues included, "sitting back to think things through" rather than taking the risk and moving fast (59%), lack of cross-functional collaboration (56%), lack of digital talent and resources (56%), lack of understanding for digital customer behavior (53%) and the need to secure executive support (42%) before taking action.

Nearly eight in 10 companies are budgeting to improve their omnichannel processes and to expedite changes to digital properties, such as website updates, new mobile or social platforms, while 71% are specifically updating their website and ecommerce programs for a mobile world. Transformation also includes integrated social, mobile, web, ecommerce, people services and investment updates to deliver a frictionless customer experience across the enterprise. Ongoing research into customer digital touch points, using thorough analytic services will result in the brand's ability to react, in essence, meeting the customer service immediacy of the digital landscape.


Physical Stores Are a Cornerstone to Digital Success

A.T. Kearney concluded that a physical store completes the ominchannel experience -- especially for fine jewelry. While online shopping will continue to grow, so too will the consumer desire for retail solutions that deliver anything, anytime, anywhere and anyhow.

Jewelers that develop effective value addition and track shopper engagement beyond “sales” will succeed. Without omnichannel in place, it is too easy for retailers to downplay their physical store.

A.T. Kearney measured five steps in the purchasing process and found that the "product discovery" phase often took place online; however, for the trial and test stage the majority of consumers preferred a physical store. In addition, for the actual purchasing stage, shoppers again preferred a store due to immediacy and added value. While delivery options varied by product, fine jewelry was one item that shoppers preferred to pick up in a store as opposed to having it delivered at home. As for "product returns," shoppers preferred physical stores. A.T. Kearney confirmed that 90% of all retail sales are transacted in stores and 95% of all retail sales are captured by retailers with a brick-and-mortar presence.

U.S. shoppers of all ages find physical stores more appealing than online only experiences, especially for the fine jewelry and home furnishing categories, as the sensory experience allows them to touch and feel products. What jewelers must do, however, is ensure that shoppers enjoy a remarkable brand experience online and in the store, hire engaging and expert sales associates and create an atmosphere of confidence in the store that reflects the quality of the product.



KGK Licenses Judith Ripka

Xcel Brands Inc., the parent company of the Judith Ripka label, signed an exclusive licensing agreement with KGK Jewellery Manufacturing Ltd. to take over the wholesale jewelry business under the Judith Ripka brand. This agreement will give KGK the license to manufacture, source, sell and distribute jewelry, including fine jewelry, diamond jewelry, and bridal jewelry, under the Judith Ripka label.


GENERAL

Sofisti to Head Gucci Jewels

Luxury retail giant Kering restructured its jewelry and watch division and appointed Sowind Group's CEO, Michele Sofisti, to the role of CEO of Gucci watches and jewelry beginning October 1. Kering will appoint a new CEO for Sowind Group in the coming months. In three years as the CEO of Sowind Group, Sofisti modernized the production capacities of Sowind Group and reorganized the product offer of both Girard-Perregaux and JeanRichard brands. Sofisti joined Gucci watches as strategic advisor in 2009 and he was promoted to CEO in 2010. In 2011, he was appointed the CEO of Sowind Group.

Cumenal to Replace Kowalski

Michael J. Kowalski, the CEO of Tiffany & Co., intends to retire on March 31, 2015. Kowalski, who has been a member of the company's board since 1995, will continue to serve as a non-executive chairman. The board has named Frederic Cumenal, pictured, currently the company's president, to succeed Kowalski as CEO on April 1. Kowalski, 62, joined Tiffany in 1983 and became CEO in 1999. Cumenal, 54, joined Tiffany in 2011 as executive vice president with responsibilities for worldwide sales and distribution. In 2013, his responsibilities were expanded to include the design, merchandising and marketing functions, and he was promoted to president and appointed to Tiffany's board.


De Beers Revises Sightholder Model

De Beers updated the model for allocating rough diamonds with respect to the March 2015 to March 2018 sightholder contractual period. Roughly 90% of goods (by value) are sold through sightholder sales and the new model will introduce stricter screening methods for determining rough buying eligibility. De Beers requires sightholders to practice transparent and ethical business practices for all financial and supply chain compliance issues.

But De Beers has also loosened up the way in which nonsightholders may purchase rough in the future with a simplified demand-based process. De Beers anticipates strong demand from across the manufacturing sector. The sightholder application period opens August 25 to 29.


MINING

ALROSA's Production -16%

ALROSA’s diamond production fell 16% year on year to 8.043 million carats in the second quarter that ended on June 30. It sold 8.4 million carats during the quarter, including 6.1 million carats of gem-quality diamonds at an average price of $200 per carat. Revenue from rough diamond sales for the first half of the year rose 13% year on year to $2.7 billion.

Quarterly production at the Aikhal division, which consists of the Jubilee pipe, Aikhal underground mine and Komsomolskaya pipe, declined 35% to 2.38 million carats. The Mirny division, which includes the International and Mir underground mines and various alluvial deposits, recorded a production decline of 13% to 1.553 million carats. The Udachny division reported a production decrease of 25% to 1.039 million carats, the Nyurba division's production fell 21% to 848,000 carats and production at Almazy Anabara increased 28% to 1.239 million carats.

First Nation Deal Signed

De Beers Canada Inc., Mountain Province Diamonds and the Lutsel K’e Dene First Nation entered into an impact benefit agreement for the proposed Gahcho Kué diamond mine. De Beers is the operator of the project and holds a 51% stake, while Mountain Province Diamonds owns a 49% share.

The agreement creates a framework for De Beers and the Lutsel K’e Dene First Nation to work together over the life of the mine, with a particular focus on local participation in the opportunities that construction and operations will provide. In addition, it recognizes local culture and customs and establishes that training, employment and business opportunities are made available to Lutsel K’e Dene members, including financial provisions necessary for ensuring fair participation in opportunities the project will provide.


Walsh Sets Pace for Bunder

Sam Walsh, the CEO of Rio Tinto, said that India has great potential for diamond mining as global demand continues to grow. Rio Tinto hopes to ramp up its pending Bunder diamond project in Madhya Pradesh sooner rather than later. Walsh expressed great hope that with a new government in place, the red tape involved with conducting business in India will diminish so that commodity suppliers can partner with the country's economic development.


Trans Hex Sells Subsidiary

The Trans Hex Group agreed to sell its 100% interest in subsidiary Pioneer Minerals Ltd. for about $3.3 million (ZAR 35 million) to Bondeo 140 CC. The deal marks a final step in Trans Hex's decision to dispose of mining and prospecting projects that were located between Douglas and Prieska in the Middle Orange River region of the Northern Cape Province in South Africa. Pioneer holds a diamond mining right on the farm Remhoogte and Bondeo owns other diamond mining and prospecting operations in the Middle Orange River region, where it holds a regional presence and extensive local knowledge.


STATS
India

June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,469 -1% $10,125 -6%
Polished imports $662 -8% $3,366 -12%
Net exports $807 3% $6,759 -5%

Rough imports $1,596 16% $9,293 7%
Rough exports $111 -1% $781 -24%
Net imports $1,485 18% $8,512 12%

Net diamond account ($67 ($1,753)

Rough synthetic imports $3 -54%
Total synthetic imports $5 -41%
Total synthetic exports $6 100%



ECONWATCH
Diamond Industry Stock Report

U.S. retail shares mainly higher except for Charles & Colvard (-6%) and Signet (-2%). Hong Kong shares little changed, Europe mainly lower led by Swatch (-2%). Indian shares all lower except for Goldiam, Rajesh Exports and Titan, all of which were flat. Mining shares mixed with Gemfields (-7%) and Stellar (+11%) defining a wide trading margin. Anglo (De Beers) reports results July 25 and shares closed the week +3%. View the extended stock report.
July 17 July 17 Chng.
$1 = Euro 0.743 0.739 0.004
$1 = Rupee 60.07 60.61 -0.5
$1 = Israel Shekel 3.42 3.43 -0.01
$1 = Rand 10.53 10.76 -0.23
$1 = Canadian Dollar 1.07 1.08 -0.01

Precious Metals
Gold $1,292.60 $1,318.50 -$25.90
Platinum $1,462.00 $1,497.00 -$35.00

Stock Indexes Chng.
BSE 26,271.85 25,561.16 710.69 2.8%
Dow Jones 17,083.80 16,976.88 106.92 0.6%
FTSE 6,821.46 6,738.32 83.14 1.2%
Hang Seng 24,141.50 23,520.87 620.63 2.6%
S&P 500 1,987.98 1,958.13 29.85 1.5%
Yahoo! Jewelry 981.33 984.27 -2.94 -0.3%

Rapaport Weekly Market Comment Aug. 1, 2014



TRADE NOTICE: The Rapaport Price List will be based on the new “Rapaport Specification A-” effective next week August 8, 2014. Full details of all new specifications are available at diamonds.net/rapspec. Comments from the trade should be emailed rapspec@diamonds.net by Wednesday, August 6 for immediate consideration. The Rapaport Price List will exclude price information for Marange and green-tinted diamonds. RapNet members will now be required to remove all non-fancy color, green-tinted diamonds from RapNet regardless of origin. Members that list green-tinted or Marange diamonds on RapNet will be subject to suspension and publication.

Trading: NY jewelry shows slow. Market sentiment improves with rising U.S. consumer confidence as 2Q GDP +4%. Steady U.S. and Far East demand for commercial-quality below 1ct., SI-I2, G-M diamonds. Rough markets stable with seasonal Indian demand for pre-Diwali manufacturing. De Beers 1H rough sales +15% to $3.5B, earnings +59% to $469M, prices +7%. Petra FY revenue +17% to $473M, production +17% to 3.1M cts. Letšeng 1H sales +14% to $54M, average price +58% to $2,747/ct. Birks FY revenue -4% to $281M, loss of $5.8M vs. profit of $1.5M. Kering 1H jewelry group sales +5% to $4B. Cash America 2Q revenue +11% to $455M, profit -17% to $21M.

RapNet Data: July 31

Diamonds 1,184,287
Value $7,509,141,572
Carats 1,306,122
Average Discount -26.91%



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RAPAPORT ANNOUNCEMENTS


August 6-13 Wed-Wed


Rapaport Melee Auction

New York & Dubai

www.rapaportauctions.com
Aug-Sep 27-4 Wed-Thu


Rapaport Single Stone Auction

New York & Israel



QUOTE OF THE WEEK
Jeweler Kendra Scott's compelling omnichannel business model, commitment to customer experience and a strong management team make for a powerful combination. Norwest Venture Partners is completely aligned with the company's long-term approach.

Robert Arditi | Norwest Venture Partners

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INDUSTRY

De Beers Profit +59%

Anglo American's group underlying earnings rose 3% to $1.284 billion for the first half that ended on June 30 and De Beers contribution of $469 million reflected an increase of 59%. De Beers revenue rose 15% year on year to $3.823 billion in the first half, which was the highest segment total of Anglo's business units. Rough diamond sales jumped 15% to $3.5 billion.

De Beers recorded an underlying operating profit of $765 million, representing an increase of 34% from 2013 due to stronger diamond demand across key markets, resulting in revenue growth, coupled with favorable exchange rates. De Beers production rose 12% year on year to 16 million carats with strong performance by Debswana and the South African operations. Production targets for 2014 were increased just slightly to between 31 million and 32 million carats, up from a previous prediction of between 30 million carats and 32 million carats.

Diamond brand Forevermark continues to expand globally, particularly in the core markets of China, Japan, India and the U.S. In May, Forevermark was launched in Turkey and, in July, plans were announced to make the brand available in the U.K. and Ireland. The brand is now available in more than 1,400 authorized jewelry stores in 29 countries, an increase of more than 30% at the same point in 2013. De Beers Jewellers recorded "healthy" same-store sales growth during the first half, according to Anglo, but it declined to provide an exact figure.

Slower Trade Marks JA NY Show

The JA New York Summer Show was better for jewelry designers than it was for loose stone dealers. Overall, exhibitors reported much weaker traffic than usual and retailers were primarily shopping for one-of-a-kind pieces and unique collections that will spark consumer interest.

Diamond wholesaler Krishna Vedawala of Diacenter Inc. attributed the lack of buyers to the overall change in how they shop, saying more buyers turn to online services, such as RapNet. Fifteen years ago, "people didn't have as many tools to compare prices as they do now. They are more hesitant to buy right away at these shows. It's easier to shop around online for the right product," Vedawala said.

Nonetheless, A. Jaffe reported "a good response" from the show, according to Kate Smith, who cited new brand schemes as the main attraction at their exhibit space. Puja Bordia of Tresor added, "People are buying big pieces for the holidays. Our Origami collection and long necklaces from the Lente collection did particularly well."


RETAIL & WHOLESALE
Kering Reports Profit +7%, Acquires Ulysse Nardin

Kering's revenue rose 1.5% year on year to $6.4 billion (EUR 4.75 billion) for the first half of the year that ended on June 30. Revenue increased 4% based on comparable-exchange-rates. The luxury group segment, which includes Gucci, Boucheron, Bottega Veneta, Saint Laurent and others, experienced a sales increase of 4.9% to $4.3 billion, but comparable-store sales increased 5.7%. Kering's net income rose 7% to $248 million or EUR 1.47 per share; however, recurring net income from continuing operations fell 4.7% to $743 million.

Along with reporting its fiscal results, Kering announced that it signed an agreement to acquire Ulysse Nardin. The brand will become part of Kering's luxury, watches and jewelry division, which is headed by Albert Bensoussan. The transaction is subject to the approval of the competition authorities and is expected to complete during the second half of 2014
Cash America's Profit -17%

Cash America International Inc. reported that company profit fell 16.6% year on year to $20.97 million for the second quarter that ended on June 30, in large part due to $15 million in charges related to an early extinguishment of debt. Revenue for the second quarter rose 10.9% to $455.1 million, while net revenue, which is less the cost of merchandise sold and loan loss provision expenses, increased 13% to $275.9 million.

Cash America stated that strong revenue growth was observed from its ecommerce channel, where sales jumped 27% to $134.6 million during the quarter. The company’s retail services sector experienced a 3% increase in sales at $141.1 million as revenue from pawn loans jumped 11%. Same-store pawn loan balances across U.S. lending locations rose 4.5%.


Birks Records Loss, Plans Consolidation

The Birks Group reported that revenue fell 4% year on year to $281.2 million for the fiscal year that ended on March 29. However, same-store sales rose 4% and the cost of sales was flat at $166.5 million. Birks recorded a loss of $5.8 million or 35 cents per share compared with profit of $1.5 million or 11 cents per share one year earlier.

Stronger comparable-store sales were driven by an increase in the average sale transaction, while the overall revenue decline was primarily the result of closing 10 retail locations over the past two years. Approximately $7.6 million in revenue was lost in currency translation due to a stronger dollar. The jeweler recorded inventory of $144.6 million as of March 29, an increase of 5.6%. Birks Group will consolidate most of its corporate administrative workforce from its regional office in Tamarac, Florida to its Montreal corporate head office. Restructuring costs are expected to be between $2 million and $4 million; however, annual savings will exceed the costs in the first full year after implementation.

Norwest Backs Kendra Scott

Norwest Venture Partners invested in jeweler Kendra Scott as a minority stakeholder, further enabling the retailer to expand and increase the brand's reach. Kendra Scott, the founder and CEO of the company bearing her name, explained that by leveraging Norwest's strategic resources and experience in fashion, retail and ecommerce, she will accelerate company growth effort across. Scott targets opening 17 retail locations before the end of 2014.

Investors Bank on BaubleBar

J. Christopher Burch’s Burch Creative Capital, Aspect Ventures, Triplepoint Ventures and Comcast Ventures, as well as existing investors Accel Partners and Greycroft Partners agreed to a $10 million "series B" round of financing for BaubleBar, a fashion jewelry firm based in New York City. Burch said he was impressed by BaubleBar’s growth and marketing strategy, having moved from a popup shop into traditional retail doors. He intends to mentor the founders as part of the funding deal. The investors also believe that the current fashion trend is moving toward minimalism, placing BaubleBar in a perfect position to grow its direct-to-consumer and wholesale businesses. Price points for BaubleBar merchandise is generally under $40.


Equity Firm Acquires John Hardy

Private equity firm Catterton acquired designer jewelry brand John Hardy for an undisclosed sum. In addition, Robert Hanson was appointed as John Hardy's CEO. Hanson is a 25-year veteran of brand development in the retail space where he served as CEO of American Eagle Outfitters Inc. and global president of Levi's.

Damien Dernoncourt, who has served as John Hardy's CEO since 2007, will retain an equity stake in the brand and was named a non-executive chairman. Guy Bedarida will continue to serve as John Hardy's creative director and head designer and Miles Graham will continue to serve as president and chief operating officer.


Stuller, Toscow Receive Trademarks

The U.S. Patent & Trademark Office (USPTO) granted the trademark "DayDream" for diamond jewelry to H.E. Murdock Co. Inc. of Maine on July 15 with registration number 4567790. Stuller Inc. was granted the trademark "Mystara Diamonds" on July 22 with registration number 4573707. Retailer Robbins Bros. Jewelry Inc. of California received the trademark "Yesterday. Today. Forever." on July 15 with registration number 4569189 for three-stone diamond rings and jewelry.

The USPTO issued the trademark "Ring of Fire" for diamond jewelry to Ambar Betzalel of California on July 15 with registration number 4566575. Genovese Jewelers Ltd. of Creve Coeur, Missouri received the trademark "Novia by Genovese Jewelers" on July 22 with registration number 4571570 for jewelry. Simon Golub & Sons Inc. of Washington received the trademark "Simon Golub" on July 22, with registration number 4571780.

Australia's government accepted the trademark "Imperial Australia" on May 5 on behalf of Toscow Pty. Ltd. Australia with the registration number 1549443 for the period April 3, 2013 through April 3, 2023.

De Beers Debuts New Signature

De Beers introduced a new signature design for sightholders that aims reflect the central role they play in group activity. The new signature includes an "S" in a circle with a diamond icon in the middle and a De Beers Group of Companies signifier below, which was not present in the old logo.

"The signature stands for excellence, leadership and integrity in the diamond industry and signifies our joint commitment to excellence," explained David Johnson, the head of midstream communications for De Beers. Last week, De Beers updated the model for the allocation of rough diamonds by global sightholder sales for the March 2015 to March 2018 contractual period. Registrations of interest for the new contract period are set to open on August 25 through 28.
Omnichannel Drives In Store Sales

L2 Think Tank found that 44% of luxury goods, including jewelry and watch purchases in the past year, were made in stores after shoppers were first influenced by what they found online. Only 4% of luxury goods were purchased through ecommerce. Jewelers that have not developed their omnichannel strategy and, thus, haven't placed their store inventory across the digital channel are missing a great sales opportunity, according to the group.

Digital influence for all product purchases is growing exponentially and L2 predicted that by this September in the U.S., more than half of all offline retail sales will have been influenced by the digital experience. Which retailers are "role models" for the omnichannel experience? L2 said, Saks, Guess, Walgreens and Walmart meet the challenge, with Coach, Gap, Neiman Marcus and Sephora narrowly missing out. These retail models balance online and offline investment, focus on consistency across all channels, offer strong mobile apps, consumer loyalty programs and facilitate dynamic data capture for example.

However, L2 noted that the luxury brands have a lot of catching up to do, as the jewelry and watch category scored lowest overall for integrating the digital and in store experience. L2 stated that to create (or improve) a strong omnichannel strategy, at least include all of the following capabilities: online purchase and in store pickup, real-time in store inventory, enable product filtering and store locator, personalized store promotions and booking appointments, shopper wishlists, allow preorders, offer exclusives as well as free shipping and expedited delivery.

Reasons why the omnichannel strategy may fail certain retailers include a poorly managed business model; difficulty integrating backend systems with new technology designs and the inability to share customer data across all platforms. Human problems included team conflicts, limited associate training and departments that can't break out of the silo mentalti.

Blommaert Joins Panama Exchange

The Panama Diamond Exchange appointed Dirk Blommaert as its business development director, a newly created role to advance the position of the Panama Gem & Jewelry Center worldwide. Blommaert will also promote the bourse across Latin America as the region's principal trading center for diamonds, colored gemstones and jewelry.

Blommaert is a 20-year veteran of the gemstone and jewelry business and led promotional efforts for the trade in Antwerp, Baselworld and the International Gem Tower in New York. More recently, he has focused on developing business-to-business events for Antwerp diamond companies under the umbrella of ACTYF, in developing diamond markets such as Brazil, Russia, China, Indonesia, Malaysia and Turkey.

Saurashtra Workforce Grows

Diamond polishing work is beginning to shift to units outside of Surat that are located in the Saurashtra region of India -- in cities such as Rajkot, Amreli, Bhavnagar and Junagadh. Dinesh Navadia, the president of the Surat Diamond Association (SDA), noted that the trend is a positive development since the Uniform Wage Structure enables workers to earn the same anywhere. The shift does not diminish the importance of Surat, since it will maintain the core center of sorting rough, cleaning, polishing and grading. The diamond industry in Saurashtra contributes significantly to the annual turnover of polished diamonds, especially small and near gem-quality stones.


Suit Alleges Silver Price Fixing

HSBC Holdings PLC, Deutsche Bank and the Bank of Nova Scotia face silver price-fixing allegations, according to a lawsuit filed in Washington state. The suit seeks class-action status and claimed that the banks established "positions in both physical silver and silver derivatives prior to the public release of silver fixing results, allowing them to reap large illegitimate profits." Silver was about 4.5% higher than one year ago at $20.45 per ounce at noon in New York on July 31. The metal's price extremes during this past year have been $24.52 and $18.76.

MINING

Petra's Revenue +17%

Petra Diamonds reported that revenue rose 17% year on year to $472.6 million during the fiscal year that ended on June 30 as production rose and rough prices firmed. The company sold 3,134,706 carats during the year, 23% more than one year ago. Two exceptional stones sold, a 126.40-carat white diamond from the Cullinan mine, which fetched $8.5 million, and a 29.60-carat blue diamond that sold for $25.6 million. Group production rose 17% to 3.11 million carats, above the company's guidance of 3 million carats, due to an increased contribution from the company's Finsch, Williamson, Koffiefontein and Kimberley underground mines.

In other news, Petra's second-largest shareholder, Awal Bank BSC, placed 43 million shares with financial institutions for about $139 million, representing a 12% discount from the July 28 closing price. Awal Bank, which is owned by Saad Investments, still holds 17.8 million shares, 13.2 million of which are subject to a 90 day lock-up.

Letseng's Revenue +14%

Gem Diamonds reported that rough diamond sales from the Letšeng mine in Lesotho rose 14% year on year to $53.8 million in the first half of 2014. The average price of the goods rose 58% mainly due to strong prices achieved from five tenders that were held for exceptional-quality diamonds. The company sold 53,799 carats for an average price of $2,747 per carat during the period, compared with 47,065 carats selling for $1,741 per carat one year earlier. During the first half, 37 diamonds sold for over $1 million each, 77 stones achieved a value in excess of $20,000 per carat, while five stones sold for over $60,000 per carat. Additionally, a 162.02-carat diamond sold for $11.1 million or $68,687 per carat, a 161.31-carat stone fetched $2.4 million or $14,636 per carat and a 132.55-carat diamond sold for $7.5 million or $56,492 per carat.

Letšeng's production grew 29% year on year to 54,678 carats. Gem Diamonds revised its full year guidance for Letšeng production to between 95,000 to 100,000 carats, compared with its previous guidance one year ago of up to 95,000 carats.


Lace Tenders Achieve $910K

DiamondCorp sold 14,853 carats from its Lace mine for $909,611, during the first half of 2014. The company noted that demand for good-quality rough diamonds remains relatively strong, with prices rising between 5% and 10% since December. During the second quarter, DiamondCorp recovered 6,102 carats from tailings, including a 15.20-carat, white, octahedral diamond.

DiamondCorp also revised its underground development plan and budget for Lace during the second quarter. The new plan will see the mine ramp up commercial production from underground mining at Lace's Upper K4 Block (UK4) by the first half of 2015, six months ahead of schedule, with an aim to achieve steady production of 30,000 tonnes per month by the second half of 2015.

ZELA Calls for ZMDC Audit, Guidelines

The Zimbabwe Mining Development Corporation (ZMDC), which is under U.S. sanctions and controls all diamond mining in Zimbabwe, must value Marange diamond reserves to ensure full value, according to the Zimbabwe Environment Law Association (ZELA).

Analysis of ZMDC's financial results found that is solely relies on diamond revenue. Valuing diamond reserves would bring transparency and ZELA recommended that ZMDC conduct a full audit of its mining partners. Other recommendations included, adopting transparency and accountability initiatives, setting guidelines on the distribution and sharing of diamond revenue and creating a monitoring program as required by the International Monetary Fund (IMF). ZELA stated that Marange diamond revenue to ZMDC was $252,063,707 in 2011 and $272,259,401 in 2012, with Mbada Diamonds contributing the nearly half each year.

Mountain Province Names Lenders

Mountain Province Diamonds Inc. selected three banking institutions to arrange and underwrite a senior secured term loan facility of up to $370 million to fund the company's share of construction costs at the Gahcho Kué diamond mine located in Canada's Northwest Territories. Mountain Province holds a 49% stake in Gahcho Kué, while De Beers Canada Inc.'s share is 51%. Mountain Province mandated Deutsche Bank A.G., acting through its London Branch, Natixis S.A. and Nedbank Limited as the lead arrangers to underwrite, arrange and manage the primary syndication of the credit facility, subject to the satisfaction of certain conditions.

Brazil Minerals Builds Mgmt. Team

Brazil Minerals Inc. added three professionals to its management team. Carlos Henrique de Oliveira Garcia joined the diamond and gold mining company as manager and Armando Franz Netto Soares joined as an associate. Both men will be based in Belo Horizonte, the capital of the state of Minas Gerais in Brazil. Eder Patrick Soares de Araujo joined Brazil Minerals as a manager and will be based at the company's satellite office in Montes Claros, in the northern part of Minas Gerais.


ECONWATCH
Diamond Industry Stock Report

A tough week on stocks, all industry shares in the U.S. were lower except for JCP (+4%), Kohl's (+3%) and Movado (+4%). European shares all lower, led by LVMH (-9%) and Indian shares mainly lower led by Classic Diamond (-13%). Mining shares were mainly higher with Firestone and Gemfields leading the way, up 6%. View the extended stock report.
July 30 July 24 Chng.
$1 = Euro 0.746 0.743 0.003
$1 = Rupee 60.52 60.07 0.5
$1 = Israel Shekel 3.43 3.42 0.01
$1 = Rand 10.72 10.53 0.19
$1 = Canadian Dollar 1.09 1.07 0.02

Precious Metals
Gold $1,281.80 $1,292.60 -$10.80
Platinum $1,456.00 $1,462.00 -$6.00

Stock Indexes Chng.
BSE 25,894.97 26,271.85 -376.88 -1.4%
Dow Jones 16,563.30 17,083.80 -520.50 -3.0%
FTSE 6,730.11 6,821.46 -91.35 -1.3%
Hang Seng 24,756.86 24,141.50 615.36 2.5%
S&P 500 1,930.67 1,987.98 -57.31 -2.9%
Yahoo! Jewelry 952.34 981.33 -28.99 -3.0%

Rapaport Weekly Market Comment Aug. 8, 2014



TRADE NOTICE: The Rapaport Price List is now based on the new “Rapaport Specification A” as modified and published August 8, 2014. Full details of all new specifications are at diamonds.net/rapspec. The new specifications have been significantly modified. Comments from the trade should be emailed to rapspec@diamonds.net. Effective today the Rapaport Price List excludes price information for Marange and green-tinted diamonds. RapNet members will be required to remove all non-fancy color, green-tinted diamonds from RapNet regardless of origin. Members that list green-tinted or Marange diamonds on RapNet will be subject to suspension and publication.

Rounds: New Rapaport Diamond Specifications published with modifications following comments from trade. Diamond trading quiet with Belgian and Israeli dealers taking August vacation. U.S. market positive with moderate expectations for India Diamond Week in New York. Polished buyers avoiding large inventory purchases before Sept. HK show. July RapNet Diamond Index (RAPI) for 1ct. -2.4%. Rough trading stable but manufacturer margins tight due to high rough prices. Rio Tinto’s 1H diamond revenue +7% to $431M, diamond earnings +260% to $18M. Titan Company 1Q sales -8% to $466M, profit -3% to $29M. Blue Nile 2Q sales -1% to $107M, profit -2% to $2.2M. U.S. June jewelry sales +3% to estimated $4.9B. U.S. June polished imports +4% to $1.6B, polished exports +15% to $2.9B.


RapNet Data: Aug. 7

Diamonds 1,205,088
Value $7,558,093,800
Carats 1,316,409
Average Discount -27.01%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed
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Rapaport Single Stone Auction

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The Diamond Business is Changing
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QUOTE OF THE WEEK
Hopefully, still above-average consumer confidence across Europe, modestly improving labor markets in most countries and very low consumer price inflation will provide support to consumer spending over the coming months and help the euro-zone economic recovery to gradually gain traction following a largely disappointing first half of the year.

Howard Archer | IHS Global Insight

Careers@Rapaport


The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.


INDUSTRY

Polished Prices Decline in July

The RapNet Diamond Index (RAPI) for 1-carat certified polished diamonds fell 2.4% during the month of July, while RAPI for 0.30-carat diamonds declined 1.3%, RAPI for 0.50-carat diamonds rose 0.3% and RAPI for 3-carat diamonds fell 0.5%. Diamond manufacturing margins remained under pressure as polished trading was seasonably quiet, while rough prices stayed high.

Nonetheless, there is steady U.S. and Far East demand for below 1-carat, G-M, SI-I2, commercial-quality diamonds. Demand for 0.30- to 0.50-carat, G-M, VS2-I2 diamonds remains strong with reported shortages in the market. Many New York and Antwerp-based dealers took their summer vacations during the month, which further reduced trading volume. Some Indian cutters reduced 1-carat and larger prices due to weak demand, oversupply and to boost cash flow. Rough trading was robust and prices rose approximately 2% with goods selling for mid-single-digit premiums on the secondary market. Manufacturers are buying rough in order to have their polished inventories ready before the Diwali break.

RETAIL & WHOLESALE

U.S. Jewelry & Watch Sales +3%

U.S. jewelry and watch sales together rose 3.4% year on year in June, according to preliminary government calculations. Jewelry sales rose 3.3% to $4.886 billion, while watch sales rose 3.6% to $666.3 million, according to Rapaport News calculations.

Jewelry sales for the first six months of 2013 have risen 2.3% year on year to $30.323 billion, while watch sales rose 1.4% to $4.134 billion. The rate of growth was revised lower for each of the past six months. In addition, the rate of growth for the jewelry and watch sector in 2012 was revised lower, but still increased 5%, with jewelry sales of $64.762 billion and watch sales of $8.831 billion. In 2013, the sector experienced a 5.7% increase with jewelry sales of $68.428 billion and watch sales of $9.331 billion, according to Rapaport's calculations.

Sterne Agee's analyst Ike Boruchow observed that specialty retailers experienced choppy sales trends in the month of June in large part due to uneven product category sales coupled with a consumer appetite that lacks "must have" items. Boruchow also hinted that margins may have held steady since Signet Jeweler's discounting in June was restrained, while Fossil stores did not repeat a coupon promotion that took place a year ago.

Titan's Profit -3%

Titan Company Ltd., the owners of the Tanishq jewelry brand in India, reported that sales declined 7.6% year on year to $466.4 million (INR 28.54 billion) in the first quarter that ended on June 30. Profit fell 3% to $29 million. The company anticipated lower sales as a result of difficult comparisons given such an unprecedented first quarter one year earlier, at which time Titan's jewelry sales surged 47% as a result of lower gold prices.

Titan's jewelry sales fell 10% in the first quarter to $380 million, while watch sales recorded a 10% increase to $71.9 million. The company plans to stimulate demand for all its product categories through innovative advertising campaigns and new product launches.


Blue Nile's Profit -2%

Blue Nile's sales declined 1.3% year on year to $106.6 million for the second quarter that ended on June 29. The company's cost of sales fell 1.7% to $86.4 million. Profit fell 1.6% to $2.2 million or 18 cents per share. Engagement jewelry sales in the U.S. fell 4.6% to $60.9 million, while non-engagement sales rose 2.6% to $27.7 million. International sales rose 4.8% to $18 million, while excluding the impact from foreign exchange-rates, the increase was 6.7%. The value of inventory fell nearly 7% year on year to $32.1 million.

Harvey Kanter, Blue Nile's CEO, told investors that a weak diamond price environment in the second quarter materially impacted performance, resulting in price changes. "With these changes we are seeing a return to growth, and when diamond prices normalize, we expect to see even greater benefits from ongoing investments we're making in the user experience," he said.


Charles & Colvard's Loss Widens

Charles & Colvard's revenue rose 20.4% year on year to $7.84 million for the second quarter that ended on June 30. However, costs and expenses jumped 34.1% to $9.88 million, driving a quarterly loss higher to $6.19 million compared with a loss of $491,585 one year earlier. During the period, U.S. sales increased 35% to $7.3 million and international sales fell 50% to almost $600,000. Loose jewel sales, including Forever Brilliant® moissanite, dropped 2% to $4 million; however, finished jewelry sales surged 57% to $3.8 million. Revenue from Charles & Colvard's direct-to-consumer businesses, Moissanite.com and Lulu Avenue®, increased 59%.

TBZ's Profit Falls

Tribhovandas Bhimji Zaveri (TBZ) Ltd. reported that revenue dropped 18.9% year on year to $70.4 million (INR 4.32 billion) in the first quarter that ended on June 30. The company held expenses down by 15% to $68.6 million, however, profit plunged 97.4% to $84,974. TBZ stated that it successfully steered through a difficult quarter. The company hopes to stimulate consumer demand during the current fiscal year through innovative strategies. TBZ will also slow its store expansion to remain focused on improving performance at existing stores.

Gitanjali to Raise Expansion Funding

Gitanjali Gems Ltd. is seeking shareholder approval to raise up to $28.7 million (INR 1.75 billion) through the issue of convertible warrants. The company intends to fund global expansion with the equity. The company also was looking for approval to borrow up to $1.64 billion. Gitanjali's jewelry brands include Gili, Naksharta, D'Damas and Asmi among others. The company has over 4,000 points of sale in India and also operates stores in the U.S, U.K., China, Japan, and Europe and across southeastern Asia.

Damiani, Rocca Merge Operations

Damiani S.p.A.'s board of directors approved merging Damiani and the group's subsidiary Rocca in an effort to increase synergies and corporate functions between the two companies. The merger will not lead to an increase in capital, nor is it subject to regulatory procedures since both companies are wholly owned without any significant interest from other related parties. Damiani S.p.A. was founded in Valenza in 1924 and is now managed by the founder's family third generation, who lead the production and sale of fine jewelry and watches. Rocca 1794 is a jewelry chain with a history dating back more than 200 years and offers a brand of jewelry and watches.


Walmart Chief Outlines Growth Initiatives

Walmart Inc.'s CEO, David Cheesewright, outlined plans to spark competitive growth during an interview with The Wall Street Journal. In brief, he said 80% of retail growth will be coming from outside the U.S. in the next decade and in order to position the retailer ahead of time, Walmart will target opportunities in China, turn around operations in Brazil, rejuvenate Mexico and drive greater ecommerce presence globally.

Online sales are an incredibly important revenue channel as is a fully integrated omnichannel strategy that integrates with the company's 6,100 physical stores. Walmart aims to allow people access to any product from anywhere, he told the newspaper. Still, while various country regulatory issues sometimes hold back growth initiatives for physical stores, he said the key to overcoming these issues is to deal with mistakes immediately. There have been missteps in China and Walmart shelved plans to open stores in India. Now, Walmart is focused on business-to-business in India as a first step. Shares in Walmart have been trading in a $72 to $81 range in the past 52 weeks but are running about 6% lower from one year ago.

GENERAL

U.S. Jewelry Crime Incidents -13%

Jewelers’ Security Alliance (JSA) reported that the total number of crimes against the U.S. industry decreased 13.4% year on year to 740 for the first half of 2014. Total dollar losses were 3.8% lower at $34 million. The bright spot was that during the first six months, the number of arrests of jewelry criminals soared 77% to 374, largely as a result of authorities nabbing large organized jewelry crime gangs. John Kennedy, the president of JSA, observed that terrific investigative work by the FBI and local law enforcement agencies across the U.S. was a principal driver of crime reduction. More arrests have also been possible through information sharing, better surveillance photos and videos and detailed leads provided by jewelers, he said.

PDE's Board Adds Four Members

The Panama Diamond Exchange (PDE) appointed jewelry designer and businessman Roberto Coin, IDMA's president, Maxim Shkadov, IDE's president, Shmuel Schnitzer, and New York Diamond Dealers Club president, Reuven Kaufman, to its board of directors. Eli Izhakoff, the founding chairman of the PDE, described each of the new board members as a wealth of knowledge about the international diamond and jewelry markets. The four join existing board members Ernest Blom, WFDB's president, Gaetano Cavalieri, CIBJO's president, and Avi Paz, WFDB honorary life president. PDE anticipates naming four additional directors in due course.

Martin Joins GIA

The Gemological Institute of America (GIA) appointed Anna Martin, previously the managing director and head of global marketing of diamonds and jewelry at Standard Chartered Bank, to the position of senior vice president of global development. Martin will broaden and deepen GIA’s relationships with clients and stakeholders and overseeing the Institute’s global beneficiation efforts. In addition, Rohit Tandon was appointed as its chief human resources officer and GIA promoted chief learning officer Bev Hori, chief marketing officer Kathryn Kimmel and chief financial officer David Tearle to senior vice presidents. Corporate Counsel Jennifer Wilson was promoted to vice president.

JA Adds Two Board Members

Jewelers of America (JA) elected Karen Goracke of Borsheims Fine Jewelry and Gifts and Mercedes Abramo of Cartier North America to serve on the board of directors through 2017. Goracke was appointed as president of the retailer by Warren Buffett in 2013; she is also active with the Jewelers Vigilance Committee (JVC), Jewelers for Children (JFC) and the Women’s Jewelry Association (WJA). Abramo oversees the strategy and operations for Cartier in North America as president and CEO; prior to joining Cartier, she held management positions with Tiffany & Co., Ritz Carlton Hotels and Loews Miami Beach.

MINING

Rio Tinto Diamonds' Revenue +7%

Rio Tinto's diamond division revenue rose 7% year on ‎year to $431 million during the first half of 2014. Growth was driven by‎ an 8% increase in industry diamond prices, the company explained. Rio Tinto recorded an operating profit of $18 million from its diamond business, compared with an operating profit of $5 million one year ago.

Diamond production rose 2% to 7.482 million across its three mines. Rio Tinto’s capital expenditures on the diamond business fell 55% to $82 million, in line with the company's overall strategy to reduce its costs.‎ Strong demand is expected, especially from India and China, as disposable consumer income rises, leading to higher consumer luxury demand, according to the company's assessment. Rio Tinto Group’s consolidated sales revenue fell 1% to $24.33 billion during the period, while profit more than doubled to $4.285 billion.‎


Gem Diamonds Recovers 198-Ct. Diamond

Gem Diamonds reported that it recovered a 198-carat, type IIa diamond from the Letšeng mine in Lesotho at the end of July 2014. The company explained that the diamond, which is exceptional white and displays no florescence, is expected to be sold before the end of the year.

Clifford Elphick, the CEO of Gem Diamonds, explained that this recent recovery supports Letšeng mine's reputation as an important source of exceptional-quality large diamonds.

Faraday's Sample Grade Impresses Evans

Kennady Diamonds Inc. reported that diamond recovery results from its Faraday 2014 spring drilling program at Kennady North, located in Canada's Northwest Territories, resulted in 5.10 carats per tonne of ore. Company president Patrick Evans stated that the grade was outstanding and amongst the highest diamond sample grades recorded in Canada. "This result confirms that the Faraday kimberlite has the potential to host a high-grade diamond resource," he said.

Approximately 933 kilograms of kimberlite from Faraday was processed at the Geoanalytical Laboratories Diamond Services at the Saskatchewan Research Council. Nearly all of the commercial-size diamonds were described as transparent and white/colorless or off-white. Approximately 75% have either no or only minor inclusions, according to the company.

Zimbabwe Seeks Payment at Point of Sale

Zimbabwe's Mines and Mining Development Minister Walter Chidhakwa told a parliamentary portfolio committee that the government will now collect its share of diamond revenue at the point of sale rather than wait for its mining partners to remit dividends, according to The Herald newspaper. Zimbabwe's treasury has long stated that country's share of diamond revenue failed to materialize. The Zimbabwe Mining Development Corporation (ZMDC) is the government's mining arm that holds a 50% stake in each of the firms mining diamonds across the Marange, including Mbada Diamonds, Anjin Investments, Diamond Mining Company, Jinan and Kusena. The government owns Marange Resources outright. ZMDC, Mbada Diamonds and Marange Resources are on the U.S. list of sanctioned companies.

In addition, Chidhakwa said the Minerals Marketing Corporation of Zimbabwe, which is also on the U.S. sanctions list, is no longer relevant in marketing minerals. The government claimed that diamond revenue in 2013 fell 38% year on year to $466.9 million. However, according to the Kimberley Process Certification Scheme, Zimbabwe’s production value declined 14% to $538.5 million as volume fell 14% to 10.41 million carats and the average price dropped 3% to $51.72 per carat.

Namdeb Strike Enters Sixth Day

Nearly a week has passed with no agreement to end the Namdeb workers strike in Namibia. Namdeb offered a 10% salary increase, a 14% housing allowance increase and a 70/30 increase on medical aid. While the salary increases were in line with demands, the Mineworkers Union of Namibia (MUN) also sought an 80/20 medical increase and educational fee allowances. About 740 workers are on strike, posing a threat to the mine's emergency services that are crucial to maintaining seawalls and mining de-watering. Lawyers for Namdeb threatened workers with court action if a deal was not reached immediately to end the strike.

STATS

USA

June $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,619 4% $12,212 5%
Polished exports $2,941 26% $11,490 14%
Net imports ($1,321) $723 -51%

Rough imports $36 80% $366 73%
Rough exports $14 -48% $249 82%
Net imports $22 297% $116 57%

Net diamond account ($1,299) 44% $839 -46%

ECONWATCH

Diamond Industry Stock Report

Gold gained ground on safe haven buying after Russia sanctioned western imports and the U.S. weighed military action on Iraq. U.S. retail shares mainly lower, led by Blue Nile (-5%). European shares all lower, led by Damiani (-5%). Indian shares mixed with Classic Diamond (+3%) and Winsome (-3%) defining the trading range with the exception of C. Mahendra (-51%). Diamond miners were mixed as gains were led by Kennady (+9%) and losses led by Rockwell (-11%). View the extended stock report.

.
Aug. 7 July 30 Chng.
$1 = Euro 0.748 0.746 0.002
$1 = Rupee 61.52 60.52 1.0
$1 = Israel Shekel 3.48 3.43 0.05
$1 = Rand 10.77 10.72 0.05
$1 = Canadian Dollar 1.09 1.09 0.00

Precious Metals
Gold $1,311.40 $1,281.80 $29.60
Platinum $1,473.00 $1,456.00 $17.00

Stock Indexes Chng.
BSE 25,589.01 25,894.97 -305.96 -1.2%
Dow Jones 16,368.27 16,563.30 -195.03 -1.2%
FTSE 6,597.37 6,730.11 -132.74 -2.0%
Hang Seng 24,387.56 24,756.86 -369.30 -1.5%
S&P 500 1,909.57 1,930.67 -21.10 -1.1%
Yahoo! Jewelry 950.58 952.34 -1.76 -0.2%

Rapaport Weekly Market Comment Aug. 15, 2014

Diamond market demand shifting away from expensive better-quality goods toward lower-priced, commercial and promotional qualities. Dossiers doing well, although Chinese market is relatively slow. Rough trading cautious with stable prices expected at next week’s De Beers sight. Lucara Diamond Corp. 2Q revenue +50% to $71M, net income -31% to $16M. Sarine Technologies 2Q revenue +12% to $25M, profit +4% to $9M. Shrenuj & Co. 1Q revenue +35% to $220M, profit +21% to $3M, Asian Star 1Q revenue +32% to $139M, profit +56% to $3M. U.S. June jewelry store sales +3% to $2.4B. Japan June polished imports +7% to $80M. Global 2Q gold jewelry demand -36% to $21B.

RapNet Data: Aug. 14

Diamonds 1,178,924
Value $7,454,093,711
Carats 1,298,972
Average Discount -27.17%

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QUOTE OF THE WEEK
What we've begun to realize as we expand globally into markets like China is to develop an accessories business — which is critical in the development of retail in Asia. That is why we need people who come with different experiences and a different sense of how to get things done.

David Lauren | Ralph Lauren Corp.

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INDUSTRY

Gold Jewelry Demand Declines

Gold jewelry demand fell 36% year on year to $21.11 billion during the second quarter that ended on June 30, according to the World Gold Council. By weight, gold jewelry demand dropped 30% to 509.6 tonnes. Gold demand in general during the period fell 24% to $39.92 billion and declined 16% by weight to 1,063 tonnes, according to the World Gold Council.

The group explained that the decline in jewelry demand was predictably dramatic, given such high levels of demand one year earlier. In China, consumers adopted a cautious approach to gold jewelry purchases following a surge of buying activity in 2013. The value of gold jewelry demand fell 50% to $6.4 billion during the quarter, however, one year ago the demand had jumped 48%. The World Gold Council contended that demand in China simply turned back to more normal levels.

In India, gold jewelry demand fell 25% to $6.4 billion. The World Gold Council stated that an "unofficial flow of gold" into India continued during the second quarter, particularly during the first half as premiums were pushed higher. Such flow of gold will likely build momentum over the coming months as the market moves into the seasonally stronger period of Diwali and the wedding season. Gold jewelry demand across the Middle East plunged 31% to $1.9 billion. U.S. gold jewelry demand increased 5% to $1.1 billion. A 20% year-on-year decline in Turkish jewelry demand, was the result of domestic issues, according to the group, citing a clampdown on payment by credit card installments. U.K. consumers drove gold jewelry demand up 10% during the quarter and even better, up 25 percent for the first half.

NY Hosts India Diamond Week

The New York Diamond Dealers Club hosted its first India Diamond Week and, for the most part, all participants agreed that the initiative boosted sales and fostered new business relationships. There was some buyer price resistance given tight margins and high rough prices on the manufacturing side. Trading activity for rounds was centered on 1.50 carat to 2 carat, SI-VS, while trading was healthy for fancy shapes in 3-carat-plus sizes. Fancy colors were in demand, especially in pink and blue. Top-quality stones and sizes under 0.90-carats were weak.

RETAIL & WHOLESALE
U.S. Jewelry Store Sales +3%

U.S. jewelry store sales increased 3% year on year to $2.391 billion in June, according to government calculations. As reported earlier this month on Rapaport News, U.S. jewelry and watch sales from all retail channels rose 3.4% during the month, with jewelry sales up 3.3% to $4.886 billion and watch sales increasing 3.6% to $666.3 million. Jewelry store sales have improved 4.3% year on year to $15.34 billion in the first six months of 2014, whereas jewelry sales from all channels have risen 2.3% to $30.323 billion and watch rose 1.4% to $4.134 billion, according to Rapaport News calculations.

Meanwhile, advanced sales estimates from U.S. department stores declined 2.8% on year to $12.341 billion in July. However, retail sales estimates for all products and services in July jumped 4.2% to $446.3 billion. Retail trade sales rose 3.4% and nonstore retail sales increased 6.7% during the month.

Gitanjali's Profit +34%

Gitanjali Gems Ltd. reported that revenue fell 41.6% year on year to $250.8 million (INR 15.26 billion) in the first quarter that ended on June 30. Expenses were reduced 43% to $232.8 million and profit rose 34% to $13.1 million. Diamond segment revenue plunged 63.1% to $86.5 million, while jewelry revenue fell 12.7% to $172.1 million. Intersegment revenue, which is deducted from the total, more than tripled to $7.8 million. The company noted that restriction on gold imports and an unfavorable rupee exchange-rate against the dollar severely impacted results. Gitanjali's overdrawn amount on June 30 amounted to $16.5 million (INR 1 billion), mainly from not servicing interest debt during the period.


Ralph Lauren Preps for China

Ralph Lauren Corp. reiterated its commitment to expanding the luxury accessories business, including handbags and fine-jewelry and watches. The company stated that accessories business is the future growth opportunity, especially across Asia. Ralph Lauren reported that profit fell 10.5% year on year to $162 million in the first quarter that ended on June 28; however, revenue increased 3% to $1.7 billion.

The company plans to open a Ralph Lauren luxury flagship store in China in the third quarter. It anticipates global sales growth of between 6% and 8% this fiscal year, while the operating margin is reduced by 75 to 125 basis points due to continued investment in global retail development and infrastructure, in addition to increased advertising and marketing expense.

Jewelry Sales Decline at QVC

Liberty Interactive Corporation, the parent company of QVC, reported that revenue increased 4% year on year to $2.5 billion in the second quarter that ended on June 30. Group profit fell 5% to $255 million. QVC's revenue improved 3% to $2 billion; however, the division's operating income decreased by 2%. QVC.com's revenue, as a percent of total U.S. sales, jumped 157 basis points to 43%. The company added that QVC U.S. mobile penetration was 37% of QVC.com orders. QVC U.S.'s sales rose for all product categories except for electronics and jewelry. Sales of jewelry items also declined in Japan and Germany but they rose in the U.K.


HSN Reports Lower Jewelry Sales

HSN Inc. reported that sales rose 5% year on year to $855.2 million for the second quarter that ended on June 30. HSN's net sales increased 6% to $556.5 million, including an 11% increase for its digital channel, while Cornerstone's net sales increased 4% to $298.7 million. HSNi observed that sales from mobile devices represented 15% of the total. The company's profit fell 5% to $40.9 million. During the quarter, HSN recorded increased sales for beauty, home design, and health and culinary, which were offset by lower sales for electronics and jewelry.

Sotheby's Profit +3%

Sotheby's auction sales rose 24% year on year to $2.7 billion during the first half of the year that ended on June 30. The company's revenue increased 21.2% to $492.6 million, while expenses rose 21.6% to $358.1 million. Profit for the first half increased 3% to $71.5 million, resulting in diluted earnings per share of $1.01. The company stated that continued strength in the global art market and by excellent spring sales worldwide for all categories drove Sotheby's adjusted operating income up 42%.

Shrenuj's Profit +21%

Shrenuj & Company Ltd. reported that group revenue jumped 34.9% year on year to $220 million (INR 13.443 billion) for the first quarter that ended on June 30. Expenses increased 36.4% to $209 million. The company's profit rose 20.9% to $3.3 million. Diamond revenue during the quarter surged 44.7% to $193 million, while studded jewelry sales slid 17.4% to nearly $31 million. Intersegment sales, however, plummeted 50.2% to $3.9 million.

Pandora's Profit +54%

Pandora Jewelry reported that its revenue increased 31.7% year on year to $456 million (DKK 2.544 billion) in the second quarter that ended on June 30. Gross margin as a percentage of sales improved to 70.7% compared with 66% one year earlier. The brand's profit surged 53.6% to $119 million. By region and local currencies, revenue rose 8.3% in the U.S., while it surged 22.7% across other countries in the Americas. Sales in the U.K. jumped 53.2% and they increased 12.6% in Germany, while all other areas of Europe reported an 82.1% improvement. Sales rose 38.4% in Australia and 157.4% for the rest of the Asia-Pacific division.

Pandora signed an agreement to acquire 27 concept stores from U.S. jeweler and franchisee Hannoush for $29 million. This transaction includes physical store locations, inventory and other assets. This is part of the process to refresh the network in Northeastern U.S.

Asian Star's Profit +56%

Asian Star Company Limited reported that its revenue grew 32% year on year to $139.4 million (INR 8.54 billion) for the quarter that ended on June 30. Diamond sales grew 45% to $126.8 million but jewelry division revenue fell 27% to $19 million. Expenses rose 32% to $134.4 million and profit rose 56% to $3.2 million.

GENERAL

New York Widens Ivory Ban

New York amended the state’s environmental law to ban elephant ivory, mammoth ivory and rhino horn sales. The new legislation enhances federal efforts to tighten the ivory trade ban across the board. The only exceptions for the sale of these products follow, according to the Jewelers Vigilance Committee:

• 100 year-old antiques comprised of less than 20% elephant ivory with documented proof of provenance;
• Musical instruments manufactured prior to 1975;
• Elephant ivory where transfer of ownership is for education and scientific purposes including to a museum authorized by special charter from the legislature;
• Elephant ivory where transfer is to a legal beneficiary of a trust or estate.

Existing license and permit holders may sell ivory and rhino horn as defined on their licenses and permits only until the current licenses or permits expire.

Sarine's Profit +4%

Sarine Technologies Ltd. reported that revenue grew 12% year on year to $24.7 million during the second quarter that ended June 30. The company's profit rose 4% to $8.6 million, as sales growth was partially offset by an increase in the company's corporate tax rate. Sarine’s strongest growth market for the quarter was across North America, where revenue jumped more than tenfold to $287,000. In absolute terms, most of the company’s growth occurred in India, the world’s main diamond manufacturing hub, where Sarine’s sales increased 19% to $20.2 million during the period.

MINING

Lucara's Profit -31%

Lucara Diamond Corp. reported that revenue grew 50% year on year to $71 million during the second quarter that ended on June 30. The average price of diamonds sold from the Karowe mine in Botswana, the company’s sole producing asset, rose 59% to $836 per carat during the quarter. Lucara’s profit fell 31% to $15.6 million and earnings per share declined by one-third to 4 cents. The drop in profitability resulted from higher operating costs as the Karowe mine processed lower-grade ore and increased capital expenditures as the company pursued its plant optimization plan.

Gemfields Auction Achieves $16M

Gemfields plc auctioned 11.6 million carats of emerald and beryl from its Kagem mine in Zambia for $15.5 million, or $1.34 per carat. The integrated gemstone mining company sold 17 lots from 21 offered and described the stones as mostly lower-quality. Excluding the sale of 1.5 tonnes of low-grade beryl, the average realized price was $3.61 per carat, according to the company. Gemfields has now held 16 auctions of emerald and beryl from the Kagem mine, totaling $276 million since July 2009.

Shore Gold Narrows Loss

Shore Gold Inc. reported a net loss of about $900,000 for the second quarter that ended on June 30. The explorer narrowed its loss from $1.6 million one year earlier. Shore Gold also reduced its loss for the first half of the year to $1.8 million compared with $3.1 million in 2013, as a result of lower exploration and evaluation expenditures related to the Start - Orion South diamond project.

The company has completed its technical review of the Star - Orion project through the Canadian Environmental Assessment Agency, submitted the final version of its Environmental Impact Statement, and has signed a memorandum of understanding with the James Smith First Nation, Peter Chapman Cree Nation and Chakastaypasin Cree Nation. Shore Gold stated that it continues to seek project development capital. As of June 30, the company recorded working capital of $2.7 million.

PL/117 Drill Targets Set for Sept.

ALROSA's geological report on exploration work for the PL/117 project in the Orapa area of Botswana identified four previously unknown mineralogical anomalies and two with geophysical anomalies. ALROSA and Botswana Diamonds are partnering on the project. The report identified strong mineralogical and geophysical anomalies for the northern part of the license AN117/2, which will be drilled in September. Target AN117/1, in the northwest area of the license, has a very strong mineralogical signature and it will be drilled in September after further geophysical work to pinpoint drill-hole sites.

Permit Issued for Gahcho Kue

The Gahcho Kué diamond project in the Northwest Territories of Canada received its much anticipated land use permit. Project operators, De Beers Canada Inc. and Mountain Province Diamonds, explained that the Mackenzie Valley Land and Water Board (MVLWB) issued Gahcho Kué a type A land use permit and sent a water license for final approval to the Minister of Environment and Natural Resources (ENR).

Gahcho Kué expects to employ close to 700 people during its two-year construction phase and approximately 400 people during its operational phase. De Beers owns a 51% share in the project, while Mountain Province Diamonds is a 49% stakeholder.

ECONWATCH

Diamond Industry Stock Report

U.S. shares were mostly higher except for Birks (-4%), while Far East shares were all higher, led by ValueMax (+7%). European shares were little changed, Indian shares were mixed but C.Mahendra (-27%) led declines. Mining shares mainly higher, led by Kennady Diamonds (+7%). View the extended stock report.
Aug. 14 Aug. 7 Chng.
$1 = Euro 0.748 0.748 0.000
$1 = Rupee 60.92 61.52 -0.6
$1 = Israel Shekel 3.47 3.48 -0.01
$1 = Rand 10.55 10.77 -0.22
$1 = Canadian Dollar 1.09 1.09 0.00

Precious Metals
Gold $1,314.00 $1,311.40 $2.60
Platinum $1,461.00 $1,473.00 -$12.00

Stock Indexes Chng.
BSE 26,103.23 25,589.01 514.22 2.0%
Dow Jones 16,713.58 16,368.27 345.31 2.1%
FTSE 6,685.26 6,597.37 87.89 1.3%
Hang Seng 24,801.36 24,387.56 413.80 1.7%
S&P 500 1,955.18 1,909.57 45.61 2.4%
Yahoo! Jewelry 971.24 950.58 20.66 2.2%

Rapaport Weekly Market Comment Aug. 22, 2014


Markets relatively quiet and conservative. Steady U.S. demand for commercial quality SI-I1 diamonds helping Indian market. Major Chinese buyers have completed large purchases. HK market improving before very important Sept. show but Chinese consumer demand remains cautious. De Beers keeps average prices stable at large Aug. sight but rough trading slows and premiums weaken on secondary market. Gem Diamonds 1H revenue +54% to $149M, net profit +129% to $20M. Dominion 2Q sales +6% to $277M with rough prices +8% in 1H. India’s July polished exports -11% to $1.9B, rough imports +14% to $1.9B. Belgium’s July polished exports +5% to $1.4B, rough imports +20% to $1.2B.


RapNet Data: Aug. 21

Diamonds 1,176,379
Value $7,418,146,836
Carats 1,288,987
Average Discount -27.07%

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QUOTE OF THE WEEK
We are observing enough steady demand for all categories of rough diamonds, but most of all for those that are used in the production of diamonds for the U.S. market. The second intensely growing market is India. China has somewhat slowed its growth but that was expected. Consumption in China, all the same, remains large enough. The European market is not very active at the moment.

Vladlen Nogovitsyn | ALROSA

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RETAIL & WHOLESALE

U.S. Jewelry CPI -5%

The U.S. consumer price index (CPI) for jewelry declined 4.5% year on year to 171.97 points in July. However, the reading has been slowly inching higher since the index reached the lowest point of the year so far at 169.36 points in May. The CPI for watches, meanwhile, was down 0.5% year on year to 123.58 points.

The average price of gold in July was about 3% lower and platinum was about 2% lower compared with July 2013. The RapNet Diamond Index (RAPI), the global benchmark for polished diamond prices, fell 3.5% year on year for 1-carat diamonds in July, while RAPI for 3-carat diamonds dropped 1.9%. However, RAPI for 0.30-carat diamonds jumped 13% and the index increased 9.8% for 0.50-carat stones. By comparison, the CPI for all product categories in July increased 2% year on year to set a new record high of 237.91 points.

DGSE Notes Higher Jewelry Sales

DGSE Companies Inc. reported that revenue dropped 26.3% year on year to $17.52 million in the second quarter that ended on June 30. Costs of goods sold were reduced by 30.6% to $14.51 million. Losses from discontinued operations surged to $3.91 million and DGSE's quarterly loss jumped fourfold to $4.45 million during the period.

DGSE, which wholesales and retails jewelry, diamonds, fine watches, precious metal bullion and rare coin products, closed its Southern Bullion Coin and Jewelry division this year, which accounted for the high rate of discontinued operations. In terms of retail activity, the company noted a significant decrease in both bullion and scrap sales during the quarter, a result of the drop in gold prices; however, this was partially offset by strong growth in jewelry sales. Furthermore, gross profit improved to 17.2% of sales compared with 12.1% one year ago, as high-margin jewelry sales increased and low margin bullion sales fell, according to the company.

De Beers Explores Reselling Methods

De Beers created a program through its independent entity, the International Institute of Diamond Valuation (IIDV), that is meant to evaluate and understand consumer diamond reselling activity in the U.S. and will being operating with a small number of retailers to improve the process.

Tom Montgomery, the senior vice president of strategic initiatives at De Beers, explained that some retailers have expressed reservations about how the current reselling experience could impact consumers' views on diamond equity. Nonetheless, the only way to gain a true understanding of diamond reselling activity is to run assess the market and measure how the practice impacts consumer perceptions of diamonds.


Tiffany & Co. Introduces 'T'

Francesca Amfitheatrof, the design director at Tiffany & Co., created "Tiffany T" to mark a new era of jewelry that is dedicated to great cities of the world and attracts consumers who gravitate toward art and culture. In the first launch of the collection, she said Tiffany T reflects the modern life and relentless energy of New York. Tiffany T designs play up angles and curves, and are manufactured in 18-karat gold -- rose, yellow and white -- and sterling silver for wide cuffs, minimal bracelets, chains of varied lengths, pendants, earrings and stackable rings. Some of the pieces feature diamonds and high-quality gemstones.

Sterne Agee used the launch as an opportunity to reiterate Tiffany & Co.'s price target of $108 and rating of "Buy." The company added that even if the collection falls outside of entry-level budgets, the story surrounding Tiffany T generates a sought-after luxury halo that drives traffic and aspirational customers. Tiffany & Co. reports financial results on August 27.

Signet Launches Sofia Vergara Collection

Sofia Vergara partnered with Signet Jeweler's retail store Kay® Jewelers in the U.S. to launch the jewelry collection, SOFIA VERGARA so Sofia™. The collection crosses a range of design elements and is described as elegant, playful, vibrant and sexy, with bold statement necklaces and earrings as well as shimmering bracelets.

The SOFIA VERGARA so Sofia collection includes rings, necklaces, earrings and bangle bracelets, many of which are set with diamonds and semi-precious gemstones, such as amethyst, tanzanite and topaz. Settings in 10-karat gold and sterling silver feature intricate details that are meant to add a feminine touch. Each piece also includes a hidden natural emerald to symbolize the designer's home country of Colombia.


Seiko Opens in Manhattan

Seiko Corporation of America opened its first Seiko boutique in the U.S. at 510 Madison Avenue in New York City. The New York Seiko boutique is primarily dedicated to Seiko's prestigious collections, including Astron and Grand Seiko. It also unveils collections never before sold in the U.S., including Galante and Credor and various boutique exclusives, including the Prospex collection. The store follows design standards from boutiques in Paris, Amsterdam, Hong Kong and Cairo as well as the original Wako luxury specialty store opened in 1881 in Tokyo.

U.S., India Issue Trademarks

The U.S. Patent & Trademark Office issued the trademark "Brilliance In Motion" to Ostbye & Anderson Inc. of Minnesota with registration number 4585986. Suashish Jewels Inc. of Irving, Texas received the trademark "Lovebeat Diamond" with registration number 4585892. Robbins Delaware Diamonds LLC of Newark, Delaware received the trademark "YEAH!" with registration number 4583173. Lou Maddaoloni Jewelers Inc. of Huntington, New York received the trademark "Maddaloni Jewelers" with registration number 4583266.

In India, the Office of The Trade Marks Registry renewed the trademark "GCI" for Gemological Centers (GCI) Ltd. of Ramat Gan, Israel on July 14 with registration number 1823989.

Scott Kay Hires Three Executives

Scott Kay Inc. appointed Susan Chandler to the role of chief merchandising officer, named Tom Kennedy as the brand's chief commercial officer and selected John Croston as its chief supply chain officer. All three senior-level executives joined Scott Kay from David Yurman Inc. David Minster, the CEO of Scott Kay, said these executive hires were part of the brand's strategic growth initiative that targets increasing annual revenue to $500 million.

Panama Exchange Appoints Two Directors

The Panama Diamond Exchange appointed Hecliton Santini Henriques, the president of Instituto Brasileiro de Gemas e Metais Preciosos (IBGM), Brazil's leading gem and jewelry trade association, and Dr. Luciano Pataro, the founder and director of Gold America S.A. in Panama to its board.

The two new directors join other principal industry leaders who have been named directors of the Panama Diamond Exchange, including Ernest Blom, the president of the World Federation of Diamond Bourses (WFDB); Gaetano Cavalieri, the president of CIBJO, the World Jewellery Confederation; Maxim Shkadov, the president of the International Diamond Manufacturers Association; Avi Paz, honorary life president of the WFDB and the Israel Diamond Exchange (IDE); Roberto Coin, a leading Italian jewelry designer and producer; Shmuel Schnitzer, the president of the IDE and honorary life president of the WFDB, and Reuven Kaufman, the president of the Diamond Dealers Club of New York. Two additional directors will be announced shortly, thus completing the composition of the board.


Armenia Bank Accepts Diamond Collateral

VTB Bank in Armenia now offers loans to its customers that are secured with diamonds and diamond jewelry, according to ARKA news. Loans are reportedly being arranged quickly with proper citizen identification and through at four of VTB's branch offices. Those who are younger than 21 and older than 65 are not eligible. Loans are made in local currency at a rate of 22% and as long as 540 days. VTB Bank in Armenia is a subsidiary of Russia's second largest bank with the same name.

MINING
Dominion's 2Q Revenue +6%

Dominion Diamond Corporation reported that rough diamond sales rose 5.9% year on year to $277.3 million for the second quarter that ended on July 31. The company sold 1.511 million carats, representing an increase of approximately 16% compared with one year earlier.

In addition, Dominion stated that average rough diamond prices have risen 8% since January. The company's 40% share of production from the Diavik diamond mine jumped 44.5% to 870,000 carats. Dominion's production from the Ekati diamond mine surged to 802,000 carats compared with 483,000 carats one year earlier. Rough inventory on July 31 totaled $315 million, of which $45 million represent discretionary goods.

Gem Diamonds Doubles Profit

Gem Diamonds reported that revenue rose 54% year on year to $148.9 million in the ‎first half of 2014, driven by an increase in carat volume sales coupled with higher diamond prices. The mining company's profit more than doubled to $19.7 million. Strong demand for rough diamonds from Letšeng helped to drive the average price per carat up 58% to $2,747.

Gem Diamonds anticipates that the second half of the year will experience strong price dynamics as well. Letseng's first half production rose 29% to 54,678 carats, while the volume ‎of sales grew 14%.


ALROSA Observes Stronger Prices

ALROSA stated that a stable market resulted in rough price growth in the 6% to 7% range, above plan of 5%, according to Interfax. The company will release first half results on August 29, but it has observed stable demand in the U.S., rapid growth in India and moderate demand from China. Europe's market is quiet. In addition, lenders are more willing to extend credit as profit improves for many diamond players and loans are being repaid by manufacturers, according to the report.

In other news, ALROSA is working with Russia's Finance Ministry to regulate the synthetic diamond trade in the name of transparency and full disclosure.


STATS
Japan

$Mil. June %Chng. $Mil. YTD %Chng.
Polished diamond imports $80 7% $445 8%

Belgium

$Mil. July %Chng. $Mil. YTD %Chng.
Polished diamond exports $1,382 5% $8,955 6%
Polished diamond imports $1,027 9% $9,152 16%
Net polished exports $355 -4% ($197)

Rough diamond imports $1,226 20% $9,086 13%
Rough diamond exports $1,797 17% $9,939 9%
Net rough imports ($571) ($853)

Net diamond account $926 0% $656 -59%


India

$Mil. July %Chng. $Mil. YTD %Chng.
Polished diamond exports $1,852 -11% $11,977 -4%
Polished diamond imports $634 -1% $4,000 -9%
Net polished exports $1,218 -14% $7,977 -2%

Rough diamond imports $1,912 14% $11,205 9%
Rough diamond exports $140 0% $921 -22%
Net rough imports $1,772 15% $10,284 12%

Net diamond account ($554) ($2,307)

ECONWATCH
Diamond Industry Stock Report

U.S. shares all closed higher this week, led by Blue Nile (+9%), while Hong Kong was mainly lower. European shares were also in positive territory, led by Damiani (+6%). Indian shares were volatile with C. Mahendra (-18%) and Gitanjali (+14%) defining a wide trading range. Mining shares mainly lower with Lucara (-11%) showing largest decline. View the extended stock report.
Aug. 21 Aug. 14 Chng.
$1 = Euro 0.753 0.748 0.005
$1 = Rupee 60.59 60.92 -0.3
$1 = Israel Shekel 3.52 3.47 0.05
$1 = Rand 10.71 10.55 0.16
$1 = Canadian Dollar 1.09 1.09 0.00

Precious Metals
Gold $1,277.00 $1,314.00 -$37.00
Platinum $1,412.00 $1,461.00 -$49.00

Stock Indexes Chng.
BSE 26,360.11 26,103.23 256.88 1.0%
Dow Jones 17,039.49 16,713.58 325.91 1.9%
FTSE 6,777.66 6,685.26 92.40 1.4%
Hang Seng 24,994.10 24,801.36 192.74 0.8%
S&P 500 1,992.37 1,955.18 37.19 1.9%
Yahoo! Jewelry 986.73 971.24 15.49 1.6%

Rapaport Weekly Market Comment Aug. 29, 2014

Market sentiment weak with liquidity difficulties for manufacturers as banks tighten credit. Polished suppliers offer greater discounts to generate cash as rough and polished inventory levels remain high. Low expectations in India for Hong Kong show but Hong Kong dealers hoping show will increase sales of large diamonds. De Beers Aug. sight est. at $715M. Registration opens for 2015 De Beers sightholder contract with focus on financial compliance. ALROSA to start client contract negotiations in Sept. Signet 2Q revenue +39% to $1.2B, profit -14% to $58M. Tiffany 2Q revenue +7% to $993M, profit +16% to $124M. Chow Sang Sang 1H revenue -34% to $1.2B, profit -15% to $67M.

RapNet Data: Aug. 28

Diamonds 1,234,271
Value $7,661,799,328
Carats 1,322,224
Average Discount -27.02%

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September 8-18 Mon-Thu
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September 15-19 Mon-Fri

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QUOTE OF THE WEEK
The HENRYs, with incomes ranging from $100,000-$249,999, feel decidedly middle-class and penny pinch, even if they are by every other measure at the upper tier of the income pyramid. Ultra-affluents who are at the top of the income hierarchy tend to feel more financial stable, yet they are worried too, especially about the growing public opinion about income inequality, so they purchase luxury items incognito.

Pam Danziger | Unity Marketing

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INDUSTRY

De Beers Sight Estimate at $715M

The De Beers August sight closed with an estimated value of $715 million as the company maintained steady prices despite liquidity concerns in the diamond manufacturing sector. Rough trading slowed on the secondary market and premiums on boxes declined, selling at an average of low-single-digit percentages during and after the sight.

Observers noted that polished trading is resuming at a weaker than expected pace, which further strains rough demand and cash flow. De Beers anticipates a positive year for the markets, however, as global gross domestic product (GDP) growth targets and consumer demand for diamonds remains fairly stable. Sightholders noted that the short time between the July and August sights, which were the two largest De Beers rough sales of the year so far, added to the liquidity pressures among manufacturers.

Rapaport anticipates that the three remaining sights of the year will be relatively small, especially given that the August sight pushed De Beers rough sales past the $5 billion mark, representing a 23% year on year increase. Sightholders forecast additional softening of prices on the secondary market, reinforcing the imbalance between rough and polished prices.

In other news, De Beers opened registration to apply for sights in the new three-year contract period that begins on April 1, 2015.

RETAIL & WHOLESALE

Signet's Profit -14%

Signet Jewelers' sales rose 39.3% year on year to $1.23 billion during the second quarter that ended on August 2, which was the first reporting cycle following the acquisition of Zale Corporation in May. Excluding Zale's contribution of $247.5 million from sales, Signet's increase was still strong at 11.2%. Cost of sales increased 43.2% to $816.9 million. Profit fell 13.9% to $58 million or 73 cents per share.

Same-store sales company wide rose 4.8%, however, there were noticeable differences by brand. Kay's same-store sales jumped 8.1%, while Jared's improved 4.9%. H.Samuel's comparable-store sales rose 2.6% and Ernest Jones' rose 6.4%, both reflecting solid growth in the U.K. Meanwhile, Zale Jewelers' comparable-store sales fell 1%, Gordon's Jewelers' dropped 5.7%, Peoples Jewellers' rose 3.9% and Mappins' declined 4.3%. Zale Canada's same-store sales improved 2.5%.

The retailer observed strong U.S. consumer demand for bridal brands, fashion diamonds and watches at its Sterling Jewelers division, with the average transaction price up 4.6%. In the U.K., sales growth was driven by a strategic marketing initiative to improve diamond sales, coupled with higher consumer demand for watches, but the average transaction price fell 0.9%. At Zale, the strongest categories were branded bridal and fashion jewelry. Signet's inventory level at the close of the quarter totaled $2.35 billion, up 65.4% year on year, with the acquisition of Zale accounting for $841.3 million in goods. The company's Sterling Jewelers division added $61.2 million in inventory during the period, primarily in bridal and fashion brands. Signet's diamond sourcing initiative added $8.1 million in inventory. The group's U.K. division increased inventory level by $17 million; however, the figure was related to the impact of foreign currency translation.

Chow Sang Sang's Profit -15%

Chow Sang Sang's revenue plummeted 34% year on year to $1.2 billion (HKD 9.33 billion) for the first half of the year that ended on June 30. Jewelry retail sales fell 25% to $1.1 billion, but the group's "other" areas of business experienced a 65% drop in revenue at $144.3 million. Profit attributable to shareholders fell 15% to $67.1 million. Inventory was basically flat at $889 million.

The company stated that tourism to Hong Kong in the first half of the year had increased compared with 2013; however, this trend did not translate into higher retail sales for jewelry and watches in the region. Demand for gold products was greatly reduced, political disputes in Hong Kong and an anti-corruption drive coupled with tight credit in Mainland China contributed to sales weakness in the first six months of 2014. Chow Sang Sang stated that jewelry retail comparable-store sales fell 32% in Hong Kong and Macau, primarily due to a dramatic drop in gold sales. Same-store sales in Mainland China fell 20%, even though jewelry sales were strong, according to management. Online sales surged 40%.

Tiffany's Profit +16%

Tiffany & Co.'s revenue rose 7.2% year on year to $992.93 million in the second fiscal quarter that ended on July 31. Same-store sales increased 3%. The jeweler held cost of sales in check and noted that favorable product costs and price increases for all product categories pushed gross margin higher to 59.9% from 57.5% one year earlier. Profit rose 16.2% to $124.12 million or 96 cents per share.

The company's cash and cash equivalents and short-term investments totaled $398 million at the close of the quarter, down from $490 million in July 2013. Short-term and long-term debt totaled $1.03 billion, up from $964 million and the retailer's inventory level increased 9% to $2.5 billion.

Sales across the Americas rose 9% year on year to $484 million, with comparable-store sales increasing by 8%. In the Asia-Pacific, Tiffany & Co.'s sales increased 14% to $237 million, while same-store sales rose 7%. Consumers in Japan pulled back on spending since the government implemented a tax scheme in April and Tiffany reported that revenue and same-store sales both fell 13% in the quarter to $119 million. In Europe, total sales increased 8% to $120 million; however, same-store sales declined 8%. Tiffany & Co. observed strong sales increases in Russia and in the United Arab Emirates.

Movado's Profit -4%

Movado Group's revenue improved 3.8% year on year to $143.6 million for the second quarter that ended on July 31. Gross profit as a percentage of sales was basically flat at 54% due to an unfavorable impact of changes in foreign currency exchange rates, offset by the leverage gained on certain fixed costs due to increased sales. Operating expenses rose 4.6% to $60.4 million due largely to increased payroll and related costs and expenses associated with the Baselworld show. Profit fell 3.8 percent $12.17 million, or 47 cents per share.

Affluent Spending Hits a Bump

Unity Marketing found that the U.S. luxury retail market is experiencing a "Tale of Two Cities," with a sharp divide between spending habits of ultra-affluents and those of mass-affluent HENRYs (high-earners-not-rich yet). During the second quarter, Unity stated that luxury goods spending dropped 13.7% year on year to approximately $11 billion. Additionally, the Unity Marketing's Luxury Consumption Index (LCI) for the current third quarter did not recover a 15.9 point loss.

Unity stated that HENRYs are financially skittish, while the top 2% ultra-affluents feel more stable, but are opting for inconspicuous, as opposed to conspicuous, consumption. Across the board, affluents are worried, but their worries differ; nonetheless, this will take a toll on marketers who target the high-end and luxury sectors.

Pam Danziger, the president of Unity Marketing, said, "The mass-affluent HENRYs are watching their pennies and saving their discretionary income, rather than spending it. As a result, HENRYs are trading down to less premium brands and shopping in more mass-market oriented stores. Ultra-affluents, on the other hand, are turning to inconspicuous consumption. They are confident enough to pay premium and luxury prices, but they don't want to make a spectacle of their wealth. So, their spending is going undercover toward purchases that are private, like things for their home, or less showy, such as brands with subtle logos and markings, or to luxury purchases made online where the FedEx truck delivers the goods and nobody sees them walking down the street with a Neiman Marcus, Barney's or Bergdorf Goodman bag."

Danziger advised retailers to create different approaches and different strategies. Get a fix on the type of customer they want to sell, meet those very different and distinct needs. HENRYs want bargains and less expensive indulgences, while ultra-affluents need to stay undercover.

Malak Jewelers Opens New Showroom

Malak Jewelers opened a new 5,000-square-foot showroom at The Arboretum Shopping Center in Charlotte, North Carolina. The retailer relocated to this larger space from a more moderately-sized showroom, where it had been operating for almost two decades. The new location also provided Malak Jewelers with a larger workshop area for its in-house goldsmith and design team. The display area is quadrupled in size from the previous location to allow for more inventory and the addition of brands, according to the company.

Embee Diamonds Schedules U.S. Tour

Embee Diamonds scheduled a series of in store diamond cutting and polishing events for the Southern U.S. and Midwest, featuring master diamond cutter Mike Botha. The special tour will provide the company's clients with a firsthand view into precision diamond cutting, facet definition, light performance and some beautiful stones. The tour begins at Stanley Jewelers in North Little Rock, Arkansas on September 24 and 25, which will also include a day to dig for diamonds at Crater of Diamonds National Park. Event attendees at all of the brand's tour stops will have an opportunity to experience using the cutting wheel themselves, courtesy of Embee Diamonds' mobile polishing bench, which is named "Belle."

Embee Diamonds next visits the New Approach School for Jewelers and the AGS Tennessee Guild in Franklin, Tennessee on October 1. The following day, the team appears at J. Bacher Fine Jewelry Design in Harrisburg, Illinois and on October 3, they travel to Summa Jewelers in St. Louis, Missouri. On October 6, Embee Diamonds will continue the tour at Underwood Jewelers and at the AGS Northeast Florida Guild in Jacksonville, Florida, before closing on October 8 at Bromberg's in Birmingham, Alabama.

IDE Cancels Diamond Week

The Israel Diamond Exchange (IDE) postponed the fourth International Diamond Week that was scheduled to begin on September 1. IDE's board made the decision following the assessment of logistical difficulties caused by the ongoing conflict with Gaza, added security and insurance measures required.

SA Police Nab Dealers

South Africa police arrested 19 business leaders who were allegedly involved with illegal diamond trading. Following the arrest, eight additional suspects turned themselves in and all have since been arraigned. Authorities launched a sting operation in 2012, targeting diamond traders and believe the suspects are members of a 35-member syndicate. Suspects face charges of illegal diamond dealing, possession and sale of unpolished diamonds, tax evasion and money laundering.

GJEPC, Panyu to Boost Trade With China

India's Gem & Jewellery Export Promotion Council (GJEPC) signed a memorandum of understanding with the Guangzhou Panyu Economy & Trade Promotion Bureau of China to strengthen cooperation in economic, trade and investment deals. The GJEPC is looking to open avenues for exporting gems and jewelry to China. The agreement will create special benefits for the gems and jewelry industry of Jaipur, owing to its prominence in the colored stone and manufacturing sectors, and given China is becoming a large market for colored gemstones.

GJEPC also conducted a seminar, “Your Gateway to the China gemstones Market,” for exporters to learn about Panyu's offerings at the China Gem Centre. The vice mayor of Panyu, Chen De Jun, was present for the event and he invited the Indian exporters to visit Panyu on a sponsored trip from Hong Kong during the upcoming September jewelry fair.

MINING

ALROSA Begins Contract Screening

ALROSA will begin considering candidates for its long-term contract period, which runs from 2015 to 2017. Companies will be examined in accordance with “Regulations on the Procedure and Terms of Sales of Natural Rough Diamonds by OJSC ALROSA,” approved by the federal anti-monopoly service of the Russian Federation. Other requirements will consider prior trading activity, legal capacity, business reputation and financial stability, trade experience and solvency. ALROSA will commence signing long term agreements on rough diamonds supplies for the new contract period starting in November 2014.


Grib to Hold First Auction

LUKOIL's diamond subsidiary, Grib Diamonds NV, will conduct an invitation-only first rough diamond auction online on September 23. The company will host a viewing session in Antwerp on September 15. The diamond inventory up for sale originated from V. Grib in the Arkhangelsk region of Russia. The online tender will be a multi-split, ascending clock auction with the clearing price set by the highest losing bid.

Grib Diamonds intends to operate with maximum transparency, according to Martin Leake, the head of sales for Grib Diamonds. "In the Grib Diamonds auction model, we let the market set the price, since that creates a win-win situation for both the seller and the buyer," he said.


Kimberley Diamonds to Raise $10M

Kimberley Diamonds announced a pro-rata non-renounceable rights issue offer of new shares at 19 cents each in an effort to raise $9.9 million. The funds raised, coupled with existing capital, will be used to recommission the Lerala diamond mine in Botswana and for general operating requirements. Eligible shareholders will be able to purchase one new share for each two existing shares.

Kimberley Diamonds anticipates production from Lerala to be approximately 400,000 carats per year, increasing the company's potential rough diamond production to 700,000 carats annually. The mining company operates the Ellendale mine and Smoke Creek alluvial diamond mine in Australia as well as holds interests in the Slave and Superior Cratons projects in Northwest Territories of Canada.

Debswana Extends Life of Mine Plan

Debswana extended the projected life span of its diamond mining operations in Botswana to 2050. The joint-venture mining firm between De Beers and Botswana stated that a longer life further strengthens the nation as a long-term, leading global diamond center. Debswana continues to support beneficiary efforts in the country and believes that Gaborone can become an international hub for diamond aggregation, marketing, polishing and cutting and jewelry production.


DiamondCorp's Loss Widens

DiamondCorp's loss rose 25% year on year to $4.6 million (GBP 2.75 million) for the six months that ended on June 30. The loss included a fair value adjustment of $2.6 million on the derivative component of convertible bonds. Cash on hand at the end of the period was almost $12.2 million. Capital expenses on the Lace diamond project totaled $7.1 million, which included underground development and infrastructure. The Lace processing plant operated on tailings during the first half, resulting in the additional recovery of 13,055 carats. The company sold 14,583 carats for proceeds of $907,308. The most valuable diamond sold was a 5.60-carat rough stone that sold for $3,250 per carat.



ECONWATCH

Diamond Industry Stock Report

U.S. shares mixed with Movado (-15%) and Signet (+10%) the largest movers, Hong Kong shares lower except ValueMax (+11%) and Europe all higher except for Damiani (-1%). Indian shares mainly lower, led by C. Mahendra (-22%) and mining shares all lower except for Kennady (+12%), Gemfields (+5%) and Stellar (+5%). View the extended stock report.
Aug. 28 Aug. 21 Chng.
$1 = Euro 0.759 0.753 0.006
$1 = Rupee 60.62 60.59 0.0
$1 = Israel Shekel 3.57 3.52 0.05
$1 = Rand 10.64 10.71 -0.07
$1 = Canadian Dollar 1.09 1.09 0.00

Precious Metals
Gold $1,289.40 $1,277.00 $12.40
Platinum $1,419.00 $1,412.00 $7.00

Stock Indexes Chng.
BSE 26,638.11 26,360.11 278.00 1.1%
Dow Jones 17,079.57 17,039.49 40.08 0.2%
FTSE 6,805.80 6,777.66 28.14 0.4%
Hang Seng 24,741.00 24,994.10 -253.10 -1.0%
S&P 500 1,996.74 1,992.37 4.37 0.2%
Yahoo! Jewelry 1,002.92 986.73 16.19 1.6%

Rapaport Weekly Market Comment Sept. 5, 2014

Diamond trading markets weak with low expectations for Hong Kong show. Rising concern about financial insolvencies in India as banks tighten credit policies and liquidity remains difficult. Cash buyers getting significant discounts. Commercial goods for the U.S. are strong. Expensive stones soft. Rough prices decline with some goods selling at 3% to 5% discounts. ALROSA 1H revenue +27% to $2.8B, profit +58% to $624M, average price +4% to $172/ct. Dominion’s 2Q profit at $27M vs. loss of $14M a year ago. Japan’s July polished imports -12% to $69M. U.S. July polished imports flat at $2.1B, polished exports +6% to $1.6B. U.S. July jewelry sales +4% to $4.9B.


RapNet Data: Sept. 4

Diamonds 1,248,062
Value $7,705,833,302
Carats 1,310,422
Average Discount -27.15%

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RAPAPORT ANNOUNCEMENTS

Aug-Sep 27-8 Wed-Mon

Rapaport Single Stone Auction

New York & Israel

View Details.

September 8-18 Mon-Thu

Rapaport Melee Auction

New York & Hong Kong

www.rapaportauctions.com

September 15-19 Mon-Fri


Rapaport at HK Jewellery & Gem Fair

Exhibitors may upload show diamonds here for display on RapNet's show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo

QUOTE OF THE WEEK
Our job is to do a good job with the business and at the end of the day, if somebody sees value then there's a conversation to be had. I'm not anti-takeover. I'm very open. I'm not scared by it (but) that's not what we're setting this business up for.

Mark Cutifani | Anglo American


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INDUSTRY

ALROSA's Profit +58%

ALROSA reported that revenue increased 27% year on year to $2.83 billion (RUB 104.8 billion) for the first half that ended on June 30. Cost of sales rose 28% to $1.4 billion and the company's profit jumped 58% to $624.4 million, while earnings per share increased 57% to RUB 3.07. Diamond production during the period declined 7% to 15.9 million carats.

ALROSA sold 21.1 million carats of diamonds during the first half, representing a 10% increase from 2013. The sale of gem-quality rough diamonds rose 27% to $2.41 billion. ALROSA explained that, on the whole, there was a 5% increase in the average carat price due to changes in the mix of goods offered, but "due to market conditions" the average price fell 1%, leaving the average price per carat up 4% to $172 for the first half. By quarter, however, the average selling price of gem-quality rough diamonds in the first three months of the year, ending in March, fell 2% year on year to $154.60 per carat, but in the second quarter, ALROSA's average selling price jumped 15.5% to $199.80 per carat.

RETAIL & WHOLESALE

U.S. Jewelry, Watch Sales +4%

U.S. jewelry and watch sales rose 4.3% year on year in July, according to preliminary government calculations and the increase represented the strongest monthly gain so far this year. In August, and beginning with June's provisional sales data, the government revised sector growth lower for each of the previous five months. The jewelry and watch sector also benefited from weak inflation pressure in July as the U.S. consumer price index (CPI) for jewelry declined 4.5%, while the CPI for watches was down 0.5%.

According to Rapaport News calculations, jewelry sales in July for all retail outlets increased 4.1% year on year to $4.907 billion. Watch sales rose 5.2% year on year to $669 million. Jewelry and watch sales in the first seven months of 2014 have risen 2.6% to $40.021 billion with jewelry sales of $35.218 billion and watch sales of $4.802 billion, according to Rapaport News calculations. Meanwhile, advanced sales estimates from U.S. department stores declined 2.8% year on year to $12.341 billion in July. However, retail sales estimates for all products and services jumped 4.2% to $446.3 billion.

Retail sales were mixed in other major economies during the month. Hong Kong's retail sales declined 3.1% due to weaker tourist spending overall and a drop in demand for jewelry and luxury goods. Germany recorded a 0.7% increase in retail sales, however, sales growth missed expectations and signaled consumers were belt tightening. Japan recorded a 0.5% year on year increase in retail sales for July at $114 billion (JPY 11.8 trillion); however, the larger retailers reported consumer spending weakness. In the U.K., consumers went on a spending spree at retailers, leading analysts at CBI to conclude that retail sales should remain accelerated through September.

Swiss Watch Exports +2%

Swiss watch exports rose 2.2% year on year to $2.27 billion (CHF 2.084 billion) in July, according to the Federation of the Swiss ‎Watch Industry.‎ Growth was buoyed by strong demand for bimetallic and platinum watches. Wristwatch exports rose 0.8% to $2.123 billion, while the number of units shipped grew by 2.1% to 2.772 million. The value of other timepiece exports grew 28% to $146.8 million. Exports to Hong Kong fell 1.8% to $408.3 million, while exports to the U.S. dropped 0.8% to $217 million. Following a long contraction, exports to China experienced an upsurge of 49% to $184.1 million. Exports to Japan continued to show strong growth and increased 19% to $141.8 million. Exports to Italy fell 6.7% to $138.4 million. Meanwhile, exports to Germany fell 6.9% to $114.3 million. Exports to the U.K. grew 8.8%, while exports to Spain rose 15.4%, showing marked improvements.


Lazare Kaplan's Revenue Gains From Licensing

Lazare Kaplan anticipates that revenue rose by $3 million to $71 million for the fiscal year that ended on May 31. However, sales plummeted 20.4% year on year $54.3 million, due to a decrease in sales of commercial (non-branded) polished diamonds. Nonetheless, Lazare Kaplan gained $16.7 million from a settlement and license agreement with the Gemological Institute of America (GIA). The agreement granted GIA a license to practice certain patents and GIA agreed to pay the company a per inscription royalty until July 31, 2016.

The diamond firm contended that uncertain economic conditions prevail across certain sectors of the diamond and jewelry industry. Rough diamond prices have generally been rising ahead of polished diamond prices, placing significant pressure on diamond manufacturers. In addition, the continued existence of Lazare Kaplan's litigation with Antwerp Diamond Bank N.V. and KBC Bank N.V. and the inability to timely resolve material uncertainties has adversely impacted the company's ability to transact business. Lazare Kaplan reiterated its intention to file official quarterly and annual financial reports dating back to May 31, 2009, only after it has resolved material uncertainties.


Juwelo, Silverline Form elumeo

Berlin-based Juwelo TV Deutschland GmbH and Silverline Distribution Ltd. of Hong Kong merged to form elumeo SE. The new company has more than 1,100 employees worldwide and combines human capital and business processes as well as physical locations, such as the Silverline's manufacturing unit, located in Chanthaburi, Thailand. Additionally, the group anticipates that the new company's structure will strengthen its position within the European jewelry market and create a foundation for business expansion, particularly with ecommerce activity. The elumeo Group operates from six global offices, including Berlin, Rome, Bangkok, Hong Kong, Chanthaburi and Leamington in the U.K. It has established ecommerce channels across six key European markets and the company anticipates generating revenue of about $92 million (EUR 70 million) in 2014.


Fortunoff Fine Jewelry Opens a Store

Fortunoff Fine Jewelry will open a new store in Long Island as the company looks to extend its jewelry retail business from online to brick-and-mortar once again. The store has opened for a sneak peek but will host its official opening on September 18 at 1504 Old Country Road in Westbury, New York at The Mall at The Source, the same town where the company once operated its flagship store.

Mehta, Bin Sulayem to Receive Industry Awards

Jewellery News Asia selected Anoop Mehta, the president of the Bharat Diamond Bourse (BDB), to receive a Lifetime Achievement Award that recognizes visionary leaders who have made significant contributions to the jewelry industry, particularly in Asia. In addition, Ahmed Bin Sulayem, the executive chairman of the Dubai Multi Commodities Centre (DMCC) will receive the 2014 Outstanding Contribution Award. Both men will be honored at the JNA awards ceremony and gala dinner on September 16 at the InterContinental Hong Kong.


Mugabe Seeks Partners in China

President Robert Mugabe said that Zimbabwe intends to partner with Chow Tai Fook to process rough diamonds on his home turf in an effort to bring added value to the pipeline. Beneficiation has been a cornerstone of Zimbabwe's new five-year economic blueprint, the Zimbabwe Agenda for Sustainable Socio Economic Transformation. Under the program, the government directed manufacturing and mining industries to develop strategies for the country's minerals and agricultural products. Mugabe conducted a state visit to China to visit factories, especially diamond firms, with the intention of creating new business partnerships.


LVMH, Hermés Make Up

LVMH and Hermès ended a shareholding conflict between the two competing luxury groups. LVMH had amassed a 23% stake in Hermes during the past four years, which resulted in a fine in 2013 for improper disclosures and led Hermés' executives to take legal action fearing a takeover. According to a joint statement by LVMH and Hermés, LVMH will distribute all shares to its shareholders, on the understanding that its largest shareholder, Christian Dior, will in turn distribute the Hermès shares it receives to its own shareholders.

LVMH, Christian Dior and Groupe Arnault have also agreed not to acquire any shares in Hermès for the next five years. The distribution of Hermès shares, approved by the boards of LVMH and Christian Dior, will be completed no later than December 20, 2014. Following this distribution, Groupe Arnault will hold about 8.5% of the capital of Hermès International.


Citizen Extends Deal With U.S. Open

Citizen Watch Company of America announced a long term deal with the United States Tennis Association (USTA) to extend its partnership through 2020. The new deal, which is set to begin in 2015, will provide Citizen with expanded brand visibility throughout the USTA Billie Jean King National Tennis Center (NTC) grounds and an enhanced presence on U.S. Open digital platforms, while continuing to be the tournament's exclusive timekeeper. Citizen Watch will also become the official timekeeper of the Emirates Airline U.S. Open Series and will have a presence at all U.S.-based series' tournaments. The watch brand will also be integrated into the USTA's future "Home of American Tennis" within the Lake Nona region of Orlando, Florida.


Birks Pays Tribute to Women in Film

Birks will host its second annual diamond tribute to 10 Canadian women directors and actors on September 10 at the Birks store on Bloor Street West in Toronto, presented in partnership with Telefilm Canada. This year's honorees are directors Jennifer Baichwal, Ric Esther Bienstock, Marie-Hélène Cousineau and Madeline Piujuq Ivalu (co-directors of Uvanga), and Nancy Florence Savard, as well as actors Anne Dorval, Tatiana Maslany, Sophie Nélisse, Molly Parker and Cobie Smulders.



Security Increasingly Important for Omnichannel

Seventy-percent of U.S. retail executives have now adopted an omnichannel strategy that links the in-store experience with the brand's website, mobile apps and social media platforms, according to the KPMG 2014 Retail Outlook Survey. While a retailer's omnichannel initiative is meant to seamlessly integrate the shopping experience with legacy systems, 53% of retail executives stated that the cost and complexity of technology upgrades were one of the main challenges that their organization faced.

Cyber security is also becoming an increasingly worrisome issue, as 77% of executives surveyed said that their companies share customers' personal and payment information across their channels. Given numerous large-scale breaches this year at retailers, KPMG urged executives to reevaluate what customer information they really need to share across their channels and determine the appropriate level of security necessary to protect that information. Such measures will also increase customer loyalty.

The most significant driver of revenue growth is customer retention, according 70% of the executives. This potential is why a retailer's omnichannel strategy -- coupled with operational efficiencies and technology investments -- continue to consume the most amount of time for senior leadership in 2014, according to the survey. Forty-one percent of the executives stated that losing market share to lower-cost competitors is the top threat and in relation to lower-cost competition, 36% stated that discounting and other sales incentives have had and will continue to have the greatest negative impact on their company's profit margins during 2014.



Gujarat Okays Surat Diamond Bourse Project

Gujarat approved an ambitious Surat Diamond Bourse (SDB) project and develop a state-of-the-art industrial infrastructure on 2,000 acres near Khajod village, situated on the outskirt of Surat. The upcoming industrial facilities are being planned in line with Prime Minister Narendra Modi's pet project - Gujarat International Finance Tech City (GIFT), which is under development near Gandhinagar to promote Gujarat's capital as international financial hub.

The Pioneer newspaper added, "SDB will be part of the upcoming industrial cluster near Fajod. The bourse will house minimum 12,000 offices. Already the SDB development committee has received demand letters from 5,000 Mumbai-based diamond processing firms, 2,000 overseas firms and 5,000 firms from Surat, Ahmedabad and Bhavnagar," according to Mathur Savani, one of the 12 committee members of the proposed SDB.

MINING

Dominion Diamond Reports Profit

Dominion Diamond Corporation reported that its profit rose to $26.6 million in the second quarter that ended on July 31, compared with a loss of $13.9 million one year earlier. As we reported on August 19, rough diamond sales rose 5.9% year on year to $277.3 million and cost of sales fell 4.2% to $221.2 million. Gross margin as a percentage of sales improved to 20.2% compared with 11.7% in 2013. The company sold 1.511 million carats, representing an increase of approximately 16% compared with one year earlier. In addition, Dominion stated that average rough diamond prices have risen 8% since January.

Diamond Mine to Open on Bushmen Land

Botswana President Ian Khama is scheduled to open the Ghaghoo diamond mine on Friday, located in the Central Kalahari Game Reserve, which also happens to be the ancestral land of the Bushmen. Human rights advocates on behalf of the Bushmen have condemned the move and claim the government evicted Bushmen without notice. The government contends that proceeds from the estimated $4.9 billion mine would be used to provide better schools and health facilities for Bushmen outside of the reserve.

Survival International, which has long rallied for the Bushmen, charged that Botswana justified evictions in the name of conservation and has been arresting Bushmen hunters on poaching charges. Furthermore, the group claimed that the government falsely claims that the Bushmen’s presence in the reserve is “incompatible with wildlife conservation,” while allowing a diamond mine and fracking exploration. A Bushman was quoted as saying, "The residents of the Reserve are not benefitting anything from the mine. The only benefits go to communities living outside the reserve, while our natural resources are being destroyed. We strongly oppose the opening of the mine until the government and Gem Diamonds sit down with us and tell us what we will benefit from the mine.”


NUM Opposes New Licenses for Petra

The National Union of Mineworkers (NUM) in South Africa said that it opposes the government awarding additional mining rights to Petra Diamonds at Swartruggens, in the North West Province. The NUM made the statement following Petra Diamonds' announcement of retrenching 370 out of 421 permanent employees at the Helam mine. NUM's chief negotiator at the Helam mine, Lekhotla Mabea, added that Petra Diamonds applied for additional rights with the Department of Mineral Resources. "We are very surprised that the company is retrenching 80% of its workforce at Helam mine and, at the same time, it has applied for the mining rights in the same area," Mabea said.


Letseng Mine Unaffected by Lesotho Turmoil

Gem Diamonds reported that the unfolding political crisis in Lesotho has not disrupted operations at its flagship Letšeng mine. Lesotho's Prime Minister Thomas Thabane, fled the country on Saturday for South Africa, following a reported military coup that led to army units surrounding his residence and taking over police headquarters, Reuters reported. Gem Diamonds stated that its management in Lesotho reported calm in the country's capital, Maseru, and that there has been no disruption to operations at the mine, which is situated in the Maluti mountains, four hours away from Maseru.



Zaamwani-Kamwi Receives Accolade

Namdeb's CEO, Inge Zaamwani-Kamwi, was named the winner of the Africa Most Influential Women in Business on Heroes Day, August 26, while attending the national commemoration activities at Heroes Acre in Windhoek. One day earlier, she was conferred with the national honor of "Most Distinguished Order of Namibia: Third Class," alongside other business personalities, by President Hifikepunye Pohamba at State House. She received the women in business award for the mining sector from CEO Communications, a South African based company. Africa's Most Influential Women is a continental body dedicated to women empowerment and advancement in leadership positions across the continent.


McFarland Joins Botswana Diamonds

Botswana Diamonds appointed Anne Margaret McFarland as a non-executive director. McFarland, 53, has extensive experience in resources in Russia and for 15 years she worked as a senior finance executive for Glencore, BP and Russian conglomerates. She holds qualifications from Trinity College Dublin, University College Dublin and qualified as a chartered accountant in London.

John Teeling, the chairman of Botswana Diamonds, said, “Anne will bring added dimensions to our board. A fluent Russian speaker with many years on the ground resources experience in Russia she will be actively involved with our fast growing joint venture with ALROSA.”


STATS

Russia

Jan. - June Mil. %Chng.
Production 17 -3%
Value $1,648 13%
Avg. carat price (actual $s) $96.56 16%

USA

July $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $2,134 0% $14,346 5%
Polished exports $1,546 6% $13,036 13%
Net imports $588 -13% $1,311 -39%

Rough imports $46 -47% $412 38%
Rough exports $17 0% $266 73%
Net imports $29 -58% $145 3%

Net diamond account $617 -17% $1,456 -


Japan

July $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $69 -12% $514 5%

ECONWATCH

Diamond Industry Stock Report

U.S. and Hong Kong shares marginally higher, led by JCPenney (+3%) and Chow Sang Sang (+2%). Europe higher except for Damiani (-1%). India mainly lower except for Rajesh Exports (+10%) and Titan (+7%). Mining shares lower, led by Gem Diamonds (-8%). View the extended stock report.
Sept. 4 Aug. 28 Chng.
$1 = Euro 0.770 0.759 0.011
$1 = Rupee 60.38 60.62 -0.2
$1 = Israel Shekel 3.60 3.57 0.03
$1 = Rand 10.72 10.64 0.08
$1 = Canadian Dollar 1.09 1.09 0.00

Precious Metals
Gold $1,261.30 $1,289.40 -$28.10
Platinum $1,401.00 $1,419.00 -$18.00

Stock Indexes Chng.
BSE 27,085.93 26,638.11 447.82 1.7%
Dow Jones 17,069.58 17,079.57 -9.99 -0.1%
FTSE 6,877.97 6,805.80 72.17 1.1%
Hang Seng 25,297.92 24,741.00 556.92 2.3%
S&P 500 1,997.65 1,996.74 0.91 0.0%
Yahoo! Jewelry 1,164.84 1,002.92 161.92 16.1%

Rapaport Weekly Market Comment Sept. 12, 2014


All eyes on next week’s Hong Kong Show with mixed expectations for Far East demand as diamond markets remain uncertain. Indian suppliers reducing prices to raise liquidity levels. Buyer’s market prevails. The RapNet Diamond Index (RAPI™) for 1ct. lab-graded diamonds -1.4% in Aug. Rough trading slows as Surat manufacturers focus on cutting operations ahead of Oct. Diwali season. Gem Diamonds opens Ghaghoo underground mine in Botswana. Belgium’s Aug. polished exports -12% to $484M, rough imports +30% to $1.1B. Rapaport to stop listing all EGL grading reports on RapNet Diamond Trading Network, effective Oct. 1.



RapNet Data: Sept. 11

Diamonds 1,243,786
Value $7,652,575,847
Carats 1,347,779
Average Discount -27.02%

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RAPAPORT ANNOUNCEMENTS

September 8-18 Mon-Thu


Rapaport Melee Auction

New York & Hong Kong

www.rapaportauctions.com

September 15-19 Mon-Fri
Rapaport at HK Jewellery & Gem Fair

Exhibitors may upload show diamonds here for display on RapNet's show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo
Sep-Oct 23-1 Tue-Wed


Rapaport Single Stone Auction

New York & Israel View Details.

QUOTE OF THE WEEK
There is so much ‘noise’ and uncertainty in the U.S. economic system that small business owners are finding it difficult to be optimistic. More U.S. small business owners think conditions will be worse in six months than think they will be better. Few see the current period as a good time to expand. The outlook for improvement in real sales volume faded this month.

Bill Dunkelberg | NFIB

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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.

INDUSTRY

Polished Prices Decline

The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds fell 1.4% during August. RAPI for 0.30-carat diamonds declined 1.5%, while RAPI for 0.50-carat diamonds decreased 1% and RAPI for 3-carat diamonds fell 1.2%. Trading slowed and liquidity tightened in the manufacturing centers and buyers avoided making large inventory purchases in advance of the Hong Kong Jewellery and Gem Fair, yet suppliers are maintaining low expectations for the show.

There was steady U.S. demand for commercial-quality, SI-I2 clarity diamonds. Demand for Gemological Institute of America (GIA) dossiers slowed from previous months but remained fairly robust. Rough trading slowed and prices softened on the secondary market, following the relatively big De Beers sight. Manufacturers currently have significant quantities of rough inventory, which has further pressured their liquidity. Rough buying is expected to slow further in September.

RapNet Drops EGL Reports

Diamond grading reports from all European Gemological Laboratories (EGL) will no longer be listed on the RapNet Diamond Trading Network, effective October 1. RapNet is concerned about the misrepresentation of diamond quality by laboratories that use Gemological Institute of America (GIA) grading terminology, while applying alternative grading standards that overstate the quality of diamonds.

While some EGL grading reports are more consistent with GIA grading standards than others, there is, in our opinion, confusion and inconsistency among the various EGL grading reports. RapNet recognizes that GIA and other diamond laboratory grading is based on human evaluation and is therefore subjective. We recognize that a difference of one color and one clarity between diamond grading reports from the same or different laboratories is within a reasonable tolerance range.

We reject the idea that there is no diamond grading standard and caution RapNet members not to use GIA grading terminology to describe diamonds that are below a reasonable tolerance range of the GIA standard. RapNet members using GIA terminology are required to honestly communicate diamond quality based on the GIA standard.

Gem Opens Ghaghoo

Gem Diamonds opened the Ghaghoo diamond mine in Botswana, the first underground diamond mine in the country and the company's second major producing diamond mine -- the first of which is Letšeng in Lesotho. Gem Diamonds explained that a phased development plan at Ghaghoo defines the project as a "new generation" of diamond mining, with a core focus on ensuring that the highest benchmarks of excellence across health and safety and social and environmental impact are achieved. Ghaghoo's launch was not without controversy, however, given its location on the ancestral land of the Bushmen.

Gem Diamonds acquired the mine in May 2007 through its local subsidiary, Gem Diamonds Botswana, and it holds a 25 year mining license on the project. The Ghaghoo mine is situated in the southeast portion of the famed Central Kalahari Game Reserve. Development remains on target to deliver first phase objectives and begin commercial production before the end of the year. It is anticipated that Ghaghoo will ultimately tap 20.53 million carats with an in-situ value of $4.9 billion.

Petra Recovers 232-Carat Diamond

Petra Diamonds recovered a 232.08-carat, D, type II, white diamond at the Cullinan mine in South Africa. The stone was described as exceptional size and clarity. In February, Petra sold a 29.60-carat, blue diamond from the mine for $25.6 million or $862,780 per carat. In June, the company recovered a 122.50-carat, blue diamond, which is currently for sale in South Africa. The company intends to offer the recently discovered diamond for sale in the second quarter of its fiscal year and will notify the market once a date is finalized.

RETAIL & WHOLESALE

LVMH, Google Sign Pact

LVMH and Google signed a cooperation agreement, committing to enhance their resources in an effort to tackle the advertising and sale of counterfeit goods online. The deal ends a decade-long legal dispute between Louis Vuitton and Google over who was responsible for chasing counterfeiters online. Pierre Godé, the vice president at LVMH, said the LVMH-Google agreement paves the way for greater cooperation toward a safer and more engaging digital environment.

Winsome Says 'No' Synthetics

Winsome Diamonds & Jewellery Ltd. told shareholders that a rogue media report was grossly mistaken to have defined the company as the world's largest producer of synthetic diamonds and the firm reiterated a long-held stance that it has "nothing to do with synthetic or man-made diamonds." In addition, Winsome stated that it did not operate a base in Singapore, Malaysia or the U.S., and disparaging press reports are negatively impacting an already "crisis ridden" image. The note was filed on the Bombay Stock Exchange and condemned the banks, too, for misleading the public by not producing an audit report from Kroll Advisory Solutions. Winsome also denied it had a run in with U.S. authorities over synthetic diamonds, adding that it has no investments in a U.S. company.

FTC Clarifies 'Made in the USA'

The U.S. Federal Trade Commission (FTC) told jewelry industry groups that unless a company can substantiate that all components, including a natural resource, in a product they sell did not originate from the U.S., that brand should not advertise product as "Made in the USA." The Jewelers Vigilance Committee, Jewelers of America, MJSA, AGTA and the Richline Group reached out to the FTC in June seeking an opinion on whether metals that were recycled in the U.S. qualified for branding a product made from those elements as Made in the USA.

The groups argued that it often can be impossible to identify origins of metals but that once the resource has been recycled, it begins a new life cycle, which can be tracked and traced. The FTC included in its response that its staff is available to help craft qualified claims that avoid deception, while highlighting the work done to recycle precious metal in this country. The trade associations and Richline are considering further steps, in accordance with the FTC’s response.


U.S. Regulations Swamp Smaller Firms

The National Federation of Independent Business (NFIB) determined that U.S. manufacturers face prohibitively high regulatory expenses that undermine any economic incentives intended to support small business growth. The average business with less than 50 employees pays $12,000 per person per year to comply with federal regulations, while manufacturers with fewer than 50 staff pay $35,000 per headcount. A jewelry making firm with 10 employees, therefore, would fork out $350,000 just in regulatory fees before $1 of profit can be made, the group surmised.

NFIB's small business index that measures owner optimism rose 0.4 points to 96.1 (1986=100) in August. The overwhelming majority of small business owners are not adding employees, suggesting a weak market in the fourth quarter. The net percent of all owners reported higher nominal sales in the past 3 months compared with the prior 3 months; however, expected real sales volume posted a 4 point decline, falling to a net 6% of owners expecting gains.

Rising labor costs are keeping pressure on earnings, along with poor sales performances. Owners cited high taxes as their primary concern, followed by regulations and a weak sales outlook. Only 4% of owners reported that all their credit needs were not met, equal to a record low reading. A net negative 2% of all owners reported growth in inventory, reflecting that more firms are reducing stock rather than building; but sales trends continued to deteriorate somewhat and expected real sales did not improve.


Is Your Shop Flex Ready?

Convenience dominates preferences both on and offline, according to the latest U.S. consumer shopping study conducted by comScore and UPS. In addition, shoppers demand comprehensive information about the jewelry product before weighing a purchase. The study revealed that it is essential to detail full product information, high-quality images and offer a variety of ways to ship and track the product after a purchase.

The study revealed that the first step in making a purchase for 27% of U.S. shoppers is to begin on Amazon, where products abound as do reviews and product summaries. This does not necessarily translate into an Amazon purchase, however. The second most popular way to research product was through search engines, whereas 18% of shoppers begin their research in a store and another 18% begin at a retailer's website. UPS and comScore found that, ultimately, 40% of consumers cross channel paths when shopping, 39% search and buy exclusively online and 21% search online and buy in a store.

Overall 63% of U.S. consumers just use a single device in the process, while 37% engage multiple devices and of that group: 57% purchase via laptop/desktop, 24% buy through a tablet and 19% purchase on smartphones. Eighty-one percent want free shipping from retailers and the study revealed that 93% of consumers will take some action to qualify for the option, while 58% actually add items to their shopping cart to qualify. In addition, comScore found that 48% of consumers have made additional purchases simply because a special or coupon was included with the packed item they received from the retailer.


Jewelers Debut Collections in Paris

Graff Diamonds joined several high-end jewelry exhibitors at the La Biennale des Antiquaires in Paris to showcase unique and rare masterpiece creations, including a dramatic necklace with richly colored clusters of sapphire beads entwined with pave diamond leaves and stems. A pair of earrings accompanies the necklace and feature a single emerald-cut sapphire surrounded by three pave diamond leaves and sapphire beads.

The 27th Biennale des Antiquaires began September 11 and ends on September 21 at the Grand Palais. Fine jewelry brands schedule to exhibit this year include Alexandre Reza, Véronique Bamps, Boucheron, Bulgari, Chanel, Cartier, Chaumet, David Morris, Dior, Martin Du Daffoy, Piaget, Siegelson, Van Cleef & Arpels and Wallace Chan.

Damas Opens in Ladies Club

Damas opened its latest boutique at Dubai's exclusive Zabeel Ladies Club, showcasing contemporary styles in high fashion jewelry, diamonds and precious gemstones. The new Damas boutique features elegant and plush interiors and offers its namesake jewels as well as Mikimoto, Roberto Coin, Fope, Marco Becigo and Utopia. The Zabeel Ladies Club contended that a Damas store on the premises is a unique value addition for members and guests.


Tissot Opens in New York

Swiss watchmaker Tissot hosted a grand opening celebration for its first U.S. boutique at 666 Fifth Avenue in Manhattan. Brand ambassador and NBA star Tony Parker was on hand to greet fans and perform the traditional ribbon cutting. More than 550 guests visited the boutique to see the newly introduced Tissot T-Touch Expert Solar Tony Parker 2014 Limited Edition Watch. The new boutique features a clock display highlighting Tissot’s T-Touch watch design and features digital exploration areas where customers can learn more about Tissot’s Touch Collection models and their tactile functionalities.

MINING

Angola's Diamonds Sales Jump

Angola's diamond sales rose 18% year on year to $661 million during the first six months of the year, according to MacauHub. The government realized approximately $47 million in revenue from the sales total.

Diamond production, meanwhile, rose 4% to 4.26 million carats, according to the report.


Trans Hex Rough Prices +21%

Trans Hex's tender sales held during May, July and September, consisted of 22,033 carats from its South African mines and realized $24.7 million, or an average of $1,497 per carat. The company noted that average prices grew by 21% compared to the average prices achieved during the financial year that ended on March 31. Twenty-two single stones achieved over $10,000 per carat, including a 3.20-carat, pink diamond that was recovered at the Baken mine and sold for $54,750 per carat. A 132-carat diamond, also from Baken, realized $1.28 million.

De Beers Denies Miners' Claims

De Beers strongly condemned a DFA press report that allegedly quoted South African men who claimed they were renting parcels of land and selling rough stones to the mining giant for as little as $46 per carat. Police reportedly raided the area where some 1,500 were camping and mining on De Beers land, but many of the men subsequently set up camp at an adjacent site and continued to mine by hand.

DFA claimed the miners provided the names of two De Beers officials who they said kept records of all the diamonds they uncovered. Tom Tweedy, the head of communications at De Beers, called the episode preposterous and said that legal mining companies in Kimberley were being seriously undermined by such claims by illegal operators.

"De Beers states for the record that no diamonds emanating from any operation not managed by the company are purchased by it and states that it is untrue that the company rents sites to illegal diggers 'at ZAR 100 a fortnight' as claimed. The article (published in the DFA) is without fact in the references made to De Beers," Tweedy said.

Pangolin Sample Program Underway

Pangolin Diamonds Corp. recovered two additional diamonds on its Malatswae project in east-central Botswana. The stones were identified during a close-spaced follow-up sampling program and a number of samples also reported ilmenite; a common kimberlite indicator mineral. The samples were processed through the Pangolin DMS plant in Francistown.

A concentrate was then independently examined in Gaborone by a specialist mineral consultant who subsequently submitted the stones to MCC Geoscience Inc. in Canada who confirmed the two diamonds. The diamonds will now be viewed using a scanning electron microscope (SEM) in order to characterize the surface textures and features.

True North Signs Finance Deal

True North Gems signed an agreement with Leonhard Nilsen & Sonner and LNS Greenland under which the combined LNS entities will provide over $11 million in financing to transition quickly into the construction phase of the Aappaluttoq ruby project. The financing allows the company to restructure its share of capital expenses, reduce immediate requirements and minimizing dilution to current shareholders. With this funding, the company will be able to deliver on its vision of becoming one of the world's leading colored gemstone production and exploration companies.


Stellar Commissions Baoule Plant

Stellar Diamonds reported that it commissioned the diamond processing plant at its Baoulé kimberlite project in Guinea ahead of trial mining. The company intends to process 100,000 tonnes of ore to measure diamond grade and test for value as part of trial mining at the site, which is expected to begin in October. Commissioning is underway to establish the optimal operating parameters for the plant, after which the first kimberlite ore will be processed. Diamonds recovered during trial mining will be sold to generate cash flow.

STATS
Belgium

Aug. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $484 -12% $9,433 5%
Polished imports $833 -7% $9,260 5%
Net exports $349 0% $173 12%

Rough imports $1,094 30% $10,179 15%
Rough exports $675 36% $10,614 10%
Net imports $419 21% ($435)

Net diamond account ($76 11% $608 36%


ECONWATCH

Diamond Industry Stock Report

U.S. shares were all lower except for Blue Nile (+4%), while Chow Tai Fook (+2%) led gains in Hong Kong. European shares were all lower except for Damiani (+2%). Indian shares were mixed as C. Mahendra (-22%) continued a long slide and Goenka Diamond (+21%) led gains. Mining shares were also mixed, ALROSA (-7%) and Anglo (-6%) led declines and Petra (+9%) pulled ahead after two analyst upgrades. View the extended stock report.
Sept. 11 Sept. 4 Chng.
$1 = Euro 0.774 0.770 0.004
$1 = Rupee 60.91 60.38 0.5
$1 = Israel Shekel 3.63 3.60 0.03
$1 = Rand 10.98 10.72 0.26
$1 = Canadian Dollar 1.10 1.09 0.01

Precious Metals
Gold $1,241.30 $1,261.30 -$20.00
Platinum $1,366.00 $1,401.00 -$35.00

Stock Indexes Chng.
BSE 26,995.87 27,085.93 -90.06 -0.3%
Dow Jones 17,049.00 17,069.58 -20.58 -0.1%
FTSE 6,799.62 6,877.97 -78.35 -1.1%
Hang Seng 24,662.64 25,297.92 -635.28 -2.5%
S&P 500 1,997.45 1,997.65 -0.20 0.0%
Yahoo! Jewelry 1,171.12 1,164.84 6.28 0.5%

Rapaport Weekly Market Comment Sept. 19, 2014


Sharp improvement in market sentiment as HK show exceeds low expectations. Strong visitor traffic but sales not booming due to stiff buyer price resistance. Sellers that reduce prices are selling with some manufacturers lowering prices to generate cash flow as Indian liquidity is tight. Steady demand for G-J, VS-SI goods, high-end, D-F, VVS+ very weak. Chinese jewelry demand stable ahead of October 1 Golden Week. De Beers says global diamond jewelry demand +3% to $79B in 2013. Hong Kong 1H polished imports +9% to $9.7B, polished exports +17% to $6.8B. India Aug. polished exports -19% to $1.9B, rough imports +27% to $864M. Petra Diamonds sells 122.52ct. blue rough stone for $28M ($225K/ct.).



RapNet Data: Sept. 18

Diamonds 1,322,255
Value $7,864,464,819
Carats 1,402,460
Average Discount -27.02%

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RAPAPORT ANNOUNCEMENTS
Sep-Oct 23-1 Tue-Wed
Rapaport Single Stone Auction

New York & Israel

View Details.

QUOTE OF THE WEEK
While Petra's $27.6 million blue diamond sale is less than the $35 million to $40 million I had in my figures, given that the company does share in the upside it is not a disastrous number. Colored stones are particularly difficult to price given the intensity of the color can lift the value by a factor of 10 times relative to an equivalent white.

Alison Turner | Panmure Gordon

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.


INDUSTRY

Petra Sells 122.52-Ct. Blue Diamond

Petra Diamonds sold a 122.52-carat blue diamond recovered from its Cullinan mine for $27.6 million, or $225,269 per carat, to a beneficiation partnership, which is 85% owned by an unnamed diamond manufacturer. Petra owns 15% of the firm, resulting in a cash payment of $23.5 million for the sale. Petra will record this sum as revenue in its first quarter of fiscal 2015. Once the stone has been cut and polished, it will be re-sold at which time Petra will receive its share of the proceeds after beneficiation and related expenses.


Hong Kong Show Meets Dealer Expectations

Diamond trading at the Hong Kong Jewellery & Gem Fair held steady this week with strong visitor traffic observed. Diamond dealers were prepared for a drop in traffic to the loose stone area as the finished jewelry venue opened on September 17.

Diamond exhibitors noted that buyers were looking for specific items to fill existing orders and avoided high-volume orders. There was generally good demand for G-J, VS-SI goods in all sizes, with strong demand for nice-make, triple EX diamonds. Prices were relatively steady, if slightly softer, on most items with some larger companies looking to generate cash to ease their liquidity concerns.

RETAIL & WHOLESALE

Richemont Observes Weaker Growth

Richemont estimated that sales growth was subdued during the five months that ended on August 31, rising just 4% year on year at constant-exchange rates, or 1% at actual exchange rates. The group did not provide hard totals, but it noted that sales were impacted negatively by the weakening of the dollar and the yen against the euro. Jewelry sales rose by 2% year on year, while watch sales grew by 4% during the five-month period. The company explained that Cartier's jewelry sales continued to outperform watch sales, which suffered from weak demand and destocking particularly in Asia-Pacific. Richemont will report interim results on November 7.


U.S. Jewelry Store Sales +8%

U.S. jewelry store sales jumped 8% year on year to $2.37 billion in July, according to the government's retail survey. The increase for jewelry stores was stronger than the overall jewelry and watch sector, which recorded a preliminary increase of 4.3% to $5.576 billion in July. Jewelry store sales for the first seven months of 2014 have risen 4.8% year on year to $17.704 billion. Meanwhile, jewelry and watch sales across all retail outlets has risen 2.6% to $40.021 billion, as estimated by Rapaport News.

Advanced estimates for sales at U.S. department stores in August continued to show a slow and steady decline, as has been the case for most of the past two years. Department store sales fell 1.5% year on year to $14.028 billion in August; however, retail and food sales during the month rose 5% to $444.4 billion. Retail trade sales rose 4.8%. U.S. chain-store sales in August increased 5.2% on a same-store sales basis, according to the International Council of Shopping Centers (ICSC), primarily due to back-to-school spending.


U.S. Jewelry CPI -5%

The U.S. consumer price index (CPI) for jewelry declined 4.7% year on year to 171.87 points in August. The reading was one-tenth of a point lower than July, but still higher compared with the lowest reading of the year when the index was 169.36 points in May. The CPI for watches, meanwhile, rose 4.5% to 122.41 points, after marking its highest reading of the year at 123.58 points in July.

Precious metals prices for the jewelry sector have come under pressure recently, contributing to a declining CPI in the past several months. The average price of gold was about 2% lower in August compared with one year ago and platinum was basically flat. However, polished diamond prices were mixed in August. The RapNet Diamond Index (RAPI), the global benchmark for polished diamond prices, fell 4.7% year on year for 1-carat diamonds in August, while RAPI for 3-carat diamonds dropped 2.6%. RAPI for 0.30-carat diamonds jumped 9.9% and the index increased 7.8% for 0.50-carat stones.

Invest to Sustain Long Term Growth

De Beers estimated that global diamond jewelry sales rose 3.4% year on year to $79 billion in 2013 and that consumer demand will continue to increase, pressuring rough supplies, especially by 2020 and beyond. Sales of polished diamonds in the U.S. increased 7%, while both India and China have experienced a compound annual growth rate of 12% in local currency terms between 2008 and 2013.

In launching the "Diamond Insight Report" at the Hong Kong show this week, De Beers CEO, Philippe Mellier, said the industry must address the risks and opportunities in order to compete with other luxury sectors. The share of diamond advertising, for example, in the U.S. has been reduced by almost half since 2007. Over the same period, the fashion and electronics industries grew their share of advertising. Online engagement has also become an important channel, further altering consumer buying habits. China, for example, is the world’s fastest growing market for diamond jewelry and more than one quarter of all Chinese buyers research their purchase online in advance.

Stephen Lussier, the CEO of Forevermark, told retailers not to underestimate an opportunity to tell the story about diamonds to consumers online, while building a solid brand image to stoke future growth. De Beers estimated that an eventual imbalance between rough and polished supplies will plateau in the second half of this decade before rough supplies begin to decline from year 2020 forward. The cost of mining diamonds is becoming more prohibitive and as supplies from existing mines decrease, mining will become increasingly complex and remote, driving up costs.

Substantial investment will be required in diamond production, technology and branding, marketing and retail standards if the industry is to sustain its recent levels of growth.

CARE Reaffirms Rating on Suashish

CARE Ratings reaffirmed its single A minus (A-) rating on the approximately $69.7 million (Rs. 425 crore) bank facilities of Suashish Diamonds Ltd. The rating reflected the diamond firm's extensive industry experience, healthy financial risk profile marked by a healthy net worth, a comfortable overall gearing and robust debt protection metrics, according to CARE's statement. The rating was offset by the firm's substantial investment exposure to group companies, declining sales trends over the past three years, susceptibility of margin movements due to foreign currency exchange rates, strong competition and subdued demand for cut and polished diamonds.

Chow Tai Fook Debuts 'Reflections of Siem'

Chow Tai Fook Jewellery Group Ltd. previewed its "Reflections of Siem" collection to highlight its fourth annual high jewelry brand campaign. The event took place at Singapore's iconic ION Sky, atop the luxurious ION Orchard shopping mall and it marked the first collection debut in Singapore for Chow Tai Fook. Reflections of Siem was inspired by history and local folklore of Cambodia and featured 12 sets of jewels. The collection celebrates the enduring Khmer spirit, while showcasing the best of Chow Tai Fook's gemstone selection, artistry and craftsmanship in the realm of couture jewelry.

Parikh Bros. to Manufacture GSR Stones

Golden Saint Resources (GSR) Ltd. entered into a memorandum of understanding with Parikh Brothers of Mumbai to process, cut and polish rough diamonds from alluvial mining in Sierra Leone. The agreement also includes assistance for the resale of rough and polished diamonds. Processing of each rough shipment must be completed within 90 days unless otherwise agreed.

In August, Golden Saint Resources recovered four yellow stones with approximate sizes of 2.30 carats, 4.20 carats, 10 carats and 10.34 carats and its directors believed that these early recoveries were a promising sign for future artisanal production. Terms of this particular license agreement state that the company retains 70% of revenue and the landowner receives 30%.


Quadamas Introduces 'AsscherQueen'

Diamond manufacturer Quadamas Inc. introduced the “AsscherQueen” diamond to the U.S. market in August. The company holds six U.S. patents on this new cut, which it described as a creative extension of the Asscher cut Princess (AcP) line. The “AsscherQueen” diamond will be available in loose stones from 3.1mm and up calibrated, as well as 0.50 carat and larger stones starting from M and S12 on up to higher grades, each with its own certificate from the Gemological Institute of America (GIA) and an “AsscherQueen” logo laser inscribed on the girdle.


New Tiffany Masterpieces Debuts

The latest collection from Tiffany & Co. marks the debut of a number of modern Tiffany Masterpieces and was created by the brand's design director, Francesca Amfitheatrof. Several pieces are inspired by archival jewels of diamonds set in square bezels that are delicately linked, while some take a cue from the linearity and fluidity of 1920s design.

Amfitheatrof combined a mixture of custom cut princess, baguette and round brilliant diamonds for the collection's necklaces and bracelets. Defining this fall 2014 collection, Tiffany & Co. stated that a current flows through the jewels, driven by the stone's firepower. Tiffany Masterpieces include earrings of radiant diamond tiers, bracelets in open weaves, medallions and tassel pendants with diamonds and seed pearls. Rings feature rare colored diamonds, capturing saturated hues from yellow and purplish pink to bluish green.


Pandora Steps Up Expansion in Japan

Pandora Jewelry signed an agreement to take over the majority of Bluebell's Pandora-related assets in Japan in a non-cash transaction with the deal taking effect on January 1, 2015. Currently, Bluebell owns and operates one concept store and seven shop-in-shops. The agreement is subject to certain conditions; however, Pandora expects it will accelerate its own store roll out in Japan, enhance expansion and make significant marketing investments in that market. Bluebell will contribute to deal with its knowledge and insight into the retail and real estate markets and the Japanese consumer.

The two company's relationship goes back to April 2013, when Pandora authorized Bluebell's exclusive distribution rights in Japan. The Japanese jewelry market had a value of about $9 billion (JPY 961 billion) in 2013, up 6% from 2012, according to Pandora.

Court Seizes Zimbabwe Goods in Belgium

Zimbabwe's Mines Minister, Walter Chidhakwa, said rough diamond auctions would begin locally in November to maximize revenue and protect the country's assets, according to the state-run Herald. About $45 million worth of rough diamonds from Zimbabwe were seized in Belgium this week during a preplanned tender, following a court order in an unrelated lawsuit brought by Amari Platinum Holdings Ltd. of South Africa. Chidhakwa said the government sent a team of lawyers to Belgium to plead its case and seek the release of the diamonds. Amari sued Zimbabwe in 2010 following the cancellation of its platinum mining agreement with the Zimbabwe Mining Development Corporation (ZMDC). Chidhakwa stated that ZMDC does not own diamonds outright, so the seizure was not legal because those stones belonged to independent mining companies.

MINING

Petra's FY Profit Surges

Petra Diamonds' revenue increased 20.2% year on year to $471.8 million for the fiscal year that ended on June 30. Group profit jumped to $67.5 million compared with $27.9 million one year earlier. Diamond inventory fell 14.3% to $27 million and the company's net debt rose 3.4% to $124.9 million. Production during the fiscal year increased 17% to 3.1 million carats.

Petra Diamonds concluded that the rough diamond market performed well during the course of the period, with prices improving about 10% during the second fiscal half. Petra anticipates that rough demand will continue to strengthen over the course of its current fiscal year due to constrained supplies, robust U.S. demand and accelerated growth from emerging markets such as China and India. Due to the favorable market dynamics, Petra expects higher prices through 2015. Production for the current fiscal year is expected to achieve 3.2 million carats, while Petra's expansion plans remain on track to increase production to 5 million carats by 2019.


Stornoway Reports 1Q Loss

Stornoway Diamond Corporation reported a loss of $11.5 million during the first quarter that ended on July 31, and the company held cash and cash equivalents on hand of $438.3 million. The junior mining company completed a $946 million financing deal during the period for its Renard diamond project. In addition, Stornoway initiated construction, procured equipment entered into an engineering, procurement and construction management contract with SNC Lavalin Inc., including sub-contracted services to be provided by AMEC Americas Ltd. and DRA Americas Inc.; and confirmed the Renard 2 kimberlite extends to a vertical depth of at least 970 meters -- 370 meters below the base of its current mineral reserve.

Mine development capital expenditures for the Renard project were $24.3 million during the period, against a total project capital cost estimate of $811 million. Stornoway's net loss for the period related to mainly finance costs, a foreign exchange gain, the recognition of changes in the estimated fair value of embedded derivatives associated with the corporation's financing as well as transaction fees attributed to these derivatives.


Kennady to Raise $5M

Kennady Diamonds Inc. is arranging a non-brokered private placement to raise approximately $5 million through the issuance of common shares at a price of $6.50 each. The placement is expected to close on or about September 30 and is subject to regulatory approval. Kennady Diamonds' major shareholder, Bottin International Investments Ltd., is subscribing for 538,000 common shares for gross proceeds of approximately $3.5 million. Proceeds from the entire placement will be used to fund Kennady's summer and fall exploration program and for general corporate purposes.

Diamcor Receives Mining Rights

Diamcor Mining Inc. received a 30-year term mining right for the Krone-Endora at Venetia project this week from the South African Department of Mineral Resources. The deal also grants Diamcor the exclusive right to mine and recover diamonds over areas initially targeted, encompassing 657.71 hectares of the project's total area of 5,888 hectares.

The company has submitted an application for a mining right over the remaining area. With the mining right in place, the company will advance the project to the next stage of development. Diamcor acquired the project from De Beers in February of 2011 through its South African subsidiary, DMI Minerals South Africa (Pty.) Ltd., which is 30% owned by a black economic empowerment partner, Nozala Investments (Pty.) Ltd. Nozala is a women owned business, representing 500,000 rural women shareholders.

Lucara Receives Licenses

Botswana's Ministry of Minerals, Energy and Water Resources granted Lucara Diamond Corp. two prospecting licenses near the Orapa kimberlite field. Both prospecting licenses are in close proximity to the Karowe diamond mine and host known diamondiferous kimberlites. One license, block A, or the BK2 license, is located 30 kilometers to the east of Lucara's Karowe mine and has a surface area of 5.9 acres. The other, block E, is located immediately to the south and east of Debswana's Orapa mine and 15 kilometers to the north of Karowe. The prospecting license holds four known kimberlites, namely AK11, 12, 13, and 14. The company plans to begin work on both license areas as soon as all permits and approvals are in place.


BD, ALROSA Begin Drilling

Botswana Diamonds (BD) reported that it will begin drilling on its joint licenses with ALROSA in the Orapa region of Botswana within 10 days. A seven person geological team from ALROSA recently arrived in Botswana for the work and is on site to lead the Botswana team.

Gemfields to Explore Sri Lanka

Gemfields Plc formed a joint venture East West Gem Investments Ltd. (EWGI) to explore sapphire and gemstones in Sri Lanka. Under the agreement, the joint venture will operate through three Sri Lankan subsidiaries. Gemfields will hold a 75% stake in the project with EWGI holding the remaining 25%. Gemfields said it acquired its operating interest in 16 exploration licenses of diverse minerals for $400,000. The company will also establish a gemstone trading company named Ratnapura Lanka Gemstones Pvt. Ltd. with the aim to focus on sourcing rough sapphires from various resources in the local market.

STATS

India

Aug. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,920 -19% $13,897 -4%
Polished imports $511 -3% $4,511 -8%
Net exports $1,409 0% $9,386 -2%

Rough imports $864 27% $12,069 10%
Rough exports $116 -14% $1,037 -21%
Net imports $748 22% $11,032 11%

Net diamond account $661 -22% ($1,646)
Hong Kong

1H $Mil. %Chng.
Polished imports $9,713 9%
Polished exports $6,768 17%
Net imports $2,945 -2%

Rough imports $1,147 20%
Rough exports $1,212 -13%
Net imports $64


ECONWATCH

Diamond Industry Stock Report

U.S., Far East and European shares were mixed, but no shocks. Chow Tai Fook (-6%) marked the greatest decline, Charles & Colvard (+5%) was top gainer. Indian shares all lower except Ren. Jewellery (+1%), Titan (+1%) and Winsome (+12%). Little change for miners except for Peregrine (-18%), Gem Diamonds (-8%) and Kennady (+5%). View the extended stock report.
Sept. 18 Sept. 11 Chng.
$1 = Euro 0.774 0.774 0.000
$1 = Rupee 60.77 60.91 -0.1
$1 = Israel Shekel 3.64 3.63 0.01
$1 = Rand 11.09 10.98 0.11
$1 = Canadian Dollar 1.09 1.10 -0.01

Precious Metals
Gold $1,225.50 $1,241.30 -$15.80
Platinum $1,342.00 $1,366.00 -$24.00

Stock Indexes Chng.
BSE 27,112.21 26,995.87 116.34 0.4%
Dow Jones 17,265.99 17,049.00 216.99 1.3%
FTSE 6,819.29 6,799.62 19.67 0.3%
Hang Seng 24,168.72 24,662.64 -493.92 -2.0%
S&P 500 2,011.35 1,997.45 13.90 0.7%
Yahoo! Jewelry 1,163.33 1,171.12 -7.79 -0.7%

Rapaport Weekly Market Comment Sept. 24, 2014

Hong Kong show improves outlook for holiday season but liquidity remains tight with significant buyer price resistance. Polished trading cautious with price-point buyers shifting to lower qualities. Steady Chinese demand before Oct. 1 Golden Week. Rough trading is slow. Petra Diamonds FY revenue +20% to $472M, profit more than doubles to $68M. ALROSA president Fyodor Andreev resigns for medical reasons, senior VP Ilya Ryashchin to serve as interim president. KGC Group to close Antwerp Diamond Bank. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED THIS WEEK DUE TO THE ‎JEWISH NEW YEAR.‎ Visit TradeScreen for continuously updated RapNet prices. Best wishes to all for a happy, healthy and prosperous Jewish New Year.


RapNet Data: Sept. 24

Diamonds 1,321,876
Value $7,740,448,705
Carats 1,384,403
Average Discount -26.93%

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holidays:

Rosh Hashanah: Sept. 25-26
Succot: Oct. 9-10, 16-17

With best wishes for the new year,
The Rapaport Group

Sep-Oct 23-1 Tue-Wed


Rapaport Single Stone Auction

New York & IsraelView Details.

QUOTE OF THE WEEK
Antwerp’s purchasing power is going to diminish relative to other centers, reducing its trading capacity. There’s also a symbolic aspect. The Antwerp Diamond Bank is one of the industry’s most established and enduring players.

Anish Aggarwal | Gemdax


Careers@Rapaport

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.

INDUSTRY

Fitch Assigns 'A-,' Stable Outlook on Tiffany & Co.

Fitch Ratings assigned an issuer default rating (IDR) of "A-" to Tiffany & Co. as well as an "A-" to the retailer's senior unsecured facilities and senior unsecured notes. The rating outlook is stable. Fitch explained that this rating reflected Tiffany & Co.'s strong positioning in the mid- to high-tier global luxury jewelry market, supporting mid-single-digit top line growth, high margins, strong liquidity and reasonable credit metrics.

Fitch anticipates that Tiffany & Co. will experience top line growth of between 6% and 6.5%, EBITDA margin to improve modestly -- from 26% (adjusted for any one-time charges) currently -- from strong product mix and pricing and some upside from cost efficiencies. Fitch expects top line growth to be supported by low single-digit comps in the U.S., Japan and Europe along with 6% to 7% comp growth across the Asia-Pacific and about 2.5% to 3% growth contribution from new stores.

Tiffany & Co. plans refinancing to increase its existing $550 million unsecured multi-currency credit facilities ($275 million expires in December of both 2014 and 2016), with $750 million (four-year and five-year, $375 million each). Fitch determined that the refinance would further strengthen Tiffany & Co.'s liquidity profile and support the growth in its global operations. Tiffany is also issuing $500 million of 10-year and 30-year unsecured notes to refinance $400 million in aggregate principal amount. After this transaction, Tiffany will have pushed out its debt maturities past 2020 with only $97 million of debt due September 2016, Fitch explained.

KBC Prepares to Close ADB

The KBC Group will fold Antwerp Diamond Bank (ADB) operations into KBC Bank NV and no longer accept new loans or business. The decision to close ADB followed the collapse of a planned buyout by the Yinren Group of China and was in accordance with the European Commission on divesting the bank. Since 2009, KBC has made continuous efforts to find a suitable strategic investor for the bank; however, due to the bank's specific niche business, daily funding needs and difficult economic and market conditions for the industry -- all of those factors were too much of a challenge, according to KBC.

The Antwerp World Diamond Centre (AWDC), however, believed there was still room to find a solution and keep the financing levels of the Antwerp diamond sector in check. About one-third of Antwerp diamond dealers are financed by the bank, primarily small and medium size diamond dealers, for whom finding other sources of financing presents challenges, according to AWDC.

Andreev Resigns as ALROSA CEO

ALROSA's president and CEO, Fyodor Andreev, will resign from his position due to medical reasons. Ilya Ryashchin, ALROSA's senior vice president, will assume the role of acting president following Andreev's departure. Andreev announced his decision to step down at the company's weekly management meeting that was held Monday. He will continue to be involved in the company as a member of its supervisory board. Andreev was appointed CEO on July 15, 2009.


RETAIL & WHOLESALE

U.S. Data Reveals Consumer Stress

The U.S. retail economy continues to face headwinds for all but the top 20% of households, according to the latest data. While the "Current Population Survey" conducted by the U.S. Commerce Department confirmed the employment rate has risen every month for more than four years, both Pew Research and the Federal Reserve's consumer surveys concluded that the average household is worse off today than was the case seven years ago.

Only 21% of consumers rate the economy as excellent or good, 54% believe nothing will change anytime soon and they remain pessimistic shoppers, and 21% believe the great recession hasn't ended. Retail growth is primarily being driven by to top 20%, or households earning north of $100,000, and to some extent due to population growth. Still, the monthly Personal Consumption Expenditures index has not returned to pre-recession levels, which presents a continued challenge for retailers.

The median household income for the 2014 population survey was 8% lower than it was in 2007 at $51,939, while 56% of consumers said their salaries have fallen behind the basic cost of living. Households in the middle of the income distribution spectrum earned about $4,500 less than they had six years ago, while families in the top 10%, with annual incomes averaging nearly $400,000, experienced healthy gains. Middle-income households (with a college education) experienced an 11% contraction in salaries to $41,000. Households headed by workers under age 35 have suffered even more as many fail to secure professional wage jobs.


Deloitte: Expect Moderate Seasonal Growth

Deloitte anticipates that U.S. Christmas-season retail sales for 2014 will increase by between 4% and 4.5% year on year to between $981 billion and $986 billion. Additionally, Deloitte predicts that non-store retail sales, including ecommerce and mail order, will rise between 13.5% and 14%. Deloitte defines the U.S. Christmas retail season as beginning on November 1 and ending January 31. The expected rate of sales growth is a moderate improvement over the 2.8% gain in 2013, the consulting firm stated. The group concluded that there has been positive wage growth at the top to boost its outlook, coupled with historically low levels of consumer debt across all income levels. Geo-political tensions were not expected to dampen consumer spending, according to Deloitte.

For retailers, though, Alison Paul, the vice chairman of Deloitte, explained that digital customer interactions through both virtual and physical store channels present greater sales opportunities than online or mobile commerce alone. Deloitte said that 84% of shoppers use digital tools before and during their trip to a store. Additionally, those shoppers convert, or make a purchase, at a 40% higher rate than those who do not use such devices. Deloitte forecasts that digital interactions will influence 50%, or $345 billion worth of retail stores sales this Christmas season.

"Retailers should focus on the right functionality, rather than more functionality, when creating digital experiences this holiday season. Rather than offer their full ecommerce site on a mobile device, for example, retailers may be more effective by helping consumers compare prices, scan through local assortments, and navigate the store," Paul said. "Retailers that better understand how consumers make purchasing decisions, then deliver tools that support that process in a way that is consistent and complementary across online, mobile and store channels — may have the advantage this holiday season."


Fabrikant-Tara Partners With Zac Posen

Zac Posen and Fabrikant-Tara International signed a deal to create a new collection of handcrafted fine diamond jewelry that will launch shortly. The collection is being described as an infusion of the Zac Posen brand's modern U.S. glamour with the fine details and craftsmanship of Fabrikant-Tara to deliver fashion, bridal and bespoke luxury jewels.

Posen said that the time was right to expand into fine jewelry. The company established House of Z in 2001 and currently produces a range of products through his Zac Posen, ZAC Zac Posen, Z Spoke, and Truly Zac Posen labels including women's ready-to-wear, bridal, social occasion, furs, handbags, accessories and eyewear. The licensing partnership will help Fabrikant-Tara create further value for its customers and reinforce the diamond firm's focus on branded and co-branded jewelry.

Dillard's to Offer James Avery Jewelry

James Avery will begin showcasing a selection of branded jewelry at 43 Dillard's Inc. department stores and online in mid-October. James Avery offers a wide selection of hand crafted designs in sterling silver, gold and gemstones and is recognized for its inspiring traditional and contemporary style. Dillard's stated that the retailer has admired James Avery jewelry for many years and believes the product will be a good fit. Dillard's sells jewelry, fashion apparel, cosmetics and home furnishings and reported annual revenue of about $6.2 billion. The retailer operates 278 Dillard's locations and 18 clearance centers across 29 states.

RJC Recognizes Fairmined Standard 2.0

The Responsible Jewellery Council (RJC) and the Alliance for Responsible Mining (ARM) jointly announced that Fairmined Standard v.2.0 is recognized under the RJC chain-of-custody program for precious metals. The Fairmined initiative, developed by ARM, is a landmark mining definition for the artisanal and small-scale gold mining sector with an aim to provide the incentive to become certified under the Fairmined Standard.

The initiative's success is dependent on increasing market opportunities for miners across the pipeline and the Fairmined Standard provides brands with three different innovative sourcing models: labeled, incorporated and Fairmined certificates. The RJC recognition equally serves to help mitigate the potential impact that conflict-mineral due diligence can have on ASM's miners. RJC's chain-of-custody certified refiners can source from Fairmined certified artisanal and small-scale miners, further integrating those gold miners into the formal economy.

This initiative also builds on the recommendations of the OECD Due Diligence Guidance for Responsible Supply Chains – Supplement on Gold that all gold supply chain participants support legitimate producers.

Dillard's, Argyle, Alex Woo Receive Trademarks

The U.S. Patent & Trademark Office (USPTO) issued the trademark "Dillard's Diamond Collection" to Dillard's Corporation of Little Rock, Arkansas on September 16 with registration number 4606903. The department store chain applied for the trademark on July 18, 2013 as it refers to jewelry made with diamonds. "Dillard's Diamond Collection" was first used in commerce in January 2013.

The Argyle Diamonds Ltd. Company of Australia was awarded the "Argyle Pink" trademark with registration number 4607622 on September 23. The trademark applied to cut and uncut pink diamonds, precious stones, pink sapphires and garnets and jewelry set with pink diamonds. Alex Woo Inc. of New York City received the U.S. trademark "What's Your Icon" on September 16 with registration number 4605641. "What's Your Icon" was first used in commerce in April 2014 and refers to diamonds, jewelry, watches, precious metals for use in manufacturing sculptures, among other items.

Seraph Designs Ltd. of Hong Kong received the U.S. trademark "LEXTIA" on September 16 with registration number 4604143. The trademark refers to rough and polished gemstones, diamonds, coral, precious metals and their alloys and jewelry along with ornaments, watches and cases. "LEXTIA" was first used in commerce in April 2013.

Majhgawan Tender Achieves $1M

India's National Mineral Development Corporation's Diamond Mining Project received $1.4 million (Rs 8.62 crore) from the sale of 6,200 carats of rough. In all, 13,200 carats were offered and the largest stone, a 37.68-carat diamond, did not sell. The sale was held in Majhgawan over a two-day period and attracted 120 buyers.

Denver Hosts Cartier Exhibit

The Denver Art Museum will exhibit "Brilliant: Cartier in the 20th Century," from November 16 to March 15, featuring a stunning assortment of jewelry, timepieces and precious objects created between 1900 and 1975. In addition to items loaned by the Cartier Collection, the exhibition will include loans from museums and private collections from around the world.

Organized in seven thematic sections, the exhibition will feature a special section dedicated to providing a rare look at Cartier-crafted men's items. The installation also highlights original preparatory drawings, historic photographs, advertising materials, film clips and movie stills to provide insight into the evolving cultural setting of the time period that tells the story of aristocracy and aspiration, Art Deco, foreign fascination, masculinity, the art of smoking, age of glamour and icons of style.

MINING

Rockwell's Revenue +55%

Rockwell Diamonds' production rose 36% year on year to 9,581 carats in the second fiscal quarter that ended on August 31, while the value of sales rose 55% to $13.2 million. The company sold 8,864 carats, representing a 58% year-on-year increase, while the average price per carat fell 2% to $1,489. Rockwell's diamond inventory on August 31 totaled 5,954 carats, including royalty contract miners' inventory of 3,034 carats. Specifically from the company's Middle Orange River operations in South Africa during the second quarter, carat production rose 6% to 3,764 carats with volume sales up 43% to 3,810 carats. The value of revenue from this operation rose 36% to $9 million.


Gemfield's Profit Soars

Gemfields plc. reported that revenue rose to $160.1 million for the fiscal year that ended on June 30, far surpassing revenue of $48.4 million one year earlier. The integrated gemstone mining company's profit surged to $16.3 million compared with a loss of $22.8 million. Gemfields held cash of $36.8 million on June 30 and it estimated that inventory on hand, excluding fuel and other consumables, totaled $86.3 million. During the company's fiscal year, Gemfields' production of emerald and beryl fell 32.7% to 20.2 million carats.

Three auctions of emerald and beryl mined at Kagem (two of higher quality and one of lower quality) were held in Lusaka, Zambia, generating revenue of $84.4 million. Rough emerald auctions for gems that were not mined directly by the company were held in Jaipur, India, generating revenue of $22 million. Bulk sampling from Montepuez Ruby Mining Limitada in Mozambique resulted in approximately 6.5 million carats of ruby and corundum, up from less than 2 million carats one year earlier. Gemfields held an inaugural rough ruby auction in Singapore in June, generating revenue of $33.5 million from the sale of 1.82 million carats.


Diamond Fields Ends Afri-Can Marine Deal

Diamond Fields International Ltd. is terminating an agreement with Afri-Can Marine Mineral Corp., regarding the company's Namibian marine diamond concessions. Diamond Fields will now develop the properties independently and is planning a resource development program with an aim recommence mining before the end of 2015. The offshore explorer expects the first marine survey work to commence in October.

Ian Ransome, the CEO of Diamond Fields, said they had identified a number of potential resource targets on the concessions, which the company will fully explore.

True North Beings Construction

True North Gems Inc. has mobilized equipment to inaugurate construction of the Aappaluttoq ruby and pink sapphire project located in southwestern Greenland. Nicholas Houghton, the CEO of True North Gems, explained that construction will progress quickly, with immediate objectives to include transporting and installing a pre-fabricated loading dock, moving rolling stock required to commence road construction, establishing living quarters and completing infrastructure, which will enable planned production to commence in 2015.


ECONWATCH
Diamond Industry Stock Report

Little change on the index, however, all U.S. retailers were lower except for Blue Nile (+2%) and Charles & Colvard (+3%), while the Far East was mixed with Chow Sang Sang (+3%) and Chow Tai Fook (-3%) setting the trading range. Europe's shares were all lower, led by Kering (-3%), and India was mainly lower, led by Goenka (-12%), while Goldiam (+9%) pulled ahead. Mining shares were mixed with gains led by Gemfields (+5%) and loss leader was Shore Gold (-7%). View the extended stock report.
Sept. 24 Sept. 18 Chng.
$1 = Euro 0.780 0.774 0.006
$1 = Rupee 60.97 60.77 0.2
$1 = Israel Shekel 3.67 3.64 0.03
$1 = Rand 11.13 11.09 0.04
$1 = Canadian Dollar 1.11 1.09 0.02

Precious Metals
Gold $1,217.00 $1,225.50 -$8.50
Platinum $1,313.00 $1,342.00 -$29.00

Stock Indexes Chng.
BSE 26,744.69 27,112.21 -367.52 -1.4%
Dow Jones 17,210.06 17,265.99 -55.93 -0.3%
FTSE 6,706.27 6,819.29 -113.02 -1.7%
Hang Seng 23,921.61 24,168.72 -247.11 -1.0%
S&P 500 1,998.30 2,011.35 -13.05 -0.6%
Yahoo! Jewelry 1,149.15 1,163.33 -14.18 -1.2%

Rapaport Weekly Market Comment Oct. 3, 2014

Buyers’ market prevails as polished prices soften. Market for 30 to 40 pointers cooling as Chinese demand shifts to larger size, lower qualities. Sept. 1ct. RAPI -1%, 0.30ct. -1.5%. Suppliers under pressure with tight liquidity and large inventories. Golden Week jewelry sales forecast dampened by Hong Kong protests. Rough trading quiet ahead of next week’s small De Beers sight. Catoca mine 2013 production -2% to 6.6M cts., sales +3% to $594M, profit -24% to $100M. Gem Diamonds sells 198ct., type IIa rough for $10.6M ($53,746/ct.). U.S. Aug. jewelry sales +5% to estimated $4.9B. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED ON OCT. 10 & 17 DUE TO JEWISH HOLIDAYS.

RapNet Data: Oct. 2

Diamonds 1,371,917
Value $7,975,064,234
Carats 1,435,865
Average Discount -27.02%

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holiday:

Succot: Oct. 9-10, 16-17

With best wishes for the new year,
The Rapaport Group

October 3-7 Fri-Tue
Rapaport Melee Auction

New York (Closed Oct. 4 & 5)

www.rapaportauctions.com
October 12 Sun
New RapNet App

Download RapNet's most advanced and user-friendly app for the iPhone.

www.rapnet.com
October 22-29 Wed-Wed

Rapaport Single Stone Auction

New York & Israel View Details.

QUOTE OF THE WEEK
Wealthier Chinese are choosing to go further afield to make big-ticket purchases. One of the biggest reasons behind the [local] spending slump has been a reduced tourist flow from Mainland China to Hong Kong thanks to large ongoing pro-democracy protests. South Korea has become a hub for cool consumer trends.

Luca Solca | Exane BNP Paribas

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INDUSTRY
Gem Diamonds Sells 198ct. Stone for $11M

Gem Diamonds sold a 198-carat, type IIa rough diamond for $10.6 million, or $53,746 per carat. The stone was recovered at the Letšeng mine at the end of July. The sale demonstrated, once again, the continued robust demand for large high-quality diamonds, according to Clifford Elphick, the CEO of Gem Diamonds. Gem Diamonds declined to name the buyer.

U.S. Jewelry & Watch Sales +5%

U.S. jewelry and watch sector sales from all retail channels, including jewelry stores and department stores, increased 4.9% year on year in August, according to preliminary government estimates. Meanwhile, the consumer price index (CPI) for jewelry in August fell 4.7%, while the CPI for watches rose 4.5%.

Jewelry sales, independent of watches, in August increased 4.8% year on year to $4.94 billion, according to Rapaport News estimates. The increase was similarly strong to July's rate of growth of 5%. Jewelry sales for the first eight months of the year have risen 2.8% to $40.198 billion. U.S. sales of watches in August improved 5.8% to $673.6 million, helping to boost the year-to-date total by 3.7% to $5.476 billion. Overall, the U.S. jewelry and watch sector combined recorded a 2.9% year on year improvement in sales between January and August at $45.68 billion.

De Beers Sight Dates for 2015


Sight 1: January 19 to 23
Sight 2: February 23 to 27
Sight 3: March 23 to 27
Sight 4: May 4 to 8
Sight 5: June 8 to 12
Sight 6: July 13 to 17
Sight 7: August 24 to 28
Sight 8: October 5 to 9
Sight 9: November 2 to 6
Sight 10: December 7 to 11

RETAIL & WHOLESALE

Neiman Marcus Acquires Theresa

Neiman Marcus Group Ltd. reported that sales increased 4.2% year on year to $4.84 billion for the fiscal year that ended on August 2. Same-store sales at the group's specialty retail stores rose 3.4%, while online comparable-store sales jumped 12.9%. Cost of goods sold jumped 8.5% to $3.25 billion. The luxury retailer reported a loss of $147.2 million compared with a profit of $163.7 million one year earlier.

The group operates the physical and online properties of Neiman Marcus, Bergdorf Goodman, Horchow, Cusp and Last Call, and signed an agreement to purchase the luxury business Theresa and mytheresa.com from Christoph and Susanne Botschen and Acton Capital Partners for approximately $190 million (EUR 150 million). The purchase includes the Theresa flagship luxury store in Munich, Germany and the transaction is expected to close later this year.

Sears Raises Funds

Sears Holdings anticipates raising as much as $380 million from selling most of its stake in Sears Canada Inc. through a rights offering of up to 40 million shares, which would boost the beleaguered retailer's liquidity ahead of the Christmas season. Sears Holdings has a 51% stake in Sears Canada, but once the offerings is approved by regulators and completed, its share would fall to about 12%. The offering will be issued to Sears Holdings shareholders of record as of October 20 and company CEO Edward Lampert stated that his hedge fund, ESL Partners LP, would exercise their rights, raising at least $168 million. ESL Partners provided a $400 million loan to Sears Holdings in September.


Ultra-Wealthy Favor Spending on Leisure

The Spectrem Group reported that the ultra-wealthy in the U.S., or those worth $25 million or more, favor spending on leisure, entertainment and collectible items, such as art. More than half of those surveyed said that "saving and investing" is more pleasurable to them than spending. Data revealed that 60% of ultra-wealthy spend more than $10,000 annually on a vacation, while 30% spend that much on jewelry each year and 19% spent more than $50,000 on an automobile. Spectrem Group concluded that the ultra-wealthy have toned-down their public display of flash and embraced private clubs and social affairs.

Data Hints at Christmas Jewelry Spending

The Shullman Research Center found that 21% of U.S. adults who plan Christmas shopping expect to purchase jewelry this year; however, the percentage increases dramatically for the top 41% of households, or those earning $75,000 or more. In the group's latest proprietary "Insights Into Luxury, Affluence And Wealth" report, 27% of those earning between $75,000 and $249,000 plan to buy jewelry this Christmas season, while 29% of those earning between $250,000 and $499,999 and 38% earning $500,000 or more expect to make a jewelry purchase.

The top gift for all income levels was gift cards, followed by toys, video games, clothing, books, electronics and food. Jewelry tied with home electronics on the shopping list, but scored ahead of liquor, designer clothing and accessories, charitable donations, designer cosmetics, travel and wine or champagne. The average Christmas shopping budget for all adults who intend to spend was $904. However, those who earn between $75,000 and $249,000 expect to spend $1,387 this year, while adults earning between $250,000 to $499,999 budgeted $2,479, on average, and those with incomes of $500,000 or more expect to spend $4,228 on gifts.

De Beers Briefs NY Bankers

Rough diamond supplies are likely to plateau by 2020 and then significantly decline during the following decade, according to Howard Davies, the head of commercial development for De Beers, who briefed members of the New York banking community on Wednesday about fundamentals affecting the state of the diamond market. Estimated global rough production, according to De Beers projections, will drop to 115 million carats by 2030, down from the nearly 160 million carats expected for 2014.

This trend, Davies said, would likely result in a widening gap between demand and supply that the industry will have to prepare for and address, which leads to a great need for transparency, business acumen and accountability. Davies also discussed pricing, emerging markets and the future of further diamond exploration. The informational meeting was the first time De Beers reached out to the New York financial community with an aim to provide a comprehensive update on the latest developments in the diamond industry and the stringent standards of corporate compliance that De Beers will require from all of its sightholders for the upcoming 2015 contract period. Clients must agree to third-party audited financial statements and operate in accordance with IFRS.

Alex & Ani Move Up on Inc. 500

Alex and Ani reached No. 53 on Inc. magazine’s annual list of the fastest growing private companies, up from No. 94 in 2013. The jeweler reported revenue of $230 million in 2013, which was up 5,200% since it debuted on the list in 2011. Carolyn Rafaelian, the founder, creative director and CEO of Alex and Ani, said the brand empowers its customers with products they need and will be expanding offerings, including leather goods, all of which are made in the U.S. and inspire mindful manufacturing and consumerism.


Todd Reed Opens Second Showroom

Jeweler Todd Reed opened a second boutique this month, having remodeled a 4,000-square-foot retail space on Abbot Kinney Blvd. in Venice Beach, California. The three-story structure is quite modern, boasts a residential feel and open design and supports a living wall with 1,400 plants. The space serves as a jewelry-making studio, a bridal salon and VIP shopping area as well as sleeping quarters. Todd Reed is based in Boulder, Colorado and the company intends to open additional stores in towns with a similar vibe associated with Venice and Boulder.

ALROSA Tenders Polished Diamonds

ALROSA held a polished diamond auction in September and achieved a sales total of $2.976 million. The sale included 65 lots of goods totaling 192.91 carats. The top lot was a 16-carat fancy yellow diamond that sold for $486,000, while a traditional round diamond, weighing over 10 carats, achieved $592,360.

MINING

Firestone Narrows Loss

Firestone Diamonds narrowed its fiscal year loss by 50% year on year to $11.2 million for the period that ended on June 30. Revenue rose 52% to $9.9 million. The mining company's source of revenue came from the sale of 58,086 diamonds from the Liqhobong mine in Lesotho at an average price of $68 per carat. The company noted that rough prices were in line with market demand and held steady, considering that no large or special stones were sold.


Mountain Province Raises $89M

Mountain Province Diamonds Inc. entered into an agreement with a syndicate of underwriters, led jointly by BMO Capital Markets, RBC Capital Markets and Scotia Capital Inc., under which the underwriters agreed to buy, on a bought-deal basis by way of private placement, 15 million common shares at CAD 5 each for gross proceeds of $67 million (CAD 75 million). Concurrently, Mountain Province intends undertaking a non-brokered private placement of 5 million common shares at CAD 5 to be sold to Bottin (International) Investments Ltd. and other qualified investors. Net proceeds of $89.3 million will fund continued development of the Gahcho Kué diamond project and for general corporate purposes.

Catoca Production -2%

Production at the Catoca mine in Angola fell 2% year on year to 6.556 million ‎carats in 2013. Rough diamond sales in total increased 3% to $594.4 million, however, the average price fell 4% to $89.68 per carat. Catoca’s profit decreased 24% to $100 million during the year as a result of reforms to Angola's tax system, coupled with legal requirements that call for payment in local currency. ‎ The company increased its efforts during the year to meet pre-established production rates, improve its diamond selling prices and control the company's costs.

Zimbabwe Holds Rough Tender

Zimbabwe held a small rough tender of 74,000 carats from Marange Resources this week, which attracted 25 buyers, according to the state-run Herald. Another tender is planned for next week, followed by a larger rough auction in November. Local sales are being planned to avoid foreign intervention and hostility. A court order on an unrelated diamond industry matter in Belgium resulted in the seizure of $45 million in Zimbabwe rough diamonds during a tender in Antwerp last month. Zimbabwe Diamond Technology Centre's chairperson, Lovemore Kurotwi, said local auctions were long overdue, adding that Zimbabwe benefited more by selling locally.

Kimberley Diamonds Restates Reserves

Kimberley Diamonds reported an increase in reserves and resources at its diamond mines, stating that its gross mineral resources as of June 30, more than tripled to 11.426 million carats compared with 3.765 million carats one year ago. The increase was mainly due to the company's acquisition of Lerala and Smoke Creek in early 2014. However, the average price per carat of the company's resources fell 62% to $95.

Reserves at its Ellendale mine declined 47% to 2.173 million carats due to mining depletion, while Lerala contains 3.253 million carats valued at an average price of $74 per carat and Smoke Creek contains an estimated 6 million carats at an average price of $30 per carat. The company denied rumors that it was looking to dispose of its Lerala mine.


ECONWATCH

Diamond Industry Stock Report

A sharply negative week for stocks will all U.S., Far East and European shares lower except for a surprising jump on Birks (+14%). Some Indian shares took a bath, led by Lypsa (-41%) and C.Mahendra and Goenka (both -22%); however, Classic (+8%) headed gains. Mining shares lower, led by Lucara (-10%), but Dominion (+6%) reversed course and pulled out of its summer slump. View the extended stock report.
Oct. 2 Sept. 24 Chng.
$1 = Euro 0.789 0.780 0.009
$1 = Rupee 61.44 60.97 0.5
$1 = Israel Shekel 3.67 3.67 0.00
$1 = Rand 11.19 11.13 0.06
$1 = Canadian Dollar 1.12 1.11 0.01

Precious Metals
Gold $1,214.00 $1,217.00 -$3.00
Platinum $1,261.00 $1,313.00 -$52.00

Stock Indexes Chng.
BSE 26,567.99 26,744.69 -176.70 -0.7%
Dow Jones 16,801.05 17,210.06 -409.01 -2.4%
FTSE 6,446.39 6,706.27 -259.88 -3.9%
Hang Seng 22,932.98 23,921.61 -988.63 -4.1%
S&P 500 1,946.17 1,998.30 -52.13 -2.6%
Yahoo! Jewelry 1,128.18 1,149.15 -20.97 -1.8%

Rapaport Weekly Market Comment Oct. 8, 2014

Diamond market sentiment cautious. Buyers taking advantage of tight suppliers' liquidity as polished prices soften. Rough trading slow but ALROSA and De Beers maintain steady prices at Oct. sales with some increases in select items. Manufacturers ramp up operations ahead of Oct. 23 Diwali festival. Golden Week luxury sales dampened as Hong Kong’s pro-democracy protests reduce travel to Hong Kong and close some stores. Sotheby’s HK sells $75.3M (69% by lot) with 8.41ct., fancy vivid purple-pink, FL diamond selling for $17.8M ($2.1M/ct.). U.S. Aug. polished imports -6% to $1.6B, polished exports -6% to $1.6B. ALROSA launches Karpinskogo-1 mine. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED OCT. 10 & 17 DUE TO JEWISH HOLIDAY OF SUCCOT.

RapNet Data: Oct. 8

Diamonds 1,376,155
Value $7,940,080,359
Carats 1,420,109
Average Discount -27.15%

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holiday:

Succot: Oct. 9-10, 16-17

With best wishes for the new year,
The Rapaport Group

October 12 Sun
New RapNet App

Download RapNet's most advanced and user-friendly app for the iPhone.

www.rapnet.com
October 22-29 Wed-Wed

Rapaport Single Stone Auction

New York & Israel
www.rapaportauctions.com

November 11-19 Tue-Wed
Rapaport Melee Auction

New York & Dubai View Details.

QUOTE OF THE WEEK
The upcoming U.S. holiday shopping season will look very similar to 2013 as shoppers remain cautious on the economy and are concerned about disposable income, the rising cost of living and insufficient salary, leading surveyed participants to project an average household spend of $684, down from $735 in 2013.

Steven Barr | PwC

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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.

INDUSTRY

Polished Prices Drop

Polished diamond prices fell in September as manufacturers were placed under increased pressure by tight liquidity and high levels of inventory. There is steady U.S. and Chinese diamond demand but buyers are facing price sensitive consumers and are pushing for higher discounts. A buyers’ market prevails ahead of the holiday shopping season as prices continue to soften.

The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds fell 1% during September. RAPI for 0.30-carat diamonds declined 1.5%, while RAPI for 0.50-carat diamonds dropped by 0.1%. RAPI for 3-carat diamonds fell 0.7%.

Notably there was an increase of available goods, especially as the Gemological Institute of America (GIA) continues to work through its backlog. The Hong Kong show offers strong visitor traffic and suppliers who lowered prices sold well. The show signaled that there is good demand for 0.50-0.90 ct. GIA dossiers but profitability is low, while demand for 0.30-0.49 ct. has softened. High-end large diamonds are weak and there has been a general shift away from D-F, IF-VVS diamonds toward lower colors and clarities in all sizes.

RETAIL & WHOLESALE

Sotheby's HK Jewels Sale Tops $75M

Sotheby's Hong Kong sale of magnificent jewels and jadeite achieved $75,275,870 (HKD 584,140,750) and was 69% sold by lot. The top lot, an 8.41-carat, internally flawless, fancy vivid purple-pink diamond ring set a world auction record at $17,768,041 or $2.1 million per carat. Asian privates purchased nine of the top 10 lots, including the ring.

Rounding out the top three lots, a 3.32-carat, internally flawless, fancy vivid blue, emerald-cut diamond ring sold for $5,355,670 and a 35.72-carat, step-cut emerald and diamond ring achieved a sales price of $4,345,361. Sotheby's stated that a 17.16-carat, unheated Kashmir sapphire and diamond ring set a world record price per carat of $236,404, for a total sales price of $4,056,701.

Sotheby's stated that the previous world auction record for a fancy vivid pink diamond and record price per carat for a pink diamond were both achieved by a 5.00-carat fancy vivid pink diamond, which sold for $10,776,660, or $2,155,332 per carat, in Hong Kong in November 2009. The previous record price per carat for a sapphire was achieved by a 28.18-carat Kashmir sapphire and diamond ring that sold for $5,093,000, or $180,731 per carat, at Sotheby’s New York in April 2014.

Retail Sales Slide in Hong Kong

The Hong Kong Retail Management Association trade group surveyed members following China's National Day “Golden Week” holidays and concluded that overall sales performance was disappointing. Parts of Hong Kong have been experiencing student and citizen protests and barricades remained on the streets of three important shopping districts at the end of the holiday period on October 5. The majority of retailers recorded mid double-digit drops in same-store sales compared with one year ago, according to the trade group, with jewelers, fashion and accessories stores and catering businesses registering the steepest declines. The full impact will emerge more succinctly in the coming months, as both local consumption and tourist spending totals are tallied.

Diamonds Boost NY & Canada Ties

During the 47th Street Business Improvement District's (BID) annual meeting in Manhattan this week, guest speakers impressed upon the trade what an important economic story New York and Canada share. U.S. Senator Charles Schumer praised the Diamond District for its extraordinary financial impact to the state of New York, accounting for more than $24 billion in trade. Schumer also stressed the importance of fighting crime and maintaining strong security measures to ensure long-term safety of not only the Diamond District but the city, as a whole.

Consul General John F. Prato of Canada added that trade between New York and Canada represents a $32.2 billion relationship and that diamonds are accounting for an increasingly important role in his nation's economy. Canada exported $131.2 million in polished goods to the U.S. in 2013, but it imported $279.9 million in goods from the states, much of that from New York. Canada imported $34.9 million in rough goods to the U.S. for manufacturing.

Additionally, the BID recognized Martin Hochbaum, Robert Hadi and New York State Senator Brad Hoylman each with an annual Diamond Award for their contributions to the trade during the past year. The group approved their budget of $861,000 and board members for the year ahead. BID also announced a $42,000 grant for Diamond District members, who are interested, to participate in Israel's Jovella jewelry show next year.

Opposing Projections Season Christmas Outlook

The National Retail Federation (NRF) predicts that U.S. Christmas-season retail sales will increase 4.1% year on year to approximately $619.9 million for the months of November and December 2014. The projected increase is higher than the actual increases for 2012 and 2013, but lower than the 4.8% rise in 2011. Online retail sales growth is expected to be in the 8% to 11% range, according to the NRF.

While the NRF believes this prediction is optimistic, the group also agrees there is an increasingly wider divide between the "haves" and "have nots," with most sales growth coming from households above the median income level of approximately $50,000. NRF's chief economist, Jack Kleinhenz, stated that the U.S. recovery will not fully take shape until all income levels are able to freely spend.

The Christmas season is the most important time of the year for U.S. retailers as total sales represent more than 19% of annual figures. The NRF noted that during the Christmas season in 2013, jewelry stores experienced the bulk of their annual sales -- at 28%, or $9.3 billion nationwide. By comparison, seasonal sales at department stores, totaling $41.7 billion, accounted for 23.8% of that sector's annual total.

Roughly 40% of U.S. consumers who shop for the Christmas season are already on the annual hunt for gifts and bargains. The NRF also found that other reasons why consumers shop earlier each year is to spread out their shopping budget, avoid crowded stores during the traditional Thanksgiving and Christmas weeks and to avoid the general stress cause by the shopping chaos.

Meanwhile, in a much more detailed report, consulting firm PwC expects the U.S. Christmas-shopping season to be characterized by two distinct groups of consumers: the selectionists who represent 33% of shoppers and earn more than the median household income, and survivalists, who represent the majority (at 67%) and earn less than the median. Overall, PwC projected that holiday spending will drop nearly 7% year on year to $684 per household.

Complicating the 2014 Christmas outlook, there have been fewer selectionsists each of the past three years; nevertheless, PwC anticipates those households will spend about $978 on average. The average household spending projection for survivalists households was $377. PwC's retail practice leader, Steven Barr, said the spending divide among shoppers is widening, but retailers must cater to both segments with a seamless omnichannel experience, many deals to woo shoppers into stores and ensure zero tolerance for another season of data privacy invasion.

How will retailers attract shoppers? Eighty-four percent of consumers told PwC that "best prices" will be the main reason to visit a store to purchase gifts, remarkably that percentage jumped from 74% one year ago. Secondly, 43% of shoppers will shop based on frequency and quality of seasonal deals presented by the retailer. In addition, the share of online sales will continue to grow as shoppers seek convenience and value, with 50% of spending projected for physical stores and 43% of spending conducted exclusively online.

Jewelers Select Raymark Omnichannel Solution

The Luxury Jewelers Resource Group (LJRG), a consortium of privately-owned and independent jewelers, chose Raymark to provide an end-to-end, omnichannel suite for business needs that range from point of sale, mobile and merchandising to planning, purchasing and analyzing data. Raymark serves the jewelry, apparel, footwear, cosmetics, sporting goods, specialty and hard goods verticals. Raymark's real-time solutions will provide each LJRG select member with a 360 degree view of its customers and business operations across all channels.

The consortium includes Fink's Jewelers, Hamilton Jewelers, Hyde Park Jewelers, Lee Michaels Fine Jewelry, London Jewelers, Lux Bond & Green, Tapper's Diamond & Fine Jewelry, Tivol and Traditional Jewelers.

MINING

Severalmaz Begins Mining Project

ALROSA subsidiary Severalmaz JSC has begun mining at the Karpinskogo-1 kimberlite pipe at the M.I. Lomonosov deposit in the Arkhangelsk region of Russia. Karpinskogo-1 contains over 33 million carats, according to JORC reserves. The pipe is expected to process 600,000 tonnes of ore in 2014, with production set to ramp up to 2 million tonnes per year beginning in 2015. Severalmaz is set to refine and test small amounts of ore at the end of 2014 in order to approve diamond-grade and adjust processing technology at the pipe. ALROSA stressed that development of Severalmaz is an important part of its growth strategy. ALROSA's production is expected to reach 36 million carats in 2014. The company intends to increase its production to 41 million carats by 2021.

Rio Dismisses Glencore Speculation

Rio Tinto dismissed reports that it was still in discussion with Glencore for a possible merger, and the board concluded unanimously that a combined conglomerate was not in the best interests of shareholders. The board’s rejection was communicated to Glencore in early August and there has been no further contact between the companies on this matter, the company stressed.

Rio Tinto's chairman, Jan du Plessis, noted that the company has made significant progress in refocusing and strengthening its business under the leadership of Sam Walsh and Chris Lynch. “The board believes that the continued successful execution of Rio Tinto’s strategy will allow Rio Tinto to increase free cash flow significantly in the near term and materially increase returns to shareholders," the chairman said. Nonetheless, analysts at JPMorgan suggested a future deal still could take place, baring a number of regulatory issues and possible divestitures required .

Kennady Confirms Sample Grade

Kennady Diamonds Inc. revealed that diamond recovery results from the Kelvin mini-bulk sample, which was processed by dense media separation at the Geoanalytical Laboratories Diamond Services of the Saskatchewan Research Council (SRC), was 2.16 carats per tonne. A 25-tonne sample was recovered by drilling from ice in an area where the Kelvin kimberlite outcrops at surface, or where the country rock cover is relatively thin. Prior to processing, the Kelvin sample was divided into four batches based on four distinct kimberlite phases, the explorer stated. These four phases were defined in consultation with SRK Consultants of Vancouver.

Patrick Evans, Kennady Diamonds' CEO, said, "It's apparent that the number of larger diamonds in the sample is lower compared with previous Kelvin samples. A higher frequency of larger diamonds in previous samples resulted in sample grades well above 2 carats per tonne. The sampling and treatment methods used for the mini-bulk sample will be reviewed to understand the reasons for this."

Brazil Minerals Completes Purchase

Brazil Minerals Inc. purchased and formally received title to the remainder of Mineração Duas Barras Ltda., an alluvial diamond and gold concession. The company had planned to finish the acquisition by the end of 2014, but was able to expedite the process earlier. Duas Barras operates mineral rights on approximately 1,404 acres. To complete the acquisition Brazil Minerals disbursed $200,000 in cash and issued 2,142,857 shares of its restricted common stock to a private individual.

STATS
U.S.

Aug. $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,563 -6% $15,909 3%
Polished exports $1,596 -6% $14,632 10%
Net imports ($33) $1,277 -40%

Rough imports $20 -38% $432 31%
Rough exports $27 -31% $293 52%
Net imports ($7) $139 0%

Net diamond account ($40) -14% $1,416 -38%

ECONWATCH

Diamond Industry Stock Report

U.S. retailers were largely flat, except for Charles & Colvard (+13%) and JCP (-15%), which plummeted after the retailer confirmed consumer spending failed to raise comps. Industry firms in the Far East and in Europe were unchanged, but India was mainly lower led by C.Mahendra (-10%). Mining shares were mixed with Kennady (-25%) and Peregrine (+10%) defining the trading range. View the extended stock report.
Oct. 8 Oct. 2 Chng.
$1 = Euro 0.786 0.789 -0.003
$1 = Rupee 61.06 61.44 -0.4
$1 = Israel Shekel 3.70 3.67 0.03
$1 = Rand 11.06 11.19 -0.13
$1 = Canadian Dollar 1.11 1.12 -0.01

Precious Metals
Gold $1,219.00 $1,214.00 $5.00
Platinum $1,269.00 $1,261.00 $8.00

Stock Indexes Chng.
BSE 26,246.79 26,567.99 -321.20 -1.2%
Dow Jones 16,965.42 16,801.05 164.37 1.0%
FTSE 6,482.24 6,446.39 35.85 0.6%
Hang Seng 23,263.33 22,932.98 330.35 1.4%
S&P 500 1,964.69 1,946.17 18.52 1.0%
Yahoo! Jewelry 1,135.10 1,128.18 6.92 0.6%

Rapaport Weekly Market Comment Oct. 15, 2014

Polished centers quiet over Jewish holidays with sluggish Indian demand ahead of important Diwali holiday season. Buyer's market prevails as suppliers face tight liquidity. De Beers Oct. sight estimated at $460M; few extra goods (ex-plan) sold with more refusals and deferrals. Rough secondary market weak amid concerns of post-Diwali oversupply. Bankers are tightening up the diamond trade. Belgium Sept. polished exports +15% to $1.6B; rough imports +28% to $1.3B. Mixed outlook for U.S. Christmas with National Retail Federation expecting total sales +4% to $620B; but PwC foresees average spending -7% to $684 as households have less to spend. Signet appoints Mark Light as CEO following Michael Barnes resignation. Best wishes for a happy and enlightened Diwali to all our Indian friends. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED OCT. 17 DUE TO JEWISH HOLIDAY OF SUCCOT.
RapNet Data: Oct. 14
Diamonds 1,410,635
Value $7,958,693,951
Carats 1,439,810
Average Discount -27.34%

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RAPAPORT ANNOUNCEMENTS
Our offices will be closed for the following Jewish holiday:

Succot: Oct. 16-17

With best wishes for the new year,
The Rapaport Group

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October 22-29 Wed-Wed

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New York & Israel
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November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai View Details.

QUOTE OF THE WEEK
Lately, we’ve seen a few Dubai banks coming into the market for the first time. [This activity in the UAE] is the reverse of what has been happening in Europe.

Dilip Mehta | Rosy Blue

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.

INDUSTRY
Rap Melee Index Edges Lower During 3Q

The Rapaport Melee Index (RMI™) for small diamonds fell 6.8% to 129.32 during the third quarter of 2014, while year-over-year the index is up 2.6%. As expected, polished trading slowed during the third quarter and prices softened as manufacturers faced tight liquidity due to slow sales and diminished bank credit. Polished suppliers were prepared to reduce prices in order to improve cash flow and shrink their large inventory levels.

Suppliers are hoping the fourth-quarter holiday season will improve diamond trading and help ease liquidity concerns; however, there is no indication of a turnaround in trading conditions for now. Buyers sense that suppliers are under pressure to improve their cash flow and, are accordingly, pushing for higher discounts. Following the weak third quarter, the trading centers begin the all important holiday shopping season with an environment that clearly favors buyers.

De Beers Sight Estimate at $460M

De Beers October sight closed with an estimated value of $460 million as prices for several categories running between 2% and 4% lower; however, sightholders noted a shift in assortment to higher qualities, thereby pushing average prices higher by 2% to 3%. Overall, sightholder mood was subdued since buyers are more cautious because polished prices have been on the slide. Very little in the way of ex-plan goods sold, and there were a noticeable amount of sightholder refusals and box deferrals.

De Beers anticipated a small sight due to intentions to offer (ITO), especially given this time of year when manufacturers are facing tight liquidity. De Beers contended that many major retailers have switched to just-in-time supply chain management, leading manufacturers to jump with little notice and tie up working capital to polish a large amount of goods just before the Christmas retailing season. Nonetheless, De Beers remains very optimistic for strong diamond jewelry sales over the Christmas season.

RETAIL & WHOLESALE
U.S. Jewelry Store Sales +4%

U.S. jewelry store sales rose 3.7% year on year to $2.45 billion in August. As reported earlier on Rapaport News, jewelry and watch sector sales from all retail channels, including jewelry stores and department stores, increased 4.9% in August to $5.61 billion. Meanwhile, the consumer price index (CPI) for jewelry in August fell 4.7%, while the CPI for watches rose 4.5%. Jewelry store sales have recorded revenue of $20.13 billion for the first eight months of the year, representing a year-on-year increase of 4.5%, according to government estimates.

By comparison, advanced estimates for U.S. department store sales slipped 2.3% year on year to $12.28 billion in September. Department store sales for the first nine months of the year have dropped 2.5% to $114.2 billion.

Jewelry Sales +2% at LVMH

LVMH reported that revenue rose 4% year on year to $27 billion (EUR 21.4 billion) for the nine months that ended on September 30. The watches and jewelry segment recorded growth of 2% at $2.5 billion, while on a comparable-basis and at constant-exchange-rates, the increase was 5%. During the third quarter, LVMH observed an acceleration of sales for its jewelry segment, driven by Bulgari. Watch sales, however, continued to be impacted by a more cautious purchasing trend observed by multi-brand retailers in an uncertain economic environment, according to LVMH.

The group launched a new watch -- Lvcea by Bvlgari -- for women during the third quarter and it observed good sales across Hublot’s iconic lines. Overall, LVMH defined the global economic and financial market as "uncertain" and vowed to continue an operational strategy that is focused on innovative products and targeted geographic expansion for the most promising growth markets.

GJEPC: Heavy Discounts Haven't Materialized

The Gem & Jewelry Export Promotion Council (GJEPC) took issue with press reports citing that diamantaires had offered discounts of as much as 20% on inventory to free-up cash flow. The industry body explained that even with the planned closure of Antwerp Diamond Bank (ADB), there is no immediate impact on the trade given the adequate time to settle accounts. The GJEPC opined that sentiment is strong across the industry with the Diwali, wedding and Christmas seasons on the doorstep.

“The long term fundamentals of the diamond industry remain strong and robust as there are no new major (rough) finds, and sales of diamonds are growing in emerging markets of China and India. The rough diamond prices by De Beers have gone up by 3% to 5%, while the Russian goods have increased 2% to 5%. This only adds to the diamond and diamond jewelry prices, for which they are on an upward trend in the coming festive season and in the future,” said GJEPC's chairman, Vipul Shah.

Signet Appoints Light as CEO

Michael Barnes resigned from his position as CEO of Signet Jewelers Ltd. and from the board of directors, effective October 31. Mark Light, currently Signet's president and chief operating officer, will succeed Barnes and will also join the board. Todd Stitzer, the board's chairman, described Light as an experienced, strategic leader who has been deeply involved in the company's Vision 2020 Strategy, the Zale acquisition and its ongoing integration. Light stated that the company is on target to achieve a three-year synergy savings of between $150 million and $175 million from the Zale integration.

Analyst Ike Boruchow of Sterne Agee noted that Light is a "very strong choice" to lead Signet and with business fundamentals holding intact, such as fiscal guidance and merger synergies, he reiterated a rating of "Buy" and the group's long term outlook. "We continue to believe that the combined Zale/Signet business can generate earnings power in excess of $11 per share by 2017," Boruchow wrote in a note to clients.

Dubai's Banks Increase Trade Credit

Emirates NBD, Mashreq Bank and National Bank of Fujairah have begun extending credit to industry players that operate in the Dubai Diamond Exchange (DDE), its chairman, Peter Meeus, told Bloomberg News. Reportedly, the Dubai lenders extended their services as KBC Group begins closing its Antwerp Diamond Bank division. Dubai is aggressively pursuing commodity trading and with local banking support, the UAE hopes to boost its stature as a diamond trading center. Rosy Blue's CEO Dilip Mehta told Bloomberg that Dubai's banks could lend as much as $500 million for rough diamond trading by the end of the year.
GJPEC Presses Minister on Key Issues

Executives from the Gem & Jewellery Export Promotion Council (GJEPC) met with Saurabhbhai Patel, India's Minister of Finance for Gujarat, to discuss pressing trade issues, including taxation and assessment and infrastructure requirements for rough trading. The industry group argued that it was imperative for India to incorporate a turnover tax and a consignment scheme for rough diamonds, which is the case in Belgium and Israel, to become a world class rough trading hub.

Additionally, the group supported a presumptive tax system to simplify the existing tax and avoid litigation against industry players. Furthermore, a turnover-based tax system would attract foreign diamond mining companies to trade in Surat. GJEPC proposed introducing a turnover tax with net profit calculated for computing prevalent income tax at the rate of 2% of turnover for trading activity and 3% for manufacturing activity. The GJEPC also recommended broadening the Foreign Trade Policy to allow rough consignment imports, which aren’t permitted due to the absence of custom notification; designate diamond bourses as special zones where imports and trading will be allowed and address the availability of financing, in general.

The GJEPC stated that Export Credit Guarantee Corporation (ECGC) is unable to guarantee credit by the Public Sector Undertaking (PSU) banks and that those banks have been seeking extra collateral for additional lines of credit to the industry without ECGC guarantee. The minister assured the trade that he will take up these issues with the central government, directly with Nirmala Sitaraman, the Minister of State for Commerce and Industry.

MINING
Diavik Production Flat

Dominion Diamond Corporation reported that Diavik's rough production was flat year on year in the third quarter at 1.67 million carats. However, production for the first nine months of the year was up 10% to 5.69 million carats. The mining company revised its Diavik production outlook for the year higher to 6.5 million carats from an original estimate of 6.1 million carats. Processing of ore includes material from both mining and stockpiles. Mining activity will be exclusively underground with approximately 700,000 tonnes of ore to be sourced from A-154 North, 500,000 tonnes from A-154 South and 800,000 tonnes from A-418 kimberlite pipes.

Rockwell Records 2Q Loss

Rockwell Diamonds reported a loss of $1.5 million in the second quarter that ended on August 31 compared with a profit of $300,000 one year ago as higher revenue and lower unit costs were offset by lower beneficiation income, resulting in a $3.4 million downward inventory adjustment. Earlier, the company reported that revenue jumped 71% year on year to $16.9 million, with $14.2 million from direct diamond sales and an additional $2.7 million from its beneficiation agreement with Diacore, formerly Steinmetz. Production rose 36% to 9,581 carats, with 5,817 carats derived from the company's royalty mining contractors. Inventory at the close of the second quarter totaled 5,954 carats carried forward, including 3,034 carats on royalty mining contracts.

Miners Adjust During Ebola Outbreak

Octéa Ltd contended that diamond production and sales were proceeding in Sierra Leone, following the lifting of a region wide lock-down to contain Ebola. The company does not anticipate any negative impact to production this year as a result of the virus; however, at its Tongo diamond project, work on a definitive feasibility study faced logistical issues caused by Ebola containment efforts. Octéa's anticipates at least another six months before the report is ready.

Stellar Diamonds pushed back its expected Tongo area feasibility study results to mid-2015 and still doesn't know when it can resume ground work. In Guinea, Stellar Diamonds commenced trial mining at its Baoulé project, which is located in an area that has not been affected by Ebola.

Both companies are monitoring the health of staff and participating in community Ebola containment efforts.

STATS
Belgium

Sept. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,572 15% $11,000 6%
Polished imports $1,523 10% $10,783 6%
Net exports $50 $223 38%

Rough imports $1,340 28% $11,519 16%
Rough exports $1,416 18% $12,030 11%
Net imports ($76) -51% ($511) -42%

Net diamond account $125 -8% $734 -30%

ECONWATCH
Diamond Industry Stock Report

One day of panic doesn't make a week, although consumer spending fundamentals -- which don't look great -- are worrying retail investors who were planning on a strong fourth quarter. U.S. shares all down except for Movado (+1%), with Birks (-20%) and JCP (-13%) leading the drop. European shares were lower, led by Damiani (-7%) and all of India's firms were down except for Classic Diamond (+3%) and Goenka (+15%). Mining shares were mixed, however, several firms were down by double-digits: Kennady (-13%), Rockwell (-19%), Shore (-13%), True North (-17%), Stellar (-11%). View the extended stock report.
Oct. 15 Oct. 8 Chng.
$1 = Euro 0.780 0.786 -0.006
$1 = Rupee 61.56 61.06 0.5
$1 = Israel Shekel 3.70 3.70 0.00
$1 = Rand 11.09 11.06 0.03
$1 = Canadian Dollar 1.13 1.11 0.02

Precious Metals
Gold $1,239.60 $1,219.00 $20.60
Platinum $1,257.00 $1,269.00 -$12.00

Stock Indexes Chng.
BSE 26,349.33 26,246.79 102.54 0.4%
Dow Jones 16,141.67 16,965.42 -823.75 -4.9%
FTSE 6,211.64 6,482.24 -270.60 -4.2%
Hang Seng 23,140.05 23,263.33 -123.28 -0.5%
S&P 500 1,862.49 1,964.69 -102.20 -5.2%
Yahoo! Jewelry 1,095.09 1,135.10 -40.01 -3.5%

Rapaport Weekly Market Comment Oct. 24, 2014

Rough prices discounted on secondary market as sightholders pay for the privilege of steady supply. Polished markets under pressure with liquidity concerns as Antwerp Diamond Bank begins shut down process and other banks tighten credit. Global diamond demand weak. Hong Kong trading declines as Chinese government restricts currency transfers and cracks down on corruption. Indian market closes for Diwali with soft holiday sales. U.S. market steady with good expectations for holiday season. Christies NY sells $34M (75% by lot). Chow Tai Fook 2Q retail sales -10%. ALROSA 3Q production -2% to 9.7M cts., De Beers +6% to 8.2M cts. We wish all our friends a happy, enlightening Diwali.


RapNet Data: Oct. 23

Diamonds 1,395,949
Value $7,878,008,755
Carats 1,412,685
Average Discount -27.45%

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RAPAPORT ANNOUNCEMENTS

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October 22-29 Wed-Wed

Rapaport Single Stone Auction

New York & Israel

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November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai View Details.

QUOTE OF THE WEEK
[W]e note a greater number of deep promotions during the month of October in the U.S., while it should typically be sequentially deeper, as it is a clearance month, we are more concerned with that increase, especially since inventory levels are in quite good shape. We believe retailers must rely on inventory conservatism to preserve merchandise margins and begin to control promotions better on a year-over-year basis.

Adrienne Yih-Tennant | Janney Capital Markets


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INDUSTRY

ALROSA's Production -2% in 3Q

ALROSA sold approximately $1 billion worth of diamonds during the third quarter that ended on September 30, according to the company's preliminary estimate. ALROSA sold 5.3 million carats of gem-quality goods with an average price of $182 per carat and 2.3 million carats of industrial stones for $16 per carat during the quarter. The company noted that group revenue for the first nine months of the year rose 8% year on year to approximately $3.7 billion for 28.8 million carats. ALROSA told investors that diamond market performance remained positive and that rough diamond prices have risen about 7% since January.

Production during the third quarter fell 2.1% year on year to 9.737 million carats; however, seasonal production growth at ALROSA's alluvial deposits helped to boost production compared with the second-quarter totals. ALROSA stated that production decreased, in part, due to the reduction in ore processing at its Udachnaya pipe, where output plummeted 39% to 293,000 carats and the company's Mirny division output contracted 67% to 621,000 carats. ALROSA's Aikhal division output jumped 21% to 2.981 million carats, while production jumped nearly 12% for the Nyurba division to 2.264 million carats. Severalmaz's production rose to 524,000 carats from 155,000 carats one year earlier and Almazy Anabara's output increased 17% to 1.82 million carats, however, Nizhne-Lenskoye's production slipped 12% to 1.234 million carats.

Production for the first nine months of 2014 has fallen 5% year on year to 25.655 million carats, however, ALROSA expects to achieve full year production of 36 million carats in 2014.

De Beers Production +6% in 3Q

De Beers production rose 6% year on year to 8.193 million carats in the third quarter of 2014, Anglo American reported. The increase was largely due to strong output at the company's Jwaneng mine in Botswana where production grew 27% to 3.3 million carats. Still, higher output from Jwaneng was partially offset by lower production from Canada and South Africa, where the Voorspoed mine's production dropped 40% to 143,000 carats and Venetia's output declined 13% to 776,000 carats.

In total, production from De Beers Consolidated Mines in South Africa decreased 17% to 1.126 million carats. Production at Debswana, a joint venture with Botswana, which included the Orapa, Letlhakane, Damtshaa and Jwaneng mines, rose 14% to 6.224 million carats. Production at Namdeb, which includes both terrestrial and marine mining in Namibia, increased by 1% to 449,000 carats. De Beers Canada production from the Snap Lake and Victor mines declined 19% to 394,000 carats. The company also reported progress at its developing Gahcho Kué project, after attaining the necessary permits and licensing.

During the first nine months of 2014, De Beers production grew 10% to 24.2 million carats. De Beers expects to produce 32 million carats in 2014, which is at the top end of the company's earlier guidance of between 31 million to 32 million carats.

U.S. CPI Eases for Jewelry, Rises on Watches

The U.S. consumer price index (CPI) for jewelry declined 3.8% year on year to 172.35 points in September, although it was the highest reading since January. The CPI for watches, meanwhile, rose 1.9% to 125.29 points, marking the highest reading since November 1997. Market prices for precious metals during the month remained under pressure with the average price of gold down approximately 7.5% compared with one year ago, while platinum experienced a difficult month as the average price fell about 10%.

Diamond price movement was mixed in September, according to the RapNet Diamond Index (RAPI), the global benchmark for polished goods. Polished prices for 0.30-carat rose 7.8% year on year, while they increased 7.6% for 0.50-carat stones, according to RAPI. However, polished prices for 1-carat diamonds fell 5.4% and prices were down by 3.2% for 3-carat diamonds. By comparison, the CPI for all product categories in September increased 1.7% year on year to 237.63 points.

RETAIL & WHOLESALE

Diwali Sales Point Higher

Gold prices were running about 7% lower this Diwali season compared with 2013, which appears to be giving a welcomed sales boost to retail jewelers across India. The All India Gems & Jewellery Trade Federation (GJF) anticipates that gold imports this quarter could increase by as much as 75% year on year, given easy comparisons with 2013 due to restricted imports, coupled with pent up consumer demand this quarter.

Rajesh Exports Ltd. anticipated jewelry sales rising between 30% and 40% during Dhanteras, and, as noted by several news reports, gold purchases were running 15% to 20% higher on average for Dhanteras. The Popley Group predicts gold and jewelry sales could improve between 20% and 30% for Diwali season. Haresh Soni of GJF observed positive consumer sentiment and strong rural demand for gold due to lower prices would boost overall trading. Consumers are favoring heavy jewelry and gold and silver coins so far this Diwali.

Sales Weaken at Chow Tai Fook

Chow Tai Fook's retail sales fell 10% year on year in its second quarter that ended on September 30, though the retail giant did not provide hard totals. Chow Tai Fook faced a high base effect caused by the gold rush one year ago. Group retail sales in Mainland China fell by 2% and declined by 20% in Hong Kong, Macau and other Asian markets. Chow Tai Fook attributed the slightly better performance in China to the relatively lower base effect compared with the other Asian markets, coupled with better consumer sentiment in China for gem-set jewelry during the period.

Chow Tai Fook's same-store sales growth of gem-set jewelry was flat, while gold product same-store sales decreased by 33%. Chow Tai Fook opened 58 new points of sale in the second quarter, including three in Hong Kong, Macau and other Asian markets. The company had 2,181 points of sale as of September 30.

Revenue Falls at Luk Fook

Luk Fook Holdings reported that same-store sales dropped 21% year on year in the second quarter that ended on September 30, with comparable-store sales falling 30% in Mainland China and plunging 20% in Hong Kong and Macau. Luk Fook did not provide hard totals. Gold product same-store sales fell 28%, while gem-set jewelry same-store sales declined 6%. The group had 1,333 points of sale as of September 30, which included 1,190 licensed stores in Mainland China and 143 self-operated stores consisting of 46 self-operated stores in Hong Kong, 10 stores in Macau, 82 shops in Mainland China and five overseas.

Additionally, Luk Fook reported that same-store sales for National Day Golden Week, which took place October 1 to 7, rose 28% in Mainland China. Gold jewelry same-store sales rose 29%, while gem-set jewelry grew by 28%.

Christie's NY Sale Achieves $34M

Christie's New York sale of important jewels achieved a total of $33.7 million and was 75% sold by lot. The top lot was a cushion-cut, 101.36-carat, L, VS2 diamond that sold for $4.98 million or an average $49,100 per carat. A rectangular-cut and circular-cut, 81.83-carat, K, VVS1, potentially internally flawless, faint brown diamond pendant necklace achieved $3.2 million, while a rectangular-cut, 23.89-carat, H, potentially internally flawless diamond sold for $1.6 million or $65,000 per carat. A rectangular-cut, 16.07-carat, F, potentially internally flawless diamond achieved $1.5 million or an average $93,700 per carat, while a rectangular-cut, 16.99-carat, G, VVS2 diamond sold for $1.3 million or $66,700 per carat.

Cash America's Profit -79%

Cash America International Inc. reported that its revenue rose 7.9% year on year to $472.2 million during the third quarter that ended on September 30. Net revenue, meanwhile, increased 11.9% to $276.4 million and expenses rose 5.9% to $231.4 million as loss rates from the consumer loan portfolio were lower overall and pawn-related revenue was higher. Total pawn loan balances in the U.S. were up 6.5% and same-store pawn loan balances were up 2.1%.

Profit fell 78.5% to $9.9 million, as management implemented plans that generated $14.1 million in after tax expenses related to the sale of non-strategic operations, the early repayment of long-term debt and a corporate reorganization for the retail services segment. One year earlier, Cash America gained an after tax net benefit of $21.9 million from a tax credit that was partially offset by a significant litigation settlement during the period.


Kalyan Jewellers Secures Funding

Kalyan Jewellers received a $196 million (Rs 1,200 crore) round of investment funding from an affiliate of Warburg Pincus for expansion. With 55 outlets across South India, Mahatashtra, Gujarat, Punjab and New Delhi, the brand aims to enter newer regions in India with a special focus on strengthening its existing presence in North and West of the nation. The brand also has a strong presence in the United Arab Emirates with six exclusive outlets. The investment will also enable Kalyan Jewellers to scale up its presence in the Middle East -- opening in Kuwait and Qatar -- and also enter Southeast Asia.

NRF: 25% Have Jewelry on Wish List

U.S. consumers who purchase gifts during the 2014 Christmas season anticipate spending an average of $596.53, according to the National Retail Federation's (NRF) annual holiday intentions survey. The anticipated figure represented an increase of 6.9% from actual gift spending in 2014, although the average is dramatically different by income segment. The NRF noted that U.S. consumers who earn less than $50,000 per year expect to spend $368.97 holiday gifts this year, while those earning more than $50,000 plan to spend $797.68, on average. Nearly 57% of U.S. consumers also plan to take advantage of retail sales or discounts during the Christmas season to make a self- or non-gift purchase with the average anticipated amount down 6% year on year to $126.66, according to the NRF.

The most popular gift item that consumers hope to receive is a gift card this year, as noted by 62% of those surveyed. Nonetheless, 24.8% said that jewelry or a precious metal accessory gift was on their wish list for 2014, a percentage that is on the higher side of the 10-year trend and the best since 2006 when 26% selected the jewelry category. Other popular wish list gifts were clothing (52.5%), consumer electronics (34.6%), books, CDs, DVDs, videos or games (43.1%) and items for the home (22.9%).


Sotheby's Plans Geneva Sale on Nov. 12

Sotheby's Geneva will hold its magnificent jewels and noble jewels sale on November 12, offering important jewels from the collection of Dimitri Mavrommatis, as well as a selection of historic jewels with noble provenance. The top lot from the noble jewels collection is a natural pearl necklace, formerly from the collection of Joséphine de Beauharnais, Queen of Sweden and Norway. The necklace, accompanied by an oil portrait of the queen wearing the piece is expected to fetch a price between $800,000 and $1.4 million.

Other top lots include a 55.19-carat, fancy yellow diamond pendant by Gübelin expected to fetch up to $2 million and a pair of perfectly matched D, flawless excellent polish, excellent symmetry, type IIa diamonds weighing 20.05-carat and 20.06-carat, cut from a 162.02-carat rough diamond. The pair of diamonds has a presale estimate of between $6.3 million to $8.3 million.

Sterling, Eurostar Receive Trademarks

The U.S. Patent & Trademark Office assigned the trademark "Diamonds In Rhythm" to Sterling Jewelers Inc., the U.S. subsidiary of Signet Jewelers Ltd., on October 14 with the registration number 4622350. The trademark was first used in October 2013 in marketing jewelry that is made in whole or with a significant part of diamonds. The USPTO also issued the trademark "EUROSTAR" to Eurostar Diamond Traders of Belgium on October 14 with registration number 4619155.


Russia Considers Law on Synthetics

Russia's Finance Ministry and ALROSA outlined an amendment to federal law that would oblige jewelers to mark synthetic diamonds and sell them separately, according to RBC News. The amendment was discussed in the State Duma's working group on natural resources, which considered man made stones not to be defined as precious stones. While lab-grown diamonds were not viewed as a threat to diamonds, ALROSA was concerned that synthetics are being sold as natural in stores and at some diamond exchanges, according to the report.

Core Jewels Adds NFC to Its 'One' Collection

Core Jewels unveiled a new collection of diamond jewelry in Japan that is branded "One" -- Time of Love. The collection features rings and matching pendants, all of which incorporate near field communication (NFC) technology that can unlock private digital content on computers and Android phones. With advanced NFC technology, an entrusted piece of jewelry now evokes the richness and emotional connection that will become the future of high-end jewelry, according to the company. The emotional connection behind "One" jewelry evokes an album of life where the wearer interacts and connects precious memories with loved ones.
Shane Co. Installs Retalon Omnichannel Solution

Shane Co. implemented Retalon inventory and assortment management solutions to maintain product assortment and inventory levels across all of its channels. Retalon provides retail predictive analytics solutions and, in Shane Co.'s case, which is very complex with thousands of jewelry products and loose gemstones, the service provider helped the jeweler to manage inventory more accurately, according to Tom Shane, the chairman of Shane Co. The jeweler stated that it reduced one of its main product lines by 40%, while also increasing sales in that same product line by 20%, using Retalon's solution. Shane Co.'s previous process required cumbersome data analysis, taking more than a month to complete, according to the firm, but predictive analytics rebalanced the jeweler's entire inventory in just 15 minutes.

Fairtrade Gold Enters Swiss Market

Max Havelaar Switzerland began to offer Fairtrade gold jewelry through Coop City and Christ Uhren & Schmuck, both parts of the Coop Group. The gold has been mined by Fairtrade gold mine Sotrami, which is located in southern Peru. Switzerland joins a number of Fairtrade gold markets where labeled and traceable gold jewelry is already available. After launching in the U.K. in February 2011, Fairtrade gold has expanded to Australia/New Zealand, Belgium, Canada, Denmark, Ireland, Luxembourg, Netherlands, South Korea, Sweden, Czech Republic, Hong Kong, Indonesia, India, Norway and Trinidad.

Hari Krishna Rewards Employees

Hari Krishna Exports Pvt. Ltd. celebrated Diwali in a big way by rewarding employees with cars, flats, foreign trips and SIva Collection-Kisna Diamond Jewelry. Overall, the company's gifts included 424 Fiat Punto cars, 207 apartments and 570 SIva Collection-Kisna Diamond Jewelry that were awarded to 1,201 employees from the manufacturing unit. In Mumbai, 86 employees were rewarded as well, which included foreign trips with their families and SIva Collection-Kisna Diamond Jewelry.

HRD Awards Four Retailers in China

HRD Antwerp recognized diamond jewelry retailers Chow Tai Seng, Kela, Splendia and Tesiro, with an HRD Antwerp Recognition Award in Shanghai. The recognition followed the retailers' relentless efforts to bring Antwerp's diamond heritage to the Chinese consumer through special programs. Serge Couvreur, the CEO HRD Antwerp, stated that the diamond craftsmanship and pioneering design that Antwerp is known for has begun to resonate across China's diamond jewelry market, in large part due to its retail partners.

MINING

Lucara Tender Achieves $46M

Lucara Diamond Corp. achieved $46.4 million from its third exceptional stone tender, which closed on October 21. The company sold 14 diamonds for an average price of $30,129 per carat, with 12 of the 14 lots offered achieving over $1 million and six diamonds fetching over $4 million. The highest value diamonds sold during the tender included a 203-carat diamond that sold for $8.2 million, a 239-carat stone achieved $7.2 million and a 141-carat diamond fetched $6.1 million. Lucara will report its third quarter results in November.

Stornoway Optimizes for Large Diamond Recovery

Stornoway Diamond Corporation optimized its plant design for the Renard diamond project in order to add large diamond recovery capacity early in the project. In January 2013, the plant's optimized feasibility study contemplated a diamond plant flow-sheet geared to recover diamonds up to 30mm in diameter (equivalent to a 200-carat round octahedral stone), leaving room to retrofit a large recovery capacity later, and a cost estimate of about $148 million (CAD 163 million), excluding capitalized operating costs.

But with new modifications made recently, the plant design will recover diamonds up to 45mm in diameter (equivalent to a 600-carat round octahedral stone), with a corresponding capital cost estimate of $130 million. Stornoway expects to pour concrete for the plant’s foundation in April, but continues to review design efficiencies in order to achieve cost saving.

Stellar's Sample Beats Estimate

Stellar Diamonds recovered 196 carats, including several large diamonds, during trial mining at its Baoulé kimberlite pipe in Guinea. The sample yielded two octahedral diamonds weighing 5.50 carats and 5.10 carats. Additional diamonds recovered included a 3.10-carat, 1.90-carat, 1.30-carat and a 1.20-carat stone. Half of the diamonds recovered were classified as gem-quality and the average grade of 17 carats per hundred tonnes in the trial exceeded the expected minimum grade of 13 carats. The company expects to hold its first diamond sale toward the end of 2014.

Separately, Stellar said it increased health screening at its project sites and at the homes of the company’s employees due to the Ebola virus outbreak. The company also implemented restrictions on staff travel and a total ban on visits to the epicenters of the Ebola virus outbreak in Guinea

Rio Extends CEO's Tenure

Rio Tinto's board extended the tenure of its CEO, Sam Walsh, and the chief financial officer, Chris Lynch, providing a strong endorsement of their leadership, the group’s strategy and its focus on driving shareholder value. Rio Tinto's chairman, Jan du Plessis, praised Walsh for his enthusiasm and request to extend tenure, adding both men had led a successful corporate transformation and established a track record of delivering on their promises. Over the past year, Rio Tinto has increased cash flow from operations, achieved significant operating cash cost improvements, reduced net debt and refocused capital expenditure on profitable projects.

Anjin Workers Strike

More than 250 workers at Anjin's mining operations in Zimbabwe went on strike, demanding back pay and better working conditions, according to The Zimbabwean. Workers claimed that even when management offered some payment weeks after the scheduled payday that the amount was only half of the normal salary. Anjin told employees that they have to fund ZANU-PF (political) events and pay royalties for diamonds mined. The Zimbabwe Diamond and Allied Workers Union (ZIDAWU) expressed deep concern that diamond miners pay slave wages, force 12 hour work days instead of mandatory 8 hours and that operations are shrouded in secrecy.

ECONWATCH

Diamond Industry Stock Report

As expected, nearly all industry stocks bounced back nicely this week. Birks (+9%) led gains in the U.S., while only Movado (-2%) was down and all European shares were higher, led by Damiani (+9%). Far East shares were higher except for Luk Fook (-2%). Indian shares were mixed with C.Mahendra (-17%) and Rajesh Exports (+6%) defining the spread. Miners were slightly lower except for Kennady (+22%) and Stellar (+19%). View the extended stock report.
Oct. 23 Oct. 15 Chng.
$1 = Euro 0.790 0.780 0.010
$1 = Rupee 61.18 61.56 -0.4
$1 = Israel Shekel 3.77 3.70 0.07
$1 = Rand 10.97 11.09 -0.12
$1 = Canadian Dollar 1.12 1.13 -0.01

Precious Metals
Gold $1,232.30 $1,239.60 -$7.30
Platinum $1,253.00 $1,257.00 -$4.00

Stock Indexes Chng.
BSE 26,851.05 26,349.33 501.72 1.9%
Dow Jones 16,677.90 16,141.67 536.23 3.3%
FTSE 6,419.15 6,211.64 207.51 3.3%
Hang Seng 23,333.18 23,140.05 193.13 0.8%
S&P 500 1,950.82 1,862.49 88.33 4.7%
Yahoo! Jewelry 1,144.01 1,095.09 48.92 4.5%

Rapaport Weekly Market Comment Oct. 31, 2014

Polished trading quiet with Indian market closed for Diwali holiday. U.S. market stable with good demand for commercial-quality SI-I2 diamonds. Cash buyers gain higher discounts as suppliers seek to boost liquidity. Rough trading slow while sightholders hope for lower prices at next week’s De Beers sight. Petra Diamonds sells 232.08ct. rough for $15M ($65,577/ct.) to Diacore. India’s Sept. polished exports +11% to $2.7B, rough imports +16% to $1.5B. Titan’s 2Q revenue +56% to $580M, profit +29% to $39M. Blue Nile’s 3Q revenue +7% to $106M, profit -43% to $1.7M. Rio Tinto says record prices at Argyle pink diamond tender. Botswana to appoint new mines minister following elections.


RapNet Data: Oct. 30

Diamonds 1,336,201
Value $7,743,138,328
Carats 1,384,988
Average Discount -27.76%

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QUOTE OF THE WEEK
The industry and its committed bankers are well aware that a good client is not just someone with a high turnover, but -- more importantly -- someone who has a sound business model, a balanced distribution, is focused on profitability, acts responsibly, meets all compliance requirements and is well-governed.

Dilip Mehta | Rosy Blue

The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.

RETAIL & WHOLESALE

Swiss Watch Exports +3%

Swiss watch exports rose 2.8% year on year to $2.065 billion (CHF 1.963 billion) in September, according to the Federation of the Swiss ‎Watch Industry.‎ Wristwatch exports rose 3.2% to $1.951 billion, while the number of units shipped grew 4.2% to 2.672 million. The value of other timepiece exports fell 3.8% to $48.1 million. Exports to Hong Kong rose 3%, while exports to the U.S. grew 7.3%, but exports to China fell 4.2%. Exports to Japan increased 2%, while European markets were mixed.

Blue Nile's Profit Sinks

Blue Nile Inc. reported that sales rose 6.9% year on year to $105.8 million in the third quarter that ended on September 28. Cost of sales increased 8.3% to $86.9 million and income plummeted 43.2% to $1.65 million or 14 cents per share. Gross profit as a percentage of sales fell to 17.8% compared with 18.9% one year earlier. U.S. engagement jewelry sales at Blue Nile rose 5% year on year to $60.8 million, while non-engagement jewelry revenue fell 1.7% to $23.5 million. International sales jumped 25.6% to $21.5 million. Sector sales were weaker than the U.S. jewelry market as a whole, as determined by Rapaport News.

In other developments, Blue Nile added Sloane Street and Lisa Jenks to its designer collective initiative, which was launched in March to broaden offerings through partnerships with jewelry designers. The collective already includes Monique Lhuillier Fine Jewelry and Zac Posen. Sloane Street will feature 18-karat gold jewelry with rubies, sapphires and other precious and semi-precious stones as well as "The Sage by Sloane Street" that includes diamonds, pearls and a signature "rough diamond" in every piece. Jenks' designs are inspired by the cultural landscape and handcrafted with pearls and sterling silver.

Titan's Profit Soars

Titan Company Ltd. reported that revenue rose 55.7% year on year to $580 million (INR 35.65 billion) in the second quarter that ended on September 30. The strong increase was, in part, due to the redemption of "Golden Harvest" accounts from existing customers, which were set to be closed as a result of new regulatory changes, according to the company. Titan's profit rose 28.6% to $39 million. Watch division revenue was given a boost from strong sales of Titan and Fastrack brands and rose 20% to $85.7 million. Jewelry business sales jumped nearly 65% to $476 million. Titan operates precision engineering and eyewear divisions and a business-to-business service, with a combined revenue increase of nearly 21%.

Overstock Debuts Jewelry Vault Concept

Overstock.com purchased Bidz.com's inventory out of foreclosure to sell online in its new "Jewelry Liquidation Vault." Bidz.com had estimated the value of the inventory at $89 million. Overstock also said it has trusted relationships with jewelry merchants and designers from around the world who will be able to use the liquidation vault to showcase and sell their own jewelry online. Overstock claimed that Bidz.com inventory was its largest purchase to date.

Equity Firm Buys Christ

Private equity firm 3i Group purchased the Christ jewelry stores from retailer Douglas and its equity partner Advent. The deal was reportedly worth $510 million (EUR 400 million), including debt. Insiders told Reuters that 3i is investing $273 million in the jewelry chain. Christ's annual revenue was reported at about $508 million for the latest fiscal year, it employs 2,400 and operates 220 stores. Douglas sold the jeweler to focus on its core retail business of beauty and perfumes. The sale is subject to regulatory approval.

Crisis or Crying Wolf?

Dilip Mehta, the CEO of Rosy Blue, penned an essay stating that the mood in the market, while currently at a low point, should be getting stronger due to several factors. Aside from a round of headlines about banks shunning the industry and dealers offering deep discounts to improve cash flow, the actual liquidity challenge is the result of specific measures all of which can be addressed. Paramount to moving forward, however, is to operate with sound business practices. Read the essay and weigh in.

Rapaport Says Put America First

Putting America first by adding and promoting value to diamonds and jewelry was the cornerstone of a presentation by Martin Rapaport, the chairman of the Rapaport Group, to members of the DMIA, AGA, WJA and other industry groups on October 27 in Manhattan. While the U.S. market is often taken for granted, Rapaport said it remains most important to the industry and is the “primary place” for the last 18 inches — a designation that refers to the retail counter and the final distance that a diamond travels over its long journey from mine to consumer. Furthermore, the U.S. market leads the world in “adding value” to diamond products.

Making customers happy, Rapaport said, is the “name of the game” for diamond dealers and retailers and that is how the market will prosper moving forward. At a time when some banks are pulling out of the diamond business it is up to dealers and retailers to create demand. Branding, utilizing social media, championing ethics, communicating value to customers and “distinguishing yourself” from competitors are key to success, in Rapaport’s view. Dealers must also invest in and develop those practices in order to survive and thrive in today’s increasingly challenging and disruptive business environment. “Go deeper,” he said. “Don’t just sell diamonds, sell relationships.”

Chow Tai Fook Unveils Anniversary Diamond

Chow Tai Fook will unveil a 104-carat, D, internally flawless, round, brilliant-cut that it named the Cullinan Heritage 1 in honor of the company's 85th anniversary, which will take place on November 28. The diamond will be showcased alongside other diamonds that were cut from the same 507.55-carat, type IIA rough diamond known as the Cullinan Heritage, which the company purchased in 2010 for $35.5 million. Master craftsmen have spent the past three years analyzing and perfecting the best approach to cutting and polishing the diamond. The stone is graded by Forevermark and will be set in a special design by a world-renowned jewelry artist.

JTV Taps Crowdsourcing for Top Gem

Jewelry Television (JTV) is tapping into crowdsourcing to determine JTV's Gem of the Year initiative, based on the most votes for gemstones between October 28 and November 9. JTV gemstone buyers, gemology experts and merchandisers narrowed the selection to three top-performing gemstones at the network: chrome diopside, sometimes known as tashmarine; morganite and tanzanite. The initiative creates a lot of buzz for the network leading into the all-important Christmas season.

Price Matters, Walmart Weighs Matching

In preparation for a wickedly competitive Christmas season in the U.S., retail giant Walmart is testing an initiative that would meet competitors' online prices. Store managers already have wiggle room on certain product prices from their local markets, but Walmart's executives have expressed reservations that a nationwide rollout could further erode profitability during the most important season of the year.

However, Walmart prices don't have far to match, if at all. According to 360pi, the most prolific dynamic-pricing practitioners are Amazon and Sears, with daily prices changing for nearly 20% of online items, but these are not always the lowest. Walmart, on the other hand, has only been changing daily prices on 8% of items; nonetheless, in a study with Wells Fargo, 360pi found that Walmart and its biggest rival Target already offered lower online prices than Amazon. Target's prices were approximately 4% lower than Amazon's and about equal with Walmart. The study's author Matt Nemer stated that Walmart went from being priced 1% lower than Amazon six months ago, to approximately 10% lower in September for a basket of items.

In a fiercely competitive pricing environment underway, a small percentage matters. Earlier this month, the National Retail Federation (NRF) determined that the average U.S. consumer plans to spend 44% of their Christmas gift budget online -- the highest to date. Prices and value matter most, with 75% of shoppers stating that a sale or discount will entice them to make a purchase with a retailer either on or off line. Walmart is also promoting its mobile app, Savings Catcher, to gain a competitive advantage this holiday season. The app analyzes shopper’s receipts and if a local competitor advertises a lower price, shoppers receive an eGift card for the difference.

GENERAL

Dubai Show Adds Exhibitors

Organizers of the Dubai International Jewellery Week, scheduled for December 3 to 6, stated that exhibitor participation is up 25% compared with 2013. The event expects to host more than 380 exhibitors and 800 brands from 30 countries, with 100 new firms planning to participate this year at the Dubai World Trade Centre (DWTC). Given strong jewelry demand in Dubai, Thailand has committed to occupying 42% more floor space at the show this year, while the country pavilion from Lebanon increased its occupancy by 28%, Hong Kong by 18% and India by 16%. In addition, the number of loose stone dealers and diamond jewelry manufacturers occupying the Dazzling Avenue area will increase 42%, according to the organizers.

Groups Decline to Attend WDC Meeting

The WFDB, GJEPC, IDE, CIBJO, Federation of Belgian Diamond Bourses, Bharat Diamond Bourse, Israel Diamond Institute and Dubai Diamond Exchange jointly agreed not to participate in the World Diamond Council's (WDC) annual meeting, citing lack of clarity on mission and direction. The groups took issue with what they called a "biased survey conducted without consulting 98% of the industry," and while being committed to the Kimberley Process, they wouldn't support arbitrary decisions and lack of transparency from an entity under the mandate of the WFDB.

While the WDC stated it would be discussing the survey during the meeting, scheduled for October 28 to 30 in Antwerp, it would also address Kimberley Process issues as well as ethical and legal challenges facing the industry. The group also coordinated an address by Philippe Mellier, the CEO of De Beers.

Ahead of the meeting, the WDC named Patricia Syvrud, the founder and president of Joia Consulting LLC, as its first executive director, effective October 31. Syvrud will report to the WDC's executive committee, assist the president, represent the group in the Kimberley Process and provide overall leadership and strategic direction to the organization. Edward Asscher, the president of the WDC, cited Syvrud's breadth and depth of knowledge of the jewelry industry, as well as experience in the non-profit sector, for making her an obvious choice in the new role.

WFDB Explores Strategic Initiatives

WFDB held a strategy session that was focused on operational areas of the trade and members agreed to broaden and deepen ongoing dialog and cooperation with all industry stakeholders. With 30 international bourses, the WFDB expects to increase its communications, thereby providing the market and observers with ongoing reports and news of its activities and plans. Attendees agreed on new objectives for the future and appointed a facilitator to manage further discussions. The WFDB added that the meeting defined priorities including, industry banking, company profitability, compliance, certificates, shipping, disciplinary measures and its support for generic marketing.

U.S., India Assign Trademarks

The U.S. Patent & Trademark Office (USPTO) issued the trademark "Rebel Chique Man-Made Diamonds by Royal Asscher" to Mine Diamonds B.V. Ltd. of the Netherlands, with registration number 4622867 and an international number 1158011 on October 21. The trademark "Portier Jewelers" was also issued to Ediberto Portilla of Florida with registration number 4624062. United States Patent No. D716,155 was issued on October 28 and assigned to Graff Diamonds SA of Switzerland. The patent, a watch case, was invented by Laurence Graff and filed on October 21.

In India, the Office of The Trade Marks Registry approved the trademark "Koyilat" for Koyilat Jewellery on September 22 with registration number 1879620. Rajshree Jewellers received approval for the trademark "R & J" with registration number 2051946.

Strong Demand at Argyle Tender

Rio Tinto stated that its annual Argyle tender of pink and red diamonds achieved outstanding prices, with the highest average price per carat to date. The company did not provide actual sales figures. There were more than 600 bids for 54 lots, with the most valuable stone called the Argyle Cardinal™, a 1.21-carat radiant-cut fancy red diamond, selling to Glenn Bakker Jewels.

MINING

Petra's Revenue +55%

Petra Diamonds reported that revenue grew 55% year on year to $100.8 million during the first fiscal quarter that ended on September 30. The company sold 532,250 carats during the period, 10% less than one year ago. Group production rose 2% to 833,744 carats, marking the highest quarterly production figure to date. Petra noted that the rough diamond market is currently exhibiting post-summer softness but it expects the market to improve beginning in late November as Christmas and the wedding season in India usually result in greater demand.

Production at the Finsch mine was flat at 517,998 carats and sales totaled $26.7 million, while production at the Cullinan mine fell 4% to 209,632 carats and sales jumped 154% to $43.2 million. Koffiefontein produced 10,618 carats, 37% higher and sales rose 48% to $3.7 million. Kimberley underground recorded a 31% production increase to 36,036 carats, with sales of $7.8 million.

Petra sold an exceptional 232.08-carat white diamond that was recovered from the Cullinan mine in South Africa to Diacore for $15,219,219 or $65,577 per carat. Johan Dippenaar, the CEO of Petra Diamonds, said, "We are delighted to have achieved the sales result for this exceptional white stone, which is an outstanding example of the very high-quality, large diamonds produced at Cullinan."

Trans Hex Completes Acquisition

Trans Hex completed the acquisition of Namaqualand mines from De Beers Consolidated Mines (DBCM) in a transaction valued at $21.2 million in May 2011. Closing was delayed and subject to a number of conditions, including all beneficiation and necessary statutory and regulatory approvals. Emerald Panther Investments (EPI) 78 Ltd., in which Trans Hex owns a 40% interest, acquired all assets and liabilities related to Namaqualand from DBCM with all outstanding conditions being fulfilled.

Kleven to Build Vessel for De Beers

Kleven Verft of Norway will build a diamond-mining vessel for De Beers Marine Namibia that is modeled after the MT 6022 design from Marin Teknikk. The new ship will be highly specialized for deep water mineral exploration with a wider range of tailor made equipment and features. Underwater mineral exploration is a new line of business for Kleven and it has worked with Marin Teknikk on a number of prototypes for the De Beers contract, which consists of two phases with final building approval expected during the first quarter of 2015. The vessel will be built at Kleven Verft in Ulsteinvik, Norway and is anticipated to be completed in June 2016.


STATS
India

Sept. $Mil. %Chng. 2014 $Mil. %Chng.
Polished exports $2,664 11% $16,561 3%
Polished import $1,097 81% $5,608 2%
Net exports $1,567 45% $10,953 3%

Rough imports $1,482 16% $13,551 10%
Rough exports $151 22% $1,188 -17%
Net imports $1,331 15% $12,363 14%

Net diamond account $236 ($1,410)

ECONWATCH
Diamond Industry Stock Report

U.S. shares mainly higher, led by Blue Nile (+17%) but tempered by Kohl's (-7%). Far East shares unchanged, while Europe's were mixed as Damiani (-6%) and LVMH (+3%) were the biggest movers. India mainly lower, led by Classic Diamond (-12%). Mining shares all lower except Lucara (+3%) and Stornoway (2%). View the extended stock report.
Oct. 30 Oct. 23 Chng.
$1 = Euro 0.793 0.790 0.003
$1 = Rupee 61.35 61.18 0.2
$1 = Israel Shekel 3.77 3.77 0.00
$1 = Rand 10.87 10.97 -0.10
$1 = Canadian Dollar 1.12 1.12 0.00

Precious Metals
Gold $1,198.10 $1,232.30 -$34.20
Platinum $1,239.00 $1,253.00 -$14.00

Stock Indexes Chng.
BSE 27,346.33 26,851.05 495.28 1.8%
Dow Jones 17,196.77 16,677.90 518.87 3.1%
FTSE 6,463.55 6,419.15 44.40 0.7%
Hang Seng 23,702.04 23,333.18 368.86 1.6%
S&P 500 1,994.63 1,950.82 43.81 2.2%
Yahoo! Jewelry 1,178.79 1,144.01 34.78 3.0%

Rapaport Weekly Market Comment Nov. 7, 2014

Polished markets unusually slow before holiday season. Dealers not buying for inventory. Memo sourcing becoming more important given selective demand and tight market liquidity. Indian market cautious as polished prices soften after Diwali break. 1 ct. RAPI -2.2% in Oct. De Beers holding rough prices steady at small Nov. sight with discounts for some boxes. Letšeng 3Q sales +48% to $61M, average price +29% to $2,603/ct. Trans Hex 1H sales +59% to $37M, profit of $3.2M vs. loss of $4.8M. U.S. Sept. polished imports +29% to $2.1B, polished exports +21% to $1.8B. U.S. Sept. jewelry and watch sales +3% to $5.5B. Onkokame Kitso Mokaila re-appointed Botswana’s Mining Minister.

RapNet Data: Nov. 6

Diamonds 1,385,149
Value $8,018,958,465
Carats 1,425,193
Average Discount -27.47%

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QUOTE OF THE WEEK
Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth. When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.

Paul Singer | Elliott Management Corp.

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INDUSTRY

Polished Prices Fall

The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds declined by 2.2% in October. RAPI for 0.30-carat diamonds fell 3.7%, RAPI for 0.50-carat diamonds dropped 2.1% and RAPI for 3-carat diamonds decreased by 1.5%.

Suppliers sought to increase turnover and raise liquidity levels but global demand for polished goods remained weak. Buyers avoided making large-scale purchases in a downward trending marketplace as they expected prices to soften further. Liquidity, of course, among manufacturers and dealers is being affected by weak polished demand, reduced bank credit and increased supplies. Rough trading slowed in October as manufacturers now have sufficient inventory for the fourth quarter and rough prices softened on the secondary market given the seasonally subdued trading expected for the rest of the year.

While U.S. retail remains sluggish overall, jewelry sales are projected to rise by low single-digits for the Christmas season; however, it remains unclear whether modest growth will be enough to alleviate liquidity concerns among manufacturers and dealers going into 2015.

Diamonds Fund Conflict in CAR

A U.N. panel of experts this week reviewed evidence that diamonds and gold from the Central African Republic (CAR) are funding various Muslim Seleka rebels in the north. The country has been a hotbed of violence since Seleka seized control in March 2013, but U.N. intervention, along with breakaway fighters within Seleka, resulted in peacekeepers restoring some order in the Christian south. Still, the panel estimated 3,000 civilian deaths have occurred just between December and August of this year.

The Kimberley Process (KP) banned rough diamonds from CAR; however, the panel estimated that $24 million worth of goods have been smuggled out this year. The panel urged the peacekeeping mission (MINUSCA) to deploy troops in the north and use drones to monitor the rebels. While there was no evidence that CAR violated an arms embargo, peacekeepers have been unsuccessful disarming the rebels.

Meanwhile, the KP lifted its ban on rough diamonds from Côte d’Ivoire, according to the AWDC. The U.N. lifted its near decade-long ban on the country in April, following a number of benchmarks to bring a peaceful transition of power and free and fair elections.

RETAIL & WHOLESALE

TBZ's Profit Drops

Tribhovandas Bhimji Zaveri (TBZ) Ltd. reported that revenue rose 32.1% year on year to $69.4 million (INR 4.26 billion) in the second quarter that ended on September 30. The company's profit, however, plunged 84.3% to $89,560. Shrikant Zaveri, the chairman and managing director of TBZ, explained that it is working on stimulating consumer demand with innovative offerings, while tightly managing operating costs.

GIA Suspends Sealing Service

The Gemological Institute of America (GIA) suspended diamond sealing services and the issuance of duplicate reports, following the discovery of a sealed diamond that did not match the data label. GIA, with the assistance of an outside corporate investigation firm, is examining the circumstances to determine the source. Clients with concerns about a GIA-sealed diamond may submit the unopened sealing packet to GIA for examination.

India Curbs Black Money Channel

Among the many issues India's new government must address, reports have surfaced of how big businesses continue to siphon money off their balance sheets to avoid certain taxes. Intelligence agencies raised an alert when they found diamond trading being used to redirect money from India through various banking channels, especially to Switzerland. One industry expert, who spoke on the condition of anonymity, suggested the diamond trade would be better served if businesses declared revenue and taxes that were paid.

How the scheme generally works, an importer shows a higher value for the goods he purchased and the difference is remitted to a foreign bank. It is easier to do this with unworked diamonds. In addition, some traders use multiple invoices to siphon money, whereas funds may be remitted overseas on the basis of multiple bills of entry — the documents that provide details on the actual shipment importing a consignment.

Nonetheless, the practice does not appear to be widespread. Sabyasachi Ray, the executive director of the Gem and Jewellery Export Promotion Council (GJEPC), explained that many cases under review were due to fly-by-night operators. "We all should come together to condemn such activities and see to it that outside industry players may not be able to tarnish our image,” he said.

JCP Promotes Diamond Vault

JCPenney is promoting its exclusive Modern Bride Signature Collection for those who are planning an engagement during the all important Christmas season with a new Modern Bride Diamond Vault at jcpenney.com. The concept is meant to help online shoppers access a selection of diamonds for the purpose of creating a ring, pendant or earrings. Customers can hand-select their diamonds -- a solitaire or multi-stone design -- and then choose the setting, which comes in platinum, white and yellow gold. The Modern Bride Diamond Vault also features a resource guide with information on how to distinguish a diamond's quality by evaluating the range of cuts, clarity, colors and carat weight.


De Beers Debuts Diamonds in Ceramic

De Beers Diamond Jewellers debuted the "Enchanted Lotus" diamond jewelry collection that was inspired by the lotus flower, while introducing open work ceramic settings. The retail jeweler stated that a bold contrast of ceramic color and texture honors the diamonds' brilliance, while creating a graphic interpretation of the feminine enchanted lotus motif. The daylight lotus band, featuring white ceramic and pink gold, echoes the energy and warmth of the sunrise, while a black ceramic and white gold lotus band symbolizes the more mysterious side of the moonlight shining with serenity.

Jewelry Scores on Gift Lists

The Survey of Affluence and Wealth, published by Time Inc. and YouGov, revealed that the jewelry and watch category made the top five gifts for Christmas season 2014 as 30% of affluents selected that option, which was up from 27% in 2013. Other top gift choices were gift cards (64%), fashion (58%), books (38%) and food, wine and spirits (37%).

Another trend the survey observed was an increase in self-gifting as a reward for one's hard work. Gifts on the list of those 45% who intend to shop for themselves included jewelry and watches at 33%, while 25% selected food, wine and spirits, 20% chose fragrances and cosmetics and 13% each chose a smartphone and art.

The only complication in the survey was for expected Christmas spending. U.S. households with incomes of between $125,000 and $150,000 expect to spend 32% more this year; however, those earning between $150,000 and $450,000 expect to spend about 10% less. The very top of the wealthy class, those earning more than $450,000, anticipate spending 29% more this season than last.
New Super Shopping Day

Black Friday, the day after Thanksgiving, will lose its status as the busiest shopping day of the year across the U.S., according to ShopperTrak Inc. The shift is largely due to what many call a controversial move by big retailers to open their doors on Thanksgiving Day, which -- rather than attract millions of new shoppers -- depletes Black Friday crowds.

ShopperTrak expects the busiest shopping day of the Christmas season to fall on Super Saturday, December 20, which is the final Saturday before the holiday itself. In addition, the second busiest day of the year should be December 26, since it will be a day off work for many. Black Friday, November 28, sits in third place this year, followed by December 13, 22, 19, 21, 6, 23 and 22 to round out the top 10 busiest days, ShopperTrak predicted.

NPD Makes Sense of the Season

In reviewing gift intentions and spending plans for Christmas 2014, the NPD Group found that U.S. consumers expect to spend the same this year as they had in 2013. While jewelry didn't make the top 10 gift categories, Marshal Cohen, NPD's chief industry analyst for fashion, said the sector will still do well enough -- along with handbags and small leather goods. “Accessories have gotten hot again. The difference this time around is that it isn’t one type of accessory over another," Cohen said.

Top gift categories were clothing (44%), toys (36%), books (18%), food (18%), fragrances (17%), music (16%), liquor (16%), footwear (15%), DVDs (15%) and games (13%). NPD stated that 60% of U.S. shoppers will conduct some buying online, but that channel has become the leading way for nearly all consumers to do their homework and learn about brands and products before making any purchase.

“Online has truly become the place for consumers to start and finish their holiday shopping. Last year we saw a mad dash at the end, with many consumers disappointed because gifts were delayed due to so much last minute online shopping. Hopefully stores and shippers learned from that mistake and will be more prepared for the even bigger crush to come closer to Christmas this year,” said Cohen. “Until retailers drive the consumers back into the stores, online will continue to grow at a faster pace than traditional store shopping. The convenience and bargains offered online are too plentiful for the consumer to pass up.”

Affluent Consumers Signal Trouble

The Luxury Consumption Index (LCI), a propriety survey of the top 20% of wealthy U.S. households, plummeted to 46.4 points in October -- the lowest level since the great recession, according to Unity Marketing. With such a drop in the economic sentiment of households with an average income of $259,000, Unity Marketing warned that affluents are not likely to spend extravagantly this Christmas season.

Affluent consumers are simply sitting on the sidelines for now, the group observed, which will factor into the holiday shopping season. Pam Danziger, the president of Unity Marketing, observed that all five key questions in the LCI tanked in the latest survey. "This sets up a bleak Christmas shopping season, since the affluent represent only 20% of U.S. households (24.5 million out of total 122.5 million), but account for more than 40% of all consumer spending," she said.

GENERAL

Mokaila Maintains Ministerial Post

Onkokame Kitso Mokaila has been re-appointed as Botswana’s Minister of Minerals, Energy and Water, despite losing his parliamentary seat in the national election that took place on October 24. Mokaila lost his Barolong constituency by a 4.5% margin – or 611 votes – to James Mathokgwane, of the opposition Umbrella for Democratic Change party. However, a ministry spokesperson confirmed with Rapaport News that Mokaila was co-opted as a specially elected member of Parliament and appointed to President Ian Khama’s new cabinet. Mokaila has held the position for the past two years.


CIRCA Appoints CEO

CIRCA appointed Laurence R. Grunstein as the company's CEO. Grunstein has more than 40 years of senior executive experience in the watch and jewelry industry and most recently served as president and CEO of Citizen Watch Company of America Inc. Grunstein aid that CIRCA's unique position as a buyer of jewelry, diamonds and watches from the public, as well as being on the buy-side of the jewelry, positions the firm for significant growth.


Kring Hosts Rough Day

Antwerpsche Diamantkring (Kring) held a “Rough Diamond Day” on November 6, attracting hundreds of attendees. Organizers reported that trading was positive, but the event also enabled sellers and buyers to meet and network. The Kring president, Freddy Inzlicht, noted that the group was looking to create events on an international level, with agreements already being made with the diamond bourses in Israel, Mumbai and New York.

India's Reforms Require Time, Cooperation

The new government in India, led by Prime Minister Narendra Modi, aims for economic growth of 8% or more through policies and reforms aligned with a business-friendly agenda, according to the consensus at the World Economic Forum's India summit this week. Still, many challenges await due to inadequate infrastructure, unpredictable policies, lack of transparency and a disconnect between the government, business and civil society on priorities.

Suresh Kumar, of Oliver Wyman, stated that India is well positioned to address the issues. But the government must transform and enable transparent, data-driven processes, develop superior programs with measurable results, be ruthless on civil service productivity and overcome the bureaucracy and inertia that compromise future prospects.

India's Minister of Finance, Arun Jaitley, committed to restructuring measures that would address transportation and energy chaos. Other ministers stressed the importance of clearing bottlenecks that impede India from returning to a high rate of growth, especially by freeing up trade and improving the power grid and highways. India's business executives expressed confidence in the Modi administration, but they also called for patience to allow reforms to work. Ajay S. Shriram, the president of the Confederation of Indian Industry, said, “It will take time. We are seeing results and the right direction.”

MINING

Gem Diamonds' Sales Jump

Gem Diamonds' rough diamond sales jumped 48.4% year on year to $61.3 million in the third quarter that ended on September 30. The company sold 23,550 carats during the period compared with 20,405 carats one year earlier and average prices rose 28.7% to $2,603 per carat. The mining firm sold an exceptional 197.60-carat diamond from the Letšeng mine in Lesotho for $10.6 million.

Production improved 11% at Letšeng during the quarter to 28,365 carats. In addition, the company recovered 4,028 carats from the Ghaghoo mine in Botswana, which opened in September. Gem Diamonds' cash position stood at $128 million. Clifford Elphick, the CEO of Gem Diamonds, said that diamantaires are cautious heading into the Christmas season. Still, prices achieved for Letšeng's high-value rough production have remained healthy.


STATS USA

Sept. $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $2,137 29% $18,046 6%
Polished exports $1,763 21% $16,395 11%
Net imports $374 82% $1,651 -29%

Rough imports $30 -11% $462 27%
Rough exports $5 -71% $298 42%
Net imports $25 47% $164 6%

Net diamond account $399 79% $1,815 -27%

ECONWATCH

Diamond Industry Stock Report

U.S. and Far East shares marginally higher except Birks (-11%), JCP (-2%) and Chow Tai Fook (-2%). Europe higher except Damiani (-4%) and India mixed with C. Mahendra (+15%) recovering nicely but Titan (-11%) leading declines. Mining shares flat but big declines for Peregrine (-10%), Firestone (-12%) and Stellar (-14%). View the extended stock report.
Nov. 6 Oct. 30 Chng.
$1 = Euro 0.808 0.793 0.015
$1 = Rupee 61.51 61.35 0.2
$1 = Israel Shekel 3.81 3.77 0.04
$1 = Rand 11.26 10.87 0.39
$1 = Canadian Dollar 1.15 1.12 0.03

Precious Metals
Gold $1,141.80 $1,198.10 -$56.30
Platinum $1,190.00 $1,239.00 -$49.00

Stock Indexes Chng.
BSE 27,915.88 27,346.33 569.55 2.1%
Dow Jones 17,554.47 17,196.77 357.70 2.1%
FTSE 6,551.15 6,463.55 87.60 1.4%
Hang Seng 23,649.31 23,702.04 -52.73 -0.2%
S&P 500 2,031.21 1,994.63 36.58 1.8%
Yahoo! Jewelry 1,175.95 1,178.79 -2.84 -0.2%

Rapaport Weekly Market Comment Nov. 14, 2014

Polished markets cautious. Cutters offering lower prices to improve cash flow and buy high-price rough in order to maintain next year’s sight allocations. Liquidity situation significantly worsened by China’s restrictions on money transfers. Large turnout at Israel Diamond Week in NY. De Beers Nov. sight estimated at $550M with some rejections. Lucara 3Q profit nearly triples to $42M. Sotheby’s Geneva sells $95.8M (90% by lot) with Graff buying pair of oval, 20.05ct. and 20.06ct. D, IF, diamond earrings for $7.1M ($178,188/ct.). Christie's Geneva sells $150M (89% by lot) as Graff buys pear, 6.95ct., fancy vivid blue, SI2 and pear, 6.79ct., fancy pink, VS2 ear pendants for $15.8M.



RapNet Data: Nov. 13

Diamonds 1,445,834
Value $8,197,455,850
Carats 1,466,912
Average Discount -28.11%

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RAPAPORT ANNOUNCEMENTS

RapNet App

New features added include member directory and tradescreen!

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November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai

View Details.

November 12-19 Wed-Wed
Rapaport Single Stone Auction

New York & Israel

www.rapaportauctions.com

QUOTE OF THE WEEK
Israel diamond week in New York is a tremendous event all due to the solid relationship we built with our friends from the Israel Diamond Exchange, whom I’m very grateful for and proud to work with to help move our industry forward.

Reuven Kaufman | Diamond Dealers Club



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INDUSTRY

De Beers Sight Estimate at $550M

De Beers November sight closed with an estimated value of $550 million. Minor adjustments to prices and assortments were reported in different categories. Sightholders observed that while the adjustments slightly improved the profitability of some boxes, certain categories still cannot be manufactured into polished diamonds at a profit. Some expressed disappointment that De Beers did not reduce overall prices at the sight, given the continued decline in polished prices. The market remains challenging for many manufacturers.

De Beers stated that it had not made a sizable correction to rough prices because management believes the fourth quarter Christmas shopping season would be strong in major consumer markets, ultimately improving liquidity across the pipeline. Rough trading on the secondary market reflected tight liquidity and thin profit margins among manufacturers, with most boxes trading at a discount and on credit terms.

Buyers, Sellers Gather for Diamond Week

The New York Diamond Dealers Club, in partnership with the Israel Diamond Exchange, hosted more than 160 exhibitors and 700 buyers for a third diamond trading event in Manhattan. While nearly all agreed these events in New York and Israel solidify important business relationships, actual trading was mixed. The U.S. market, while stable, continues to experience weak demand for large stones (above 3 carats), and subdued trading for 2-carat to 3-carat goods. Nonetheless, there were, at least, a few sales of very large diamonds. One exhibitor observed that the wholesale market for large rounds right now is actually better in Hong Kong and Israel. In addition, there was little demand for melee and stars and demand for 0.75-carat to 1-carat goods was soft.

However, buyers were snapping up rounds in the 0.25-carat and 0.60-carat commercial-quality range, while 1-carat to 1.50-carat, mainly SI, diamonds were also in good demand. There was fair interest in fancy yellow diamonds, but better demand for pinks and blues. Overall, buyers were mainly interested in filling immediate orders and sellers expressed hope that more retailers would attend this trade event in the future.

Reject Those Selling Over-Graded Diamonds

Martin Rapaport, the chairman of the Rapaport Group, released a comprehensive editorial, “Honest Grading,” that discloses the over-grading of over 100,000 diamonds, valued at more than a $1 billion. Rapaport calls upon the legitimate jewelry trade to reject those selling over-graded diamonds that fool consumers into believing they are getting better diamonds than they are receiving. It is an unfair trade practice to grade diamonds using Gemological Institute of America (GIA) grading terminology, while applying alternative standards that over-grade the diamonds.

“The over-grading of diamonds is a legal and ethical issue challenging the legitimacy of the diamond and jewelry trade. Consumers must be warned not to trust misleading diamond grading reports and those that sell them. Suppliers must be held responsible for the quality of the diamonds they sell. The diamond trade must prioritize the protection of consumers above profits,” said Rapaport.

View the “Honest Grading” editorial, a video and a trade summary, share the article and weigh in. Comments may also be emailed to honestgrading@diamonds.net.

RETAIL & WHOLESALE

Christie's Jewels Sale Tops $150M

Christie's Geneva achieved the highest total for a magnificent jewels sale at $150,216,738, which was 89% sold by lot. The top lot of the evening was The Blue Belle of Asia, a cushion-shaped Ceylon sapphire of 392.52 carats, mounted on a diamond necklace, which set a new world auction record for any sapphire at $17,295,796.

Laurence Graff purchased the second top lot of the sale, a pair of pear-shaped fancy vivid blue SI2 and fancy vivid pink VS2 diamond ear pendants, which sold for $15,820,731. A piece of jewelry by JAR was sold for over $3.5 million, against a presale high estimate of only $310,000, establishing the second highest price for a creation by the artist. Christie's luxury group chairman, François Curiel, concluded that there is a lot of cash available globally right now and very few masterpieces.

Sotheby's Jewels Sale Tops $95M

Sotheby's Geneva sale of magnificent jewels achieved $95,272,767 and was 90.2% sold by lot. The sale resulted in strong prices for colored stones, confirming the overall health of the market. The top lot was purchased by Laurence Graff, an 8.62-carat cushion-shaped Burmese ruby that sold for $8.6 million, setting a record price for a ruby and an auction record price per carat.

An exceptional step-cut Kashmir sapphire and diamond ring of 27.54 carats sent a record at $5,984,474. The second top lot was a highly important pair of oval diamond earrings, 20.05-carat and 20.06-carat, both D, flawless, excellent polish and symmetry, type IIa and sold for $7,147,112, or $178,188 per carat. A rare fancy intense blue diamond ring of 3.16 carats also sold to Graff for $3,194,141, or $1,010,804 per carat. Exceptional prices were achieved for natural pearls.


Patek Philippe Masterpiece Sets Auction Record

Sotheby's Geneva sold The Henry Graves Supercomplication timepiece for a record $24 million, far surpassing an $11 million presale estimate. Five bidders competed for the pocket watch during a 15 minute bidding war. The timepiece took five years to complete by Patek Philippe and master craftsmen in 1932 and it earned that status as the most complicated watch ever made by hand. Sotheby's sale of important watches achieved a total of $32,618,159.

Richemont's Profit Drops

Richemont reported that revenue rose 2% year on year to $6.75 billion (EUR 5.43 billion) for the six months that ended on September 30. The luxury group's gross margin rose one percentage point to 65%. Still, profit fell 23% to $1.13 billion. By region, and at actual exchange rates, revenue improved 6% year on year in Europe to $2.65 billion, while sales dropped 2% in the Asia Pacific to $2.59 billion. Across the Americas, sales increased 10% to $1.1 billion but in Japan, revenue plunged 13% to $448 million.

Jewelry brand boutiques recorded a sales increase of 1% to $3.34 billion; however, operating profit for the sector slipped 1% to $1.2 billion.

Berkshire's Retail Sales Rise

Berkshire Hathaway reported that revenue from its retail division increased by 5% year on year (or $48 million), in the third quarter that ended on September 30. The division, which includes Ben Bridge Jeweler, Borsheims Fine Jewelry and Helzberg Diamonds, as well as home furnishings businesses and See’s Candies among others, had pre-tax earnings that were unchanged. Company CEO Warren Buffett singled out Borsheims as a profitable, one store operation that moves a large volume of items, while operating at 15 to 20 percentage points below competitors.


Pandora's Profit Jumps

Pandora Jewelry's revenue jumped 26.2% year on year to $475 million (DKK 2.845 billion) in the third quarter that ended on September 30. Sales by unit volume rose 15.7% and the average price per transaction increased 9% to $24.20. Profit improved 18.5% to $121 million.

By regional market, sales in local currency increased 13.9% in the U.S., while surging 28.4% across other "Americas." Revenue from the U.K. jumped 26.4%, while Europe's sales surged 34.3%; however, Germany's growth was only 2.1%. Sales in Australia improved 15.6%, while revenue skyrocketed 69.3%t across other regions of the Asia Pacific. Revenue from Pandora's charms improved 22% year on year to $298 million, while silver and gold charm bracelets jumped 27.6% to $65 million and ring sales surged 97.7% to $57 million. The sale of other jewelry rose 4.5% to $54 million.

Tara Jewels' Profit Declines

Tara Jewels Ltd. reported that sales, excluding bullion, rose 7.4% year on year to $62.6 million (INR 38.5 billion) in the second quarter that ended on September 30. Net profit slipped 3.6% to $1.72 million. The company observed a revival for jewelry out of the U.S. and Europe, and it concluded that so far the wedding and festive season in India are showing strong results, which will be reflected in the current quarter's financial report.

Shrenuj's Profit Increases

Shrenuj & Company Ltd. reported that revenue jumped 21% year on year to $426.2 million (INR 26.2 billion) for the first half of the fiscal year that ended on September 30. Profit improved 14% to $7.8 million. The company stated that revenue increased 9.7% in the second quarter to $207.5 million and profit rose 10% to $4.4 million.

Demand for diamond and jewelry was subdued, except during September for the U.S. and Europe, according to the company. A decline in gold prices and marginal improvement in the prices of the polished diamonds helped to ease pressure on margins as well. The prices for rough diamonds remained stable, but significantly higher than one year ago, and Shrenuj determined there has been just a little resistance to higher prices on the consumer side of the pipeline. Private labels and Forevermark diamonds command a premium price and are continuing to experience sales growth in the double-digits. Still, Shrenuj observed that large format retailers ad chain-stores remain bullish on ordering for the Christmas and wedding seasons, while independent retailers are maintaining a cautious approach. The demand in India and China remains strong.

Tips to Manage Robbery Risks

Jewelers Mutual Insurance and the Jewelers Security Alliance reminded members of the trade that crime can happen to any jewelry business, following the armed robbery of a New York Diamond District firm this week. Authorities continue to search for two suspects, one who was dressed in business attire and sported a goatee, while an accomplice wore a red cap and blue zip-up hoodie.

The groups stated that when your area is on lock down, which was the case on 47th Street Tuesday, bolt doors, close blinds and curtains, and lock up merchandise until law enforcement provide an all-clear. Monitor exterior cameras and confirm identities of everyone before allowing them entry. If you are the victim, cooperate with the criminals' demands, don't make sudden movements, comply with the robber's instructions and move in a deliberate and methodical manner. Focus on keeping employees and customers safe, for merchandise and business assets are simple to replace.

Specific to delivery risks, have a door or wall slot for the delivery of letters and small parcels and ask delivery personnel to leave larger items within the vestibule entry. Become familiar with the names and appearances of delivery personnel, learn to identify uniforms, trades people and other service providers. When an unfamiliar service employee visits, request an I.D. and a phone number and use the Internet to confirm the individual's legitimacy. Avoid admitting a visitor when you are alone and do not admit a stranger before or after regular business hours.


Target Younger Adults for Jewelry Sales

The National Retail Federation (NRF) determined that 24% of U.S. consumers who buy gifts for the Christmas season intend to purchase jewelry or a precious metal accessory this year, according to Prosper Insights & Analytics on behalf of the retail group. The figure was slightly higher than jewelry gift intentions in 2013, but it matched the percentage of consumers who wish to receive jewelry.

In addition, 20.1% of consumers who earn under $50,000 intend to purchase jewelry, while 27.4% of those earning more than $50,000 expect to make a jewelry or precious metal purchase. Jewelers can expect that those most likely to purchase jewelry are between 18 and 24 years of age, with 34% acknowledging their intention to buy this year. As for others, 28.7% of those 25 to 34 intend to buy jewelry, 24.5% of those 35 to 44 and 22.9% of those 45 to 54 expressed their intention to make a jewelry purchase for a gift. Only 19.5% of those who were between 55 and 64 and 16.6% of those older than 65 intend to buy jewelry. Nearly 46% have not yet begun Christmas shopping and the NRF concluded that these procrastinators are simply holding out for bargain-basement deals.

James Allen Partners With Sears

James Allen is partnering with Sears to provide an exclusive shop-in-shop experience at 16 Sears locations throughout New York, Maryland and Puerto Rico. The James Allen boutiques are located within Sears’ jewelry departments, with each being staffed by a select team of engagement ring specialists, according to the retailers. The James Allen boutique will offer 120 styles in addition to thousands of items online.


Many Brands Have Room to Improve Online

L2 ThinkTank tested the digital competence of 82 specialty retailers, including some jewelers, to diagnose the brands' strengths and weaknesses online. The group developed a proprietary brand scoring system and categorized each retailer on five levels: "genius," meaning a retailer competitively differentiated itself and reached consumers on a variety of devices; "gifted" assured that the digital presence was consistent with the brand's image and marketing efforts; "average" translated into just functional and predictable efforts; "challenged" lacked consistent adoption of mobile and multi-channel platforms, and "feeble" defined retailers whose investment online is missing great opportunities.

In reviewing brands that sell jewelry and/or watches in any capacity no company managed to reach the level of "genius;" however, Ralph Lauren, Coach and Forever 21 scored solidly in the "gifted" category, while Michael Kors, Zales, Steve Madden, Tory Burch and Kate Spade were a few points behind, but still positioned well. Those retailers that scored "average," and have room to improve their digital presence, included Ann Taylor, White House | Black Market, Loft, Kay Jewelers, Tiffany & Co., Allen Edmonds, Swatch Group, Fossil, Alex and Ani, Swarovski and BCBGMaxazria.

Meanwhile, "challenged" retailers on the list included Club Monaco, Tourneau, Cartier, Desigual, C wonder and French Connection. Finally, L2 named only two "feeble" brands, suggesting they both have much work to do -- Waterford and Baccarat.

PDE Appoints Vice President

The Panama Diamond Exchange (PDE) appointed Judy Meana as the vice president. Meana previously served as PDE's director of communications, but will now be responsible for all strategic marketing and communications and operations. Prior to joining PDE, Meana was the Panamanian communication manager of the multinational electric company Union Fenosa. She also served as Panama's government spokesperson during two presidential terms.

MINING

Lucara's Profit Soars

Lucara Diamond Corp. reported that revenue jumped to $91.3 million during the third quarter, compared with $42.1 million a year earlier. Profit soared to $41.9 million from $15 million in the third quarter of 2013. Production at the Karowe mine declined 7% to 106,162 carats, although the company stated that its ore recovery was better than expected and that it achieved a higher average grade of 20.80 carats per hundred tonnes (cpht), compared with 17.6 cpht a year earlier. The company held one large stone tender during the period, which generated $46.1 million, or $27,555 per carat, helping lift the overall average price achieved. Lucara reported that the average price of goods sold rose 44% to $791 per carat.

Dominion Diamond Posts Surety Bonds

Dominion Diamond Corp. posted surety bonds with the Northwest Territories in the aggregate amount of $221 million (CAD 253,473,000) to secure its obligation under a water license to reclaim the Ekati mine site. As a result, Dominion Diamond has been returned letters of credit in the amount of approximately $72 million leveraged as security. Letters of credit in the amount of $37 million remain with the government as security for reclamation and related activities at the Ekati diamond mine, pending completion of additional governmental reviews under the mine's environmental agreement.

In addition, Dominion Diamond filed the developer's assessment report with the Mackenzie Valley Environmental Impact Review Board for its Jay kimberlite pipe at the Ekati mine. The Jay project holds the potential to extend the life of Ekati by nearly 10 years to approximately 2030. The assessment report is the next step in the permitting process to develop, what Dominion Diamond determined to be, the largest diamondiferous resource in North America.


PureDiamonds Secures Funds for Monastery

PureDiamonds Resources, a subsidiary of Thabex Ltd., entered into a $32 million equity subscription facility with Lambert Private Equity LLC. The three-year long agreement and fund drawdowns are subject to receipt of regulatory approvals. Proceeds from each drawdown will be used for general corporate and working capital purposes and may be used to develop the Monastery kimberlite project into a fully-fledged diamond mine evaluate and to pursue strategic acquisitions, according to the agreement.

ECONWATCH

Diamond Industry Stock Report

U.S. shares mixed but Walmart's (+7%) performance was the best in years, hitting a 52-week high, while JCP (-5%) and Charles & Colvard (-6%) pulled down the average. Far East shares higher except for Sarine (-5%). Europe all ahead, India mostly higher except for Goenka (-12%), Classic Diamond (-5%) and Vaibhav (-9%). Mining firms mainly higher, led by ALROSA (+12%), Peregrine (+17%) and Petra (+12%). View the extended stock report.
Nov. 13 Nov. 6 Chng.
$1 = Euro 0.802 0.808 -0.006
$1 = Rupee 61.55 61.51 0.0
$1 = Israel Shekel 3.81 3.81 0.00
$1 = Rand 11.21 11.26 -0.05
$1 = Canadian Dollar 1.14 1.15 -0.01

Precious Metals
Gold $1,160.70 $1,141.80 $18.90
Platinum $1,188.00 $1,190.00 -$2.00

Stock Indexes Chng.
BSE 27,940.64 27,915.88 24.76 0.1%
Dow Jones 17,652.79 17,554.47 98.32 0.6%
FTSE 6,635.45 6,551.15 84.30 1.3%
Hang Seng 24,019.94 23,649.31 370.63 1.6%
S&P 500 2,039.33 2,031.21 8.12 0.4%
Yahoo! Jewelry 1,190.56 1,175.95 14.61 1.2%

Rapaport Weekly Market Comment Nov. 21, 2014

Buyer’s market with suppliers pressured by tight liquidity. Limited inventory buying ahead of holiday season. U.S. demand stable, Far East weak. Market for fancy shape and fancy color diamonds improving with increasing dealer demand due to oversupply and limited profitability of rounds. Markets expect steady rise in Internet jewelry sales this holiday season as comScore predicts U.S. Nov./Dec. online retail sales +16% to $61B. U.S. Sept. specialty jewelry store sales +1% to $2.2B. Chow Tai Fook’s Oct. Hong Kong sales -17% due to political protests. Belgium Oct. polished exports -4% to $1.3B, rough imports -1% to $1.1B. Swiss Oct. watch exports +5% to $2.3B.


RapNet Data: Nov. 20

Diamonds 1,502,981
Value $8,058,366,214
Carats 1,496,201
Average Discount -27.91%

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RAPAPORT ANNOUNCEMENTS
RapNet App

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Download RapNet's app for the iPhone.

December 1-4 Mon-Thu
Rapaport Melee Auction

New York
View Details.
December 5-10 Fri-Wed

Rapaport Single Stone Auction

New York & Israel

www.rapaportauctions.com

QUOTE OF THE WEEK
Gold is still in the process of unwinding the craze that it enjoyed from 2000 to 2011. It was the commodity that got the public enamored and went up and topped over $1,900 per ounce, and that whole process of deflating that excitement that built up over 11 years is still in process. Expect another 30% decline in the next three to four years.

Doug Ramsey | Leuthold Group

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RETAIL & WHOLESALE

U.S. Jewelry Store Sales +1%

U.S. specialty jewelry store sales rose only 1.2% year on year to $2.244 billion in September. The sales total was the weakest by value since January when revenue estimates barely topped $2 billion. As reported earlier on Rapaport News, preliminary U.S. jewelry and watch sales from all retail channels in September rose and estimated 3% year on year to $5.521 billion, but that data is subject to several revisions. Specialty jewelry store sales have risen by a healthy 4.2% year on year to $22.374 billion for the first 10 months of 2014, while jewelry and watch sales from all channels have risen 2.8% to $51.129 billion, according to Rapaport News estimates.

U.S. Jewelry CPI -5%

The U.S. consumer price index (CPI) for jewelry declined 5% year on year to 171.35 points in October and the reading slipped about 4 points from September's index. The CPI for watches, meanwhile, rose 2.6% to 124.42 points, which was the second highest reading of the year. Market prices for precious metals during the month remained under pressure with the average price of gold down approximately 2% compared with one year ago, while platinum experienced a second consecutive month of double-digit declines and fell 11%.

Diamond price movement was mixed, according to the RapNet Diamond Index (RAPI), the global benchmark for polished goods. Polished prices for 0.30-carat rose 3.3% year on year, while they increased 5.1% for 0.50-carat stones. However, polished prices for 1-carat diamonds fell 5.9% and prices were down by 4% for 3-carat diamonds. By comparison, the CPI for all product categories in October increased 1.7% year on year to 237.43 points.

Ultra-Wealthy Spend $25B on Jewelry, Watches

Ultra-high-net-worth (UHNW) individuals, or those with at least $30 million in personal assets, spent an average of $1.1 million on luxury goods and services, including jewelry and watches, in the past year, according to the annual World Ultra Wealth report by Wealth-X and UBS. UHNW consumers spent $25 billion on jewelry and watches in the past year, which accounted for a 35.2% share of the market. In all, the UHNW population rose 6% year on year to 211,275 and their combined wealth jumped 7% to $29.7 trillion.

UHNW consumers accounted for 18.9% of total spending for the luxury goods and services sector, representing $234 billion, according to Wealth-X and UBS. Authors also observed that consumers who are simply mass affluents -- with assets below the $30 million threshold -- are backing off luxury goods spending right now, but UHNW consumers are shopping more due to an increase in both cash holdings and average net worth. However, these ultra wealthy consumers are seeking more experiential luxury than has typically been the case. Still, these consumers spent $45 billion on travel and hospitality this year, $40 billion on automobiles, $25 billion on art, $23 billion on private aviation, $22 billion for yachts, $15 billion on apparel and $12 billion on accessories.

Chow Tai Fook Warns of Oct. Sales Impact

Chow Tai Fook Jewellery Group Ltd. shared an unaudited operating statement with shareholders regarding October sales, which were impacted by street demonstrations in parts of Hong Kong. The group observed that demonstrators dramatically reduced store foot traffic. Retail sales in the Hong Kong market fell by 17% year on year, while same-store sales dropped 24% for the month of October, according to the group. Chow Tai Fook releases quarterly results on November 26.

Birks 1H Loss Narrows

Birks Group Inc. reported that revenue rose 9.7% year on year to $139.7 million for the first fiscal half that ended on September 27. The increase was primarily driven by a comparable-store sales improvement of 20%. Same-store sales increased 14% in Canada and 25% in the U.S., where revenue improved from a higher number of transactions, a higher average unit sale price and stronger timepiece sales. Canada's growth was primarily the result of higher average unit sales, driven by stronger revenue from bridal and fine jewelry. The retailer narrowed its loss to $4 million compared with a loss of $7.7 million one year earlier.

Kingold's Profit Drops

Kingold Jewelry Inc. reported that revenue fell 11.6% year on year to $251 million in the third quarter that ended on September 30. The company stated that over the past nine months, the decline in gold prices alone have resulted in a $97.3 million drop in revenue figures. Gross margin as a percentage of sales fell to 4% compared with 5.9% one year earlier. Profit fell to $5.2 million compared with $11 million. Kingold told shareholders that construction of the Kingold International Jewelry and Cultural Industry Park is continuing and that the firm is working aggressively on pre-leasing rental spaces.


DGSE Reports Small Profit

DGSE Companies Inc. reported that revenue fell 10% year on year to $17 million in the third quarter that ended on September 30. The company observed strong growth for jewelry, watch and diamond sales, which partially offset continued decreases in both bullion and scrap metal sales, a result of lower gold prices. Gross profit as a percent of sales rose to 18.4% compared with 17.4% one year earlier. Net income was $179,587 compared with a loss of $1.4 million.


Holiday Weekend Store Traffic Wanes

Foot traffic to U.S. retailers over the four-day Thanksgiving weekend continues a slow decline, especially as more consumers shop online from the comfort of their home. The National Retail Federation (NRF) found that 38.9% of U.S. consumers absolutely do not intend to shop in stores over the weekend, nearly 1 percentage point higher than 2013, while 29.5% were definitely planning to visit stores, which was down from 30.6% one year ago.

Those who "might shop" in a store on either Thanksgiving, Black Friday, Small Business Saturday or Super Sunday, was flat at 31.6%. With all the hype about stores opening earlier on Thanksgiving Day itself, the NRF found that only 18.3% of those in the "definite" or "maybe" camps will visit stores that day, down from 23.5% in 2013, while 68.2% will shop Friday (down from 69.1%), 42.9% on Saturday (down from 43.8%) and 21.6% on Sunday (down from 24.2% in 2013).


Wearable Tech Scores Gift Lists; Sales Count Most

While jewelry, specifically, did not make Accenture Research's most popular Christmas gifts, 13% of shoppers intend to buy wearable technology -- such as smartwatches and fitness bracelets, etc. Gift cards topped the list (57%), followed by apparel (56%) and toys (42%). Of those who intend to buy gift cards, restaurants (45%) were the top choice, but 27% intend to purchase from department stores, 18% will buy from specialty retailers such as jewelers and 4% will by from luxury brand boutiques.

Accenture pegged the average amount that shoppers will spend this Christmas season at $718, but the figure is highly inflated by wealthy households. A full 65% of Christmas shoppers will spend less than $500, with 36% anticipating their receipts to total between $251 and $500. Fifteen percent anticipate spending more than $1,000. In addition, 71% said discounts were "very important" to their budget, while 25% said a sale was "somewhat important."

In terms of in store shopping patterns this year, Accenture found that of those who intend to shop on Thanksgiving Day, 26% plan to visit a store and 27% will shop online. On Black Friday, of those who plan to shop, 36% expect to visit a store (down for the fourth consecutive year), while 37% expect to shop online.


Majors Slash Jewelry Prices for Black Friday

Number crunchers at the WalletHub analyzed 5,525 Black Friday deals at 21 of the largest U.S. retailers and found the highest average discount being offered by troubled retailer JCPenney, at 65%, and the lowest from member-only retailer Costco at 21%. Jewelry was the most discounted category from all retailers with an average price reduction of 58%, while electronics were the least at 30%, the group found.

Of those brands that sell jewelry (of any kind) and provided the data to WalletHub, AAFES's jewelry discounts averaged 33.6%, Kmart slashed prices by 78.8%, JCPenney's jewelry discounts were 66.4%, Kohl's was 24.9%, Macy's was 65.9% and Meijer slashed jewelry by 78.7%. Specific jewelry discounts were not provided to WalletHub by some, including Costco; however, the average product discount for big retailers that sell jewelry were: 26.1% at Amazon, 50.2% at Sears, 35.6% at Target and 32.2% at Walmart.

Marketing experts remind independent jewelers not to focus on beating the rock-bottom prices of mass produced jewelry at the majors. Instead, consider alternatives to price cuts, sell your unique story and the quality of merchandise, and create an experience that provides value-addition that the majors simply cannot match.


Best Omnichannel Retailers Will Win

Online retail sales for the U.S. Christmas season are expected to increase 16% year on year to $61 billion for the months of November and December combined, according to comScore Inc. Desktop ecommerce should reach $53.2 billion, up 14%, while mobile ecommerce could surge 25% to $7.9 billion. During a conference call with analysts, comScore determined that online jewelry sales remain "very strong," meaning year-on-year growth rates of 15% or more. In terms of dollar sales online, by product segment, jewelry ranked No. 13.

Gian Fulgoni, the chairman of comScore, noted that jewelry sales growth is "probably being driven by the upper income segment." The middle- and lower-income households, which represent the majority, continue to face, at best, stagnate wages and high rates of unemployment. In addition, while the Christmas retailing season definitely looks bright overall -- for the well prepared retailers -- comScore noted that 31% of U.S. consumers still believe the economy is in very bad shape. Effects from the great recession linger, so retailers that adopt and execute the best in omnichannel to serve all devices, provide free shipping, offer discounts and differentiate merchandise will come out ahead, according to comScore.

The firm anticipates the heaviest online shopping day will, again, be Cyber Monday (December 1), while weekends could experience dramatic increases in online sales. Online retail sales generally taper off by the third week in December, when free shipping no longer ensures packages arrive by Christmas Day.

Make the Shopping Chore a Breeze

The Integer Group® and M/A/R/C Research cited the top reason consumers choose a retailer is to complete the transaction easily and fast -- whether online or in a store. Mass retailers (such as Target and Walmart) edged out online stores (28% versus 26%) as the top destination for gift buying this year due to strong omnichannel investment, whereas department stores have ranked in third place for the past three years at about 20%. Even with attention focused on Thanksgiving weekend, the group found that 51% of consumers plan to conduct their gift shopping in December and 29% won't even plan before that time. Integer and M/A/R/C told retailers to know what is happening in the lives of a core customer -- aligning the shopping experience with their life stage brings a more inspiring and meaningful brand experience.

Consumers of all demographics view the Christmas season as hectic, so retailers who make holiday shopping easy and less stressful -- infusing that message into campaign and channel solutions -- will win. The groups said position the brand as clearly different, and better, than the competition. Factors that play into a gift buying decision include free shipping (58%), coupons (44%), buy one and receive half price on a second (43%), online email offers (41%), Black Friday deals (40%), a loyalty program (38%), instore email offers (38%), instant rebates (35%), a last minute deal (35%) and early bird door busters (31%).

The survey revealed that the average shopper will spend $605 for Christmas season, but there are important demographic nuances. Unmarried, but living together, couples expect to spend the most, an average of $744, followed by married couples at $713. The survey found that those in the age group of 18 to 24 plan to spend an average of $353, those of 25 to 34 expect to spend $492, while 35 to 49-year-olds plan to spend $663 and 50 to 64-year-olds budget $669. Those over 65 plan to spend an average of $622.

MINING

ALROSA Sells Insurance Stake

ALROSA sold its 99.74% stake in the ALROSA Insurance Company to SOGAZ Insurance Group. The companies signed a share purchase agreement, following an open auction and ALROSA received payment of $13.4 million (RUB 620 million). The insurance business was considered to be a non-core asset for the diamond-mining giant and the change in ownership will not affect outstanding insurance contracts, according to ALROSA. The insurance arm offers coverage to retail clients and corporations, including ALROSA and its subsidiaries.

ALROSA also paid off $500 million of outstanding company Eurobonds, reducing its debt-load to $3.7 billion. The bonds were originally issued between November 2004 and January 2005 with a fixed coupon yield of 8.875%. ALROSA's next Eurobond series totals $1 billion and will mature in the fourth quarter of 2020.


Gannicott Takes Medical Leave

Robert Gannicott, the chairman and CEO of Dominion Diamond Corp., is taking medical leave that is expected to continue until mid-February. Board member Dan Jarvis will assume the role of acting chairman and will be supported by the audit committee chairman, Ollie Oliveira, who has extensive experience in the diamond mining industry. During this period, Brendan Bell, currently the executive vice president, will assume the role of acting CEO. Bell will be supported by Elliot Holland as vice president, who is responsible for the Jay project and business development. Prior to joining Dominion Diamond, Holland was a partner at McKinsey & Company serving mining clients, including diamond mines, on operations, strategy and capital projects.


Gemfields Auction Garners $35M, Production -3%

Gemfields plc reported $34.9 million from a rough emerald auction that was held in Lusaka, Zambia from November 13 to 17. The auction offered 598,000 carats and was 94% sold by lot at an average price of $66 per carat. The auction, which was comprised of predominantly high-quality rough emeralds, was the sixth in Lusaka since April 2013. The emeralds were recovered at the mining company's Kagem mine in Zambia.

Gemfields' production fell 3.1% year on year to 6.3 million carats of emerald and beryl in the third quarter that ended on September 30. Meanwhile, production of ruby and corundum was flat at 2.9 million carats. Gemfields held an emerald auction in August, which realized $15.5 million for 11.58 million carats of predominately lower-quality goods.

STATS Belgium

Oct. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,280 -4% $12,285 5%
Polished imports $1,179 -4% $11,962 5%
Net exports $101 -2% $323 22%

Rough imports $1,120 -1% $12,640 14%
Rough exports $1,000 -1% $13,030 9%
Net imports $120 ($390) 13%

Net diamond account ($19) $713

ECONWATCH

Diamond Industry Stock Report

U.S. shares wildly mixed as investors slammed Charles & Colvard (-40%) after disappointing earnings, Movado (-32%), following a warning on weak watch sales and Blue Nile (-6%), but rewarded Birks (41%) for a strong quarter. Far East shares all lower, led by ValueMax (-7%). Europe little changed as weekly gains/losses held within (Kering) -2% and (Richemont) 2%. India mostly lower, led by C.Mahendra (-14%) and Vaibhav (-26%). Miners were mixed as Peregrine (-10%) marked the steepest drop but Lucara (6%) pulled ahead. View the extended stock report.
Nov. 20 Nov. 13 Chng.
$1 = Euro 0.797 0.802 -0.005
$1 = Rupee 61.93 61.55 0.4
$1 = Israel Shekel 3.84 3.81 0.03
$1 = Rand 10.96 11.21 -0.25
$1 = Canadian Dollar 1.13 1.14 -0.01

Precious Metals
Gold $1,195.10 $1,160.70 $34.40
Platinum $1,205.00 $1,188.00 $17.00

Stock Indexes Chng.
BSE 28,067.56 27,940.64 126.92 0.5%
Dow Jones 17,717.88 17,652.79 65.09 0.4%
FTSE 6,678.90 6,635.45 43.45 0.7%
Hang Seng 23,349.64 24,019.94 -670.30 -2.8%
S&P 500 2,052.76 2,039.33 13.43 0.7%
Yahoo! Jewelry 1,200.51 1,190.56 9.95 0.8%

Rapaport Weekly Market Comment Nov. 26, 2014

Inventory increasing, liquidity decreasing with tough rough pricing. Polished prices under pressure after relatively weak Indian Diwali and China Golden Week. All eyes and hopes are on the U.S. retail market. Chow Tai Fook 1H revenue -22% to $2.9B, profit -23% to $353M. Luk Fook 1H revenue -25% to $973M, profit -16% to $104M. Signet 3Q same store sales +4%, loss of $1.3M vs. profit of $34M. Tiffany 3Q revenue +5% to $960M, profit -60% to $38M. Sotheby’s NY sells pear, 9.75ct., fancy vivid blue, VVS2 diamond for record $32.6M ($3.3M/ct.). India’s Oct. polished exports -15% to $2.2B. The Rapaport Group wishes all our friends a happy Thanksgiving and a successful holiday season.


RapNet Data: Nov. 26

Diamonds 1,538,215
Value $8,168,442,036
Carats 1,523,522
Average Discount -27.99%

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QUOTE OF THE WEEK
In the short time period since owning Zale, we have been able to implement select initiatives to further the Zale Christmas business. We remain confident in our ability to meet our goal of $150 million to $175 million in cumulative 3-year synergies from January-end 2015 to January-end 2018.

Mark Light | Signet


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INDUSTRY

ALROSA Reports 3Q Loss

ALROSA reported a loss of $223 million (RUB 10.3 billion) during the third quarter that ended on September 30, primarily due to foreign exchange losses. ALROSA posted a profit of $180 million the previous year. An economic slump and Western sanctions imposed on Russia in response to the Ukraine crisis have hammered the ruble by 27% against the dollar since January. Revenue rose 8% year on year to $909 million, while the average price of its gem-quality diamonds fell 9% from the previous quarter to $182 per carat. The company noted that a change in the product mix offered was responsible for the average price difference even as market prices rose 3%.

ALROSA previously reported that production fell 2% to 9.737 million carats in the third quarter. Production during the first nine months of the year dropped 5% to 25.655 million carats, although the company remained on track to meet a target of 36 million carats this year. ALROSA’s revenue increased 21% to $3.17 billion, while profit fell 44% to $276 million.

U.S. Jewelry & Watch Sales Drop

U.S. jewelry and watch sales combined fell 0.6% year on year to $5.461 billion in October, according to preliminary estimates by Rapaport News. While the data is subject to several revisions, it currently marks the first monthly decline since April 2012. Jewelry sales from all retail channels fell 0.5% year on year to $4.806 billion, while watch sales declined 1.5% to $655 million during the month, according to Rapaport News. Growth began to cool in September when jewelry and watch sales experienced just a 1% increase to $5.415 billion, and by a separate measure, specialty jewelry store sales rose by only 1.2% that month to $2.2 billion. Still, jewelry and watch sales have risen 2.2% year on year to $56.5 billion for the first 10 months of 2014.

Swiss Watch Exports +5%

Swiss watch exports rose 5.2% year on year to $2.34 billion (CHF 2.27 billion) in October, representing a record level for a month, according to the Federation of Swiss Watches. Exports by volume rose 4.5% to 2.881 million units. Growth was driven by the lower and higher price segments. Exports of watches priced at less than $206 increased 7%, while exports of timepieces priced above $3,092 rose 8%. Exports of watches for the mid-market segment priced at between $206 and $3,092 declined by 2.6%. During the first 10 months of the year, Swiss watch exports increased 3.1% to $19 billion.

RETAIL & WHOLESALE

Chow Tai Fook's 1H Profit -23%

Chow Tai Fook reported that revenue fell 22% year on year to $2.88 billion (HKD 29.32 billion) in the six months that ended on September 30, as gold sales failed to keep pace with last year’s levels. Profit slumped 23% to $352.8 million. The jewelry market downturn during the first half of fiscal 2015 came as no surprise to the company, given the relatively slow economy in both Hong Kong and Mainland China. Sales of gem-set jewelry grew 25% to $1.07 billion, while gold product sales slid 41% to $1.87 billion. Sales of platinum and karat gold products fell 5% to $609.4 million, while watch sales increased 18% to $229.3 million.


Signet Records 3Q Loss

Signet Jewellers Ltd. reported that revenue rose 52.7% year on year to $1.18 billion for the third quarter that ended on November 1, based on a condensed consolidated basis that included the acquisition of Zale. Comparable-store sales across the group rose 4.2%. Revenue from the company's various online channels jumped 96.5% to $44.8 million. Cost of sales increased 56.4% to $832 million. The group recorded a loss of $1.3 million or 2 cents per share, down from profit of $33.6 million, which was largely blamed on a Zale division loss of $13.2 million and incremental interest expense of $10.6 million related to the Zale acquisition. Gross margin fell to 29.4% of sales compared with 31% one year ago, with the decrease being attributable to Zale.

Revenue improvement was driven by fashion jewelry and bridal at brands operated by Sterling, while the strongest segment at Zale was fashion diamonds. In the U.K., there as good demand for diamond jewelry and watches. Cash and cash equivalents were unchanged at $87.6 million, however, the value of inventory jumped 62.6% to $2.7 billion. Signet entered into a rough diamond supply contract with De Beers to advance its strategic diamond sourcing efforts. Signet already owns a diamond cutting factory in Botswana where sights are held.

Tiffany's 3Q Profit -60%

Tiffany & Co. reported that revenue rose 5.3% year on year to $959.6 million in the third quarter that ended on October 31. Same-store sales rose 4%. The jeweler reduced cost of sales by 0.8% to $388.7 million, but it also recorded a charge of $93.8 million due to early repayment of debt. Tiffany & Co.'s profit fell 59.6% to $38.3 million or 30 cents per share. By region, sales rose 10% across the Americas to $459 million during the quarter, with comparable-store sales rising by 11%. Across the Asia-Pacific, Tiffany & Co. recorded a 2% increase in sales at $243 million, but same-store sales fell 3%. Sales in Japan dropped 12% to $113 million and comparable-store sales fell 6%. In Europe, revenue jumped 9% to $114 million and same-store sales improved 2%.

The value of inventory as of October 31 rose 10% year on year to $2.6 billion. Gross margin rose to 59.5% from 57% one year ago. Cash and cash equivalents and short-term investments dropped to $383 million, compared with $521 million one year ago. Tiffany & Co. maintained its guidance for the fiscal year, which ends on January 31, and anticipates earnings per share of between $4.20 and $4.30, excluding the charge related to repayment of debt. However, the company softened revenue growth projections just a touch with worldwide sales increasing by a mid- to high-single-digit percentage rather than a high-single-digit projection that was forecast earlier.

Luk Fook's 1H Profit -17%

Luk Fook Holdings Company Ltd. reported that revenue plunged 25.1% year on year to $973 million (HKD 7.542 billion) in the first half that ended on September 30. Same-store sales fell 41%, but comparisons were difficult due to a "gold rush" in 2013 that drove comparable-store sales up 64.4% in the first half. Same-store sales for gold and platinum products declined 50.1% this year, while they fell 12.9% for gem-set jewelry products. Profit attributable to equity shareholders dropped 16.6% to $104 million. Still, the board was eager to declare an interim dividend of 7 cents (HKD 0.55) per ordinary share, down from 8 cents (HKD 0.63) one year earlier. Revenue from the group's retail business fell 31.7% year on year to $761 million, however, sales from the wholesale business increased 23.4% to $176 million. Licensing revenue fell 13.1% to $36 million.

Movado's 3Q Profit -4%

The Movado Group reported that sales fell 0.6% year on year to $188.6 million in the third quarter that ended on October 31. Costs of sales were reduced slightly, by 0.3%, to $88.7 million. Gross margin fell to 53% compared with 53.4% one year ago. Profit slipped 4.3% to $22.4 million. Cash and cash equivalents were unchanged at $157.9 million, but the value of inventory rose 0.7% to $182.7 million. Movado anticipates that sales during the fourth quarter, which includes the Christmas season, will total between $132 million and $137 million, while earnings per diluted share are forecast in the range of 18 cents and 23 cents.

Blue Diamond Sets Records

A 9.75-carat, VVS2, fancy vivid blue, pear-shaped diamond pendant from the collection of Mrs. Paul Mellon sold for $32,645,000 or $3,348,205 per carat, setting a new world auction record total price for any blue diamond and a new world auction record price-per-carat for any diamond. The diamond had a presale estimate of $10 million to $15 million.

A saleroom filled with onlookers watched on tenterhooks as clients placed their bids on the phone. Rivalry between seven bidders was calm but brisk and the field was eventually narrowed down to two bidders in a duel that lasted for about 20 minutes. A round of applause broke out in the room as the bidding ended when a private collector in Hong Kong prevailed and named the new acquisition The Zoe Diamond. This particular diamond is notable for the purity of the blue with no modifying colors, and its high clarity as many blue diamonds contain graining or other imperfections that develop as the crystals form. The evening session of the sale totaled $42.1 million for 42 lots, of which 41 sold.

U.S. Consumers Tighten Spending Intentions Slightly

U.S. adults are planning to spend $720 on gifts for the Christmas season, according to Gallup's latest survey, representing a 3% increase from 2013, but a decrease of about 6% compared with 2012 and 2011. Forty-six percent of those surveyed expect to spend $500 or more, 39% plan to spend $499 or less, 9% do not celebrate Christmas and 6% were unsure how much they will spend, according to the survey. Gallup observed that spending intentions have softened since October, when U.S. adults estimated their gift budgets at $781, which the firm likened to the "cold feet" syndrome. Nonetheless, Gallup estimates a broad retail spending increase of between 2.2% and 3.5% for the November and December holiday period.

Palladium Equity Invests in Daniel's

Private equity firm Palladium Equity Partners made a majority investment in Daniel's Jewelers in California, without disclosing financial details. The retailer was founded in 1948 and the family-run business has since grown to 73 locations across Southern California, the Central Valley and the Central Coast. Luis Zaldivar, a managing director of Palladium Equity, said that Daniel's is ripe for new initiatives in support of growth, including opening new locations and pursuing strategic acquisitions, both inside and outside of California.

Bulova Unveils 24-Karat Watch

Bulova Corporation introduced a watch with a case made from 24-karat gold as a special edition timepiece from the company's Bulova Accu•Swiss brand. It is the first edition in the company's Joseph Bulova Collection and it was recognized by WatchPro as the 2014 "Innovative Watch of the Year." The watch was conceptualized by Bulova's president, Gregory Thumm, and relies on a proprietary process that enabled Bulova to harden 999.9 pure 24-karat gold, while maintaining exacting quality standards for finish and fit, and ensuring water resistance to 30 meters below the surface, according to the brand.

Citizen Opens Flagship Store

Citizen Watch Company of America held the grand opening of its flagship store in Times Square at 1500 Broadway, marking the first Citizen Watch global retail concept store in North America. The 1,300-square-foot boutique features a full range of watches from Citizen Eco-Drive, DRIVE from Citizen Eco-Drive, and the Citizen Signature Collections. The store was designed to appeal to both amateur and serious watch enthusiasts and serve as a showcase for the Citizen Watch brand with interactive and hands-on displays and exclusive offerings.

David Yurman Boutique Opens in SoHo

David Yurman unveiled its second New York City retail location in the heart of SoHo at 114 Prince Street. The 2,000-square-foot store was conceived by the Yurmans in partnership with their in-house design team, in what was described as an expression of casual luxury, and in appreciation of the craft and legacy of artists in SoHo’s 1970s community. The boutique is located in the SoHo-Cast Iron Historic District in a late 19th century loft building that is known for its Richard Haas trompe l'œil mural. The classical lines of the cast-iron façade frame the sculpted forms of David Yurman’s collections.


U.S. Consumer Confidence Rises

U.S. consumer confidence was much stronger in November than was the case one year ago, according to The Conference Board Consumer Confidence Index®, which registered 88.7 points (1985=100) compared with only 70.4 points in November 2013. In addition, the Present Situation Index jumped to 91.3 points from 72 points and the Expectations Index improved to 87 points compared with 69.3 points one year ago. Even with the year-on-year improvement, The Conference Board observed that all three measures were sharply lower from readings in October.

Lynn Franco, the director of economic indicators at The Conference Board, opined that consumer confidence retreated in the past month due to reduced optimism in the short-term outlook and the continued poor performance of the U.S. job market.

Gemfields Recovers Large Ruby

Gemfields recovered a 40.23-carat rough ruby at its Montepuez deposit in Mozambique. Given the significance of this stone, Gemfields committed to follow the ruby from mine to market and, ultimately, to a new owner. The gem was appraised in advance of Gemfields’ December ruby auction in Singapore by the Gübelin Gem Lab in Switzerland.

Daniel Nyfeler, the managing director of Gubelin, said, “Although difficult to judge in the rough state, the transparency and color of the crystal indicate an important gemstone might be cut from this piece of rough. We are looking forward to following the development of this remarkable rough from its current state to a cut gem.”


MINING

Dominion Diamond's Sales Rise

Dominion Diamond Corporation’s sales jumped 47% year on year to $222.3 million from the sale of 1.154 million carats. Ekati contributed $141.9 million from the sale of 458,000 carats, while production rose 60% to 975,000 carats. Diavik's sales totaled $80.4 million from 696,000 carats, while production fell 19%, with Dominion’s share amounting to 589,000 carats.

Dominion's rough diamond inventory was about $350 million on October 31, including $185 million worth of rough that is available for sale at market value and $15 million worth from samples used in the sorting process. The balance of approximately $165 million represents work in progress. During the first nine months of the fiscal year, Dominion’s sales totaled $675.2 million from 3.5 million carats sold, compared with $522.3 million reported a year earlier.

Botswana Diamonds Widens Loss

Botswana Diamonds reported a preliminary loss of $1.61 million (GBP 1.02 million) for the fiscal year that ended on June 30, which was up from a loss of $813,440 one year earlier. Cash and cash equivalents at the close of the year rose to $659,359 compared with $61,997 in 2013. The company reported no revenue during the period.


Rockwell Raises $4M

Rockwell Diamonds Inc. completed a $4.1 million offering of two-year unsecured convertible debentures with two insiders, namely Rockwell’s principal shareholder Daboll Consultants Ltd., an affiliate of Diacore, for $3 million and with Mark Bristow, Rockwell’s non-executive chairman, for $1.1 million. The proceeds will be used to finance current and proposed work programs Rockwell's diamond projects and for general working capital purposes.

Angola Grants 35-Year License to Lucapa

Lucapa Diamond secured a 35-year mining license for its Lulo concession in Angola, which covers 218 square kilometers under exploration. The company has conducted bulk sampling of kimberlite and alluvial deposits, resulting in the recovery of many large type IIa diamonds and sales of $5.1 million. The project is a joint-venture with Endiama and Rosas & Petalas.


STATS India

Oct. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $2,219 -15% $19,199 2%
Polished imports $600 3% $6,210 2%
Net exports $1,619 -20% $12,989 3%

Rough imports $1,006 -17% $14,557 14%
Rough exports $107 -37% $1,295 -19%
Net imports $899 -14% $13,263 11%

Net diamond account $720 -26% ($274)

ECONWATCH

Diamond Industry Stock Report

Birks (+13%) continued to lead U.S. shares and Movado (+7%) wasn't far behind. European shares all higher led by Damiani (+18%). India was mixed. Double-digit gains for miners Dominion (+12%), Rockwell (+21%), Firestone (+13%) and Petra (+10%). View the extended stock report.
Nov. 26 Nov. 20 Chng.
$1 = Euro 0.799 0.797 0.002
$1 = Rupee 61.77 61.93 -0.2
$1 = Israel Shekel 3.87 3.84 0.03
$1 = Rand 10.96 10.96 0.00
$1 = Canadian Dollar 1.12 1.13 -0.01

Precious Metals
Gold $1,197.80 $1,195.10 $2.70
Platinum $1,226.00 $1,205.00 $21.00

Stock Indexes Chng.
BSE 28,386.19 28,067.56 318.63 1.1%
Dow Jones 17,827.75 17,717.88 109.87 0.6%
FTSE 6,729.17 6,678.90 50.27 0.8%
Hang Seng 24,111.98 23,349.64 762.34 3.3%
S&P 500 2,072.79 2,052.76 20.03 1.0%
Yahoo! Jewelry 1,239.28 1,200.51 38.77 3.2%

Dobrý den,
neví tu prosím někdo, jak poznat diamant v prstýnku? Normálně to poznat umím, ale když je zasazen v prstenu a nejde vyjmout?? Díky.

Aká kvalita diamantu je deklarovaná ?

Prípadne zájdite niekam do zlatníctva kde majú skúšačku na diamanty.

Kolega neznalec je ve Španělsku a nemá možnostjít do zlatnictví. Jedná se prý o malé diamanty zasazené v prstýnku.

Pokiaľ nie sú v kvalite IF farba D čo by aj prsteň bol hodne drahý rozoznať sa musia dať .
Bez poznania súvislostí sa ťažko odpovedá, toto nie je o minci kde pri dobrej fotke je na 99% poznať pravosť aj kvalitu.

Rapaport Weekly Market Comment Dec. 5, 2014

Polished market weakens with Nov. RAPI 1 ct. -1.7%. Thanksgiving weekend sales -11% to $50.9B, Cyber Monday online sales +17% to $2B as consumers move online. Rough prices out-of-line forcing cutters to reduce polished prices to maintain liquidity. Situation unsustainable as sightholders overpay for rough to ensure future supply in 2015, while polished demand declines. Diamond market is running out of money. De Beers expected to keep stable rough prices at next week’s sight. ALROSA’s 3Q revenue +8% to $909M, net loss of $223M. U.S. Oct. jewelry sales -0.5% to estimated $4.8B, watch sales -1.5% to $655M. Hong Kong YTD polished imports +9% to $14.9B, polished exports +18% to $10.5B.


RapNet Data: Dec. 4

Diamonds 1,539,382
Value $8,390,341,434
Carats 1,524,213
Average Discount -28.26%

www.rapnet.com
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QUOTE OF THE WEEK
While Thanksgiving weekend saw a slight decline, we are still hopeful that the Christmas season will prevail. Seven of the top 10 sales days are still to come, and retailers will be prepared to appeal to shoppers who are notorious for seeking last minute deals.

Bill Martin | ShopperTrak
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.


INDUSTRY

Polished Prices Battling Headwinds

Polished diamond prices fell in November as suppliers lowered prices in an effort to raise cash flow. Tight liquidity remains the biggest challenge facing diamond dealers and manufacturers. Demand is selective with low trading levels, while the focus of the industry has shifted to consumer demand during the Christmas retail shopping season.

The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds declined by 1.7% in November, while RAPI for 0.30-carat diamonds fell 2.2%, RAPI for 0.50-carat diamonds dropped 1.6% and RAPI for 3-carat diamonds decreased by 1.8%. Dealer and manufacturer sentiment is weak. U.S. demand is stable but Far East markets are quiet. Polished inventory levels are high across the pipeline and profit margins are being squeezed as polished prices have declined since April, while rough prices have been relatively steady.

RETAIL & WHOLESALE

U.S. Christmas: Best Spending Days to Come

U.S. retail sales over the Thanksgiving weekend experienced a broad-based decline; however, analysts believe that results were more indicative of shifting consumer spending patterns rather than their unwillingness to open wallets. Consumers are growing increasingly aware of brick-and-mortar promotions and price gimmicks, especially as mobile devices become their most important research tool. Online sales continue to experience healthy growth and consumers are also adopting a "wait and see" attitude toward gift spending, expecting greater bargains as Christmas draws closer.

ShopperTrak, which measures larger shopping centers and malls, anticipates that the biggest retail day of the year will be Super Saturday, which is December 20, offering retailers hope that consumer spending will only increase dramatically in the weeks ahead. While retail sales fell 2.1% to $21.8 billion for the four-day holiday weekend, by ShopperTrak's measure, stores that opened on Thanksgiving Day sacrificed sales from Black Friday (down 6.8% to $9.1 billion) and Sunday (down 6% to $3.5 billion), while Saturday was flat at $6 billion.

By comparison, ecommerce sales surged 24% year on year to $6.6 billion over the weekend and including Cyber Monday, according to comScore Inc.

Self-reported spending figures across all retail channels, however, provided a different summary over the holiday period as the average shopper spent $381, down 6.4%, and overall spending fell 11% to $51 billion, according to the National Retail Federation (NRF). The organization claimed that a stronger U.S. economy was to blame, since consumers were not being teased into stores with steep discounts this year.

The NRF maintains its guidance for a 4% increase in Christmas-season sales for all channels, ShopperTrak is more conservative by suggesting sales will rise 2% in stores, and comScore predicts that online sales will improve 16%.

Affluents' Gift Spending May Increase

Affluent U.S. consumers have grown slightly more uneasy about economic conditions in the past 12 months, according to the American Affluence Research Center; however, the group's proprietary composite index held to neutral territory, which is good news for anticipated Christmas gift spending. The average index for changes in spending plans is 13 points higher (92 versus 79) for those expecting an increase or no change in their income versus those expecting a decline in income. The difference is 29 points (94 versus 65) based on net worth expectations, the group observed.

The typical affluent household forecasts spending an average of $2,623 on gifts this Christmas, equal with 2013 plans, representing $31 billion in total. But American Affluence Research also pointed out that the affluent often tend to spend more for gifts than they had planned.

Hearts On Fire Launches in China

The diamond and jewelry brand Hearts On Fire launched in Mainland China by sharing its marketing and retail rollout strategies and unveiling a standalone store in Shanghai, which will officially open soon. In addition, the brand intends to open Hearts On Fire points of sale in Hong Kong and Macau. Fashion icon Olivia Palermo, joined the celebration by showcasing the new Hearts On Fire "Fire" collection that will be sold exclusively in China.

Hearts On Fire's strategic plan involves capturing two key Chinese consumer trends to grow diamond demand. By promoting its specialty diamond offerings to younger consumers, Hearts On Fire expects to attract that demographic, which now favors diamond jewelry over traditional gold jewelry. Secondly, the brand's premium luxury positioning will cater to China's expanding wealthy consumer class as they become more brand aware and appear eager to make lifestyle purchases.

Apple to Disrupt the Watch Industry

Scott Galloway, the founder of L2 Business Intelligence for Digital, a firm that analyzes digital trends of numerous retail brands, warned that the Apple Watch, the tech giant’s foray into the luxury world, could be a potentially “disrupting” factor.

The Apple Watch, which will be available in 2015, is predicted to hit sales of $13.5 billion during the first year -- a mark that, if reached, would make Apple the world’s largest watch company. Galloway also said that watch and jewelry companies are less savvy than their luxury retail peers in navigating the digital universe to sell and promote product. With Apple clearly crowding the space, a typical jeweler's lack of technical savvy will impact the bottom line. It’s possible, Galloway said, that the advent of the Apple Watch could create the incentive for watch companies to close that digital gap. “They’re going to have to if they want to stay competitive,” he concluded.

India Drops 80:20 Rule

India removed the 80:20 gold import scheme, thus freeing up incoming shipments of the precious metal for the wedding season. The scheme, which had been in place since August 2013, was imposed for the purpose of curbing gold imports and, in turn, reducing a growing current account deficit in the country. Many industry leaders have been critical of the 80:20 scheme, blaming it on a dramatic increase in gold smuggling. The notification to end the scheme was shared by the Reserve Bank of India.

Court Fines Pandora

Pandora Jewelry was ordered to pay a $333,000 (DKK 2 million) fine in connection with a breach of the Securities Trading Act in Denmark. The company stated that it is reviewing whether or not to appeal the ruling that was passed by the District Court in Glostrup. The jewelry company stated that the securities charge dated back to August 2, 2011, at which time it downgraded revenue growth projections just two weeks prior to the scheduled reporting date of its second-quarter results that year. The court ruled that Pandora was obliged to have announced any downward adjustments in projected revenue no later than July 18, 2011.

Arcos East Reopens at Almas Tower

The Dubai Multi Commodities Centre (DMCC) welcomed ALROSA and its subsidiary Arcos East DMCC to Dubai, as the mining giant opened a sales office in Almas Tower. ALROSA's move to reopen in Dubai highlighted the significant role the city plays in the diamond trade, especially since the global downturn in 2009. ALROSA joins some 180 Russian companies currently based in the free zone, including diamond manufacturer Smolensk Kristall and Lukoil.

Delhi to Host Diamond Conference

The inaugural World Diamond Conference in India, organized by the Gem & Jewellery Export Promotion Council (GJEPC) and the World Diamond Mark Foundation (WDMF) and supported by the Ministry of Commerce and Industry of India, takes place in Delhi on December 11 and 12. Conference participants will discuss pressing industry issues and learn new ways to excite consumers about diamonds. Speakers include business leaders from across the industry, from mining to retail marketing.

GENERAL
Daniel's Adds to Leadership Team

Daniel's Jewelers of California appointed Joseph Donaghy as its chief financial officer. The retailer recently received financial backing from private equity group Palladium Equity Partners and embarked on a range of new initiatives, including expansion and strategic acquisition plans, both inside and outside the state. Donaghy previously served as executive vice president, chief administrative officer and chief financial officer at Ultra Jewelers, prior to and immediately after the chain's acquisition by the Signet Group. Donaghy has also served in senior operating positions at Friedman Jewelers and Crescent Jewelers.


Sofisti Leaves Gucci

The CEO of Gucci's watches and jewelry division, Michele Sofisti, left the company to pursue other personal and professional opportunities. Patrizio di Marco, Gucci's president and CEO, will serve as interim head of the watch and jewelry division, while the company expects to name a permanent replacement for Sofisti shortly. In July, Gucci's parent firm Kering announced a group reorganization that would require each of its subsidiaries to have a dedicated full-time CEO. Following that decision, Sofisti resigned his position as CEO of Sowind Group to focus on his efforts on the watches and jewelry division.

Lawson to Oversee Wearable Devices at Movado

Jo An Lawson joined the Movado Group Inc. as its general manager of wearable devices and will lead the company’s strategic alliance expansion initiatives for the wearable sector. In her role, Lawson will be responsible for identifying unique opportunities that position the brand to launch wearable device products, consistent with its luxury product branding philosophy.

Lawson, who is based in San Francisco, California will report to Movado's vice chairman, Rick Coté. Most recently, she served as a marketing strategist at West Studios, a multi-disciplinary strategy and creative collective, acting as interim vice president of marketing for technology companies. Previously, Lawson has held various technologies focused marketing positions at Apple and Deloitte Consulting.


Murphy to Leave Christie's

Steven P. Murphy will step down from his role as CEO of Christie’s at the end of the year. Patricia Barbizet will become the new CEO as well as continuing in her current role as chairman of Christie’s. Barbizet said that the company is positioned for its next phase of development and she looked forward to leading the global team into a new chapter of innovation and excellence.


MINING

Rio Tinto Approves A21 Development

Rio Tinto approved the development of the A21 kimberlite pipe at the Diavik mine in Canada’s Northwest Territories. The project carries an estimated cost of $350 million and will take four years to complete. Construction will begin next year and the first production is planned for late 2018. Rio Tinto explained that the project will provide an important source of incremental supply at Diavik, ensuring the continuation of existing production levels. A21, which is the fourth pipe at Diavik, is located just south of Diavik’s existing mining operations. Rio Tinto operates the Diavik mine and owns 60% share in the asset with Dominion Diamond Corporation holding the remainder.

Stellar Prepares for a Rough Sale

Stellar Diamonds exported 941 carats of rough diamonds to Antwerp from the Baoulé diamond project in Guinea, marking a milestone for the company as it intends to hold a first sale shortly. The parcel included a few large stones, including a 9.20-carat, 5.50-carat and a 5.1-carat diamond. Stellar Diamonds reached its target processing capacity at the project, with current rates at 2,000 carats per month if they are maintained. The company anticipates holding a diamond sale every two months during 2015.

ZMDC Must Publish Financial Reports

Zimbabwe has been working toward greater financial transparency and, in particular, tracking diamond dividends as part of a long term economic development agreement with the International Monetary Fund. Given this, the country's Finance and Economic Development Minister, Patrick Chinamasa, in presenting the 2015 budget, proposed that the Zimbabwe Mining Development Corporation (ZMDC) publish annual financial reports, according to the government-run newspaper, The Herald.

The ZMDC, a state-owned entity that is under U.S. sanctions, holds interests in diamond mining firms Marange Resources, Mbada Diamonds, Diamond Mining Corporation, Anjin Investments, Jinan Mining, Kusena Diamonds, Rera Diamonds and Gye-Nyame Resources. The group also owns other mineral mining operations across the country.


Botswana Approves Lerala Assessment

Kimberley Diamonds received authorization for its environmental impact assessment at the Lerala mine in Botswana. The Botswana Department of Environmental Affairs approved and transferred the authorization to Kimberley Diamonds, having previously approved the assessment for DiamonEx, the former owner of the mine. The authorization enables Kimberley Diamonds to upgrade the plant, site infrastructure and tailings storage facilities at Lerala as it plans to resume production mid-year 2015. The company is still required to revise the existing environmental impact assessment and environmental management plan and it expects to submit its final report to the government by the end of January 2015.

Firestone to Resume Production

Firestone Diamonds expects to resume production at the Liqhobong mine in Lesotho in the second quarter of 2016, following a major overhaul of the project. The project includes the construction of a new main treatment plant and supporting infrastructure that is projected to treat 3.6 million tonnes of ore and recover approximately 1 million carats of diamonds a year. The company previously stated that it would need about $222 million to construct and commission Liqhobong’s main treatment plant. Firestone reported spending $36.3 million so far and has placed service orders worth about $116 million for its engineering, procurement, contract and management budget.

STATS

Hong Kong

YTD $Mil. %Chng.
Polished imports $14,948 9%
Polished exports $10,472 18%
Net imports $4,476 -6%

Rough imports $1,654 16%
Rough exports $1,757 13%
Net imports ($103)

Net diamond account $4,373 5%

ECONWATCH

Diamond Industry Stock Report

U.S. retailers take a beating after a disappointing start to Christmas shopping, except for Tiffany (+1%) and Nordstrom (0%). Far East shares mixed but Luk Fook (+14%) jumps. European shares largely unchanged except for Richemont (+2%). India shares mostly higher, led by Gitanjali (+14%) but tempered by C.Mahendra (-10%). Mining shares mixed, but ALROSA (+14%) hits a 52-week high. View the extended stock report.
Dec. 4 Nov. 26 Chng.
$1 = Euro 0.808 0.799 0.009
$1 = Rupee 61.92 61.77 0.1
$1 = Israel Shekel 3.95 3.87 0.08
$1 = Rand 11.20 10.96 0.24
$1 = Canadian Dollar 1.14 1.12 0.02

Precious Metals
Gold $1,206.10 $1,197.80 $8.30
Platinum $1,232.00 $1,226.00 $6.00

Stock Indexes Chng.
BSE 28,562.82 28,386.19 176.63 0.6%
Dow Jones 17,900.10 17,827.75 72.35 0.4%
FTSE 6,679.37 6,729.17 -49.80 -0.7%
Hang Seng 23,832.56 24,111.98 -279.42 -1.2%
S&P 500 2,071.82 2,072.79 -0.97 0.0%
Yahoo! Jewelry 1,255.79 1,239.28 16.51 1.3%