RAPAPORT NEWS SERVICE | July 15, 2011 www.rapaport.com | news@rapaport.com

Industry Retail EconWatch India Mining Stats

Rapaport Weekly Market Comment July 15, 2011  

Terror attack shakes Mumbais diamond district. Indians vow to continue business as usual ahead of important IIJS show. Rapaport calls on diamond industry to support India through visits and increased business. Gold hits new record ($1,595.60/oz) as dollar weakens amidst U.S. and European debt concerns. Polished trading quiet but prices remain firm. Strong demand for very small, G+, VVS+ diamonds from branded high-end watch manufacturers. Rough prices continue to rise as large dealers hold back inventories. Rio Tintos 2Q diamond production -24% to 2.733m cts. Belgiums June polished exports +38% to $1.5b. U.S. May polished imports +59% to $2.5b, polished exports +38% to $1.4b.

RapNet Data: July 14

Diamonds 722,544
Value $5,176,257,839
Carats 800,896
Average Discount -24.37%

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RAPAPORT ANNOUNCEMENTS

August
15-25
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

Aug-Sep
29-1
Mon-Thu

Rapaport Melee Auction
New York

email: auctions@rapaport.com

QUOTE OF THE WEEK:
We must be strong enough to minimize the impact the terrorists have on our lives and give support to those that have been affected. It will take a few days but soon things will be back to normal.

Sanjay Kothari | Gem & Jewellery Export Promotion Council (GJEPC)

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

Kothari Calls for Resilience

India’s diamond sector will be closed July 15 in honor of the victims of the July 13 terror attack on Mumbai. The government confirmed 17 people died and 131 were injured with 23 of those in serious condition. Listen to a firsthand account of events from Opera House.

Sanjay Kothari, vice president of the GJEPC, announced plans to host a condolences gathering on July 16 to honor those affected by the attack. Kothari added that the summer program of trade events would continue as planned and that every effort would be made to ensure the safety of all visitors.

The GJEPC is preparing to host its largest trade event of the year when large delegations of diamond dealers from Belgium, Israel and the Far East are expected to attend the India International Jewellery Show (IIJS) in Mumbai at the beginning of August. Kothari added that security would be increased to ensure the success of the event.

Rapaport News Broadcast

WATCH NOW: The Diamond Dealers Club (DDC) of New York is undergoing a transformation by reaching a wider group of members and offering value-add services at the club. DDC president Moshe Mosbacher, member services director Lou Rohde, and TransGuardians president Jim Moseley explain initiatives that were launched this month.

RETAIL & WHOLESALE

Merit Sues SK Diamonds Over Sirena Copyright

Merit Diamond Corporation filed a lawsuit in the U.S. District Court for the Southern District of Florida against SK Diamonds of Texas for copyright infringement and trade dress infringement of signature pieces from its Sirena® Collection. Merit Diamond stated that it "once again proves its willingness to go all out policing and protecting its internationally renowned Sirena Collection and the interests of all Sirena authorized dealers."

U.S. Retail Sales in June Improve

Department store sales rose 3.3% year on year in June to $14.9 billion on an unadjusted basis, according to U.S. government figures. Retail trade sales rose 8.5% and total retail and food services sales, excluding motor vehicles, rose 8.2% to $324.7 billion.

Uplifting Earth Reviews 10 Jewelry Brands

Lifeworth Consulting released a benchmarking study on the ethical performance of luxury jewelers and concluded most of the 10 brands analyzed - Boucheron, Bulgari, Buccellati, Cartier, Chanel, Chopard, Graff, Harry Winston, Piaget and Van Cleef & Arpels - failed to meet basic consumer expectations for sourcing of metals and gemstones. The report, titled "Uplifting Earth: The Ethical Performance of Luxury Jewellery Brands," was published by nonprofit group Fair Jewelry Action, and argued that while luxury jewelry brands hold the power and prestige to make a difference in the industry, all the brands except Cartier and Boucheron have been slow to demonstrate responsible business practices.

Some of findings revealed that even though some top brands belonged to the Responsible Jewellery Council (RJC), they lacked transparency, which is one pillar for membership. The brands also failed to state “how they supported” the Kimberley Process in effort to ensure that diamond mines operated without human rights abuses. The brands did not disclose how they combated corruption, which is another key pillar of RJCs best practices.

Today, the efforts of responsible jewelry pioneers are outlining a vision of ethical excellence. By comparing the actions of 10 luxury brands with this new vision, the report finds luxury jewelry firms risk being left behind in an increasingly aspirational marketplace,” the report concluded.

Faberge Introduces New Collection

The Fabergé brand unveiled its first couture egg pendants since 1917 and named the collection Les Fameux de Fabergé. The pendants mark the beginning of a series of 12 one-of-a-kind jewelry egg pendants, retailing at up to $600,000, that include the Diaghilev Egg, an egg comprising diamond circles shimmering with rubies with a secret drawer containing a surprise, and the Diamond Egg, a high-tech titanium egg entirely invisibly‐set with white diamonds in which the diamonds outweigh the titanium frame, a feat never before achieved.

The collection will be exhibited at Fabergé in Geneva from July 18 through August 21. The eggs also pave the way for private commissions, rekindling the tradition of Fabergé as gifts for special occasions.

Blue Nile Updates Mobile App

Blue Nile launched its new mobile shopping application available in Apples App Store. The new app has been updated with an enhanced engagement ring shopping platform and access to the companys full jewelry line. In addition, consumers from the more than 40 countries to which Blue Nile ships can purchase in their local currency directly through the apps shopping cart. The companys full line of bracelets, necklaces, pendants, and earrings are now available for purchase on the app as well.

STATS

Belgium

Figures rounded June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,500 38% $7,340 37%
Polished imports $1,480 39% $6,890 37%
Net exports $32 9% $453 46%

Rough imports $1,420 60% $7,060 44%
Rough exports $1,610 34% $7,740 36%
Net imports ($197) ($678)

Net diamond account $228 -34% $1,130 3%

U.S.A.

Figures rounded May $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $2,520 59% $9,400 34%
Polished exports $1,360 38% $7,000 39%
Net imports $1,170 96% $2,400 50%

Rough imports $70 15% $280 26%
Rough exports $40 -9% $183 50%
Net imports $30 76% $97 0%

Net diamond account $1,390 39% $2,490 15%

Botswana

May $Mil. %Chng. YTD $Mil. %Chng.
Diamond exports $464 82% $1,800 44%

MINING

Rio Tinto Launches Pink Tender 2011

Rio Tinto launched its Argyle Pink Diamonds Tender 2011, a collection showcasing 55 pink diamonds, weighing 47.61-carats in total. The collection will be previewed from August through October. Rio Tinto collaborated with fashion illustrator David Downton who captured the pink diamonds for the 2011 Tender Catalogue.

In other news, Rio Tinto’s diamond production fell 24% year on year to 2.733 million carats in the second quarter of 2011. Argyle’s production dropped 39% to 1.58 million carats, Murowa mine production increased 110% to 80,000 and Diaviks production in total rose 11% to 1.79 million carats with Rios share at 1.074 million carats. Harry Winston owns 40% share in Diavik to Rios majority stake. Diaviks full-year target production remains at 6.9 million carats.

Lucara Secures Funds

Lucara Diamond secured a $50 million credit facility from Zebra Holdings and Lorito Holdings, each an investment company owned by the Adolf H. Lundin trust. The facility has a maturity date of December 31, 2013, and requires quarterly repayments of principal commencing September 30, 2012. No interest is payable during the term of the facility, but an interest rate of 5% will accrue if the facility is not repaid by the maturity date or there is an event of default. The facility was secured by a pledge of shares in the subsidiary that controls the mining companys AK6 diamond mine in Botswana.

Stellar Parcel to Fetch $191 Per Carat

Stellar Diamonds has valued its first parcel of diamonds from the Tongo dyke project in Sierra Leone at $191 per carat. The company is planning to sell 639 carats of the Tongo goods soon along with stones from its Mandala project at a tender in Antwerp.

Namakwa Tender Nets $5M

Namakwa Diamonds said it is on track to launch commercial mining at its Lesotho-based Kao kimberlite project in September, but warned that production at its other projects would fall below expectations in the current fiscal year. Namakwa generated an estimated $5 million at its June tender with average prices rising more than 50% since its previous sale in March. The tender included 5,494 carats from Kao, which sold for an average price of $372 per carat, 2,438 carats from its alluvial operations in South Africa’s North West Province, which sold for $724 per carat, and 7,269 carats from the Kasai Central Node in the DRC, at an average of $161 per carat.

BlackRock Increases Stake in Gemfields

BlackRock Inc. increased its stake in Gemfields International nearly a whole percentage point to more than 5% this week. BlackRock is third largest investor in the colored stone mining company just behind Standard Life Investments. Rox Ltd. owns majority share in Gemfields at 63%. Gemfields recently acquired a stake in an "important ruby deposit" in Mozambique.

ECONWATCH

For the week ending July 14

Most industry stocks were down this week with the exception of DGSE (+9%), Damiani (+2%), Theo Fennell (+2%), Gitanjali (+6%), Peregrine Diamonds (+15%), Rockwell Diamonds (+27%), Shore Gold (+2%), and Gemfields (+43%). Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe. July 14 July 7 Chng.
$1 = Euro 0.707 0.697 0.010
$1 = Rupee 44.57 44.27 0.3
$1 = Israel Shekel 3.43 3.39 0.04
$1 = Rand 6.84 6.67 0.17
$1 = Canadian Dollar 0.96 0.96 0.00

Precious Metals
Gold $1,586.00 $1,531.80 $54.20
Platinum $1,764.00 $1,741.00 $23.00

Stock Indexes Chng.
BSE 18,618.20 19,078.30 -460.10 -2.4%
Dow Jones 12,437.12 12,719.49 -282.37 -2.2%
FTSE 5,852.30 6,054.55 -202.25 -3.3%
Hang Seng 21,940.20 22,530.18 -589.98 -2.6%
S&P 500 1,308.87 1,353.22 -44.35 -3.3%
Yahoo! Jewelry 1,152.04 1,177.41 -25.37 -2.2%

Rapaport Weekly Market Comment July 22, 2011

De Beers raises rough prices by an average 10% with very large DTC July sight estimated at about $850m. Some rough dealers still hoarding goods in anticipation of future price hikes despite forecasts for stable 3Q. Trading centers quiet as summer vacations approach in Belgium and Israel. Petra Diamonds revenues +24% to $221m as production -4% to $1.12m cts. while average prices +19%. BHP Billiton’s FY4Q diamond production -22% to 576,000 cts. due to lower grades at Ekati mine. India’s June polished exports +1% to $2.2b., rough imports +38% to $1.6b. Gold record tops $1,600/oz. barrier as U.S. debt debate continues to create currency uncertainty.

RapNet Data: July 21

Diamonds 734,922
Value $5,207,042,908
Carats 812,057
Average Discount -24.30%

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RAPAPORT ANNOUNCEMENTS

August
4-8
Thu-Mon
Rapaport at IIJS 2011
Bombay Exhibition Center, Mumbai
Booth: AL 5EX013-15 I-II

Meet the diamond suppliers at IIJS and view the diamonds they are exhibiting now!
Go to: www.rapnet.com/showlistings

August
15-25
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

Aug-Sep
29-1
Mon-Thu

Rapaport Melee Auction
New York

email: auctions@rapaport.com

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all, but give a donation to Jewelers for Children.
Register now. Seating is limited.

QUOTE OF THE WEEK:
Retailers understand consumers are extremely focused on value and are taking this opportunity to offer substantial savings on merchandise.

Matthew Shay | NRF President

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

DTC July Sight Estimate $850M

The Diamond Trading Companys (DTC) July sight had an estimated value of $850 million as demand for rough diamonds remains robust before the August vacation period. Sight participants reported that prices rose by an average of 10%.

DTC acknowledged there were some adjustments to prices, but disputed that the increases reached double digits. Sight observers said the hikes affected all DTC boxes but mainly colored goods and white commercial goods. Rapaport estimates indicate that rough diamond prices have increased by more than 40% so far in 2011. Rapaport estimates that DTC sales in the first seven months of the year --through the July sight-- have increased 24% to about $3.85 billion. De Beers releases mid-year results next week.

Gold Hits New Record

Spot gold rose to a record of $1,611oz. on July 19, which was nearly 35% higher than one year ago. Gold continued to act as a safe haven for investors and speculators as the U.S. and E.U. debt crises remain unresolved.

U.S. Jewelry CPI Hits a Record

The U.S. consumer price index (CPI) for jewelry in the month of June jumped 9.5% year on year to record high of 176.29 points, marking the sixth consecutive month with a reading greater than 170 points, and the 41st consecutive month where the CPI has been above 150 points. Meanwhile, the CPI for all product categories rose 3.6% year on year in June to 225.72 points.

RETAIL & WHOLESALE

Rapaport Broadcast

Watch Now: JOVELLA 2011, Israel’s eight annual international jewelry and diamond exhibition, was held in Tel Aviv and included a diamond pavilion for the first time. The diamond area was sponsored by the Israel Diamond Institute Group of Companies (IDI). The annual exhibition was organized by the Stier Group, with the sponsorship of the IDI, the Israel Ministry of Industry, Trade and Labor, the Israel Export and International Cooperation Institute, the Israel Jewelry Manufacturers’ Association and the Federation of Israeli Chambers of Commerce.

India Signals Strong Retail Growth

The annual value of India’s local gems and jewelry trade is expected to jump 75% from now through 2015 to $47.9 billion, according to a study by the Associated Chambers of Commerce and Industry of India (ASSOCHAM). The group reported that rising purchasing power, lifestyle changes and overall increasing affordability among Indian middle class are significant reasons for higher jewelry demand.

ASSOCHAM also reported that at the current rate of growth, India’s gem and jewelry exports could exceed $50 billion in the current fiscal year that ends March 31, 2012. Growth is expected to be boosted by the annual festive season, which runs from August through October.

CRISIL Ratings added that Indias small and mid-tier towns will help boost branded gold jewelry sales. Buoyed by increasing affluence and preference for branded jewelry, CRISIL said that retailers are expected to generate more than half of their revenues from these smaller population centers by fiscal period 2012-2013, compared with around 40 percent in fiscal period 2009-2010. The wide variety of design, aggressive marketing and promotional strategies, and innovative offers such as gold deposit and buy-back schemes, will also bolster the growth from these smaller towns.

Royal Asscher Opens in Tokyo

Royal Asscher opened a flagship store in Japan, on Ginza Street in Tokyo. The interior of the store is decorated in white, contrasting with Royal Asscher’s signature blue, and showcases a wide variety of Royal Asscher diamond engagement rings and jewelry. In commemoration of the opening, a Royal Asscher diamond tiara has been created containing a total of 10 carats of diamonds set in platinum and worth $385,000. The tiara will be loaned as a special treat to brides who purchase a Royal Asscher engagement ring in the Ginza store.

Damas Opens at Dalma Mall

Damas International inaugurated a new store in the Dalma Mall, Abu Dhabi. Damas incorporated its latest interior design concept to provide a sophisticated and welcoming ambience for customers.

Diamdel Advances in Business Competition

Diamdel Antwerp was selected as one of 10 businesses in Belgium to represent that nation in the European Business Awards competition, marking the second consecutive year that the company made the first cut. Diamdel will now compete for the coveted Ruban dHonneur in the next round of the competition for the category of business of the year. Award winners will be unveiled in Barcelona on November 22, 2011.

STATS

India

Figures rounded June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $2,220 1% $15,660 30%
Polished imports $1,760 20% $12,770 62%
Net exports $462 -36% $2,890 31%

Rough imports $1,590 38% $7,600 29%
Rough exports $151 66% $772 65%
Net imports $1,440 36% $6,830 26%

Net diamond account ($976) ($3,940)

MINING

BHP FY Production -18%

BHP Billiton fiscal year production fell 18% to 2.506 million carats following a fourth quarter drop of 22% at 576,000 carats. Output was negatively impacted by lower average ore grades at Ekati.

Petra Diamonds Sales +24%

Petra Diamonds reported that fiscal year revenue rose 24% to $220.6 million and production fell 4% to 1.117 million carats. The sales volume rose 4% to 1.174 million carats and the average price of goods sold jumped 19% year on year. Production is expected to increase in fiscal 2012 as the Finsch mine, which Petra bought from De Beers in January, comes into play. Output at Finsch is expected to reach 125,000 carats per month once the deal closes in the coming weeks which will help boost annual production to around 3 million carats.

Shore Estimates 34M Carats at Star, Orion South

Shore Gold announced that Star and Orion South kimberlites have "probable mineral reserves" of 279 million diluted tonnes, at a weighted average grade of 12.3 carats per hundred tonnes (cpht), containing 34.4 million carats at a weighted average price of $242 per carat over the 20-year life of the mine. Based upon this information, Shore Golds senior vice president of exploration, George Read called Star and Orion a "world class diamond mine.”

Firestone Recovers High-Quality Stones

Firestone Diamonds recovered high-quality diamonds out of its Liqhobong mine in Lesotho. The most notable rough stones recovered included a 33-carat and 8-carat diamond. Two color stones included a 9-carat fancy vivid yellow and a 1.70-carat pink diamond. These diamonds will be offered during an August tender to be held in Gaborone, Botswana. Firestone expects the August sale to be "significantly larger" than the one held in June.

Gemfields Auction Nets $32M

Gemfields achieved $31.6 million from an auction of 740,000 carats of predominantly high-quality rough emeralds. The sale represented a 63 percent increase in quality-for-quality prices since a similar sale in December 2010.

Additionally, and following the success of Emeralds for Elephants in London one year ago, Gemfields is again leading an awareness campaign to raise funds to protect the elephant habitat in India. Gemfields chose 10 jewelry design firms that would use ethically mined emeralds from Zambia in the creation of a jewelry collection to be auctioned by Sothebys in October. A percentage of profits from the sale will help fund the World Land Trust’s Indian Elephant Corridor project.

The Emerald for Elephants other sponsors include Jaguar Land Rover, The Taj Hotels Resorts and Palaces, Sotheby’s, CanazWest Pictures, Mumm Champagne, BVC, Show Stuff and the Gemological Institute of America India.

Stornoway Welcomes New Board Members

Stornoway Diamond Corporation appointed Monique Mercier, John LeBoutillier and Michel Blouin to its board of directors pursuant to the mining companys recent acquisition of DIAQUEMs interest in the Renard diamond project. The new directors were designated by DIAQUEMs parent organization Investissement Quebec and were classified as independent directors.

NUM Calls for De Beers Strike

The National Union of Mineworkers (NUM) in South Africa served its notice to strike against De Beers Consolidated Mines after negotiations failed to reach a wage settlement. The strike is set to officially begin on July 22. NUM demanded a 15% increase, and De Beers offered a 7.5% increase.

Steinmetz Invests $5M in Rockwell

Rockwell Diamonds confirmed that the Steinmetz Diamond Group, through its subsidiary Daboll Consultants, subscribed to $5 million in the current private placement at 75-cents per share, or 5-cents per share prior to a 15:1 consolidation. The placement closes on July 22. According to a valuation by Evans & Evans Inc., the range of fair market value for Rockwell Diamonds was determined to be between $62 million and $69.1 million. Rockwells properties, in aggregate, were valued in a range of $149.5 million and $165 million.

ECONWATCH

For the week ending July 21

Industry stocks were largely mixed this week with the exception of: DGSE +16%, Man Sang +35%, Zale +21%, Rockwell Diamonds -14%, and Shore Gold -27%. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

July 21 July 14 Chng.   

$1 = Euro 0.690 0.707 -0.017
$1 = Rupee 44.42 44.57 -0.1
$1 = Israel Shekel 3.39 3.43 -0.04
$1 = Rand 6.78 6.84 -0.06
$1 = Canadian Dollar 0.94 0.96 -0.02

Precious Metals
Gold $1,590.30 $1,586.00 $4.30
Platinum $1,783.00 $1,764.00 $19.00

Stock Indexes Chng.
BSE 18,436.19 18,618.20 -182.01 -1.0%
Dow Jones 12,724.41 12,437.12 287.29 2.3%
FTSE 5,903.50 5,852.30 51.20 0.9%
Hang Seng 21,987.29 21,940.20 47.09 0.2%
S&P 500 1,343.80 1,308.87 34.93 2.7%
Yahoo! Jewelry 1,149.82 1,152.04 -2.22 -0.2%

Rapaport Weekly Market Comment July 29, 2011

High hopes for next weeks Mumbai show to signal strong post-summer polished trading. Mining companies report record 1H results as high rough prices compensate for lower volume sold: De Beers rough sales +33% to $3.5B, profit +72% to $694M, production flat at 15.5M cts., prices +35%; ALROSA sales +9% to $2.2B, profit +450% to $598M, production +8% to 19M cts., prices +41%; Gem Diamonds rough sales +84% to $194M as average Letseng prices +77% to $3,052/ct. Zimbabwe Treasury reports 1H Marange production of 2.329M cts., diamond exports of $103.9M. LVMH 1H watch and jewelry sales +30% to $835M. Bulgari 1H jewelry sales +44% to $347.5M. Gold prices hit record $1,629/oz.

RapNet Data: July 28

Diamonds 739,643
Value $5,289,086,859
Carats 820,646
Average Discount -24.28%

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August
4-8
Thu-Mon
Rapaport at IIJS 2011
Bombay Exhibition Center, Mumbai
Booth: AL 5EX013-15 I-II

Meet the diamond suppliers at IIJS and view the diamonds they are exhibiting now!
Go to: www.rapnet.com/showlistings

August
15-25
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

Aug-Sep
29-1
Mon-Thu

Rapaport Melee Auction
New York

email: auctions@rapaport.com

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all, but give a donation to Jewelers for Children.
Register now. Seating is limited.

QUOTE OF THE WEEK:
[Minimal GDP] growth represents households that are spending only on necessities. We dont have households reaching for credit. Theyre still very much mired in that mind set of paying down debt, rather than taking on debt. And that, on top of a weak labor market, is keeping consumers from spending.

Ellen Zentner | Nomura

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

De Beers 1H Sales Hit a Record

De Beers reported group sales rose 30% year on year during the first half to a record $3.89 billion, while rough sales for the Diamond Trading Company (DTC) jumped 33% to $3.5 billion. Cost of sales rose 26% to $3.07 billion while operating costs, including exploration, marketing and technical services, fell 10% to $200 million. Net earnings rose 72% to $694 million.

Production remained flat at 15.534 million carats with the bulk of production arriving from Debswana where output increased by 10% to 11.320 million carats. De Beers expects to finalize a new marketing agreement with Botswana, governing its Debswana production, in the coming month. Furthermore, De Beers lowered its production forecast for 2011 to 35 million carats from 38 million carats as maintenance and asset management issues, aggravated by heavy rainfall in southern Africa, resulted in lower-than-expected output in the first half of the year. The shortfall was not expected to create a shortage.

In terms of retail, De Beers noted that a full U.S. Forevermark expansion will hit in second half. De Beers Diamond Jewellers (DBDJ) launched in China during the first half and will focus its expansion on the Far East.

ALROSA 1H Sales +9%

ALROSA’s diamond sales increased 9% year on year to $2.16 billion in the first half of 2011 as prices rose 41%. ALROSA sold 19.1 million carats of diamonds for an average $113 per carat during the six months, while in the first half of 2010 it sold 24.1 million carats for $80 per carat. ALROSA’s first half production grew 8% to 19 million carats. First-half profits jumped five-fold to $598 million.

Diamdel’s July Auction 100% Sold by Lot

Diamdel sold all 410 rough lots during its recent diamond auction that ended on July 14. Goods spanned near-gem quality, small sizes, grainers, 2-carat plus, and large product categories. Diamdel stated that 189 businesses took part in the July auction and 89 of those firms won lots. Fifty-five percent of lots by value were sold to those who were not Diamond Trading Company (DTC) sightholders while 45 percent of the lots were won by sightholders.

Gold Hits New Record

Spot gold reached a new high during the late morning hours in New York on July 27 at $1,629.60oz. Gold was up 40% year on year and up 8% in the past 30 days. At the same time, silver was trading mostly flat at $40.53oz. and platinum gained $2 to $1,804oz.

RETAIL & WHOLESALE

Rapaport News Broadcast

Watch Now: The JA New York summer show offered insight to upcoming fall fashion trends for diamond jewelry. Take a look at the following new collections from ISTA, Cristina V., and Baharra. Additionally, learn how Armand Jacoby sets diamonds in its high carbon compound.

Titan’s 1H Jewelry Sales +72%

Titan Industries Ltd. reported sales rose 63% year on year to $463.65 million, during its first quarter of 2012 that ended on June 30. Net profit grew 76.4% to $32.46 million. The company, which owns the Tanishq jewelry brand, attributed strong growth to improved sales across all its divisions and retail chains, but the jewelry business performed exceptionally well. Jewelry sales surged nearly 72% to $369.88 million, while watch division sales rose 23% to $70.88 million.

LVMH 1H Jewelry Sales +30%

LVMH reported that sales for the watches and jewelry segment improved 30% year on year to $835 million, during the first half of fiscal 2011. Total sales for LVMH rose 13% to $15 billion and net profit rose 25% to $1.9 billion . The LVMH Group continued to enjoy sustained growth in the U.S., Europe and Asia.

Bulgari Turns a Profit in 1H

The Bulgari Group reported that sales for the first half of 2011 increased 23% year on year to $784 million. The company also reported profit of $13 million compared with a loss of $11 million one year ago. Jewelry sales jumped 20% to $347.6 million, due to strong sales of its high-end jewelry line B.zero1, and its Sassi line; watch sales rose 25% and perfume sales leaped 28%.

Charles & Colvard 1H Sales -3%

Charles & Colvard reported first-half sales fell 3% to $6 million. Loose moissanite gemstone sales decreased 7% to $5 million, but finished jewelry sales increased 18% to approximately $932,000. The company recorded a loss of $340,000 compared with profit of $635,000 one year ago.

Amazon’s 2Q Profit -8%

Amazon.com reported that revenue rose 51% year on year to $9.91 billion and net profit fell 8% to $191 million during the second quarter that ended on June 30. The online retailer recorded a $477 million favorable impact from foreign exchange rates for the second quarter. Amazons cost of sales rose 52 percent to $7.53 billion. During the second quarter, Amazon.com launched MyHabit.com, a member-only fashion destination and it also permitted "Marketplace" sellers to list products across the European websites using one single seller account, allowing sellers to make their inventory available across Amazon.co.uk, Amazon.de, Amazon.fr and Amazon.it.

U.S. Affluent Consumer Spending -18%

Unity Marketings measure of consumer confidence among the highest earning U.S. consumers, the Luxury Consumption Index (LCI), took the steepest quarterly plunge since the Great Recession. The LCI dropped 16.8 points to reach 66 points in the second quarter, which is significantly lower than the previous quarters 82.8 points. The LCI stands close to the level attained at the onset of the Great Recession, according to Unity Marketing. Corresponding to the decline, the average amount spent by affluent consumers on luxury goods and services in the second quarter 2011 declined 18.4% year on year. Learn more about these trends when Unity Marketings Pam Danziger presents at the Rapaport IDC on September 12.

Arjav Diamonds Hosts Online Auction

Arjav Diamonds will host its second online auction of rough diamonds on August 12, offering 60 lots of rough diamond with sizes ranging from 5 carats to greater than 100 carats in a mix of single stones and assorted parcels.

Gitanjali Incorporates Subsidiary

Gitanjali Gems incorporated a wholly owned subsidiary named Leading Italian Jewels, made up of brands it acquired in the fall of 2010 from Italys DIT group, including Valente, Stefan Hafner, Nouvelle Bague, Io Si, and Porrati. The new subsidiary, which Gitanjali has stated would help the group expand in Europe, will primarily deal in the trade of precious stones, diamonds, jewelry and pearls. Gitanjali is one of the largest jewelry retail brands in India.

Ulysse Nardin Targets New Campaign for U.S.

Swiss watch manufacturer Ulysse Nardin is launching a new marketing campaign targeting U.S. consumers through the brands advertising agency, Mad 4 Marketing, which will use rVue technology, a demand-side platform, to plan, buy, and manage digital out-of-home (DOOH) and place-based media. The platform connects advertisers with DOOH networks to streamline campaign management and analytics and billing, so advertisers can research and create media plans and purchases across a diverse group of participating digital networks to reach some 115 million impressions per day, according to rVue Holdings.

Esmerian Fined $20M, Sentenced to Six Years

Ralph Esmerian, the former owner of Fred Leighton, was sentenced to six years in prison and ordered to pay $20 million to his creditors for three charges of wire fraud, bankruptcy fraud, and concealment of assets. Charges stemmed from his illicit pledging of collateral used to back $217 million worth of loans acquired from 2005 to 2006 from Merrill Lynch and Acorn Capital Group LLC while running the luxury jeweler. The $20 million fine represents the amount of collateral he illegally sold without reporting it to his creditors.

Surat Seeks More Air Travel Options

Surats diamond trade will close July 29 in effort to draw attention to the lack of air travel options into the city. The Surat Diamond Association (SDA) stated that only three flights a day arrive in Surat, so the lack of regular flights from major cities remains a big hurdle.

MINING

Zimbabwe 1H Production Tops 2M Cts.

Zimbabwe’s diamond production stood at 2.329 million carats in the first half of 2011, according to the countrys finance minister, Tendai Biti. The bulk of production was from the Marange fields. The Treasury expects full-year production of 8.2 million carats, slightly lower than 2010 production of 8.435 million carats. Biti added that Zimbabwe exported 716,959 carats from the Marange fields during the first half.

Catocas Production -4% in 2010

Production at the Catoca mine in Angola fell 4.5% year on year to 6.741 million carats in 2010 as diamond recovery fell from 0.72 carats per ton to 0.64 carats per ton. Catoca sold 6.852 million carats for an average price of $76.95 per carat, representing an increase of 24% from the previous year. Sales rose 20% to $527 million and net profits grew 59% to $111 million.

Letšengs Rough Diamond Prices Soar in 1H

Gem Diamonds reported that Letšeng sales rose 124% year on year to $160.6 million during the six months that ended on June 30, with average prices up 77% to $3,052 per carat. Production at Letšeng increased 18% to 52,798 carats.

Firestone Raises $22M

Firestone Diamonds has conditionally raised $22 million through the placing of 48,649,000 new ordinary shares with investment institutions and other investors. The financing will accelerate development work at its Liqhobong mine in Lesotho and complete the grid power connection at its BK11 mine, and commence evaluation of BK16 and other Orapa kimberlites in Botswana.

Lucara Lists in Botswana

Shares of Lucara Diamond, which is developing the AK6 mine in Botswana and the Mothae mine in Lesotho, began trading on the Botswana Stock Exchange (BSE). Lucara will continue to trade on the Toronto Stock Exchange.

Rockwell Raises $7M

Rockwell Diamonds raised $6.9 million through the sale of three non-core assets in South Africa. The assets sold included the Makoenskloof property for $1 million, the PC3000 excavator located at the Wouterspan mine for $3.2 million, and the Holpan DMS plant for $2.8 million.

ECONWATCH

For the week ending July 28

U.S. retailers were trading lower as consumer spending comes under pressure. The biggest losers this week were Movado Group (-11%) and Zale (-17%). European jewelers and Indian diamond firms were little changed. Diamond mining firms were mixed with Rockwell Diamonds (+9%), True North (+9%) and Petra Diamonds (+6%) showing the biggest gains, and Harry Winston (-7%) and Gemfields (-9%) closing the week in negative territory. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe. July 28 July 21 Chng.
$1 = Euro 0.698 0.690 0.008
$1 = Rupee 44.07 44.42 -0.4
$1 = Israel Shekel 3.43 3.39 0.04
$1 = Rand 6.75 6.78 -0.03
$1 = Canadian Dollar 0.95 0.94 0.01

Precious Metals
Gold $1,615.19 $1,590.30 $24.89
Platinum $1,786.00 $1,783.00 $3.00

Stock Indexes Chng.
BSE 18,209.52 18,436.19 -226.67 -1.2%
Dow Jones 12,240.11 12,724.41 -484.30 -3.8%
FTSE 5,873.21 5,903.50 -30.29 -0.5%
Hang Seng 22,570.74 21,987.29 583.45 2.7%
S&P 500 1,300.67 1,343.80 -43.13 -3.2%
Yahoo! Jewelry 1,140.09 1,149.82 -9.73 -0.8%

Rapaport Weekly Market Comment August 12, 2011

Financial turmoil shaking confidence in consumer markets. India show fails to meet expectations as buyers demand lower prices due to financial uncertainty. Rough prices unsustainable at current levels as liquidity dries up in cutting centers. U.S. 2Q online retail sales +14% to $37.5B. Shrenuj & Co. 1Q sales +45% to $150M, net profit +44% to $4.3M. U.S. June polished imports +6% to $1.9B, polished exports +32% to $2.5B. Belgium’s July polished exports +39% to $1.6B. Gold tops $1,800/oz. Rapaport announces initiatives to establish Ethical Certification, Investment Diamond Price Index and Rapaport Diamond Fund

RapNet Data: Aug. 11

Diamonds 733,540
Value $5,212,362,943
Carats 810,318
Average Discount -24.65%
Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August
15-25
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

Aug-Sep
29-1
Mon-Thu

Rapaport Melee Auction
New York

email: auctions@rapaport.com

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all, but give a donation to Jewelers for Children.
Register now. Seating is limited.

QUOTE OF THE WEEK:
The U.S. Federal Reserve rate signals an extended period of diminished, if not negative, economic growth for quite sometime. This bodes poorly for demand, but may indicate additional easing measures, which we know from recent experience is supportive of asset prices, especially commodities. The acute level of uncertainty, however, will have to be wrung out before energy prices can rebound from the upcoming round of financial machinations.

John Kilduff | Again Capital LLC
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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

Rapaport Group Initiatives

The Rapaport Group announced three new initiatives this week in Mumbai.

The Diamond Price Index - RAPI will be used by the financial sector to monitor the price of diamonds. The index will be published daily and available online. The Index will be based on the best price per carat for round, D-H, IF-VS2, Rapaport Specification 2 diamonds offered for sale on the RapNet Diamond Trading Network. While the RAPI indices will be available for various size categories, the primary index will be for one carat sizes.

The Rapaport Diamond Fund, a proprietary diamond investment fund, will provide an opportunity for the financial community to invest in diamonds. The fund will offer transparency and efficiency enabling access to investment grade diamonds at fair market values.

The Rapaport Ethical Certification will be created to track diamonds from the source to polished and then to finished jewelry. Different ethical grades will be provided with the highest grade reserved for fair trade diamonds that provide economic beneficiation to artisanal miners. Recycled diamonds will receive the next highest grade followed by ethical diamonds from known sources that comply with ethical mining, production and environmental standards. Initial Rapaport certification centers will be based in Surat, Mumbai, and New York.

Read Martin Rapaports "After Kimberley … Now What.
Gold Hits New Record

Spot gold hit a record of $1,813.79oz., during stock market turmoil on Wall Street August 10. At the record price, gold was up 48% year on year and had increased 16% in the past 30 days.

Rapaport News Broadcast

Watch Now: The India International Jewellery Show (IIJS) disappointed some traders of loose diamonds, but finished jewelry sales were strong. Exhibitors reported good demand for rounds in pointer sizes up to 3 carats, VS-SI clarities in all colors, given the diversified tastes apparent in various regions of India. Rajiv Jain, chairman of the Gem & Jewellery Export Promotion Council, shared his observations. Also in this broadcast, Shrenju sales in first fiscal quarter rose 45% to $150 million, profit jumped 41% to $4.3 million.
RETAIL & WHOLESALE

U.S. Online Retail Sales +14%

Online U.S. retail sales rose 14% year on year to $37.5 billion during the second quarter of 2011, according to metrics firm comScore Inc. The rate of growth was primarily a function of an increase in the number of buyers, which jumped 16%, with seven in 10 Internet users now making at least one online purchase during each quarter. The top performing online product categories in the quarter, which grew at least 15% year on year, included consumer electronics, hardware and software, and event tickets. The top 25 online retailers accounted for 66.4% of dollars spent online, down from 67.7% one year ago.
DGSE Revenue +60%

DGSE Companies reported that revenue rose 60% to $33.29 million, during the second quarter that ended on June 30. Net earnings, however, plunged 90% to $568,099 due to difficult comparisons. DGSE stated that earnings for the same period of fiscal 2010 included $8.6 million in "other income" related to its acquisition of Superior Galleries Inc.
Laxmi Diamond Secures $70M in Orders

Laxmi Diamond Private Ltd. received diamond and jewelry orders worth $70 million, during IIJS, a total that was up 40% year on year. The Mumbai-based manufacturer and distributor of polished diamonds stated that orders were mostly from the local buyers.
Zale, Vera Wang Launch Bridal Collection

Zale and Vera Wang announced the launch of a new, exclusive collection of diamond bridal jewelry called "Vera Wang LOVE," which includes a variety of diamond engagement rings, matching wedding bands and solitaire bridal jewelry. The collection will be available at Zales stores throughout the U.S. and Puerto Rico in October 2011, and in Peoples Jewellers stores Canada in early 2012.
Kiran Offers Two New Jewelry Lines

Kiran introduced two new jewelry lines designed and manufactured by its own diamond jewelry arm, Kiran Jewelry, at IIJS. One of the collections, Unity, incorporates a multi-diamond setting that creates the impression of one diamond that is much bigger than the actual weight of diamonds used. The other, Tanzanite Dreams, is a luxurious blend of diamonds and tanzanite that provide a rich and high class feel.
ORO to Create Gold Jewelry in 18K

The ORO brand will replicate its 22-karat gold jewelry designs in 18-karat to attract a wider range of consumers in India given that gold prices have risen so high. Additionally, the ORO brand expects to introduce new designs using 18-karat. It produces 2,000 pieces daily, but only 10% of the products are in 18-karat. The manufacturer expects to increase that ratio to 25% soon. ORO expects to make its 18-karat designs available throughout India.
Embee Diamonds Partners with Zmurchok

Embee Diamonds has partnered with Doug Zmurchok Agencies to further develop the brand across Western Canada. Embee Diamonds has a network of 70 independent jewelry retailers in Canada, Japan, Korea, and the U.S. and U.K. Embee Diamonds developed the Sirius Star range of diamond shapes.
2012 DTC Sight Dates

The Diamond Trading Company (DTC) sight dates for 2012 are as follows:

January 16-19
February 20-23
March 26-29
May 1-4
June 11-14
July 16-19
August 28-31
October 2-5
November 5-8
December 10-13
STATS

Belgium

Figures are rounded July $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,560 39% $8,900 38%
Polished imports $1,180 47% $8,070 38%
Net exports $381 20% $835 33%

Rough imports $1,420 101% $8,480 52%
Rough exports $1,860 85% $9,600 44%
Net imports ($444) $1,120 -2%

Net diamond account $825 31% $1,960 13%
U.S.A.

Figures are rounded June $Mil. %Chng. YTD $Mil. $Chng.
Polished imports $1,900 6% $11,300 28%
Polished exports $2,380 32% $9,400 41%
Net imports ($482) $1,900 -10%

Rough imports $48 9% $328 23%
Rough exports $40 43% $233 55%
Net imports $8 -50% $105 -9%

Net diamond account ($474) $2,000 -10%
MINING
Feasibility Study Next for Merlin

North Australian Diamonds Limited chose Consulment Pty Ltd. to conduct a definitive feasibility study (DFS) on a 300,000-carat per year operation at its Merlin diamond project in Australia. The DFS will consider a potential larger scale operation, but foremost, it will consider a number of key variables for the Merlin project, some of which are well advanced or completed. Pre-feasibility production trials resulted in the recovery of 10,600 carats of rough diamonds, of which 2,590 carats were greater than 1-carat, representing 24.4 percent of production.
CKGR Residents Get New Water Holes

Gem Diamonds Botswana will transfer four boreholes to residents of the Central Kalahari Game Reserve (CKGR) at the end of August as part of its outreach surrounding development of its Ghaghoo Diamond Mine in Botswana. The company is investigating the sustainable viability of various water purification options to ensure that the boreholes will provide potable water to CKGR communities.
Amaruk Program Begins

Diamonds North Resources launched its 2011 exploration program at the Amaruk property in Nunavut, Canada, which will focus on top priority gold prospects as well as follow-up to a new generation of kimberlite targets identified from electromagnetic airborne data. Diamond exploration on the property will primarily include detailed till sampling in close proximity to high-priority targets identified from the airborne data.
ECONWATCH

For the week ending Aug. 11

Considering how the markets reacted this week to simply "poor economics" in the U.S., a bloodbath was certain for retailers. However, not all of the stocks Rapaport News follows ended lower. Goenka Diamond rose 5%, Rajesh Exports was up 1%, Ren. Jewellery rose 7%, Su-Raj Diamonds up 2%, Titan up 4%, Rockwell Diamonds up 2%, Shore Gold jumped 13%, Mwana Africa rose 2%, and Stellar Diamonds was up 1%. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Aug. 11 Aug. 4 Chng.   

$1 = Euro 0.704 0.708 -0.004
$1 = Rupee 45.15 44.52 0.6
$1 = Israel Shekel 3.54 3.50 0.04
$1 = Rand 7.21 6.94 0.27
$1 = Canadian Dollar 0.99 0.97 0.02

Precious Metals
Gold $1,756.80 $1,650.80 $106.00
Platinum $1,784.00 $1,721.00 $63.00

Stock Indexes Chng.
BSE 17,059.40 17,693.18 -633.78 -3.6%
Dow Jones 11,143.31 11,383.68 -240.37 -2.1%
FTSE 5,168.24 5,405.76 -237.52 -4.4%
Hang Seng 19,595.14 21,884.74 -2,289.60 -10.5%
S&P 500 1,172.65 1,200.10 -27.45 -2.3%
Yahoo! Jewelry 988.88 1,050.87 -61.99 -5.9%

Rapaport Weekly Market Comment August 19, 2011

Markets turning cautious as rough prices soften in response to tighter credit and uncertain economic conditions. De Beers rough selling at low premiums, and even discounts, ahead of next week’s DTC sight. Arjav rough auction sells 45% by lot. Polished prices soften. Buyers expecting lower prices but may be disappointed as Far East consumers expected to continue buying diamonds in spite of U.S. slowdown. Hong Kong’s 2Q polished imports +37% to $4.5B, polished exports +44% to $3.3B. Gitanjali Gems FY1Q revenues +39% to $573M, profits +57% to $27M. Sarin Technologies 2Q revenues +9% to $16M, profits +8% to $5M. Diamond industry broker Gerald Rothschild dies age 86.

RapNet Data: Aug. 18

Diamonds 725,637
Value $5,247,086,434
Carats 799,053
Average Discount -24.49%

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August
15-25
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

Aug-Sep
29-1
Mon-Thu

Rapaport Melee Auction
New York

email: auctions@rapaport.com

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

JOIN US AND gain important tools and insights into:
•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all.
Register now. Seating is limited.

QUOTE OF THE WEEK:
Our revised forecasts show the U.S. and the E.U. hovering dangerously close to a recession --defined as two consecutive quarters of contraction-- over the next six to 12 months. A negative feedback loop between weak growth and soggy asset markets now appears to be in the making in Europe and the U.S. Against this dire growth backdrop, we no longer expect the ECB to hike rates. Instead, we now see the bank cutting rates next year. We lower our refi-rate forecast for the end of 2012 to 1% from 2%.

Joachim Fels | Morgan Stanley

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

U.S. Jewelry Inflation Soars

The U.S. consumer price index (CPI) for jewelry in the month of July jumped 11.9% year on year to record high of 176.46 points and marked the seventh consecutive month with a reading greater than 170 points. The July reading broke the previous record high, which was set in June. Jewelry inflation has been driven higher by continued strong year-on-year price increases for diamonds, gold and silver.

Gold Hits New Record

New York spot gold surged to a new record of $1,827.80oz. and traded solidly near that high as economic concerns weighed on Wall Street. Golds new record price was up 49% year on year and 14% higher than 30 days ago.

The World Gold Council reported that second quarter gold demand by value rose 5% to $44.5 billion. Global demand for gold jewelry rose 34% to $21.14 billion. The group’s “Gold Demand Trends - Second Quarter 2011” report released today credited gold’s strong performance to China and India, where the combined demand represented 55% of the total value. Gold jewelry demand in terms of weight rose by double-digits in China, India and Hong Kong. However demand fell by double-digits in Japan, Saudi Arabia, Italy and the U.K. The U.S. experienced an 8% drop in gold jewelry demand during the second quarter.

RETAIL & WHOLESALE

Rapaport News Broadcast

Watch Now: ShopNBC sales rose 5% to $132 million in second quarter, helped by jewelry sales, still the group reported a loss of $4.5 million. Bidz.com reported a 22% drop in second quarter sales to $20 million and it loss jumped 712% to $5.3 million. Damas chief executive, Anan Fakhreddin, was awarded the Turnaround Executive of the Year for the eighth annual International Business Awards (IBA) 2011. Damas also earned a Distinguished Honoree medal for the company of the year category in retail. Deloittes latest consumer survey for July found a mixed bag of economic results, and warned retailers to keep on top of their competitors.

Rajesh 1Q Profit Doubles

Rajesh Exports Ltd. reported that sales rose 10% year on year to $1.04 billion for its first fiscal quarter that ended on June 30. Cost of sales increased 9%to $1.02 billion and net profit more than doubled to $21 million. Rajesh opened 25 Shubh Jewellers during the quarter and is in the process of opening another 50 retail showrooms in the southern Indian state of Karnataka.

Gitanjali 1Q Profit +57%

Gitanjali Gems Ltd. reported that sales rose 39% year on year to $573.0 million for its first fiscal quarter that ended on June 30. Strong growth was driven by the companys diamond and jewelry segments. Net profits grew about 57% to $27.2 million. Diamond business increased 36% to $285.2 million, jewelry sales rose about 37% to $300.6 million.

Shrenuj 1Q Profit +41%

Shrenuj & Co. reported group sales rose 45% year on year to $149.4 million in its first fiscal quarter that ended on June 30. Diamond sales rose 78% to $112.7 million and studded jewelry sales, including branded and retail sales, increased 7% to $42.3 million. Net profits grew 41% to $4.2 million. Shrenuj is targeting sales growth of 25% to 30% through March 2012. Shrenuj estimates that polished prices have declined by around 5% as liquidity has tightened in recent weeks, but the correction is temporary and the company expects prices to stabilize and gradually start increasing again.

July Dpt. Store Sales Flat

U.S. department store sales were basically flat in July at $14 billion. Advance estimates of total U.S. retail and food services sales for July, unadjusted for price changes, rose 8.5% year on year to $390.4 billion. Retail trade sales jumped 8.9% from July 2010.

Saks 2Q Loss at $8M

Saks reported that sales during its second fiscal quarter rose 13% year on year to $670.2 million in the three months that ended on July 30. Same-store sales rose nearly 16%, cost of sales rose 12% to $415.6 million, and the luxury retailer reported a loss of $8.4 million, which was down from a loss of $32 million one year ago. Consolidated inventories on July 30 stood at $689.2 million, representing a 3% year on year increase.

Jewelry Sales Rise in Japan

The Japan Department Stores Association reported that jewelry sales rose 5.3% year on year in July. Overall, department store sales were flat on a same-store basis, compared with one year ago, at $7.8 billion. The group stated that concerns from the economic fallout of the March 11 earthquake and tsunami were easing slightly.

Kingold 2Q Profit +95%

Kingold Jewelry Inc. increased its fiscal-year guidance to a range of $800 million and $850 million from earlier guidance of $720 million and $780 million. The manufacturer, which operates in China, reported second-quarter revenue rose 134% to $252.1 million and profit increased 95% to $8.79 million.

Tough Conditions Impact Arjav Rough Auction

Tight liquidity in India and high rough diamond prices impacted sales at the second online rough auction hosted by Arjav Diamonds (India). The company reported that it sold only 27 out of 60 lots offered, with sizes ranging from 5 carats to larger than 100 carats. The largest stone sold weighed 132 carats.

GENERAL

Rothschild Dies at 86

Gerald Rothschild passed away at the age of 86 in Germany. Industry groups celebrated Rothschilds contributions to the industry, which he was part of for more than six decades. Rothschild started his business in the 1940s and served for many years as a senior executive at I. Hennig & Co., including a lengthy stint as managing director. He left the organization in 1989, but then returned to the industry at the age of 70, in 1995, when he set up his own brokerage house. Soon afterward, his company was successful in obtaining one of the first Diamond Trading Company (DTC) sights for the developing diamond industry in China.

Wessel Joins Lazare Kaplan

David Wessel joined Lazare Kaplan International as director of jewelry. Wessels professional background includes experience in operations, manufacturing, sales forecasting, inventory control, production and training.

JA Elects Gleim as Chair

Jewelers of America (JA) elected Georgie Gleim, the president of Gleim The Jeweler in Palo Alto, California, as its new board chair succeeding Terry Burman. Gleim is a third-generation jeweler and her father, Arthur, served as JA president from 1981 to 1983. As board chair, Gleim will lead an executive committee created with newly elected officers. View the list of board members. www.jewelers.org/aboutJA/board.html.

CJA Appoints Knight as Chair

The Canadian Jewellers Association (CJA) appointed Chris Knight as its chairman for the 2011 and 2012 cycle. Knight is a founding partner of Platinum Unlimited and serves as its director of commercial activities, including marketing, sales and business development. Knight is involved in charity work and started the Volunteer Builders organization 10 years ago, which constructs buildings for charitable children’s camps.

AnchorCert Launches Carat Weight App

The AnchorCert Gemstone Certification Service has launched a Gemstone Carat Weight Estimator app for smart phones. AnchorCert stated that with just a couple of clicks, the app can easily calculate the estimated carat weight of diamonds and gemstones from measurements. The free demo version, which is currently available for Android phones, shows how to use the app and offers all functions for a small sample of stones and shapes.

Diamond Promo Center to Open in Yellowknife

Crossworks Manufacturing Ltd. is creating a "Diamond Promotion Centre" in the city of Yellowknife, Canada. The Centre will provide a venue where the public can follow the diamond journey along -- from point of exploration and discovery to where diamonds eventually land, with the consumer. Exhibits at the Centre will show key elements of the diamond journey, from early stage core samples to kimberlite, and from the process of planning how a diamond will be cut to the end result. The Centre will also have polishing demonstrations by members of the Crossworks Manufacturing team. The Diamond Promotion Centre is targeted to open in the second week of January 2012, adding a new facet to the aurora borealis viewing season.

Facebook Ads Zip Code Options

Facebook added a zip code target feature for its U.S. advertisers as part of the self-service tools: Power Editor and the Ads Manager. Now, when advertisers create a Facebook campaign, they’ll see the zip code option under location targeting. They can then enter one or more zip code to display ads to users in that location. Previously, advertisers could only target their ads to cities or other geographic-specific regions.

Sarin 2Q Profits +8%

Sarin Technologies reported that revenues grew 9% year on year to $15.6 million in the second quarter that ended on June 30. Group profits increased 8% to $5 million. The company noted that diamond jewelry demand in China and India is expected to grow by more than 20% this year, which will continue to drive global diamond demand and rough and polished prices.

STATS

Israel

Figures rounded July $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $714 57% $4,770 37%
Polished imports NA NA
Net exports NA NA

Rough imports NA NA
Rough exports $351 45% $2,620 40%
Net imports NA NA

Net diamond account -$81 $941 7%

Hong Kong

Figures are rounded 2Q $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $4,500 37% $8,490 36%
Polished exports $3,300 44% $6,500 46%
Net imports $1,200 21% $1,960 9%

Rough imports $686 100% $976 71%
Rough exports $497 57% $794 50%
Net imports $189 $182

Net diamond account $1,040 2% $1,780 2%

Botswana

2Q $Mil. %Chng. YTD $Mil. %Chng.
Rough diamond exports $1,400 97% $2,530 72%

MINING

Rockwell 1Q Loss Widens

Rockwell Diamonds reported revenue for its first quarter of fiscal year 2012 rose slightly to $8.5 million and cost of sales jumped 34% year on year to $8 million for the three months that ended on May 31. Rockwell recorded a loss of $1.2 million, up from a loss of $858,517 one year ago. But the midtier mining company reduced its general administration expenses 19% to $1.8 million. Rockwell reported that accumulated losses as of May 31, were $53.6 million, with current assets exceeding liabilities by $4.9 million and total assets exceeding liabilities by $86 million.

Production during the first fiscal quarter fell 40% to 4,428 carats and along with limited inventories, these factors limited revenue growth. Rockwell sold 4,779 carats of rough in the quarter, representing a decrease of 3%, although price per carat rose to $1,631 from about $1,010 one year ago.

Lucara Extends AK6 Date

An industrial action across South Africa, during the first two weeks in July, affected steel fabricators and several mechanical and electrical contractors among others, causing indirect construction delays at Lucara Diamond Corporations AK6 diamond mine in Botswana. While construction at AK6 has resumed now, the company confirmed today that its scheduled operational handover from its contractors will be pushed ahead two months to February 16, 2012. The company also had to schedule for the year-end holiday period across the region, which generally runs for one month beginning in mid-December. The AK6 construction project is about 66 percent complete, according to Lucara.

Petra Acquisition of Finsch Nears a Close

South Africa gave its consent for De Beers to transfer the Finsch diamond mining rights to Petra Diamonds subsidiary, Afropean Diamonds Ltd. Petra Diamonds agreed to acquire Finsch from De Beers in January for about $200 million through Afropean. The only remaining condition now is for Petra to register the transfer and that is expected to happen shortly. Upon meeting that condition, Petra Diamonds will publish a Finsch mine resource statement.

ECONWATCH

For the week ending Aug. 18

Inflation and weak consumer spending is giving stock traders a sour stomach. U.S. retailers took another hit as the market plunged: Birks & Mayors (-16%), Blue Nile (-9%), JCPenney (-11%), Movado Group (-12%), Saks (-10%), Tiffany (-13%), were just some of the bigger losers this week. Walmart was up though. Indian firms experienced heavy losses across the board. Mining stocks were mixed with some of the larger losses coming from Rockwell Diamonds (-14%) and Gemfields (-16%), but True North jumped 17% and Mwana Africa was up 19%. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Aug. 18 Aug. 11 Chng.
$1 = Euro 0.697 0.704 -0.007
$1 = Rupee 45.92 45.15 0.8
$1 = Israel Shekel 3.56 3.54 0.02
$1 = Rand 7.20 7.21 -0.01
$1 = Canadian Dollar 0.98 0.99 -0.01

Precious Metals
Gold $1,823.80 $1,756.80 $67.00
Platinum $1,842.00 $1,784.00 $58.00

Stock Indexes Chng.
BSE 16,469.79 17,059.40 -589.61 -3.5%
Dow Jones 10,990.58 11,143.31 -152.73 -1.4%
FTSE 5,092.23 5,168.24 -76.01 -1.5%
Hang Seng 20,016.27 19,595.14 421.13 2.1%
S&P 500 1,140.65 1,172.65 -32.00 -2.7%
Yahoo! Jewelry 961.73 988.88 -27.15 -2.7%

RAPAPORT NEWS SERVICE | September 2, 2011 www.rapaport.com | news@rapaport.com

Industry Retail EconWatch India Mining General

Rapaport Weekly Market Comment September 2, 2011  

Trading slow with buyers avoiding large purchases as diamond markets seek stable price levels. Rough continues to fall in dealer markets with elimination of premiums and some discounting of mining company prices. ALROSA sells $23M at Aug. tenders (90% by volume) with prices +5% over regular selling list. Large jewelers report strong growth in latest quarter: Tiffany sales +31% to $873M, profits +33% to $90M; Signet sales +11% to $798M, profits +71% to $66M; Zale sales +9% to $377M, loss of $33M vs. $29M a year ago. Best wishes “Michhami Dukkadam” to our Indian friends and “Eid Mubarak” to our Arab friends. Human Rights Watch reports ongoing abuse in Marange fields. Buyers Beware.

RapNet Data: Sept. 1

Diamonds 743,511
Value $5,319,310,363
Carats 831,688
Average Discount -24.82%

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

September
4-9
Sun-Fri

Rapaport Single Stone Auction
Israel & New York

email: auctions@rapaport.com

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

JOIN US AND gain important tools and insights into:
•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all.
Register now. Seating is limited.

September
13-19
Tue-Mon

Rapaport Melee Auction
Hong Kong

email: auctions@rapaport.com

QUOTE OF THE WEEK:
The Great Recession taught consumers how to juggle their spending in hard times. Shoppers have learned to be resilient. They have lowered their aspirations. The excess may be gone, but the fun and pleasure of shopping is still there. Retail sales are holding.

Candace Corlette | WSL Strategic Retail

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

HRW Finds Marange Abuse, KP Reacts

Human Rights Watch (HRW) holds evidence that police and private security guards employed by mining companies in the Marange diamond fields of Zimbabwe are shooting, beating and unleashing attack dogs on poor, local unlicensed miners. HRW interviewed 10 miners in Mutare and towns close to the Marange diamond fields who had suffered from beatings and attacks. During patrols, police would also fire on the miners.

The BBC also aired a program recently, claiming that there were torture camps located in the diamond fields. In response to that program, the Kimberley Process (KP) chairman, Matthieu Yamba, said it was seeking clarification from Zimbabwe regarding these allegations of ongoing torture carried out in the Marange fields.

Partnership Africa Canada (PAC) and HRW concluded that financial institutions involved with the mine must undertake an audit of their investment in Zimbabwean banks that are facilitating diamond transactions to determine if they breach IFC commitments. If an audit determines a breach, financial institutions should use their shareholder influence to stop illicit diamond related transactions and or disinvest.

ALROSA Tenders Net $23M

ALROSA raised $22.5 million from its rough diamond tenders this week in Moscow, Hong Kong and Tel Aviv. The mining giant sold 90% of the goods on offer and reported that prices exceeded ALROSA’s current selling prices by more than 5%. The tenders indicated a strong demand potential for almost all categories of rough diamonds, prices were stabilized following an "insignificant price correction" for some categories, according to ALROSA.

RETAIL & WHOLESALE

Rapaport Weekly News Broadcast

WATCH NOW: See how quarterly results compared at Zale, Tiffany and Signet -- all in one shot. Additionally, U.S. consumer confidence dropped substantially in August as politics, a seemingly forever weak job market, and inflationary pressures place shoppers in a foul mood.

Tiffany Profits +33%

Tiffany & Co. reported that second-quarter revenue rose 30.5% year on year to $872.7 million, while cost of sales increased by 27% to $358 million, for the three months that ended on July 31. Same-store sales rose 22%. Net earnings jumped 32.5% to $90 million.

By region, Tiffany & Co. reported a 25% year on year increase in sales for the Americas at $438.2 million and that comparable-store sales rose 23%. Sales from the New York flagship store, specifically, increased 41% in large part due to strong foreign tourist demand. In the Asia-Pacific region, sales increased 55% to $173.2 million, while on a constant-exchange-rate basis, sales increased 45%. Tiffany & Co. reported growth in most countries with the largest increase in the greater China region. In Japan, sales rose 21% to $142.5 million, but on a constant-exchange-rate basis, total sales increased 8%. Tiffany & Co. sales across Europe increased 32% to $101.3 million, but on a constant-exchange-rate basis, sales increased 17%.

Zales Net Loss Widens

Zales fourth quarter sales rose 9.4% year on year to $377.3 million for the three months that ended on July 31. Same-store sales rose 9.8% and at a constant exchange rate with Canada, comparable store sales rose 8.5%. Zale reported a net loss of $32.6 million, which was up from $28.5 million one year ago, and that translated into a net loss per share of $1.02. Cost of sales during the quarter rose 12.6% to $183.8 million and gross margin as a percentage of revenue declined to 51.3% from 52.7% one year ago. Inventory on July 31, was recorded at $721 million, which was up from $703 million one year ago. Zale held outstanding debt of $395 million, compared with $296 million on July 31, 2010.

LJ Intl. Profit +67%

LJ International reported that second-quarter revenue rose 26% year on year to $41.6 million and cost of goods sold rose only by 5% to $20.9 million for the three months that ended on June 30. Retail revenue from the ENZO jewelry chain in China surged 70% to $28.4 million and comparable-store sales jumped 61%. Wholesale revenue fell 19% to $13.2 million with U.S. sales plunging by 26% year on year and revenue from Europe falling 6%. Wholesale revenue from the companys territory across the Asian continent rose 49%. Company profit rose 67% to $3.85 million or 10-cents per diluted share.

Damiani Loss Narrows

Damiani S.p.A. reported a 24% revenue increase in first-fiscal quarter to about $48 million through June 30 and cost of sales rose 18% to about $49 million. The company recorded a loss of $3.2 million, which was a 50% improvement from one year ago. The brand narrowed its net debt during the period by EUR 2 million to EUR 26.8 million, or $38.7 million, as of June 30.

Charles & Colvard Launch Moissanite.com

Moissanite creator Charles & Colvard Ltd. launched its e-commerce channel, Moissanite.com, where shoppers may now purchase loose stones, rings, pendants, bracelets and earrings. Moissanite.com is using a commerce software platform from Magento Inc., and offers consumer information on how silicon carbide crystals are grown, faceted and polished.

Unique Settings Preps 2011 Catalog

Unique Settings of New York is set to release their new 2011 catalog, which includes more than 350 new ring styles and builds upon the success of the companys November 2010 catalog for bridal jewelry. Unique Settings added new halo petite engagement ring sets, wedding bands and lightweight wedding bands, in addition to its collection of solitaire engagement rings, wedding bands and petite collections. The company is expecting the new catalog to help boost sales by 10% for the final quarter of 2011.

Amazon Launches NYC Local Site

Amazon.com launched its www.amazonlocal.com concept for New York City. This local online marketplace provides discounts of at least 50% and will provide unique deals from Amazon-affiliated websites, including Amazon.com, MYHABIT.com and endless.com. In the coming weeks, New York City customers in downtown, midtown, uptown and Brooklyn will see additional deals and in the months ahead, AmazonLocal is also introducing unique offerings from Amazon-affiliated websites, including discounts on jewelry and watches.

Survey Finds Average Ring Spending Drops

According to The Knots engagement and jewelry survey, the average engagement ring center stone size was 1-carat, with an average of 1.40 total carat weight of diamonds, and the average price tag was $5,200, which was $600 lower than survey results from 2008. For the engagement ring diamond, 53% of grooms preferred the round cut, while 30% bought a princess cut. The survey found that average price spent on a luxury engagement ring was $13,500 and this often held a center stone of 1.5-carat, on average, but 2.0 total carat weight of diamonds.

Sahar Seeks to Ease Liquidity Crunch

Yair Sahar, the president of the Israel Diamond Exchange (IDE), pledged to work with the banks to increase the credit to the industry as the liquidity crunch continue to weigh on the diamond cutting sector. IDE, together with the Israel Diamond Manufacturers Association (IsDMA), is setting up a think-tank to examine ways to increase industry credit.

Sahar expressed confidence that the market will stabilize as expectations for Diwali celebrations, which begin on October 26, Christmas and then the Chinese New Year in February remain positive. He noted that rough producers have pledged not to increase their prices in the near future and stressed that the recent 20% price reduction seen at the BHP Billiton tender was a technical correction from the irrational price increases previously seen at the tender. Sahar noted too that a softening of prices is being witnessed through a drop in premiums across the secondary market, which is being fueled by the apparent lack of liquidity to buy rough.

GENERAL

Banking Operations Begin at BDB

IndusInd Bank inaugurated the first banking operation at the Bharat Diamond Bourse (BDB). The BDB is a well-guarded facility in the Bandra-Kurla Complex in suburban Mumbai, where about 15 to 20 companies are already operating from the new diamond center. Mehul Shah, vice president of BDB, stated that several other banks including Axis Bank, Corporation Bank and State Bank of India are in the process of starting their operations at the bourse in the coming weeks.

The Great Debate Runs Sept. 5

The Birmingham Assay Office, in partnership with International Jewellery London (IJL), will host the fifth "Great Debate," on September 5 at the Earls Court Exhibition Centre in the Inspiration Theatre from 11:15 a.m. to 12:30 p.m. Featured debaters include designer Stephen Webster, who will also discuss his personal involvement with Fairtrade & Fairmined Gold; Gaetano Cavalieri, the president of CIBJO, who will talk about the groups Corporate Social Responsibility Centre of Excellence in Antwerp; and Catherine Sproule, the director of the Responsible Jewellery Council (RJC) who will profile some companies that have now achieved accreditation to RJCs exacting standards.

Forevermark U.S. Adds Three Reps

Forevermark U.S. named Bruce Lake as the director of sales for the western region, John Salvin as the regional sales manager for the northeast and Michael Rousso as regional sales manager for the southeast. Forevermark will officially launch into the U.S. during the fourth quarter of 2011 through Forevermark diamantaire partners.

Gilad Tache Dies in Accident

Gilad Tache, 18, was killed in an automobile accident in Antwerp on Tuesday night. Nieuwsblad news reports that Tache was alone in his Audi when it struck a guardrail and that he died at the scene. He had just returned from a farewell party at a nightclub where he and some friends were celebrating.

The Rapaport Group mourns the untimely passing of this kind and sensitive young man and wishes the Tache family solace and comfort.

MINING

Gem Discovers 553ct. Diamond

Gem Diamonds recovered a 553-carat, D, type II diamond from the Letöeng mine in Lesotho. The diamond is undergoing analysis in Antwerp. The stone is the fourth historic diamond recovered from the Letöeng mine in recent years, following the recovery of the 603-carat "Lesotho Promise," the 493-carat "Letöeng Legacy" and the 478 carat "Light of Letöeng."

Namakwa Alters Strategy

Namakwa Diamonds Limited said that a $30 million credit facility was no longer available, however, the company is negotiating with the funding provider and is actively seeking alternative funding sources. In an operational review, Namakwa stated that its phase one operations at the Kao kimberlite mine in Lesotho remains within budget and is scheduled to commence in mid-October. But Namakwa has now decided to sell its entire portfolio in the Democratic Republic of the Congo to a group comprising in-country management. For the companys operations in the North West Province of South Africa, the board decided to redefine its course and is considering moving away from an owner operator model to a contractor model.

Namakwa will reorganize its Trading & Beneficiation Division into an international marketing and distribution platform for the companys diamonds. The change requires Namakwa to wrap-up trading joint ventures, and this includes $17 million charge with respect to capital invested by Jarvirne Limited.

The board of directors was reorganized and Nico Kruger has stepped down from his role as chief executive officer (CEO), and will be replaced by Richard Collocott who was previously the chief financial officer for Namakwa. Those changes followed the resignation of board chairman Hans Smith and audit, risk committee chair Dirk van Staden earlier this month. The company is actively pursuing the appointment of a new chairman of the board and independent chairman of the audit, risk and compliance committee. Namakwas board now consists of Edward Haslam, Alex Davidson, Martiens Mulder, Tom Kruger and Collocott.

Lucara Shares Move to TSX Main Board

Lucara Diamond Corporation commenced trading on the main board of the Toronto Stock Exchange (TSX).; The companys trading symbol "LUC" was delisted from the TSX Venture Exchange. William Lamb, Lucara Diamonds president, explained that the junior minerís graduation to the TSX is a reflection of the companys growth and its accomplishments to date.

ECONWATCH

For the week ending Sept. 1

Retail stocks appeared more stable this week after a month-long selloff. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Sept. 1 Aug. 25 Chng.
$1 = Euro 0.700 0.690 0.010
$1 = Rupee 45.85 46.07 -0.2
$1 = Israel Shekel 3.57 3.62 -0.05
$1 = Rand 6.99 7.23 -0.24
$1 = Canadian Dollar 0.97 0.99 -0.02

Precious Metals
Gold $1,827.20 $1,769.40 $57.80
Platinum $1,849.00 $1,817.00 $32.00

Stock Indexes Chng.
BSE 16,676.75 16,146.33 530.42 3.3%
Dow Jones 11,537.39 11,149.82 387.57 3.5%
FTSE 5,418.65 5,131.10 287.55 5.6%
Hang Seng 20,585.33 19,752.48 832.85 4.2%
S&P 500 1,209.16 1,159.27 49.89 4.3%
Yahoo! Jewelry 1,046.85 1,006.38 40.47 4.0%

RAPAPORT NEWS SERVICE | September 9, 2011 www.rapaport.com | news@rapaport.com

Industry Retail EconWatch India Mining General

Rapaport Weekly Market Comment September 9, 2011  

Diamond markets quiet due to price uncertainties with some suppliers offering goods at low prices. Market waiting for Hong Kong show amid hopes that Far East demand will improve industry sentiment and stabilize prices. One carat RapNet Diamond Index (RAPI) falls 4% to 103.91 in August. Rough trading weak. ALROSA sales +23% to $3.2B in first eight months of 2011. Harry Winston 2Q group sales +45% to $222M, net profit -23% to $10M. U.S. July polished imports +25% to $2.06B, polished exports +20% to $1.42B. Volatile gold sets new record ($1,922.20/oz).

RapNet Data: Sept. 8

Diamonds 695,687
Value $4,952,148,978
Carats 782,172
Average Discount -25.66%

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

September
12
Mon
Rapaport Intl Diamond Conference 2011
The Times Center
242 W. 41st., New York
9:00 a.m. - 5 p.m.

JOIN US AND gain important tools and insights into:
•The Market for Luxury Jewelry
•Diamonds and Social Responsibility – Real Solutions to Real Problems

Free and open to all.
Register now. Seating is limited.

September
13-19
Tue-Mon

Rapaport Melee Auction
Hong Kong

email: auctions@rapaport.com

September
21
Wed
State of the Diamond Industry
Martin Rapaport presentation at the Hong Kong Jewellery & Gem Fair
2:30 p.m.
Room 201 A&B - Level 2
Asia-World Expo

Register Now

September
19-23
Mon-Fri
Rapaport at Hong Kong Gem Fair
AsiaWorld-Expo, Hong Kong
Rapaport Booth: AWE 7K32, L32, L33

Find diamonds and companies with the
RapNet Show Listings service

QUOTE OF THE WEEK:
Dont blame S&P for the U.S. downgrade, fix the problem with urgency. It will only get worse with time. Both [Democrats and Republicans in Washington D.C.] are right, and wrong. The government needs to increase revenue and reduce costs, including entitlement and military, without discouraging investment or sacrificing competitiveness. This is not easy, but it is possible.

Tom Albanese | CEO, Rio Tinto

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

RapNet Diamond Index (RAPI) Falls in August

Certified polished diamond prices fell in August as cautious buyers reacted to economic uncertainty and Indian suppliers faced tight liquidity. While trading is generally quiet during the summer months, dealers and retailers also delayed making large purchases while prices declined. The RapNet Diamond Index (RAPIô) for 1.00 ct. diamonds fell 4% in August to 103.91. The 0.50 ct. category declined by 2.2% to 38.24 and 3.00 ct. dropped 5.4% to 371.58.

Rough trading in the dealer market was slow as Indian diamond cutters face liquidity issues. Premiums on mining company prices fell to near-zero with some goods selling at a discount. De Beers increased prices for some items, while BHP Billitonís spot tender prices fell by 15% to 20%.

Read a detailed account of August trends in Tentative Trading, Seeking Stability.

Harry Winston Sales +45%, Profits -23% in 2Q

Harry Winston Diamond Corporation reported sales rose 45% year on year to $222.4 million in the second quarter that ended on July 31, driven by higher retail demand and strong rough diamond prices. However, due to higher costs and expenses, profits fell 23% to $10 million during the quarter.

The companys retail sales rose 98% to $132.8 million, with U.S. sales up 48% to $29.1 million and European sales increasing by about 25% to $30.8 million. Sales in Asia jumped 223% to $72.9 million. Earnings from the retail division rose 84% to $10.1 million.

Sales from the companys mining unit, consisting of a 40% share in the Diavik mine, increased 3% to $89.6 million as a 41% rise in rough diamond prices was offset by a 27% fall in volume of carats sold. The company sold 570,000 carats during the quarter compared with 780,000 carats in the same period of 2010, while its share of Diavik production increased 11% to 720,000. The mining segmentís earnings fell 23% to $33.7 million.

Harry Winston also entered into an option agreement with North Arrow Minerals Inc. and Springbok Holdings Inc. for the development of the Lac de Gras properties in the Northwest Territories. The Lac de Gras property covers 226,000 acres and is contiguous with property held by North Arrow that covers more than 81,000 acres.

RETAIL & WHOLESALE

Movado Group Recovers a Profit in 2Q

The Movado Group reported a 33% year on year increase in second-quarter revenue for fiscal-year 2012 at $113.2 million and the cost of sales rose 28% to $52.3 million for the three months that ended on July 31. Movado posted profit of $4.4 million compared with a loss of nearly $21 million one year ago. Gross profit rose to 53.8% of sales, compared with 52% one year ago. The increase was primarily the result of leverage on certain fixed costs as well as a favorable shift in channel and product mix.

Diamonds, Jewelry Rank High in eBays Asian Trade

Online retailers from across Asia reported good business through eBay in the groups Asian Exporters Index report. The category for jewelry gems and watches ranked second --just behind clothing-- as the most popular item purchased across the continent. Other top categories included photo, computers, cell phones and accessories, auto parts and toys. While the market is dominated by China and Hong Kong, India as a whole presented the story of "exuberant growth," according to the studys authors. Product sales from India were driven mainly by artisans and small-scale manufacturers, in which eBay opened the world to their shops. Top selling products from India included jewelry, particularly diamonds, followed by photographic equipment, clothing and collectibles such as coins, stamps, Bollywood posters and LP records.

SRK and Kiran Move into Bharat Diamond Bourse

Shree Ramkrishna Export (SRK) and Kiran Gems Private Ltd. opened their new offices at the Bharat Diamond Bourse (BDB) in Mumbai. The SRK offices, which are located in east wing of the eight tower complex, are equipped with advanced facilities and latest technology in addition to a high-tech security system. Likewise, the Kiran offices, situated in the Bandra-Kurla Complex (BKC), house more than 100 professionals across all major functions such as sales and marketing, finance, IT, human resources and administration.

Christies Sets Date for Elizabeth Taylors Sale

Christies announced the first events of a planned four-day series of sales devoted to the jewelry sale of Elizabeth Taylor. Christies New York will host an evening sale on December 13, featuring 80 of Taylors jewels before holding two-day sale of 189 of the starís jewels on December 14. The total selection of 269 magnificent jewels from the collection being sold by Christies in December is estimated to achieve well in excess of $30 million.

Mouawad Launches Fashion Jewelry Website

Glamhouse creator and renowned, fourth-generation jeweler Pascal Mouawad launched www.glamhouse.com as an online destination for shoppers to find fashion jewelry created by celebrities, stylists and fashion designers. There are five collections currently housed under the Glamhouse umbrella: House of Harlow 1960, designed by Nicole Richie; Low Luv x Erin Wasson; Kim Kardashians Belle Noel; Rachel Leigh and the forthcoming A.L.C. by Andrea Lieberman.

AVON Introduces Indian Diva Jewelry Collection

AVON India launched its Indian Diva jewelry collection in Delhi this past week, during the finale of its fashion tour 2011. The line offers rings, earrings, bracelets and necklaces and features the look of high-end jewelry, but with lower price points.

Rapaport Weekly News Broadcast

Watch Now: The Hay Group, IBM Coremetrics and the National Retail Federation offer benchmarks for retailers as they prepare their ecommerce channels for Christmas season sales. Check on ways to improve carting and add-on sales, and embrace mobile shopping before the rush begins.

43.51ct. Yellow Diamond Fetches Almost $3M

The U.S. Marshals Service for the Northern District of Ohio auctioned a 43.51-carat, fancy-intense, internally flawless, yellow diamond through Bid4Assets.com and the winning bid was $2,843,623 or about $65,355 per carat. The Gemological Institute of America (GIA) graded the diamond on June 8, 2011 (GIA report 15154097). According to the auctions webpage, bidding went overtime, but closed at 3:15 p.m. EDT today. This diamonds mine source was not determined and there were no U.N. sanctions or Kimberley Process claims against the stone, according to Bid4Assets.

GENERAL

Antwerp Diamond Trade Fair to be Held in January

The Antwerp Diamond Bourse, the Diamantclub of Antwerp and the Antwerp World Diamond Centre (AWDC) announced the dates for their third edition of the Antwerp Diamond Trade Fair. This invitation-only event will be held January 29 through January 31. Since the programs inception in 2010, the number of exhibitors has doubled to 66, and next year, organizers will extend invitations to jewelry manufacturers and retailers from across Asia and North America, as well as Europe.

GJEPC to Hold IIJS in January

The Gem & Jewellery Export Promotion Council (GJEPC) will hold its next IIJS Signature Show from January 6 to 9, at the NSE Grounds, Goregaon East in Mumbai. GJEPC stated that IIJS Signature 2012 participants include manufacturers, wholesalers, retailers, importers and exporters from all sectors of the jewelry industry worldwide.

STATS

India

Figures rounded July $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,922 14% $17,585 41%
Polished imports $1,429 29% $14,203 85%
Net exports $493 $3,382

Rough imports $1,886 100% $9,485 42%
Rough exports $124 96% $895 70%
Net imports $1,762 $8,590

Net diamond account ($1,269) ($5,208)

MINING

ALROSAs Sales +23%

ALROSA sold approximately $3.15 billion worth of rough and polished goods during the first eight months of 2011, compared with $2.57 billion in the first eight months of 2010. ALROSA reported sales of $2.16 billion at the close of its first-half on June 30, 2011. During a working meeting with executives on September 5, when the updated figures were discussed, company president Fyodor Andreev maintained ALROSAs sales outlook of $5 billion for this calendar year. He also noted "a certain price correction in some assortment categories, primarily due to a sharp reduction of speculative pressure on the market.î

Rockwell to Install High-Throughput Tech at Saxendrift

Rockwell Diamonds approved a capital investment of about $1.5 million to install high-throughput X-ray technology at its Saxendrift operations. Currently, the plant is using traditional pan-plant technology. Rockwell anticipates that the new technology will be more efficient in recovering rough diamonds. The new technology can identify type II diamonds. Rockwell will install one high-throughput Bourevestnik (BV) sorter and one BV single particle sorter for the concentration and final sorting of diamond bearing ore at Saxendrift.

Namakwa Secures Credit Facility

Namakwa Diamonds will be able to tap a $40 million, two-year secured loan facility with Jarvirne, with first drawdown of $5 million being available on September 9. Funds will support the kimberlite mining project at Kao in Lesotho. Namakwa will issue 11 million shares to Jarvirne and shareholders will vote to authorize an additional 50,750,000 shares in October. Once approved, Jarvirne will boost its stake in the company to 81,891,438 ordinary shares, representing 28.45% of the then enlarged issued share capital. Jarvirne appointed two non-executive directors to the board as part of the deal.

ECONWATCH

For the week ending Sept. 8

Spot gold set a record of $1,922.20oz. during the early morning hours in New York on September 6. At the record price, gold was up 51% year on year and trading 13% higher from 30 days earlier. Following early highs, gold, silver and platinum experienced a broad selloff, but bounced back as the week progressed. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Sept. 8 Sept. 1 Chng.
$1 = Euro 0.720 0.700 0.020
$1 = Rupee 46.26 45.72 0.5
$1 = Israel Shekel 3.70 3.57 0.13
$1 = Rand 7.17 7.00 0.17
$1 = Canadian Dollar 0.98 0.98 0.00

Precious Metals
Gold $1,865.90 $1,827.20 $38.70
Platinum $1,860.00 $1,849.00 $11.00

Stock Indexes Chng.
BSE 17,165.54 16,676.75 488.79 2.9%
Dow Jones 11,295.81 11,493.57 -197.76 -1.7%
FTSE 5,340.38 5,418.65 -78.27 -1.4%
Hang Seng 19,912.82 20,585.33 -672.51 -3.3%
S&P 500 1,185.90 1,204.42 -18.52 -1.5%
Yahoo! Jewelry 1,061.77 1,046.76 15.01 1.4%

Rapaport Weekly Market Comment October 19, 2011

Trading centers quiet over Jewish holidays with Indian markets cautious ahead of next week’s Diwali festival. Rio Tinto’s 3Q diamond production flat at 3.5M cts. ALROSA’s 1H sales +3% to $2.1B, profits rise five-fold to $841M. LVMH 3Q jewelry & watch sales +161% to $874M. Christie’s NY jewels sells $46.6M (83% sold by lot) with pear-shaped, 32.77-ct., fancy vivid yellow, VS2 diamond selling for $6.6M ($201,000/ct.). India’s Sept. polished exports +4% to $2.49B, rough imports -4% to $936M. U.S. Aug. polished imports +23% to $1.64B. RAPAPORT PRICE LIST WILL NOT BE PUBLISHED THIS WEEK DUE TO SUCCOT HOLIDAY. NEXT RAPAPORT PRICE LIST TO BE PUBLISHED ON OCT. 28. RAPNET PRICE LIST WILL BE PUBLISHED AND EMAILED OCT 24. WITH TRADESCREEN AVAILABLE ONLINE 24/7. We wish everyone a happy Diwali.

RapNet Data: Oct. 18

Diamonds 796,449
Value $5,235,620,092
Carats 857,493
Average Discount -25.84%

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RAPAPORT ANNOUNCEMENTS

November
7-11
Mon-Fri

Rapaport Melee Auction
New York

email: auctions@rapaport.com

November
7-15
Mon-Tue

Rapaport Single Stone Auction
New York & Israel

email: auctions@rapaport.com

QUOTE OF THE WEEK:
We have got a bifurcation that keeps getting bigger and bigger. Ten percent of the consumers account for 40% of the spending, [which is on the increase and making the ecomony seem stronger. But] 80% of consumers are in a depression, so the growing gap between the haves and have-nots is responsible for the Occupy Wall Street movement.

Howard Davidowitz | Davidowitz & Assoc.

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

Christie’s NY Auction Reflects Healthy Market

On the surface the Christie’s New York sale of Magnificent Jewels appeared to be a quiet day, however the numbers told another story. The sale garnered $46,599,650, with 83% sold by lot and 93% sold by dollar value. The presale estimate was $35 million to $40 million.

The top lot of the sale, pictured, was a 32.77-carat fancy vivid yellow diamond of VS2 clarity. It sold for $6,578,500 to a buyer who requested anonymity. Diamonds were selling very well with prices that dealers described as “healthy.” Colored diamonds were flying out the door as were white diamonds, perhaps due to the shortage of stones on the market, or demand due to the upcoming holiday gifting season. Privates and dealers were all active in the sale. In a slightly different spin from recent sales where prices went crazy and buyers snatched up anything, this sale saw strong prices that were within a reasonable range and somewhat more selective buying, Signed pieces by Tiffany & Co. sold well as did a selection of hard to find vintage 1970s Bulgari pieces.

ALROSAs Profits Surge

ALROSA reported net profit grew five-fold to $841 million in the first half of 2011. Sales increased 3% to $2.13 billion while cost of sales fell by 39% to $744 million. Revenues were comprised of 27% of goods that stayed in the domestic market, 47% that was exported to Belgium, 11% to India, 8% to Israel, and the remainder to other markets. The company’s diamond inventory was valued at $546 million at the end of the period, compared with $509 million six months earlier. Production rose 10T percent to 19.326 million carats, as previously reported. ALROSA’s reserves stood at 1.2 billion carats in 2010, which, the company stated, is sufficient to maintain current production levels for the next 32 years.

U.S. Inflation Soars

The consumer price index (CPI) for jewelry remained near record-highs in September, jumping 8% year on year to 176.78 points. The reading marked the ninth consecutive month with a total greater than 170 points. The jewelry CPI has now been above 150 points for 44 consecutive months. Meanwhile, the CPI for all product categories rose 3.9% year on year to a record 226.96 points.

RETAIL & WHOLESALE

LVMH 3Q Sales +18%

LVMH reported that company sales for all categories rose 18% year on year to $8.3 billion for the third fiscal quarter. Sales of jewelry and watches for the three months rose to $874 million from $335 million one year ago, helped in large part due to the Bulgari acquisition. Revenue for the jewelry and watch segment during the first nine months of fiscal 2011 rose 76% to $1.7 billion, and on a comparable basis the increase was 26%. The third quarter was also marked by the successful public offer for the outstanding minority shares in Bulgari.

ENZO Reports 91% Jump in Sales

LJ International Inc., parent company of the ENZO jewelry retail chain in China, recorded a 91% year on year jump in sales during that nations "National Day Golden Week" festival. Comparable-store sales increased 53%. ENZO had 182 stores in operation for this years festival, which was up from 128 stores one year ago. Golden Week took place during the first week of October.

U.S. Department Store Sales Flat in Sept.

U.S. department store sales were flat year on year in September at $13.7 billion on an unadjusted basis, according to U.S. government figures. Retail trade sales rose 8.1% year on year and total retail and food services sales, excluding motor vehicles, rose 7.6% to $315 billion. Preliminary retail sales data, which is one month behind, revealed that jewelry store sales rose 19.4% year on year in August to $2.23 billion. The government also revised its jewelry sales total lower for the month of July to $2 billion from $2.2 billion reported in the preliminary report. Meanwhile, jewelry inflation for the month of August rose 11%.

Confidence Weakens, Consumers Lose Faith

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 57.5 points in October, which was lower than expected and weaker than at any time during the Great Recession. Furthermore, the consumer outlook for the direction of the country fell to 47 points, or the lowest level since May 1980. With the average income down from one year ago, inflation topping 3%, and lack of political direction in the country, these combine to sour average consumer sentiment and keep wallets shut.

According to a Gallup poll, 80% of consumers believe the U.S. is in a recession, and none of 1,004 adults believed the economy ever even recovered from the Great Recession. Perhaps worse yet, only 1% believes the economy will have recovered from the Great Recession one year from now, while only 37% think the economy will show improvement without a full recovery. Of top issues facing the U.S., a poll conducted by Pew Research Center found that 43% of consumers cited the nations lack of jobs as the greatest economic problem, followed by 22% who thought the budget deficit was a top issue and 17% saying inflation was the greatest threat.

Analyst Initiates Buy for Tiffany

Sterne Agee analyst Margaret Whitfield initiated a "buy" rating for Tiffany & Co. with a $90 price target. Sterne Agee considered that engagement ring demand remains fairly "recession proof," and that consumers would continue to buy pricey engagement and wedding rings from the retailer even during a bad economy. Tiffany also sources high-quality diamonds and produces 60% of its item in-house. The analyst added that Tiffany is a "premier luxury" firm and has the potential to grow even where it has a lot of stores while it continues to expand in new markets.

Jewelers Must Capture Lost Market Share

Unity Marketing found that jewelers have been recently hit by a number of factors that have hurt the businesses. Rising product costs have pressured margins and given consumers reason to seek more affordable alternatives, such as new metals and faux gemstones. Consumers have also increasingly favored department stores, Internet websites, artisans and art galleries, TV shopping and discounters for new jewelry pieces. Furthermore, with a new value consciousness so pervasive in the post-Great Recession, todays jewelry consumer is finding ways to buy a new piece for a great price.

The average amount jewelry shoppers spent on their most recent piece of fine jewelry declined by nearly 60% from pre-recession 2007 when the average price was $734 to only $466 in the most recent survey. Jewelers must work harder and smarter to entice the customers to buy, using all the marketing tools available to them such as social media, local community events, and partnering with other local businesses such as bridal shops. The report also suggested that jewelers stock more items made from lower-price metals, semi-precious stones and materials that might previously have been considered as costume jewelry.

Hearts on Fire Drops Trademark Case

Hearts on Fire dropped the lawsuit it filed against De Beers Diamond Jewellers, according to court documents filed in the United States District Court in Massachusetts. The company initially filed a trademark action suit against De Beers in August, claiming that De Beers infringed on its "Sublime Symmetry trademark,” and contended that any resemblance of the mark used by De Beers would cause confusion with consumers.

Neiman Marcus Christmas Book 2011

Neiman Marcus unveiled the 85th edition of its annual Christmas Book, which, aside from its usual selection of fantasy gifts, offered a number of jewelry collections. The Roberto Coin jewelry, for example, showcases a collection of heart, cross and solitaire necklaces featuring diamonds in 18-karat gold. In addition, Roberto Coins colorful Fantasia Fireworks collection, which highlights the designers use of amethyst orange sapphire, citrine, green topaz, peridot and diamonds, is available as well. Christmas Book 2011 also offers diamond and gold earrings from the David Yurman Starburst collection. Other diamond and gold jewelry includes necklaces, bracelets, earrings and bangles by Jose and Maria Barrera, Aurelie Bidermann, John Hardy, Marco Bicego and Ippolita.

Rajesh Exports to Open 25 Stores

Rajesh Exports Ltd. will open 25 new retail stores in the southern state of Karnataka on Monday on the occasion of Dhanteras, an auspicious day for gold purchases in India. The company, which sells its jewelry under the Shubh Jewellers brand in India, stated that the opening of new showrooms will take the total number of stores to 65 in Karnataka and a total of 73 stores across the country. Rajesh Exports said that it is looking forward to an aggressive retail expansion plan, which would be the main driver for the incremental profitability in the coming quarters. The company plans to establish 500 Shubh Jewellers stores across India by 2014.

L2 Assigns Tiffany & Co. a Digital IQ of Genius

Think tank L2’s Digital IQ index on the jewelry and watch segment assigned Tiffany & Co. a Digital IQ class of "Genius”— the only jewelry brand that achieved that accolade, out of the 35 measured. L2 researchers praised Tiffany & Co. for threading the "needle between brand building and e-commerce" with its website, and for using its microsite "What makes love true" to bring its brand magic to life.

Swarovski AG, was assigned second-best "Gifted" for experimenting and innovating across its website, mobile, and social platforms. All other brands required a lot of improvement for their digital competence, as defined by L2.

Less than half of the brands were purchasing their own brand keywords for search, few offered e-commerce and many failed to engage customers through social media. L2 suggested that linking to social media properties and incorporating product sharing features can provide tangible results, and the amount of traffic coming from and going to a brand site from social media properties significantly correlates with the groups Digital IQ.

STATS

U.S.A.

Aug. $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,640 23% $14,990 27%
Polished exports $1,380 22% $12,180 35%
Net imports $258 25% $2,820 0%

Rough imports $31 0% $424 27%
Rough exports $14 -26% $291 62%
Net imports $17 42% $133 -13%

Net diamond account $241 24% $2,680 1%

India

Sept. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $2,490 4% $22,450 19%
Polished imports $1,340 -22% $17,110 36%
Net exports $1,150 70% $5,340

Rough imports $936 -4% $10,070 33%
Rough exports $147 48% $1,180 64%
Net imports $790 -10% $8,890

Net diamond account $361 ($3,550)

Israel

YTD* $Mil. %Chng.
Polished exports $5,830 37%
Polished imports $3,520 35%
Net exports $2,310 40%

Rough imports $3,520 35%
Rough exports $2,980 32%
Net imports $540 54%

Net diamond account $1,770 36%

*This table on Oct. 12 mistated YTD total as 3Q.

MINING

Rio Tintos Diamond Production Flat in 3Q

Rio Tinto’s diamond production reached 3.534 million carats in the third quarter of 2011, in line with its output one year earlier. Production at Rio Tinto’s Argyle mine in Australia fell 5% to 2.302 million carats, while output at the Murowa mine in Zimbabwe, in which Rio Tinto owns a 78% stake, grew 71% to 72,000 carats. The company’s 60% share of production at the Diavik mine in Canada increased 8% to 1.160 million carats Total production at the Diavik mine increased to 1.9 million carats, with the mine expected to add another 1.8 million carats in the fourth quarter. During the first nine months of the year, Rio Tinto’s diamond production fell 18 percent to 8.766 million carats. The company expects its share of production to reach 13 million for the full year, which would be 6 percent below output in 2010.

Rockwell Diamonds 2Q Revenues -19%

Rockwell Diamonds reported that revenues fell 19% year on year to $9.2 million in its second fiscal quarter as lower inventories impacted sales. The company, however, turned a net profit of $2 million in the three months that ended August 31, compared with a loss of $7.1 million as it reduced costs and gained from exchange rate fluctuations. Rockwell sold 3,233 carats during the quarter for an average price of $2,186 per carat, representing a price increase of 109% from a year earlier. The company’s production fell 47% to 3,611 carats during the quarter due to its closure of the Holpan mine and production issues at Klipdam and Saxendrift.

Stellar Diamonds Revenue -25%

Stellar Diamonds reported that revenue fell 25% year on year to $1.52 million for the fiscal period that ended on June 30. Stellar recorded an impairment charge of $8.6 million for its Bomboko project and a net loss of $14.9 million up from $5.6 million one year ago. During the fiscal period, the junior explorer raised $9.9 million in equity this past March and as of June it held $6.5 million in cash along with net assets of $21.1 million.

ECONWATCH

For the week ending Oct. 19

Most U.S. retail stocks were slightly higher this week, the exceptions were Birks & Mayors, Charles & Colvard, DGSE, Signet, Sothebys, and Tiffany. European retailers were mainly lower and Indian firms were mixed ahead of Diwali. Diamond mining companies all registered declines except for Rockwell Diamonds, Mwana Africa and Stellar Diamonds. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Oct. 19 @ Noon Oct. 12 Chng.
$1 = Euro 0.726 0.726 0.000
$1 = Rupee 49.19 49.01 0.2
$1 = Israel Shekel 3.65 3.65 0.00
$1 = Rand 8.02 7.81 0.21
$1 = Canadian Dollar 1.01 1.01 0.00

Precious Metals
Gold $1,644.20 $1,675.10 -$30.90
Platinum $1,518.00 $1,539.00 -$21.00

Stock Indexes Chng.
BSE 17,085.34 16,958.39 126.95 0.7%
Dow Jones 11,592.68 11,533.69 58.99 0.5%
FTSE 5,450.49 5,441.80 8.69 0.2%
Hang Seng 18,309.22 18,329.46 -20.24 -0.1%
S&P 500 1,223.74 1,211.62 12.12 1.0%
Yahoo! Jewelry 1,032.82 1,034.53 -1.71 -0.2%

RAPAPORT NEWS SERVICE | October 28, 2011

Industry Retail EconWatch Mining India General

Rapaport Weekly Market Comment October 28, 2011  

Indian liquidity crisis remains difficult with significant increase in discount levels. Goods are available at prices 5-15% lower than two months ago with excellent buying opportunities for cash buyers. Trade and consumer confidence problematic. DTC expected to reduce rough supplies at next week’s sight as De Beers and Russians attempt to maintain a firm pricing policy. De Beers 3Q production +3% to 9.3M cts. Gem Diamonds sells 550-ct., D, type IIa, Letséng rough for $16.5M ($30,000/ct.). Strong Asian demand and higher prices at Argyle pink diamond tender. Signet to buy back $300M in shares. Titan Industries 2Q sales +37% to $421M, net profit +16% to $30M. We wish everyone a happy Diwali.

RapNet Data: Oct. 27

Diamonds 818,416
Value $5,408,636,202
Carats 805,983
Average Discount -26.44%

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RAPAPORT ANNOUNCEMENTS

November
7-16
Mon-Wed

Rapaport Melee Auction
New York & Hong Kong

email: auctions@rapaport.com

November
7-15
Mon-Tue

Rapaport Single Stone Auction
New York & Israel

email: auctions@rapaport.com

QUOTE OF THE WEEK:
The fourth quarter may see some pullback in U.S. economic growth, but the positive details underlying the GDP (+2.5% for third quarter) should help ease fears of a U.S. recession - somewhat.

Jennifer Lee | BMO Capital Markets

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

INDUSTRY

Gem Diamonds Sells 550-Ct. Letšeng Star

Gem Diamonds sold the 553-carat, D, type IIa, Letšeng Star rough diamond for $16.5 million, or $30,000 per carat, to an undisclosed third party. As part of the deal, Gem Diamonds’ Lesotho-based subsidiary, Letšeng Diamonds, will benefit from a “significant share” of the downstream polished margin resulting from the sale of the polished stone, which will be cut from the Letšeng Star.

Strong Demand at Argyle Pink Tender

Rio Tinto Diamonds closed its Argyle pink diamond tender this past week, reporting strong Asian demand and continued price appreciation for the rare gems. The collection of 55 stones mined at the Argyle mine in Australia were cut and polished in-house by Rio Tinto’s polishers in Western Australia. The collection included a record 11 heart-shaped stones, which generated strong interest, particularly from Australian and Asian bidders, according to Josephine Archer, the manager of Argyle Pink Diamonds. Rio Tinto reported that bidders in Japan found considerable success in the tender, including the acquisition of the Argyle Alanya, an oval-shaped, 1.06-carat, fancy vivid purplish-pink diamond.

Rapaport Weekly News Broadcast

Watch Now: Bain & Co. provides an optimistic outlook for the global fine-jewelry sector moving forward with expected sales growth at 15% this year, and the group expects Christmastime sales increases in the low-single digits. There are nuances for future trends as Asia remains a powerhouse and demands from male shoppers increase. The American Affluence Research Center, which tracks spending of wealthiest 11 million U.S. households, noted very negative sentiment with consumers and observed a decrease in average household Christmas spending plans this year. But as there are more wealthy shoppers entering the market, this will help boost overall holiday sales slightly in 2011.

RETAIL & WHOLESALE

Exhibitors Report Weak JA Special Delivery Show

Visitor traffic at the three-day JA New York Special Delivery Jewelry Show at the Javits Convention Center was tepid, leading to less than impressive sales for many exhibiting companies. Buyers appeared interested only in lower-end jewelry and small diamonds of H to J colors. Inexpensive bracelets, necklaces and beads made of precious stones were in greater demand than diamonds, gold and silver jewelry.

Titans 2Q Profit +16% to $30M

Titan Industries Ltd. reported net sales rose 37% year on year to $420.6 million during its second fiscal-quarter that ended on September 30. Net profit grew 16% to $29.7 million Titans jewelry sales increased by nearly 45% to $327.3 million while sales at its watch division rose 16% to $83.8 million .

Charles & Colvard 3Q Profits -79%

Charles & Colvard reported its third quarter sales dropped 4% to $2.9 million with loose moissanite stone sales falling 22% to $2.2 million. Finished jewelry sales, however, rose 303% to $682,000. Profit for the company plunged 79% to $110,000. Charles & Colvard held $9.4 million in cash and investments, $37 million in inventory and no debt at the end of its quarter.

Thangamayil 2Q Profit +165%

Thangamayil Jewellery Ltd. reported that its second-quarter net profit more than doubled year on year to about $4.5 million from $1.7 million. Growth was driven by higher sales, which rose 69% to $58.8 million for the three months that ended on September 30.

Signet Approves $300M Share Repurchase

Signets board authorized a share repurchase program of $300 million and will come into effect from January 2012 and last for 24 months. The program will be funded through the companys existing cash balance and can be commenced or discontinued at any time without notice. The repurchased shares will be used for general corporate purposes.

Zacks Investment Research upgraded Signet from “neutral” to “outperform.” Shares were about 12 times forward estimates, which puts the PEG ratio at 1.0 price-to-sales is at 1.0 and the stock for 1.6 times book value.

Gitanjali Launches Jewelry Vending Machine

Gitanjali Group launched a gold and diamond automated teller machine (ATM), providing a one stop shop for consumers to buy medallions, coins and jewelry. The ATM will give the consumer a mix of up to 36 options in different sizes, price points and designs to choose from across these categories and the prices will range from INR 1,000 to INR 30,000 ($20 to $650). In the coming months, the company plans to expand the network of these ATMs in places with high consumer foot traffic such as premium malls, airports and temples to provide visitors with a range of last minute purchase choices for gifting and other needs.

Blue Nile Joins ShopRunner Network

Blue Nile joined the ShopRunner network to provide ShopRunners members free FedEx overnight and return shipping on any Blue Nile purchase. An annual membership on ShopRunner is $79 and can be shared with up to four household members. Retail partners already include Reeds Jewelers, Lord & Taylor, Calvin Klein and many others and the website indicated that watchwear.com, ice.com, diamond.com would be "coming soon."

Online Video Ads Reach 50% Mark

Digital matrix firm comScore Inc. reported that September was the first time that video advertisements reached 50% of the U.S. population online. The number of online videos watched came to 40 billion and the total number of advertisements viewed by U.S. Internet users during the month was 6.8 billion, a 37% year on year increase. Hulu accounted for the largest share of those online advertisements, with around 1.02 billion ads, while Termor Video came in second with 811 million ads. Adap.tv ranked third with 803.4 million ads. All video ads viewed by U.S. Internet users accounted for 14.7 percent of total online videos for the month with the average online ad being 24 seconds. The firm also reported the average number of hours spent watching online video content surged 25.6% to 19.5 hours per viewer per month.

Ritchies Unveils 50-Ct. Diamond for Auction

Ritchies Auctioneers will offer more than 160 lots of fine jewelry for auction on November 13 including a 50.24-carat, VS1, brilliant-cut loose diamond appraised at $10 million. Additional items include an 18-carat, fancy yellow diamond appraised at $1 million, a 78-carat fancy yellow diamond necklace appraised at $600,000, a red ruby necklace appraised at more than $500,000, and a one of a kind Piaget watch appraised at $200,000.

Jewelry Exchange Launches Great Diamond Moments

The Jewelry Exchange launched a new customer testimonial program: Great Diamond Moments. This campaign includes a series of television commercials, two minute interview clips, and the launch of a new webpage. Website visitors can view excerpts from interviews and leave feedback, or send their story for a chance to be the next featured stars of Great Diamond Moments.

GENERAL

ICBC, AWDC Sign Financing Framework

The Industrial Commercial Bank of China (ICBC) and Antwerp World Diamond Centre (AWDC) signed a Cooperation Framework Agreement for diamond financing. According to the agreement, ICBC will provide AWDC with financial services. Through its global network and advanced IT system, ICBC will provide various services to the Antwerp diamond companies, such as trade and product financing, global cash management, bank card acceptance, Chinese yuan-based international settlement, capital transaction and investment banking, etc.The AWDC will assist ICBC in entering the field of diamond financing and assist its Brussels branch to obtain the required location, the necessary professional technology, people, equipment and information to support the launch of ICBC’s diamond financing activities..

Paz Says Abide by KPs Core Principles

On the eve of the 2011 Plenary for the Kimberley Process Certification Scheme (KPCS), the president of the World Federation of Diamond Bourses (WFDB), Avi Paz, made a strong appeal to delegates to "live up to and abide by the organizations core principles."

"Our members are strongly committed to enforcing the requirements of the KPCS system, and we have never hesitated to remove from our ranks those traders who may have strayed. However, if our regulators give contradictory signals and individual countries adopt conflicting policies, it becomes increasingly difficult for our members to conduct our business in a most responsible manner," Paz stated.

GJEPC to Hold Indo-Euro Summit

The Gem & Jewellery Export Promotion Council (GJEPC) will hold the third edition of Indo-Euro Jewellery Summit from November 15 to 20, in Mumbai. The summit will include a series of high-level meetings between the top 20 European retailers and leading Indian jewelry manufacturers. GJEPC said that the summit will see participants from France, Germany, Poland and Eastern Europe as well as a major jewelry retail chain from South Africa. For the first time, the participants will also include wholesalers, TV jewelry channels and one of the leading luxury retailers from France

MINING

Botswanas Diamond Exports +52%

Botswana exported $529.6 million worth of diamonds in August 2011—an amount was 52% higher than one year ago, Rapaport records show. Exports during the first eight months of the year increased 88% to $3.7 billion.

De Beers 3Q Diamond Production +3%

De Beers rough diamond production rose 3% year on year to 9.305 million carats in the third quarter of 2011. The increase came due to higher productivity and variations in grade and despite industrial actions at operations in South Africa and Namibia. During the first nine months of the year, De Beers production increased 1.5% to 24.839 million carats. Production reached 32.997 million carats in the full year 2010.

Namakwa Diamonds Increases Loss

Namakwa Diamonds reported a net loss of $76.7 million. Revenues rose 14% to $93.3 million while cost of sales rose 19% to $95.2 million and expenses more than doubled to $44.5 million. Group production for the past year rose 55% to 128,191 carats.

Rockwell, Midamines Reach Settlement

An indirect subsidiary of Rockwell Diamonds agreed to pay $1.2 million to Midamines for royalty payments dating back to a 2006 agreement. The two have been in arbitration over what Midamines claimed to be a $41 million charge. Rockwells board stated that it was disappointed at the outcome, having vigorously argued against the claims made by Midamines, but the settlement was a fraction of the total and the executive team can now focus on implementing its diamond value management initiatives.

Mountain Province Completes Airborne Survey

Mountain Province Diamonds completed its airborne gravity survey for Gahcho Kué, a joint venture project with De Beers Canada, and its fully-owned Kennady North Diamond Project. Fugro Airborne Surveys Corporation conducted the surveys and preliminary results are expected before the end of November 2011. Mountain Province also announced that the Gahcho Kué will expand the previously announced five-hole Tuzo Deep drill program to six holes.

De Beers Wins Top Sustainability Reporting Award

For the second year running, De Beers has been declared the overall winner in the ACCA South Africa Sustainability Reporting Awards for its Report to Society 2010. This is the fourth consecutive year that the Report to Society has been recognized by ACCA South Africa. Both the 2009 and 2010 Report to Society have won the first prize in the resources category, and won the Overall Winner, Best Sustainability Report. Announcing the award, ACCA noted that De Beers “remains unmatched” in explaining its approach to sustainability management and reporting.

ECONWATCH

For the week ending Oct. 27

The bulls returned to U.S. retail stocks with half those we cover rising by double-digit increases this past week. European retailers were higher, Indian diamond firms were mixed. Diamond mining companies were volatile, but mainly came out ahead. Read the extended stock report for major retailer and miner stocks from India, the U.S., and Europe.

Oct. 27 Oct. 19 Chng.
$1 = Euro 0.708 0.726 -0.018
$1 = Rupee 49.32 49.19 0.1
$1 = Israel Shekel 3.60 3.65 -0.05
$1 = Rand 7.71 8.02 -0.31
$1 = Canadian Dollar 0.99 1.01 -0.02

Precious Metals
Gold $1,743.10 $1,644.20 $98.90
Platinum $1,636.00 $1,518.00 $118.00

Stock Indexes Chng.
BSE 17,288.83 17,085.34 203.49 1.2%
Dow Jones 12,210.60 11,592.68 617.92 5.3%
FTSE 5,713.82 5,450.49 263.33 4.8%
Hang Seng 19,688.70 18,309.22 1,379.48 7.5%
S&P 500 1,284.57 1,223.74 60.83 5.0%
Yahoo! Jewelry 1,098.20 1,032.82 65.38 6.3%

Rapaport Weekly Market Comment December 30, 2011

U.S. consumer confidence improves as retail sales expected to grow 4% in Dec. and comScore reports online sales +15% to $35B in Nov/Dec. Trading centers quiet as cutters uncertain that retailers will replenish inventories in 1Q. Cautious Far East demand ahead of January 23 Chinese New Year. Lazare Kaplan sues Antwerp Diamond Bank for alleged misappropriation of $135M. Japan’s Nov. polished imports +7% to $62M. Australia’s FY1Q diamond production -6% to 2.335M cts., rough exports -11% to $94M. The Rapaport Group wishes everyone a happy, healthy, prosperous and peaceful New Year.

RapNet Data: Dec. 29

Diamonds 818,324
Value $5,470,699,074
Carats 861,291
Average Discount -26.45%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

Dec-Jan
26-3
Mon-Tue

Rapaport Melee Auction
Mumbai

email: auctions@rapaport.com

January
16-26
Mon-Thu

Rapaport Melee Auction
New York & Belgium

email: auctions@rapaport.com

QUOTE OF THE WEEK
ear neglected this business for so long, I would expect more stores to close. They are letting Kmart and Sears die on the vine.

Brian Sozzi | Nothing But Gold Productions

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, Mumbai, Dubai, and Shanghai. To get on the fast track, email your resume to careers@rapaport.com.

RETAIL & WHOLESALE

Online Sales +15% to $35B

Online retail sales rose 15% year on year to $35.3 billion for the period of November 1 through December 26, according to metrics firm comScore Inc. The most recent week, which closed on December 25, experienced a 16 percent jump in online retail sales at $2.8 billion. The growth rate was in line with comScores early season projections.

Sears to Close Stores

Sears will close as many as 120 of its Kmart and Sears locations and tapped its credit line to borrow cash following weak Christmas season sales. Same-store sales at Kmart fell 4% and at Sears they dropped 6% for the eight weeks ending on December 25. Sears expects to record a noncash charge of $1.6 billion to $2.4 billion in the fourth quarter.

Lazare Kaplan Sues Antwerp Bank

Lazare Kaplan sued KBC Bank and its subsidiary Antwerp Diamond Bank (ADB), charging that $135 million from its diamond proceeds were funneled through numerous shell companies controlled by Erez Daleyot, owner of D.D. Manufacturing, across Europe, the Middle East and Asia. Lazare Kaplan seeks $500 million in lost proceeds on allegations of racketeering and money laundering.

Lazare claims to have consigned diamonds to Daleyot who would then sell the goods and return the proceeds. Instead, the suit alleges that the banks and Daleyot worked together to transfer diamonds through a series of transactions meant to hide the money flow and use those proceeds to pay off loans the banks extended to Daleyot.

ADB is suing Lazare in Belgium, claiming the diamond company owes on a $45 million credit facility, which Lazare denies. Ongoing litigation has prevented Lazare from filing its financial statements for two years.

Su-Raj Seeks to Raise Funds

Su-Raj Diamonds plans to raise capital through preferential issue of up to 36.4 million equity shares of INR 10 each to foreign institutional investors. The company will hold an extraordinary general meeting on January 18, to obtain shareholder consent. The company has proposed shares to Passage to India Master Fund Ltd., Sparrow Asia Diversified Opportunities Fund, Davos International Fund and Leman Diversified Fund.

Consumer Confidence Rises

The Conference Boards Consumer Confidence Index® rose 21% year on year to 64.5 points for the month of December 2011. The group defines a reading of 100 points or more as reflecting a positive economic environment. The index stood at 55.2 points in November. The Present Situation Index in December rose 88% to 46.7 points, while the Expectations Index rose 6% to 76.4 points.

Precious Metals Set to Rise in 2012

While gold prices rose about 15% year on year from December 28, 2010 to early December 28, 2011, before losing nearly all its gains, silver and platinum were most certainly down for the 2011. But looking ahead to 2012, BNP Paribas, Goldman Sachs and UBS expect stronger fundamentals for precious metals in the coming 12 months. Gold mining executives told PricewaterhouseCoopers that price increases will push average gold close to $2,000oz., which is in line with the banks predictions too. The Professional Numismatists Guild (PNG) concluded metals will experience wide price swings in the coming year, but on average, they predict gold just shy of $2,000oz., silver near $49oz. and for platinum to recover to about $1,818oz. Watch the full report

JJS Sales Miss Expectations

Exhibitors at the ninth Jaipur Jewellery Show (JJS) experienced good contact with buyers and some orders, but many added that sales did not meet expectations. Exhibitors assumed that buyers were cautious due to high gold prices and the devaluation of Indian rupee against the U.S. dollar. JJS, also known as the December show, is considered the second largest jewelry show in India.

Indias Brands to Grow Market Share

India’s major jewelry retailers could account for 10% of the countrys total jewelry retail market by 2016, up from the current 4%, according to CARE Research. Growth is being spurred by rising income levels across non-metro, large and small cities and increased consumer spending on branded and luxury goods in these areas. Increased competition, stagnation and high rental costs in metros, compared with lower costs and high availability of space in tier-I and tier-II cities present strong fundamentals for retail growth. Jewelers are offering customized items according to local tastes in each city to drive demand.

CARE Research expects that branded jewelry will grow at 40% each of the next three years as many domestic and international brands are expected to raise their profile in the country. As a result, India’s total gems and jewelry market, which was valued at approximately $27.5 billion in fiscal 2011, is likely to grow at 15% per year to reach $55.3 billion by fiscal 2016.

Cutter Margins Remain Under Pressure

Ongoing global economic uncertainties are expected to impact India’s gems and jewelry sector, with operating margins for diamond cutting projected to remain under pressure, warned CARE Ratings. The trend became apparent earlier this year as export growth was primarily driven by higher prices. Record gold prices and high inflation in 2012 may weaken local Indian demand for gems and jewelry products.

CARE added that domestic growth will continue to be driven by higher disposable income groups, the rising young population, higher rates of working women, and the increased focus on branding and organized retail. The agency stressed that larger players with strong sourcing relationships for raw materials and those with geographically diversified clientele and higher value addition, combined with a more conservative foreign exchange and liquidity management policy are likely to exhibit more stable credit profiles.

STATS

Australias Production -6%

Australia’s diamond production fell by 6% year on year to 2.335 million carats during the first fiscal quarter that ended on September 30. All diamond output was exported and reflected an 11% decline by value to $94 million. Imports of sorted gem quality rough diamonds dropped by 6% to $73 million.

Japan Imports +7%

Japan’s polished diamond imports rose 7% year on year to $62.1 in November. During the first 11 months of the year, Japan’s polished imports rose 16% to $747.2 million while the volume of imports declined 16 percent to 1.888 million carats. The average price of the imports rose 38 percent during the period to $396 per carat.

MINING

Rio Gets Green Light in India

Rio Tinto received an “in-principle” approval for a mining lease for its diamond mining project in the Bundelkhand region of Madhya Pradesh from the central government of India. Rio Tinto initially discovered diamonds in Madhya Pradesh as part of a regional exploration reconnaissance in 2004. Located 500 kilometers southeast of Delhi, the Bunder Project consists of eight lamproites and has an inferred resource of 27.4 million carats.

The development of a diamond mine at Bunder is estimated to cost Rio Tinto $500 million. Madhya Pradesh will most likely rank in volume and value, in the top 10 diamond producing regions in the world when the Bunder diamond mine commences production, which is expected from 2016. Rio Tinto also expects to invest $2 billion in taking the Argyle mine underground in Australia, which will enable the company to extend this resource through 2020.

NWB Approves Jericho Water

The Nunavut Water Board (NWB) approved a water license renewal for the Jericho diamond mine. Shear Diamonds requested an eight-year water license to cover the re-commissioning, operation and ultimate reclamation of the Jericho mine, which it bought in 2010. The previous water license for the mine was for six years. The decision now needs the approval of the minister of Aboriginal Affairs and Northern Development Canada.

ECONWATCH

For the week ending Dec. 29

Precious metals had a tough week. U.S. retailers were mixed, but noteworthy declines were observed for shares in Birks & Mayors (-12%), Charles & Colvard (-9%), Man Sang (-7%), and Zale (-6%). In India, Classic Diamonds (+17%) and Suashish Diamonds (+14%) surged. Mining shares were mostly higher, with Shore Gold (+15%) and True North (+11%) leading the pack. Read the entire stock report for major retailer and miner stocks from India, the U.S., and Europe.

Dec. 29 Dec. 22 Chng.
$1 = Euro 0.771 0.766 0.005
$1 = Rupee 53.06 52.73 0.3
$1 = Israel Shekel 3.81 3.79 0.02
$1 = Rand 8.18 8.18 0.00
$1 = Canadian Dollar 1.02 1.02 0.00

Precious Metals
Gold $1,546.40 $1,604.50 -$58.10
Platinum $1,371.00 $1,421.00 -$50.00

Stock Indexes Chng.
BSE 15,543.93 15,813.36 -269.43 -1.7%
Dow Jones 12,287.04 12,170.48 116.56 1.0%
FTSE 5,566.77 5,456.97 109.80 2.0%
Hang Seng 18,397.92 18,378.23 19.69 0.1%
S&P 500 1,263.02 1,254.01 9.01 0.7%
Yahoo! Jewelry 1,003.23 993.31 9.92 1.0%