Rapaport Weekly Market Comment April 20, 2012

U.S. polished demand stable, Far East improves ahead of May Day. ‎Strong Indian rough demand at Diamdel March auctions (90% sold by lot). Quarterly diamond production: De Beers -16% to 6.2M Cts., Rio Tinto +41% to 3.5M Cts., BHP Billiton -21% to 433K ‎Cts. Gem Diamonds 1Q prices +7%, Letseng sales -38% to $59M. LVMH 1Q jewelry, ‎watch sales of $827M, same-store sales +17%. Kristall 2011 revenue +28% to $567M. ‎Christie’s NY jewels sale $71M (95% sold by lot) with 9-ct. cushion, fancy vivid purplish-pink ‎diamond selling for $16M ($1.8M/Ct.). Sotheby’s NY sale at $43M (88% by lot) with 3.54-ct, ‎fancy blue diamond ring, selling for $2.4 ($687K/ct.). India’s March polished exports -47% ‎to $2.1B.‎

RapNet Data: Apr. 19

Diamonds 866,077
Value $5,887,485,882
Carats 924,051
Average Discount -26.39%

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RAPAPORT ANNOUNCEMENTS

Apr-May
23-3
Mon-Thu

Rapaport Melee Auction

New York & Belgium

email: auctions@rapaport.com

Apr-May
25-2
Wed-Wed

Rapaport Single Stone Auction 

New York & Israel

email: auctions@rapaport.com

June
3
Sun

Rapaport Conference at JCK 

Registration has opened for the Rapaport Conference at the JCK Las Vegas Show 2012.

RSVP now.

QUOTE OF THE WEEK
There has been a shift in the luxury goods business from Asia back to Europe. There was lower growth in Mainland China than there was for the overall [Chinese] customer base.

Jean-Jacques Guiony | LVMH

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 	  

Record Jewelry Sales at New York Auctions

WATCH NOW: It was New Yorks spring jewelry auction week at Christies and Sothebys with both sales achieving strong results for signed and high-quality diamonds. In this video, view top sellers from Christie’s sale, which achieved $70,726,650 and was 95% sold by lot. The top lot was a 9-carat cushion-cut fancy vivid purplish-pink diamond ring, which sold for $15,762,500. Sothebys total of $43,192,152 was a record for a spring sale and top lots included 16.58-carat and 17.50-carat emerald rings; a 3.54-carat marquise-shaped fancy blue diamond ring; a 20.21-carat sugarloaf cabochon sapphire and many more.

Diamdels March Auction Sells 90% by Lot

Diamdels latest rough auction, which it calls "Diamdel Days," was 90% sold by lot as demand held steady from emerging market buyers, especially from India. Demand for products in near-gem quality and grainer categories showed the greatest interest followed by 2-carat-plus products, according to Diamdel. While demand for small stones and large categories fell slightly from previous auctions, buyer appetite for these products remained robust at the highest levels witnessed since July 2011.

RETAIL & WHOLESALE 	  

February U.S. jewelry Store Sales +19% to $2.7B

U.S. jewelry store sales in February rose 18.7% year on year to $2.69 billion, according to the governments calculations. For the first two months of the year, jewelry store sales have increased 13% to $4.42 billion. Meanwhile, the index for consumer jewelry price inflation in January was at a record high, reflecting price increases of 8% from one year earlier, and the index rose 6% in February. In other retail news, the government reported that advanced estimates of sales from department stores during March rose 3.7% to $14.72 billion. Retail trade sales rose 6.5% from one year earlier.

U.S. Jewelry Price Inflation +6% in March

The U.S. consumer price index (CPI) for jewelry rose 5.9% to 182.32 points during March, according to government figures. The index was higher than Februarys reading, but below the all-time high of 185 points set in January. The CPI for jewelry has now remained above 170 points for 15 consecutive months, reflecting higher operating costs at the counter along with rising wholesale prices of precious metals, diamonds and gemstones. Meanwhile, the CPI for all product categories combined in March rose 2.6% to 229.1 points, which established a new index high.

LVMH Reports 1Q Sales Jump 25% to Almost $9B

LVMH reported that first-quarter sales rose 25% year on year to $8.636 billion. On a comparable-store basis and using constant exchange rates, which LVMH defines as organic, sales improved 14%. Revenue from the groups watches and jewelry segment, which now includes Bulgari, rose to $827 million from $342 million. The jewelry business recorded organic revenue growth of 17%. LVMH expanded its store network in Asia and the new watches presented at Basel were very well received, according to the retailer.

Kristalls Revenue +38% in 2011, Profit +53%

Kristalls revenues jumped 38% year on year to $567 million, which was above the companys financial goal in 2011. Net profit surged 53% to $9.7 million and taxes rose 80% to $26 million. During 2011, Kristall opened a proprietary training center to help many of its 2,500 workers gain specialized skills and it invested $5.8 million in innovation and equipment.

Michael Hills Sales +5% in First Three Quarters

Michael Hill reported that group sales rose 5% year on year to $322.3 million during the nine months that ended March 31, 2012. Same-store sales were ‎flat at $300.5 million due to declines in Australia, which accounts for ‎a large proportion of its sales. ‎ The retailer explained that third-quarter sales were satisfactory in New Zealand, Canada and the U.S., however, the ‎Australian market continued to be difficult for the group due to the ongoing tight retail ‎conditions.

Forevermark Launches FMX Trading Platform

Diamond brand Forevermark launched FMX, an online trading platform exclusively built for its partners to buy and sell Forevermark diamonds. FMX operates search and filtering functions along with individual listing details on the specifics of each diamond. Partners can set up custom notifications and automatically upload details of a stone after being graded by the Forevermark Diamond Institute in Antwerp.

India’s Gold ETF Assets More Than Double in March

The assets held under India’s gold exchange-traded funds (ETFs) more than doubled to ‎‎$1.93 billion in March 2012, from $857.5 million a year ‎earlier. In February 2012, total assets under gold ETFs were at $1.91 billion. ‎The number of gold ETFs in India have increased to 14 since the product was first ‎launched in early 2007. An ETF generally comprises a basket of securities, which ‎provide exposure to the market, and is traded on the stock exchange similar to a ‎company share.‎

MINING 	  

Zimbabwe Pushes to Tap Idle Reserves

Zimbabwe embarked on an aggressive drive to gather historical information on its diamond resources to tap any areas of the country where diamond fields lay idle. The initiative comes as the government is working on a diamond policy and legislation to ensure maximum exploitation of the gems. Preliminary data collected finds possible untapped resources in Ngulube, Mwenezi and Triangle areas. Meanwhile, Development Trust of Zimbabwe (DTZ) OZGEO Private Limited, noted that it could reach full commercial diamond mining in Chimanimani by the end of this year as current exploration activities have been yielding positive results. DTZs chief geologist, Mikhail Malykh, said since the start of trial mining in 2010, they had mined over 7,000 carats, and have drilled four diamond drill holes, totaling 200 meters, with the plan being to drill 24 holes, totaling 1,200 meters.

Peregrine Discovers Two Kimberlites at Lac de Gras

Peregrine Diamonds Ltd. discovered two kimberlites in the Lac de Gras region, Northwest Territories, Canada, which the company named LD-1 and LD-2. The core drill is now being moved to the third of five total targets between one and two hectares in size that are scheduled to be drilled before the program is completed in May. Samples from the LD-1 and LD-2 kimberlites will be sent to the Saskatchewan Research Council Analytical Laboratories for microdiamond testing by caustic fusion with results anticipated in the third-quarter of 2012.

Letsengs Prices Drop, Sales Slump

Gem Diamonds reported that sales of diamonds from the Letšeng mine in Lesotho fell 38% year on year to $58.7 million during the period January 1 through April 15, 2012 as ‎production focused on the lower-grade main pipe. ‎ The quantity of goods sold declined by 3% to 29,730 carats, while the average ‎price from the three tenders held during the period slumped 36% to $1,976 per ‎carat. First-quarter production at Letšeng, however, rose 6% to 28,114 carats.‎

Paragon Suspends Sierra Leone Operations

Paragon Diamonds has placed its Konoma alluvial mine on care and maintenance after ‎Sierra Leone requested the company reapply for its mining license for ‎the site. ‎The company said that it will seek clarification on “irregularities” the government alleged, noting that the licenses under discussions were issued as valid until April 2016. The company also announced that it has no further investments in Sierra Leone since the ‎cessation of operations, and has reduced its operating costs to the minimum necessary ‎to maintain its physical assets and the few remaining staff.

STATS 	  

Diamond Production

Current Quarter YTD
Mil. Cts. %Chng. Mil. Cts. %Chng.
De Beers 6,208 -16% 6,208 -16%
BHP 0.433 -21% 1,371 -29%
Rockwell 0.004 -77% 0.017 -36%
Rio Tinto 3,518 41% 3,518 41%
Harry Winston 0.64 19% 0.64 19%

India

$Mil. %Chng. YTD $Mil. %Chng.
Polished exports $2,117 -47% $5,334 -42%
Polished imports $899 -73% $2,320 -71%
Net exports $1,219 92% $3,014 152%

Rough imports $1,459 23% $3,884 18%
Rough exports $229 26% $490 18%
Net imports $1,230 23% $3,394 17%

Net diamond account ($11) ($381)

Botswana

Feb. $Mil. %Chng. YTD $Mil. %Chng.
Diamond exports $307 25% $416 -32%

ECONWATCH 	  

Diamond Industry Stock Report

DGSE shares were halted this week and the company may have to restate some financial data. U.S. and European retail shares were mainly lower with Blue Nile losing another 3%, LJ Intl. down 17%, Sothebys off 3%, Tiffany and Zale shed 2%, LVMH and PPR lost 4%. Indian shares were mostly higher with C. Mahendra up 8%, Rajesh rose 7% and Goldiam up 5%. Read the extended industry stock report for this past week.
Apr. 19 Apr. 12 Chng.
$1 = Euro 0.760 0.758 0.002
$1 = Rupee 52.07 51.39 0.7
$1 = Israel Shekel 3.76 3.75 0.01
$1 = Rand 7.85 7.91 -0.06
$1 = Canadian Dollar 1.00 1.00 0.00

Precious Metals
Gold $1,642.40 $1,672.90 -$30.50
Platinum $1,577.00 $1,593.00 -$16.00

Stock Indexes Chng.
BSE 17,503.71 17,332.62 171.09 1.0%
Dow Jones 12,964.10 12,939.92 24.18 0.2%
FTSE 5,744.55 5,706.46 38.09 0.7%
Hang Seng 20,995.01 20,327.32 667.69 3.3%
S&P 500 1,376.92 1,383.04 -6.12 -0.4%
Yahoo! Jewelry 958.03 966.90 -8.87 -0.9%

Rapaport Weekly Market Comment May 25, 2012

TRADE ALERT: CVD synthetic diamonds, diamonds triple treated to avoid detection and diamonds recut to match higher grade GIA reports being traded without disclosure. Kudos to IGI for detecting and exposing CVDs. We advise buyers to require “Natural Untreated Diamonds” be included on all invoices. Trading slow with low expectations for Vegas shows. Signet 1Q sales +1% to $900M, profits +9% to $83M. Tiffany ‎1Q sales +8% to $819M, profits +1% to $82M. Zale Corp. 3Q revenue +8% to $445M, net ‎loss of $5M vs. loss of $9M a year earlier.‎ Gitanjali 4Q sales +47% to $643M, net profit +8% to $19M. India’s April polished exports -35% to $1.3B, rough imports +20% to $1.6B.

RapNet Data: May 24

Diamonds 907,657
Value $6,006,463,015
Carats 964,916
Average Discount -26.32%

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RAPAPORT ANNOUNCEMENTS

May-Jun
31-4
Thu-Mon

Rapaport at the Las Vegas Shows 

Antique Jewelry & Watch Show at the Paris
May 31 to June 3 -- table at the front of the show.

JCK Las Vegas at Mandalay Bay Resort
June 1, 3, 4 -- Booth: B3557

Rapaport Breakfast and Conference
June 3 at the Mandalay Bay Resort

8 a.m. to 10 a.m. - South Seas Ballroom
Rapaport Breakfast and Martin Rapaports presentation on the State of the Diamond Industry.

10 a.m. to 12 p.m. - Banyan Ballroom
Rapaport Fair Trade Jewelry Conference with award winning Zimbabwean human rights activist Farai Maguwu.

2 p.m. to 3 p.m. - Banyan Ballroom
Rapaport Certification Conference with RapNet insights into grading reports.

Last chance to register. The conference is free but seating is limited. Register online or email conference@diamonds.net or call: +1-702-893-9400

JCK Diamond Show Listings
In one fast search - you can find the diamonds that RapNet members are showing at the JCK show. Start your diamond search now.

June
7-13
Thu-Wed

Rapaport Single Stone Auction 

New York & Israel

email: auctions@rapaport.com

QUOTE OF THE WEEK
Just looking at the one Graff customer, which accounted for 13% of sales in 2011, its revenue model is definitely an issue. Lack of brand recognition will also limit investor interest in Graff. Market conditions are very difficult, it’s surprising that they are trying to raise money. In this market, you need something that is cheap and a widely recognized brand.

Philippe Espinasse | IPO: A Global Guide

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 	  

IGI Finds Hundreds of Undisclosed Synthetic Diamonds

Several hundred man-made diamonds were sent to the International Gemological Institute ‎‎(IGI) in Antwerp and Mumbai to be certified as natural diamonds, raising concerns that a larger ‎volume of these undisclosed CVD synthetic stones may have entered the market already.‎ An unnamed polished dealer, who had bought the synthetic stones on the open market --at natural ‎diamond prices-- submitted the goods to IGI for certification about two weeks ago after he was ‎unable to sell them as a parcel on the dealer market. T‎he polished dealer and his supplier both claimed to be under the impression ‎that the goods were natural diamonds. IGI issued a trade alert to other laboratories regarding its findings, which can be viewed here.

Subsequently, the Diamond Trading Company (DTC) alerted sightholders that it has identified three recent instances of undisclosed ‎submission of CVD synthetics to grading laboratories in Belgium, India and China, whereby ‎each case had very similar characteristics and may have had a common source. ‎The DTC statement is here.

The Gem & Jewellery Export Promotion Council (GJEPC) also expressed their concern and affirmed a "zero tolerance policy on nondisclosure. Read GJEPCs statement here.

RETAIL & WHOLESALE 	  

Zale, Gitanjali Sales Rise, HOF Opens its Store

WATCH NOW: Results from Zales third fiscal-quarter were improved from one year ago, but the chain-store didnt increase sales more than the U.S. consumer price index for jewelry. Gitanjali, on the other hand, reported very robust sales and a surge in profit for its fiscal year. Hearts On Fire (HOF) launched its new concept store in Las Vegas. Ross-Simons launched its video series designed to help shoppers discover their inner style with jewelry accessories. Finally, the Hay Group reported a slight drop in turnover rates for the U.S. retail environment in 2011, led by fewer upper management changes, however, part-time and full-time floor staff rates rose. Hay Group suggests how to retain top talent at a time retailers are working feverishly to ensure profitability.

Tiffanys Sales +8%, Profit Flat

Tiffany & Co. reported that its first quarter revenue rose 7.6% year on year to $819.2 million for the period that ended on April 30. Same-store sales worldwide rose 4%, while profit was flat at $81.5 million. Sales only improved 3% in the Americas at $386 million, but jumped 16% --at a constant exchange rates-- in the Asia-Pacific region at $195 million and 13% in Japan at $142 million. Sales across Europe rose 7% as measured by local currency to $88 million. The retailer defined U.S. sales as disappointing.

In another development, Tiffany is in the process of negotiating future property rights with designer Elsa Peretti, who owns here intellectual property on jewelry that the company defined as a significant amount of revenue. The two parties are in the process of negotiating those rights, but if an agreement is not reached, Peretti might terminate the licensing agreement, ending a 38 year relationship with the jeweler.

Signets Sales +1%, Profit +9%

Signet Group sales for its first quarter rose 1.4% year on year to $900 million in the period that ended on April 28. Signets U.S. division sales rose 1.8% year on year to $751.5 million, while comparable-store sales rose 1.2%. In the U.K., sales rose 1.4% at a constant exchange-rate and same-store sales increased 1.2%. Despite weak sales performance, especially given the high rate of jewelry inflation in the U.S. this year, Signet did report a strong increase in profits, up 9.3% to $82.5 million.

Shree Ganeshs Sales Soar

Shree Ganesh Jewellery House Limited (SGJHL) reported that group sales rose 65% year on year to $376.4 million during its fourth fiscal-quarter that ended on March 31. Net profits more than tripled to $34.7 million during the period from $10.1 million a year earlier. For the fiscal year, the company’s net profit rose 57% year on year to $82.4 million, while net sales increased 73% to $1.8 billion. The company derives more than 85% of its sales from overseas markets such as the United Arab Emirates (UAE,) Singapore and Hong Kong.

Sears Reports 1Q Profit of $190M

Sears reported that its first quarter sales fell 2.8% year on year to $9.27 billion, however, the retailer improved gross margin to 27.7% from 26.7% for the period that ended on April 28. Furthermore, Sears reported a profit of $194 million, reversing its loss of $170 million one year ago. Net income per share rose to $1.78 compared with a loss of $1.53. The positive income results were indicative of Sears Holdings strategy to manage the liquidity of their business and improve the company’s inventory management after suffering heavy losses in the past year.

Ultra-Wealthy Pick Graff as the Best

Ultra-wealthy U.S. shoppers ranked Graff Diamonds highest among 22 luxury jewelers in the 2012 Luxury Brand Status Index (LBSI) survey conducted by the New York-based Luxury Institute. With the top overall LBSI score of 7.98 out of 10, Graff ranked first on brand reputation and product quality considerations, scoring highest in evaluations of materials and craftsmanship. Graff is also the brand that those with assets of more than $5 million are most likely to deem worthy of charging premium prices. Graff was followed by the jeweler Asprey (7.82) and Mikimoto (7.77) as top three jewelers on the survey.

Rio Tinto Explores Diamond Demand in China

Rio Tinto commissioned global market research company Ipsos to better understand Chinese ‎consumer perceptions about jewelry comprising small, affordable diamonds, referred to as ‎fashion jewelry.‎ The research showed that Chinese consumers no longer see diamonds as purely a store of ‎wealth or bridal purchase. Rather, diamond fashion jewelry is also desirable and part of a ‎broader trend in China towards “affordable luxury.” These insights challenge the conventional wisdom that Chinese consumers only appreciate ‎large, high-quality, white diamonds or gold jewelry. Rio Tinto recently partnered with leading diamond jewelry manufacturer and retailer Chow Tai ‎Fook to promote diamond jewelry as fashion accessories.‎

Glendon Group to Acquire Bidz.com

Bidz.com entered into an agreement with Glendon Group Inc., which would take the online retailer private in an all cash acquisition of 78 cents per share. The share price represents a premium of 59.2% over the companys closing price of 49 cents per share on May 16. Bidz.coms board of directors approved the merger with one abstention. Under the agreement, Bidz.com is entitled to actively solicit alternative transaction proposals until June 25. The proposed transaction is expected to close in the fourth quarter of 2012, and is subject to certain closing conditions specified in the merger agreement.

Aston Luxury Group Acquires Distribution Deal

The Aston Luxury Group (ALG) has become the distributor for six Italian brands across the Americas, including Stefan Hafner, Nouvelle Bague, Valente Milano, Porrati, Io Si and Giantti. The deal was secured by ALGs parent company, Gitanjali Gems.

USPTO Approves Industry Trademarks

The U.S. Patent & Trademark Office (USPTO) approved three industry-related trademarks on May 15. Merit Diamond Corporation, which owns the SIRENA COLLECTION, (pictured) was awarded its trademark for that diamond brand, while The Gemological Appraisal Association (GAA) was given the trademark The Fingerprint System For Diamonds.” Retailer Fred Meyer Jewelers was also issued the trademark name “the Diamond Bridal Store.”

GENERAL 	  

Element Six Opens Manufacturing Facility in CA

Element Six opened its first U.S. manufacturing facility in Silicon Valley, south of San Francisco, California. The facility will house employees in the production, technical and customer service fields, and will serve to establish a direct connection to Element Six technologies division’s customers and partners in the U.S. The company’s continued expansion into the U.S. market is in direct response to the growing demand and interest in synthetic diamond for commercial use in advanced technology applications. The company also recently announced the construction of the world’s largest and most sophisticated synthetic diamond supermaterials research and development facility near Oxford in the U.K.

Jewelry Makes Top-Loss Category in 2011

Jewelry losses by dollar value in the U.S. this past year surged to the top of the list of property insurance claims, according to a study done by Enservio. Jewelry claims rose from 13% among the top 10 contents-loss categories in 2010 to 17% for Replacement Cost Value (RCV) in 2011, surpassing electronics, which dropped to second place at 13%. the number of jewelry claims increased by 57% in 2011 and theft of jewelry, electronics and tools combined accounted for 62% of all RCV claimed for theft versus 35 percent for all other categories combined. Rings, watches and necklaces all maintained their ranking within the jewelry category as top loss-claim items.

GJEPC Plans Roadshows to Promote IIJS, IIJW

The GJEPC embarked on an awareness campaign targeting the ‎overseas markets for India International Jewellery Show (IIJS) and ‎India International Jewellery Week (IIJW), which takes place in August. The council has scheduled roadshows between May 23 and June 20, in Malaysia, ‎Singapore, Jeddah, Riyadh, South Korea and China and seeks to invite local jewelers from these ‎countries to view production capabilities and India’s expertise in jewelry manufacturing.

The Lazare Ongoma to Benefit Five Rand School

Lazare Kaplan International Inc. announced that retailers in its Lazare Diamond Incentive Program in the U.S will get a chance to also support The Lazare Ongoma Initiative (LOI), which works to raise awareness of the educational struggles in Namibia and improve resources available to the Five Rand Primary School in Okahandja. Lazare Kaplan will make a matching donation to The Five Rand Primary School in the name of its retail partners and associates for every registered Lazare Diamond.

Tiffany Promotes Hart to SVP

Tiffany & Co. appointed Andrew Hart to the newly-created position of senior vice president of diamonds and gemstones. Hart, 44, joined Tiffany as a vice president in 1999 and since 2002, he has been president of Laurelton Diamonds. Hart will continue to report to James N. Fernandez, the executive vice president and chief operating officer of Tiffany & Co.

Audemars Piguet Appoints Bennahmias

Audemars Piguet appointed Francois-Henry Bennahmias to the interim position of general manager to replace Philippe Merk, who has abruptly vacated the role as chief executive. According to a board statement, Bennahmias, 48, began his career at Audemars Piguet in 1996 and from 1997 he was assistant marketing and sales manager for Asia-Pacific and Europe. In 1999 he was promoted to president and chief executive of Audemars Piguet North America Inc. in New York.

Bangkok Gems & Jewelry Fair Starts Sept. 13

The 50th edition of the Bangkok Gems & Jewelry Fair (BGJF50) is scheduled for September 13 to 17. Organizers of the five-day fair expect to accommodate more than 3,500 exhibitors at the Impact Challenger Exhibition and Convention Center.
 

The fair is typically planned twice a year. The 49th edition, which was held in February, hosted 31,376 visitors of which 10,000 or so were from outside Thailand. The jewelry fair also features some 36 country pavilions.

MINING 	  

Zimbabwes Diamond Revenue Far Short of Target

Zimbabwe has received $293 million from rough diamond sales of 11.9 million carats by Mbada Diamonds since August 2010. Mbada Diamonds is 50% owned by the government through the Zimbabwe Mining Development Corporation (ZMDC), and has generated $592 million in sales since it went into operation in August 2010.

Zimbabwes diamond revenue, however, has underperformed this year. According to the nations finance minister, Tendai Biti. Biti, the treasurys revenue so far was $287.9 million against a target of $320.2 million, and diamond revenue of $30.4 million was far below the budget plan of $122.5 million. Additionally, Biti condemned diamond mining company Anjin for not remitting revenue or fees from its Marange operation; and he alleged a parallel government” was siphoning money away from the treasury through diamond revenue.

Rockwell Implements Strategic Equipment at Saxendrift

Rockwell Diamonds implemented a new in-field screen and a bulk x-ray and single particle sorter plant at its Saxendrift diamond mine. These two strategic projects were the first capital expenses approved by the companys board for implementation by the new management team. The in-field screen is designed to treat higher instances of sand and moisture, while maintaining the required processing rates. The bulk x-ray technology is aimed at improving concentrate efficiency and final sorting of diamond bearing ore and cost Rockwell $1.5 million. It began processing old recovery tailings at Saxendrift on April 16, and has recovered a total of 316 stones totaling 1,109 carats in the first month of production.

Rescue Underway for Illegal Miners

Rescue operations continue for a number of trapped diggers at the Namaqualand mines in South Africa after these abandoned tunnels collapsed on the men Tuesday. The diggers were operating illegally. Reports suggest three diggers were killed and as many as 15 still remained trapped. The tunnels were closed in April, however, there has been an increasing amount of illegal digging activity in the region. South Africas ministry of mines ordered a task force to seal all access points at these mines to curb the illegal diamond digging.

STATS 	  

India

Apr. $Mil %Chng. YTD $Mil %Chng.
Polished exports $1,334 -35% $6,668 -41%
Polishd imports $355 -76% $2,675 -72%
Net exports $979 82% $3,993

Rough exports $115 21% $605 19%
Rough imports $1,581 20% $5,465 18%
Net imports $1,466 20% $4,860

Net Diamond Account ($486.70) ($867.1)

ECONWATCH 	  

Diamond Industry Stock Report

U.S. retailers and jewelers rebounded this week, while European shares continued to slide this week, and Indian firms had strong gains. Among the biggest gains for retailers were Movado Group (+19%), Zale (+11%), Blue Nile (+9%), Kohl’s (+7.8%), Macy’s (+7.3%), JCPenney (5.2%), and Saks (5.1%). Mining stocks were down across the board, especially True North Gems (-18.8%), Rockwell Diamonds (-10.4%), Stellar Diamonds (-5.1%), Shore Gold (-3.7%), Namakwa Diamonds (-3.4%), and Mountain Province (-2.4%). Only exceptions were Stornoway Diamonds (+2.5%), Gemfields (+2.4%), and Peregrine Diamonds (+1.7%). Read the extended industry stock report for this past week.
May 24 May 17 Chng.
$1 = Euro 0.798 0.790 0.007
$1 = Rupee 55.65 54.38 1.3
$1 = Israel Shekel 3.85 3.83 0.02
$1 = Rand 8.35 8.33 0.02
$1 = Canadian Dollar 1.02 1.02 0.00

Precious Metals
Gold $1,559.60 $1,573.70 -$14.10
Platinum $1,419.00 $1,449.00 -$30.00

Stock Indexes Chng.
BSE 16,222.30 16,070.48 151.82 0.9%
Dow Jones 12,529.75 12,442.49 87.26 0.7%
FTSE 5,350.05 5,338.38 11.67 0.2%
Hang Seng 18,666.40 19,200.93 -534.53 -2.8%
S&P 500 1,320.68 1,304.86 15.82 1.2%
Yahoo! Jewelry 913.67 933.88 -20.21 -2.2%

Rapaport Weekly Market Comment June 8, 2012

JCK Las Vegas show exceeds low expectations with very good U.S. demand for affordable VS-SI certs and commercial goods. U.S. taking on role as leading market with steady but price sensitive consumer demand. Expensive large stone demand weak but Triple Ex cut certs selling well to Hong Kong. Polished prices steady with RapNet Diamond Index (RAPI) for 1 ct. -0.6% in May. Rough market cautious and cutting profit margins low. Expectations for another small DTC sight of around $550M with rising concerns that sightholders may start to reject goods. BHP Billiton prices estimated -7%. Harry Winston 1Q sales +34% to $193M, profit more than doubles to $12M.

RapNet Data: June 7

Diamonds 919,729
Value $6,082,623,728
Carats 979,382
Average Discount -26.69%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

June
7-14
Thu-Thu

Rapaport Single Stone Auction 

New York & Israel

email: auctions@rapaport.com

June
11-14
Mon-Thu

Rapaport Melee Auction

New York

email: auctions@rapaport.com

QUOTE OF THE WEEK
We are fully behind Rapaports ethical jewelry campaign to make sure that the international ‎jewelry community is aware of where their diamonds are coming from.

Farai Maguwu | Center for Research and Development

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INDUSTRY 	  

Polished Prices Stable in May

Certified polished diamond prices were steady during May despite a weak global trading environment. The U.S. is providing market stability while consumer demand in India and the Far East has softened and uncertainty in Europe continues to reduce confidence. Liquidity is tight and manufacturing profit margins low. Rough prices remain unsustainable and are expected to decline.

In May, the RapNet Diamond Index (RAPI) for 1 ct. diamonds fell 0.6%. The 0.3 ct. category declined by 0.3% and the 0.5 ct. stones dropped 0.4%. RAPI for 3 ct. diamonds fell 1.6% during the month. Through the first five months of the year, RAPI for 1 ct. diamonds fell 1.7% and has declined by 4.5% from one year ago. Polished inventories are stable but trading levels are low with shortages of well-made polished goods, particularly fancy shapes and SI clarity rounds.

Indian cutters are slowly returning from summer vacation but manufacturing levels are below capacity. Polished buyers expect prices to soften due to the weak economic environment but suppliers are holding their prices firm due to expensive rough. Rapaport will release its May 2012 Research Report on June 11 providing additional information about the state of the global diamond market. The Rapaport Research Reports can be found at www.diamonds.net/report.

JCK Vegas Show Concludes

The JCK Las Vegas show ended on Monday with mixed reports from diamond ‎exhibitors. Overall, the show was okay. While it did not signal a significant boom in ‎trading, most left satisfied that the U.S. market is stable in the near term.‎ Square shape fancies were strong and selling at low discounts with larger ‎discounts for princess cuts. There is a shortage of well-made fancies in the ‎market. Rounds were weaker but prices were relatively firm. Clean makes, Triple Ex goods were in ‎demand with best demand for SI goods, with shortage in supply.‎ Polished suppliers are holding prices firm due to high rough prices and there is little to ‎no profitability on manufacturing.‎ Indians were largely absent from this show, Israeli buyers played a strong role but trading from Belgians was weak in the polished market.‎ Luxury jewelry producers reported strong sales from JCK, Couture and the Antique jewelry shows.

Rapaport Launches Ethical Pledge

Zimbabwean human rights activist Farai Maguwu urged jewelers and consumers to ‎be vigilant to verify the source of their diamond purchases. Maguwu endorsed the Rapaport ‎Group’s ethical pledge program launched during JCK, which was designed to encourage members of the diamond ‎and jewelry trade to insist on written assurances in their purchases.

The pledge would ensure that sellers have ‎investigated their sources and that the products offered are free of human rights ‎violations, significant environmental damage, illegal activities, or sanctions by U.S. or ‎E.U. governments.‎ Such sourcing would exclude Zimbabwe’s Marange fields, where the mines are part ‎owned by Zimbabwean government agencies, which are sanctioned in the U.S. and E.U.‎

Maguwu noted that while the struggle to end human rights violations at Marange is being ‎won, problems associated with Marange diamonds are far from over. He explained that ‎the biggest challenge currently is to ensure that revenue from Marange ‎production goes to the treasury and is used to benefit Zimbabwes people. ‎ ‎Rapaport Group honored Maguwu with an award recognizing his work in advocating ‎human rights in Zimbabwe. Martin Rapaport, the chairman of the Rapaport Group, ‎acknowledged the extent to which Maguwu has risked his life to protect the lives, ‎freedom and human rights of diamond diggers at Zimbabwes Marange mines. ‎

Sign the pledge now.

RETAIL & WHOLESALE 	  

Fundamentals Continue to Signal Growth

WATCH NOW: Varda Shine, the Diamond Trading Companys (DTC) chief executive, discusses how market conditions are shaping the second half of 2012. In this video, she shares observations from the JCK Vegas show; Indian market conditions due to the weaker rupee; Chinas economic impact on rough demand; global price outlook for rough diamonds, and what DTCs move to Botswana represents in terms of southern Africas emerging economy.

Industrys Next Gen Shines in Vegas Show Coverage

Trading activity aside, the JCK and Couture shows present an opportunity to report on how vendors are innovating design and business practices to improve their profit margins. As most of these videos show, the next generation of industry players have emerged and are taking risks and experimenting with new concepts -- whether that be in the manufacturing process or from how they sell direct to consumers. Select vendor name to watch the feature video.
• Jewelmer shares its production story for the golden pearl and launches a new collection featuring the floral/petal motif.
• Gebruder Schaffrath unveils its ring sizing solution with a duo-purpose diamond ring/bracelet and its Vendetta diamond collection.
• TW Steel expands its mens and womens watch collection in the U.S.
• Ernst Benz reveals two new collections that reflect partnership and passion behind watchmaking.
• Kirk Kara debuts 40 new designs and wins Jewelers Choice award for an engagement ring at JCK 2012.
• Danhov debuts three new collections, featuring the increasingly popular petal design, and concludes this JCK show was its best to date.
• Lafonn debuts its new line of jewelry with Rhonda Faber Green to reach an alternative level of price points.
• Hearts On Fire details the psychology behind developing its new store concept in Las Vegas.
• Royal Asscher debuts its pop-up store concept and reports strong consumer sales.

Gitanjali Unveils Maya Jewels

Bollywood actors Emraan Hashmi and Kalki Koechlin unveiled the new monsoon collection of Maya Jewels by Gitanjali at its showroom at South Extension-1 in New Delhi. The actors also promoted their Hindi political thriller film Shanghai that will be released on June 8, at the launch. The latest collection is a blend of gold and diamond jewelry in various shapes that denotes the different flavors of the season, which can be worn with any attire, the company stated. The store offers a wide assortment of jewelry from brands such as Nakshatra, Asmi, D’damas, Parineeta, Nizam and Gili.

Using Social Media to Touch Consumers

The “2012 Social and Mobile Commerce” study, a joint research project by Shop.org, comScore, and The Partnering Group stressed the importance of social media for retailers since nearly two out of five online consumers follow retailers through social networking. The study found that social media space Pinterest has become a particularly big player in the social sharing game, with online U.S. consumers reporting that they already follow an average of 9.3 retail companies through that website compared with the average of 6.9 retailers they follow on Facebook and the 8.5 retailers they track via Twitter. Almost two out of five online consumers follow retailers through one or more social networking sites.

While Pinterest has grown into this space fairly recently, blogs, YouTube and Facebook still command the majority of consumers’ social activity. In particular, seven in 10 of those who follow a retailer’s blog click through to the website, and more than two-thirds of consumers use YouTube to browse and research a retail company. The main reason consumers follow retailers on social media -- locate product promotions. The amount of consumers searching for these promotions, however, has dropped to 51 percent from 58 percent in the past year. Four in 10 consumers also say they look for product information on social media, while 36 percent want to post/read comments about merchandise or services.

Additionally, around three in 10 consumers who follow retailers via social media say they are actively looking for information about events, current trends and ideas, or photos and videos, such as “how-to’s” and styling ideas, as well as expert opinions.

Blue Nile Launches in Japanese

Blue Nile launched a Japanese language version of its diamond retail website. The new website allows customers in Japan to shop Blue Niles entire collection of diamonds and fine jewelry in their native language and pay for products using yen. Blue Nile began serving Japan in 2008, and has developed a loyal customer following over the past four years, according to the company. Shipping to Japan is free and most products arrive in approximately three days, according to Blue Nile.

MINING 	  

Harry Winstons Profit Jumps

Harry Winston Diamond Corporation reported first quarter sales rose 34% year on year to $192.5 million for the three months that ended on April 30. Mining segment sales jumped 44% to $89 million while luxury brand segment sales, which include retail, increased 26% to $103.5 million. Harry Winstons profit improved to $11.6 million from $3.6 million one year ago.

The companys rough diamond sales improved due to a 116% year on year increase in the quantity of stones sold. Harry Winston reported selling 1 million carats of rough during the quarter, nearly twice as much as the previous year, however, the average price per carat fell 34% in part due to the company holding back higher-priced goods and selling off lower-priced inventory. Diavik ore production for the first calendar quarter consisted of 1.2 million carats produced from 0.39 million tonnes of ore from the A-418 kimberlite pipe, 0.2 million carats produced from 0.10 million tonnes of ore from the A-154 North kimberlite pipe, and 0.1 million carats produced from 0.04 million tonnes of ore from the A-154 South kimberlite pipe. Also included in production for the calendar quarter was an estimated 0.08 million carats from reprocessed plant rejects. Rough diamond production was 19% higher than the comparable calendar quarter of the prior year due to a combination of higher average grade and an increase in ore processed during the quarter.

DiamondCorp Lays Out Lace Production Plan

DiamondCorp expects its Lace mine production to reach 250,000 carats by 2014, more than 400,000 carats by 2015, and then 500,000 carats by 2025. SRK Consulting recommended that mining be initiated with a block cave on level 47 of the mine. DiamondCorps chief executive, Paul Loudon, noted that it would take 18 months to mine down to that level. The first revenue from the mine is expected before the end of the first quarter of 2014 with full production to be reached in the second quarter of 2015.

Namakwa Recovers Rare Pink Diamond

Namakwa Diamonds recovered a rare 11.36-carat pink diamond and a 44.47-carat diamond at its North West Province alluvial mining operations in South Africa. The stones are among the top five diamonds recovered from the mining area in terms of value per carat in the rough. Namakwa noted that although the pink diamond has not been sold, it ranks alongside the 7.53-carat, vivid orange diamond discovered in October 2010 in terms of quality and rareness. As of the end of May 2012, the company reported that it produced 16,569 carats during fiscal 2012 with unit costs in line with expectations and average year to date sales prices at $764 per carat. The company expects its North West Province operations to produce 20,000 carats by the end of fiscal 2012.

ECONWATCH 	  

Diamond Industry Stock Report

Diamond industry stocks were mainly lower this week. The biggest drops in share price hit Kohls (-12%), Movado (-9%), Chow Sang Sang (-7%), Theo Fennell (-18%) and Peregrine (-12%). However Stellar (+16%), Suashish (+11%), Asian Star (+9%), Scio (+11%) and LJ Intl. (+12%) recorded strong gains. Read the extended industry stock report for this past week.
June 7 May 31 Chng.
$1 = Euro 0.794 0.798 -0.003
$1 = Rupee 54.90 55.65 -0.8
$1 = Israel Shekel 3.87 3.85 0.02
$1 = Rand 8.35 8.35 0.00
$1 = Canadian Dollar 1.03 1.02 0.01

Precious Metals
Gold $1,590.20 $1,559.60 $30.60
Platinum $1,439.00 $1,419.00 $20.00

Stock Indexes Chng.
BSE 16,649.05 16,222.30 426.75 2.6%
Dow Jones 12,461.03 12,529.75 -68.72 -0.5%
FTSE 5,447.79 5,350.05 97.74 1.8%
Hang Seng 18,678.29 18,666.40 11.89 0.1%
S&P 500 1,314.99 1,320.68 -5.69 -0.4%
Yahoo! Jewelry 907.56 913.67 -6.11 -0.7%

RAPAPORT NEWS SERVICE | June 15, 2012 www.rapaport.com | news@rapaport.com

Industry
Retail
India
Stats
Mining
EconWatch

Rapaport Weekly Market Comment June 15, 2012

Diamond markets under increasing price pressure as Indian liquidity dries up and rough prices too high relative to polished. U.S. market stable but demand insufficient to support unsustainably high rough price levels. DTC May sight estimated at $540M with re-assortments that adjusted prices upward for SI quality and lower for better qualities. Christie’s NY sells $14.6M (89% by lot) with 22.46 ct., E, VS2 diamond selling for $1.9M ($84K/ct.). U.S. April polished imports -17% to $1.4B, polished exports -13% to $1.2B. Belgium’s May polished exports -15% to $1.2B, rough imports -21% to $1.1B. Israel’s May polished exports -8% to $1B. Botswana’s April diamond exports -42% to $174M.

RapNet Data: June 14

Diamonds 934,525
Value $6,097,893,256
Carats 993,031
Average Discount -26.81%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

June
18-25
Mon-Mon

Rapaport Melee Auction 

New York & Hong Kong

email: auctions@rapaport.com

July
9-19
Mon-Thu

Rapaport Melee Auction

New York & Belgium

email: auctions@rapaport.com

QUOTE OF THE WEEK
Diamonds have been the flavor of the season, with top prices achieved in Geneva, Hong Kong and New York through spring 2012 as seasoned collectors and new economies went head to head for the best.

Rahul Kadakia | Christies

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INDUSTRY 	  

Christies NY Auction Nets $14.6M

WATCH NOW: Christies New York sale of Important Jewels, which was held on June 12, realized a total of $14,596,525 and achieved 89% sold by lot. The sale of watches garnered $8,495,988. See top lots from both auctions in this video. The top lot for diamonds was a 22.46-carat, E, VS2 diamond ring by David Webb that sold above estimate for $1,874,500. A 14.82-carat, E, VVS2 pear-shaped diamond fetched $1,594,500, well above estimate. Another diamond, a 15.65-carat, F, VS1 sold for slightly above estimate at $1,538,500 and a second David Webb ring, a 39.83-carat, VS1 fancy vivid yellow diamond sold within estimate at $1,426,500.

Rough Prices to Remain Flat in 2012

Rough diamond prices are likely to remain at current levels in 2012 given near-term economic uncertainty due to euro-zone debt crisis and the uncertainty of global economic growth, BMO Capital Markets projected. BMO estimated that rough diamond supplies fell 5% year on year to 127 million carats in 2011 due to production declines at De Beers and Rio Tinto’s Argyle mine, but it expects production is to rise again as development projects are brought on stream and De Beers catches up with its stripping programs. The firm projects that the rough diamond market will be valued at around $29 billion by 2020, up 53% from $19 billion in 2011. Meanwhile, the polished market is project to grow between 6% and 9% to reach more than $33 billion in total market value by 2020, driven by strong demand in emerging economies such as China and India and consistently stable demand in the U.S.

India’s Gold ETF Assets Double in May

The assets held under India’s gold exchange-traded funds (ETFs) nearly doubled year on year to $1.85 billion as of May 31, according to the Association of Mutual Funds in India (AMFI). Total assets under gold ETFs were at $1.83 billion in April 2012. The number of gold ETFs in India has increased to 14 since the product was first launched in early 2007.

RETAIL & WHOLESALE 	  

U.S. Jewelry Store Sales -9%

Jewelry store sales fell 9.3% year on year in April to $1.996 billion, according to U.S. government calculations. Preliminary department store sales, which the government compiles quicker, were flat in the month of May at $14.576 billion. Both figures clearly reflected weaker consumer spending on jewelry and for general merchandise. Nonetheless, the U.S. estimated that total retail and food services sales for May rose 5.3% year on year to $404.6 billion. Retail trade sales rose 5% from one year ago.

U.S. Jewelry Inflation -1% in May

The U.S. consumer price index (CPI) for jewelry fell 0.7% year on year in May to 173.3 points. While the indexs change was slight, it was a significant shift being the first price decrease since August 2009. Mays reading followed a 0.5% year on year increase in April. The CPI is now at its lowest reading since March 2011, however, May was the seventeenth consecutive month of a reading above 170 points, reflecting historically strong commodity prices since 2008.

Indian Watch Market to Grow to $3B by 2020

India’s watch market is expected to grow at 15% every year to around $2.70 billion by 2020 driven by young consumers, the emergence of a strong middle class and a larger number of high-net-worth individuals, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). Due to increased international travel, Indian consumers have become more aware of various brands available globally and are willing to purchase in India. However, with more international brands entering the Indian market to cater to the growing demand of fashion and luxury watch consumers, it has also created some challenges for local manufacturers. Still, local players still continue to dominate the Indian watch industry due to a solid manufacturing base and a wide range of price points.

LJ International Reports 1Q Loss

LJ International Inc. reported a net loss $2.87 million in the first quarter that ended March 31, compared with a profit of $3.3 million one year ago as expenses weighed on its performance. Selling, general and administrative expenses increased 65% to $24.2 million mainly due to an increase in investments in new store openings, marketing and branding campaigns, and professional fees for upgrades in internal control over financial reporting. Operating revenue increased 27% to $52.2 million and comparable store sales grew 17% year on year. Wholesale revenue fell 1% to $15.5 million. The company added six new ENZO stores expanding its retail network to 208 stores at the end of March 2012. LJs store count further grew to 218 at the end of May 2012.

Kristalls Polished Diamond Tender Nets $2M

Kristall held its second exclusive polished diamond tender in Moscow from May 14 to 29 and reported that bidders were offered 55 stones, representing more than 190 carats. As a result of the tender, Kristall reported that 41 lots were sold, with 145.62 carats, for approximately $2.2 million. Kristall has schedule its next polished auction for September 2012.

Forevermark and Talos Select Damas

Forevermark appointed retailer Damas as its exclusive authorized jeweler in the United Arab Emirates (U.A.E.). Forevermark collections will soon be available at six Damas stores within the country. Damas has confirmed that it plans to increase the number of outlets that retail Forevermark diamonds to 13 by the end of this year. Luxury watch brand Talos also selected Damas to be its exclusive retailer across the Arab States in the Gulf (GCC). A number of different Talos watch collections, including its well known Volute collection, are now available at selected Damas outlets. All Talos watches are sold with diamond certificates, and the back of each watch is engraved with details about the diamonds used in each particular watch.

Amrapali Launches Ethical Emerald Collection

Amrapali launched an ethical emerald collection, Panna, which is a direct translation of the Hindi word for emerald. The collection features ethically-mined stones from Gemfields Zambia licenses. Panna designs were inspired by collections the Maharajas once commissioned to the grand Maisons of Europe and feature cuffs, necklaces and chandelier earrings. The line will be available at the company own boutique as well as Harrods.

MINING 	  

Trans Hexs FY Profit Jumps to $25M

Trans Hex reported a 15% year on year increase in revenue to $89 million for the year that ended on March 31. The cost of selling rough diamonds fell nearly 3% to $67 million. Trans Hex reported profit of $25 million compared with a loss of $5.3 million. During the year, production in South Africas increased to 84,409 carats from 69,508 carats in the 2011 with an average price per carat sold at $1,200, up from $1,162 per carat in 2011. In Angola, production at Somiluana, in which Trans Hex holds a 33% stake, increased to 45,869 carats compared with 27,662 carats. Angolan operations achieved an average price of $446 per carat. Trans Hex expects production for the 2013 financial year to reach 80,000 carats out of South Africa, and 42,000 carats from Angola.

Lucaras Online Karowe Auction Nets $6M

Lucara Diamond Corp.s first sale of Karowe diamonds through its new online auction system fetched $5.64 million. The company reported that 26,196 carats sold for an average price of $215 per carat and that sale was 86% sold by lot. A top lot included a 25.90-carat diamond, which achieved $130,070, or $5,022 per carat.

Shear Lowers Expectations for Jericho Sale

Shear Diamonds delivered 11,318 carats from its Jericho mine to its diamond marketing partner, Taché Company, to sell on the open market. Taché made an initial payment of $500,000 for the first parcel but recent declines in world rough diamond prices have resulted in a reduced expected price for the parcel. The company also noted that the recent drop in world diamond market prices will not generate sufficient cash flow to support operations. Shear must obtain financing in the very near term to fund continuing operations and to increase production by going to 24-hour by seven day a week processing.

Stornoway Reports Resource Estimate for Qilalugaq

Stornoway Diamond Corporation reported its first mineral resource estimate for the Q1-4 kimberlite pipe located at its Qilalugaq diamond project in Nunavut, Canada. Qilalugaq includes the Qilalugaq kimberlite pipes and the Naujaat system of kimberlite dykes and has been the focus of ongoing exploration and assessment work by Stornoway since it was optioned and subsequently acquired from BHP Billiton. A total inferred mineral resource for the Q1-4 kimberlite pipe was 26.1 million carats of diamonds from 48.8 million tonnes of ore. Additional resource upside has been identified in the form of a target for further exploration for the Q1-4 kimberlite pipe of between 7.9 million to 9.3 million carats.

STATS 	  

Israel

May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,040 -8% $3,320 -6%
Polished imports NA NA
Net exports

Rough imports NA NA
Rough exports $293 -31% $1,240 -33%
Net imports

Net diamond account $499 -6% $1,100 -2%

Belgium

May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,181 -15% $5,695 -2%
Polished imports $1,207 -15% $5,671 5%
Net exports $154 -19% $24 -94%

Rough imports $1,111 -21% $5,620 0%
Rough exports $1,151 -22% $5,955 -3%
Net imports ($40) ($335) 30%

Net diamond account $194 -24% $359 -60%

U.S.A.

Apr. $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,431 -17% $6,245 -9%
Polished exports $1,148 -13% $5,443 -4%
Net imports $283 -29% $803 -35%

Rough imports $27 -25% $147 -30%
Rough exports $15 -61% $125 -13%
Net imports $12 NA $22 -66%

Net diamond account $298 -24% $825 -36%

Botswana

Apr. $Mil. %Chng. YTD $Mil. %Chng.
Diamond exports $174 -42% $1,000 -30%

ECONWATCH 	  

Diamond Industry Stock Report

Broad-based selloff for U.S. retail stocks and mining companies. Biggest drops were Lucara (-21%), Stornoway (-15%) and Petra (-11%). Read the extended industry stock report for this past week.
June 14 June 7 Chng.
$1 = Euro 0.794 0.794 0.000
$1 = Rupee 55.82 54.90 0.9
$1 = Israel Shekel 3.86 3.87 -0.01
$1 = Rand 8.37 8.35 0.02
$1 = Canadian Dollar 1.02 1.03 -0.01

Precious Metals
Gold $1,625.20 $1,590.20 $35.00
Platinum $1,492.00 $1,439.00 $53.00

Stock Indexes Chng.
BSE 16,677.88 16,649.05 28.83 0.2%
Dow Jones 12,651.91 12,461.03 190.88 1.5%
FTSE 5,467.05 5,447.79 19.26 0.4%
Hang Seng 18,808.40 18,678.29 130.11 0.7%
S&P 500 1,329.10 1,314.99 14.11 1.1%
Yahoo! Jewelry 898.72 907.56 -8.84 -1.0%

Industry
Retail
India
Stats
Mining
EconWatch

Rapaport Weekly Market Comment June 22, 2012

Global markets quiet with increasing concern about global recession. Hong Kong show opens with low expectations as Far East demand remains sluggish. Rough prices declining with DTC boxes selling at discounts and some sightholders refusing to take goods. India remains highly problematic with tight liquidity and weak local demand. U.S. remains best market for polished. ALROSA 1Q sales +26% to $1.1B, net profit +8% to $386M with average prices for gem-quality stones +24% to $184/ct. India’s May polished exports -44% to $1.3B, rough imports -20% to $1.1B. Blue Star founder Vasantlal Laxmichand Mehta passes away.

RapNet Data: June 21

Diamonds 938,568
Value $6,040,348,640
Carats 992,114
Average Discount -26.60%

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RAPAPORT ANNOUNCEMENTS

June
18-25
Mon-Mon

Rapaport Melee Auction 

New York & Hong Kong

email: auctions@rapaport.com

July
9-19
Mon-Thu

Rapaport Melee Auction

New York & Belgium

email: auctions@rapaport.com

QUOTE OF THE WEEK
Our sense is that the recent weak economic data has woken Beijing up to the real risk of a global downturn and a local downturn, so there is a sense of urgency in Beijing to turn things around. The spending...will be financing housing and infrastructure projects. Rail investment comes to mind. Unlike in 2008, it will not be financed through bank loans and local government entities, but, rather it will be financed directly by Beijing, by the central government with a fiscal surplus of $132 billion.

Frederic Neumann | HSBC Asia

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INDUSTRY 	  

Failed States Index Lists Three Diamond-Producers

Foreign Policy magazine listed three diamond-producing countries in its top 10 most failed states index for 2012. The nonprofit group ranks nations annually for their stability, human flight and abuse, economic decline, security and external intervention measures. While Somalia was ranked the most failed state in 2012, and for the fifth consecutive year, due to lawlessness, ineffective government, terrorism, insurgency, crime and piracy, the Democratic Republic of the Congo took second place. Zimbabwe ranked fifth and the Central African Republic was ranked No. 10. Cote dIvoire made the list as well, but it ranked No. 11.

Rapaport Conference Videos

State of the Diamond Industry: In his annual JCK Vegas show address, Martin Rapaport, the chairman of the Rapaport Group, highlights diamond industry issues and global economic trends. In addition, Farai Maguwu, the director of the Center for Research and Development in Zimbabwe, discusses current conditions from the Marange. WATCH NOW

Where are Your Diamonds Coming From? In the Rapaport Fair Trade Diamond Conference, panelists identify ethical challenges facing the industry and discuss how to create a sustainable and responsible marketplace. Speakers include: Maguwu; Rapaport; Charles Stanley of Forevermark U.S., and Alan Martin of Partnership Africa Canada. WATCH NOW

The Rapaport Diamond Certification Conference discusses the state of diamond grading, global standards, how each lab identifies standards and how the role of certificates have evolved. Panelists include: Michael Cortez, founder of World Gemological Services; John Nichols of Huntington Jewelers and Maarten DeWitte of Embee Diamonds. WATCH NOW

Industry Groups Furthering the Cause

The Diamond Development Initiative (DDI) seeks public comment on its draft standards for the Development Diamonds™ ethical certification project until July 31. Jeff Corey, owner of Day’s Jewelers, and Dorothee Gizenga, the executive director of DDI, explain why retailers need to participate in protecting the artisanal and small-scale diamond miner. WATCH NOW.

During the Vegas show, the Diamond Empowerment Fund (D.E.F.) hosted its first pop-up booth outside JCK Luxury in its ongoing industry efforts to raise awareness for Diamonds for Good campaign. Dr. Benjamin Chavis, Nancy Orem Lyman, Nicola Breytenbach-Steiner and Joseph Munyambanza extol the program creating future leaders in diamond-producing countries. WATCH NOW.

RETAIL & WHOLESALE 	  

Analyst Assigns a Buy Rating to TBZ

Antique Stock Broking Ltd., which owns shares in Tribhovandas Bhimji Zaveri Ltd. (TBZ), issued a buy recommendation and a target price of $2.84 (INR 158) per share. The brokerage considered TBZ to be a high-growth proposition given aggressive expansion plans. TBZ currently operates 14 retail stores and plans to add 43 showrooms by the end of fiscal year 2015. The analyst anticipated TBZ sales to grow at a compound annual growth rate of 42% to about $503 million during the next two years with earnings growth at 52% to about $24 million.

NY DDC, Dubai Multi Commodities Centre to Boost Trade

Ahmed Bin Sulayem, the executive chairman of the Dubai Multi Commodities Centre, and Reuven Kaufman, the president of the New York Diamond Dealers Club (DDC), announced an agreement to cooperate on a broad range of issues affecting their memberships. The two industry bodies have agreed to regular exchanges of trade delegations between the two centers, commencing with a New York delegation visit to Dubai in the fall. The fall trade mission to Dubai is for the mutual buying and selling of diamonds, an exchange that should prove beneficial for members of the industry in both centers. Additionally, the trade mission would facilitate the development of long-term business relationships among the participants.

WFDB Distinguishes SDX from DES

The World Federation of Diamond Bourses (WFDB) sought to clarify that the opening of the Singapore Diamond Exchange (SDX), a platform for private investors to invest in diamonds, should not be mistaken for the Diamond Exchange of Singapore (DES), which is the first Asian member of the WFDB. The SDX is operating within the Singapore FreePort and has no connection with the WFDB, according to the global body. The DES, however, is registered as a non-profit association in Singapore, was the very first diamond bourse in Asia to become member of the WFDB, back in 1980. The acronym “DES” and its logo are registered trademarks in Singapore. DES members are in no way associated directly or indirectly with the SDX, stated the WFDB.

Shrenuj to Open Manhattan Office

Shrenuj USA will be taking a full floor at 64 West 48th Street in Manhattan, a building owned by The Muss Development. The integrated diamond firm reportedly rented a 4,000 square foot showroom space with executive offices on the building’s 15th floor.

GIA Discusses Synthetics at DMIA Meeting

The Diamond Manufacturers & Importers Association of America (DMIA) hosted a synthetic discussion during their general membership meeting on June 18 in New York. The Gemological Institute of America (GIA) shared the latest measures in detecting synthetic diamonds. There have been many high-quality stones made through the CVD process in recent years and it is not something can be stopped, contended GIA. Synthetic diamonds are occupying a parallel market to natural stones, and while gemologically its becoming more and more difficult to identify CVD diamonds there are many ways in which to distinguish them. CVD diamonds, for example, have irregular black inclusions and dispositions of non-diamond carbon inside and they have a red orange fluoresce under an Ultra Violet (U.V.) light. Almost all of these identification methods, however, require lab-grade equipment and expertise. “There are non-lab devices, some better than others, that will give you an indication that you should test more, but no device will tell you outright,” said GIAs Tom Moses. “It is becoming a ‘refer to a gem lab’ situation more and more.”

While HPHT can create diamonds of all colors and sizes, the stones are more easily identifiable. The HPHT process requires metal catalysts to speed up production of stones, therefore many stones have recognizable metal inclusions, which if detected with a simple magnet confirms its orgin.

Blue Star Founder Vasantlal Mehta Passes Away

Vasantlal Laxmichand Mehta, the founder of the Blue Star Group and Arjav Diamonds, passed away June 17, in Mumbai at the age of 82. Having moved to Mumbai from Palanpur in 1947, Mehta started with humble beginnings. His career began as a diamond broker in Zaveri Bazaar. He founded Blue Star in Mumbai in 1966, and over the following decade, he brought his three sons, Akshay Mehta, Anuj Mehta and Ashit Mehta, into the business. Together they expanded the firm’s Indian and overseas operations. Described as a peoples man, he has been an inspiration to not only his family and organization but also to thousands of others in the Palanpur samaj and diamond industry in India.

AWDC Elects Fischler as President

The newly elected board of directors of the Antwerp World Diamond Centre (AWDC) elected Stephane Fischler as its new president. The board also appointed Kaushik Mehta as vice president, representing the trade, and Philippe Barsamian as vice president representing the diamond bourses. Fischler said, "Antwerp has a unique people infrastructure and a unique pool of talent, in and outside our industry. Together, we must strengthen and promote our common and rich history for the benefit of all. I firmly believe we need to focus on further anchoring our industry in our local society; share the value of our entrepreneurship and global networks with Antwerp, Flanders and our country."

GIA Creates Scholarship for U.S. Veterans

U.S. military veterans will have access to new scholarships for advanced gemological education as part of the Gemological Institute of Americas (GIA) 2013 international scholarship program. The scholarship application period will run through October 31. In addition, there is a range of other scholarships available for on-campus and distance education programs, as well as for lab classes. The 2013 application period marks the debut of the GIA Scholarship Fund for U.S. Veterans. Multiple scholarships for the Accredited Jewelry Professional degree through GIA’s eLearning distance education program are available. To qualify, applicants must include proof of U.S. military service, including reservists and National Guard personnel.

MINING 	  

ALROSA Diamond Sales +27% in 1Q

ALROSA reported that diamond revenue rose 27% year on year to $1.1 billion in the first quarter of 2012 as prices strengthen and the volume of sales increased. ‎ALROSA’s total revenue increased 26% to $1.13 billion and its net profit ‎increased 8% to $386 million. The volume of sales of gem-quality diamonds rose 2% to 6.1 ‎million carats, the total volume of sales increased 4% to 9.5 million carats and ALROSA’s production fell 19% to 8.1 million carats. ‎

Additionally, ALROSAs supervisory board approved, in principle, the companys production development plan through the year 2021. The key objectives are to ensure that ALROSA’s growth is primarily driven by its core-business of diamond-mining; retain leadership in the world market; anticipate mineral replenishment needs; raise the company’s market value and implement investment projects to fund new facilities. The long-term plan also stipulates growing production volume from 34 million carats at present to an average annual target of 38 million to 40 million carats. The supervisory board also terminated Dmitry Mostovov, the former director of the Mirny Mining and Processing Division, from ALROSAs executive committee and appointed Ilya Ryashchin, ALROSA’s first vice president to the post.

Gemfields Auction Nets $9M in Jaipur

Gemfields raised $9 million from its auction of predominantly lower-quality rough emerald and beryl in Jaipur between June 9 and June 13. The company offered 10.85 million carats for sale of which 3.47 million carats were sold. Twenty five companies attended the auction and 20 of these placed bids on the goods. The auction yielded an average of $2.61 per carat for the lots sold.

Rio Tinto Appoints Truter to Oversee Argyle Mine

Rio Tinto appointed Kim Truter as the managing director of the companys Argyle diamond mine in Australia, ‎effective July 1. Truter held a number of senior roles within Rio Tinto and most recently served as president ‎and chief operating officer of the Diavik diamond mine in Canada. He was instrumental in ‎leading the development of underground mining at the Diavik mine, the company noted.

Diamcor Commissions its Plant at Krone-Endora

Diamcor Mining Inc. completed the vast majority of construction and the installation of site infrastructure at its Krone-Endora at Venetia diamond project in South Africa. Next, Diamcor will process the remainder of ore concentrate material secured as part of the propertys acquisition from De Beers, process new material that was recently mined and stockpiled, and conduct further testing in order to achieve new diamond valuation estimates. Following these exercises, Diamcor plans to focus on achieving targeted production through trial-mining exercises in effort to improve production for sale to its partner Tiffany & Co.

STATS 	  

India

May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,245 -44% $7,913 -42%
Polished imports $193 -88% $2,870 -74%
Net exports $1,051 59% $5,043 108%

Rough imports $1,135 -20% $6,600 9%
Rough exports $117 -25% $722 9%
Net imports $1,018 -20% $5,878 9%

Net diamond account $33 $835

ECONWATCH 	  

Diamond Industry Stock Report

Stocks were largely mixed this week with U.S. retail taking the brunt of losses, while European retail made solid gains. Indian shares were mixed and mining shares were mainly lower. Read the extended industry stock report for this past week.
June 21 June 14 Chng.
$1 = Euro 0.797 0.794 0.003
$1 = Rupee 56.28 55.82 0.5
$1 = Israel Shekel 3.89 3.86 0.03
$1 = Rand 8.38 8.37 0.01
$1 = Canadian Dollar 1.03 1.02 0.01

Precious Metals
Gold $1,565.70 $1,625.20 -$59.50
Platinum $1,435.00 $1,492.00 -$57.00

Stock Indexes Chng.
BSE 17,032.56 16,677.88 354.68 2.1%
Dow Jones 12,573.57 12,651.91 -78.34 -0.6%
FTSE 5,566.36 5,467.05 99.31 1.8%
Hang Seng 19,265.07 18,808.40 456.67 2.4%
S&P 500 1,325.51 1,329.10 -3.59 -0.3%
Yahoo! Jewelry 905.83 898.72 7.11

RAPAPORT NEWS SERVICE | June 29, 2012 www.rapaport.com | news@rapaport.com

Industry
Retail & Wholesale
India
Mining
EconWatch

Rapaport Weekly Market Comment June 29, 2012

Polished prices coming under increasing pressure as poor Hong Kong show disappoints suppliers. Tight liquidity, plummeting rupee and irresponsible Indian government policies destroying Indian demand. DTC sightholders, tired of losing 10% to 20% on overpriced rough, are refusing boxes. Irrational, exploitative rough prices expected to decline as cutters run out of money. U.S. consumer confidence falls to a 5-month low of 62 in June. Chow Tai Fook FY 2012 revenue +61% to $7.3B, net income +79% to $847M. Rockwell Diamonds 1Q revenue -24% to $5.9M as prices slump 42%. Itzu Kaszirer passes away at age 90.

RapNet Data: June 28

Diamonds 947,992
Value $6,102,318,320
Carats 1,003,455
Average Discount -27.04%

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July
9-19
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New York & Belgium

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11-18
Wed-Wed

Rapaport Single Stone Auction

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QUOTE OF THE WEEK
We note that there is a problem of transparency in Zimbabwes diamond mining sectors revenues...Transparency is a political issue but it is also a technical issue that demands proper capacity to carry out due inspections. Therefore, if so requested by the government of Zimbabwe, the E.U. could provide the necessary technical assistance to update, upgrade, complete the national installed capacity to carry out proper inspections.

Aldo DellAriccia | E.U. Ambassador

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INDUSTRY 	  

DTC to Allow Deferments

The Diamond Trading Company (DTC) informed sightholders that they may reschedule up to 50% of their in-plan-‎target for July to any other sight in the current intention to offer (ITO) period that ends March ‎‎2013. Sightholders had also been deferring goods in June due to diminished demand for rough and high DTC prices.

Des Kilalea, an analyst with RBC Capital Markets, said he expects rough prices will ‎remain under pressure in the near-term, given the lack of liquidity in the cutting centers. RBC estimates that De Beers sales, including at DTC, its retail division and its industrial ‎synthetics business, fell 15% year on year to around $3 billion in the first half of the ‎year. Rapaport estimates that DTC sales declined by 19% to approximately $2.83 ‎billion during the period. ‎

HK Show Disappoints Dealers

The June Hong Kong Jewellery & Gem Fair failed to signal significant Far East demand ‎as dealers in round diamonds left the show disappointed. ‎Traffic and trading was lower than previous shows and this soured the mood of dealers. Buyers were looking for SI goods while better-quality VVS stones were ‎still proving difficult to sell. Exhibitors suggested that suppliers were prepared to lower prices in order to spur sales of rounds. But the show was better for dealers in fancies, even if trading was below levels seen at ‎the June show of 2011.‎

Inter-dealer trading was significantly reduced from one year ago as Indian buyers were not a ‎significant presence at the show. While buyers from mainland China attending the fair were there to shop around, however, they did not buy significant quantities. ‎Dealers in the region may be holding ‎large inventories of goods and therefore can hold back from buying, while economic sentiment remains so weak. ‎

Consumer Confidence Remains Weak

U.S. consumer confidence in June was at 62 points (1985=100), according to The Conference Board, which was up from 58.5 points one year ago. The consumer Expectations Index was flat year on year at 72.3 points and the Present Situation Index rose to 46.6 points from 37.6 points in June 2011. Even though consumer confidence was slightly more positive from one year ago, it was weaker than the readings from May and represented a fourth consecutive monthly decline. Consumers held a slightly more pessimistic view on the economy for the short-term and expectations for higher income declined.

E.U. Tour of Diamond Fields Ends

E.U. Ambassador Aldo DellAriccia led a delegation of Western diplomats on a two-day tour of Zimbabwes Marange diamond fields and said it was impossible to determine how much of the countrys diamond revenue reaches government coffers. The countrys Finance Minister Tendai Biti has told Parliament that the government has recieved about $25 million so far this year, much less less than the anticipated $600 million. DellAriccia said, "For the moment, the benefit of diamonds is not translating to the betterment of lives for the people."

RETAIL & WHOLESALE 	  

Top Emerging Online Retail Markets

WATCH NOW: As e-commerce sales skyrocket across the developing world, building an online presence is a low-risk way to test new markets if done right, according to A.T. Kearney. The group published its inaugural E-Commerce Index, examined the top 30 countries for online retail sales potential and rated emerging markets by retail-specific variables. China, Brazil, Russia and Chile were the top, but overall many Middle Eastern and Latin American countries proved to be strong contenders.

Chow Tai Fook Profit +79%

Chow Tai Fook reported that revenue rose 61% year on year to $7.3 billion, while cost of sales jumped 60% to $5.2 billion for the year that that ended on March 31. Same-store sales increased 40.3%, gross profit margin increased to 29.1% from 28.3% one year earlier. Retail sales accounted for about 83% of total revenue with wholesale sales representing 17%. Net income surged 79% to $847 million. Chow Tai Fook had 1,627 points of sale at the close of its financial year, up from 1,358 one year earlier. Gold product sales represented the bulk of revenue during the year at $3.8 billion and gem-set jewelry was the second strongest category at $2 billion.

Birks & Mayors Profit at $219K

Birks & Mayors Inc. reported net sales rose nearly 12% to $302.2 million for its fiscal year that ended on March 31. Comparable-store sales rose 5%. Net profit improved to $219,000 from a net loss of $7.7 million. The retailer observed an increase in the average sales transaction during the year, a cash benefit from a weaker U.S. dollar and a gross profit margin improvement of 114 basis points.

NRF to Fight Health Care Law

The National Retail Federation (NRF) vowed to redouble its efforts to repeal the Affordable Health Care Law that was upheld by the Supreme Court, citing it would continue to work with regulators to smooth implementation for retailers and businesses alike. The NRF contended that the law has many shortcomings and wrongly focuses more on penalizing employers and the private sector than reducing health costs.

FTC Seeks Comment on Jewelry Guides

The Jewelers Vigilance Committee (JVC) reminded the trade that as part of the Federal Trade Commissions (FTC) systematic review of rules and guides, the government agency is seeking public comment on revisions to the jewelry guides. The deadline for comments is August 27. Public comments and concerns about the guides can also address specific issues such as the marketing of lead-glass-filled composite stones --hybrid or composite rubies for example-- use of the word "cultured" in marketing laboratory-created diamonds and gemstones, disclosures relating to freshwater pearls and treatments to pearl products, and content descriptions of alloys and alloy products containing precious metals in amounts less than the minimum thresholds currently reflected in the guides. The FTC completed its last comprehensive review of the guides in 1996 and has modified them four times since, according to JVC.

RJC Seeks COP Comment

The Responsible Jewellery Council (RJC) seeks public comment on its Code of Practices (COP), the standards against which all members must demonstrate independently verified conformance to achieve certification. The first of at least three scheduled public comment periods is open until September 10, 2012. The COP is the cornerstone of RJC’s certification program and sets standards for responsible business practices for companies in the jewelry supply chain.

U.S. Marshals to Auction Jewelry

The U.S. Department of Justices U.S. Marshals Service is conducting a live and online simulcast auction to sell nearly 400 lots of fine jewelry, watches, gold, diamonds and other items on June 30. The auction starts at 10 a.m. (MDT) at the Colorado Convention Center in Denver, with the online simulcast at www.txauction.com. A catalog with the expected price range for each item is available at that same website and a public preview is scheduled for June 29 from 10 a.m. to 3 p.m. in Denver. All items being sold were seized from federal court cases nationwide and are now forfeited to the government. Proceeds generated from the sale are used to compensate victims of crimes and supplement law enforcement programs.

Antwerp Police Arrest Four

Antwerp police arrested four people in connection with alleged bribery at HRD Lab headquarters over improper grading practices. Police have not revealed any names. HRD conducted an internal investigation of diamond graders who were allegedly paid to prepare certificates falsifying the value of the diamonds. As a result, four people were asked to leave in April. HRD then turned its results over to Antwerp police who decided to pursue it further.

Two of the arrests were diamond dealers and one was a grader allegedly active in the bribery, while the fourth was alleged to be a middleman. HRD refused to comment on the ongoing investigation.

MINING 	  

De Beers Canada Posts Year in Review

De Beers Canada released its 2011 Year in Review, summarizing the companys performance in the areas of operations, finance, sustainability and contributions to Canada and the communities in which it operates. This year, the company detailed its Snap Lake mine in the Northwest Territories and the Victor mine in northern Ontario among other projects. In 2011, De Beers Canada employed 1,023 people and injected more than $500 million directly into the Canadian economy. At Snap Lake, De Beers Canada spent $161 million on local goods and services with $110 million of the amount going directly to northern businesses, and $40 million buying these services from Aboriginal suppliers. At the Victor mine, $101 million was spent on goods and services and $57 million worth was supplied by Aboriginal businesses.

Namakwa to Raise $55M

Namakwa Diamonds expects to raise approximately $55 million after shareholders approved issuing more shares. Funds were expected to pay down debt and provide working capital. The diamond-mining junior expects to repay approximately $45 million in debt.

Namakwas largest shareholder, Jarvine Limited, approved the share offering and agreed to subscribe for all of the shares if other qualifying shareholders don’t subscribe.

Rockwell 1Q Sales -24%

Rockwell Diamonds reported revenues dropped 24% year on year to $5.9 ‎million during the first quarter that ended May 31, as rough diamond prices slumped ‎from weaker demand. The volume of sales rose 30%, however, to 6,234 carats while the ‎average price of the goods sold fell 42% to $944 per carat. ‎Production from four recovery projects reached 6,116 carats, or more than twice the number from one year ago. At the companys Saxendrift mine, the number of carats rose 26% year on year to 2,126. Rockwell added 1,118 carats from its Saxendrift bulk x-ray and 1,222 carats from its Tirisano mine, both recovery projects were not online one year ago. The Klipdam mines production rose 51% year on year to 2,768 carats.

Kennady Diamonds to List in July

Mountain Province Diamonds Inc. announced that, subject to final approval of the TSX Venture Exchange, shares of Kennady Diamonds Inc. will commence regular trading on July 10. Mountain Province will transfer its Kennady North diamond property and working capital in the amount of approximately $3 million to Kennady Diamonds and distribute the shares of Kennady Diamonds to Mountain Province shareholders on the basis of one Kennady Diamonds share for every five shares of Mountain Province held by shareholders. Once Kennady Diamonds is listed on the TSX-V, the company intends to pursue a listing on the OTCQX in the United States.

Global Witness Finds Diamonds Funding Military

Global Witness called for urgent action to prevent a businessman in China from financing Zimbabwes President Robert Mugabes military regime. According to the group, Zimbabwe’s Central Intelligence Organisation (CIO) received financing from Hong Kong-based businessman, Sam Pa, at the same time that the CIO is alleged to be engaging in a campaign to discredit key members of Mugabes political opposition.

CIO members jointly control Sino Zimbabwe Development (Pvt.) Ltd., a diamond, cotton and property development company in Zimbabwe. Pa, their partner, is a prominent member of the Queensway Syndicate, a network of companies with a track record of negotiating opaque resource for infrastructure deals across Africa, according to Global Witness. The NGO also exposed that a Zimbabwean military lawyer owns half of Anjin Investments (Pvt.) Ltd., the biggest diamond company in Zimbabwe’s Marange diamond fields, on behalf of Zimbabwe’s Ministry of Defence. Pa did not respond to the groups request for comment.

ECONWATCH 	  

Diamond Industry Stock Report

The dollar proved stronger this week, while gold and platinum sank. Shares in nearly all U.S. and E.U. diamond retailers dropped, Zale (+5%) and Damiani (+2%) were the exceptions. Indian shares were moderatly higher, but strong gains for Goldiam (+17%) and Suashish (+11%). Mining shares tumbled by mid-single digits except for Namakwa (+5%). Read the extended industry stock report for this past week.
June 28 June 21 Chng.
$1 = Euro 0.800 0.797 0.003
$1 = Rupee 56.82 56.28 0.5
$1 = Israel Shekel 3.94 3.89 0.05
$1 = Rand 8.41 8.38 0.03
$1 = Canadian Dollar 1.03 1.03 0.00

Precious Metals
Gold $1,554.90 $1,565.70 -$10.80
Platinum $1,385.00 $1,435.00 -$50.00

Stock Indexes Chng.
BSE 16,990.76 17,032.56 -41.80 -0.2%
Dow Jones 12,602.26 12,573.57 28.69 0.2%
FTSE 5,493.06 5,566.36 -73.30 -1.3%
Hang Seng 19,025.27 19,265.07 -239.80 -1.2%
S&P 500 1,329.04 1,325.51 3.53 0.3%
Yahoo! Jewelry 889.64 905.83 -16.19 -1.8%

Rapaport Weekly Market Comment July 27, 2012

Rough markets under pressure with prices softening, inventories rising and ‎cutters losing money. Polished trading very weak as Israel and Belgium head to vacation ‎and liquidity pressures mount in India. De Beers 1H profits -44% to $386M with ‎rough sales -12% to $3.1B and production -13% to 13.449M Cts. Zale secures new ‎‎$665M credit facility. Swatch Group 1H net sales +16% to $3.7B, net income +25% to ‎‎$729M. Bulgari boosts LVMH 1H jewelry & watch sales 133% to $1.6B, operating profit +87% to $195M. Antwerp bourses to close July 30 to Aug. 19 and Israel Diamond Exchange to ‎close Aug. 5-19 for vacations.

RapNet Data: July 26

Diamonds 994,148
Value $6,257,670,387
Carats 1,052,793
Average Discount -27.17%

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Rapaport Melee Auction

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29
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Rapaport Intl. Diamond Conference 2012

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• Diamond Prices
• Diamonds as an Investment
• The Branding Opportunity

Registration is now open. Visit www.diamonds.net/idc for more details or call: +91-22-6627-2618

QUOTE OF THE WEEK
Today’s consumer is looking for assurance that the jewelry they buy has been produced to the highest ethical, social and environmental standards.

Jean-Marc Lieberherr | Rio Tinto Diamonds

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INDUSTRY 	  

De Beers Profit -44%

De Beers earnings fell 44% to $386 million in the first half of 2012 as group sales declined 14% to $3.35 billion. Sales of rough diamonds through the Diamond Trading ‎Company (DTC) dropped 12% to $3.07 billion. De Beers observed that DTC prices ‎remained relatively stable and that sightholder demand ‎was impacted by increased inventories in the cutting centers, while tight liquidity persisted in India. De Beers Diamond Jewellers saw a decline in the ‎high-end market, while experiencing growth in its core jewelry market.

The mining giant expects trading to remain challenging in the second half, but anticipates global diamond jewelry sales will see moderate, positive growth in ‎‎2012. The company expects the U.S., China, the Gulf and Japan to contribute the bulk of ‎the growth, while India and Europe are expected to remain weak. ‎ De Beers production in the first half of the year fell 13% to 13.449 million carats. Production in Botswana and Canada fell 9%, South ‎Africas slumped 41%, but Namibias production ‎grew 30%.

Group Pressures KP Vice Chair

South Africas Mineral Resources Minister, Susan Shabangu, is the target of a letter-writing campaign meant to show support for adding human rights to the mandate of the Kimberley Process (KP). Shabangu, pictured, is currently the KPs vice chair and will assume the rotating chairmanship role in 2013. The campaign was launched by Sokwanele and calls for an investigation into Chiadzwas diamond fields for human rights abuses and calls to end diamond sales in support of a "parallel government" in Zimbabwe.

MDC: Diamond Revenue Funds Zanu-PF

The Movement for Democratic Change (MDC), the political party in Zimbabwe which has a power sharing agreement with President Robert Mugabes ruling Zanu-PF, said it sympathizes with the plight of civil servants who are on strike for better wages, however, the group urged them not to protest Zimbabwes Finance Minister Tendai Biti. MDC contended that Biti, pictured, is on record as saying revenue inflows to treasury are pathetic owing to the lack of transparency in the remittance of funds mostly from the sale of diamonds. Biti, who is a member of the MDC, favors the Zimbabwe Revenue Authority monitoring diamond revenue from the Marange.

The MDC stated that four companies extracting diamonds from the Marange have failed to meet revenue targets, with the largest one, Anjin being the main culprit. There is strong suspicion that the money from Marange is being used to run a parallel government with Anjin buying more than 200 trucks to fund Zanu-PFs election campaign, according to the political statement.

RETAIL & WHOLESALE 	  

LVMH Profit +28%

LVMH reported revenue growth of 26% year on year to $16 billion for the first half of 2012. Group profit rose 28% to $2 billion. The luxury group, which acquired Bulgari one year ago, reported organic growth (comparable sales at constant exchange rates) of 13% year on year for the watches and jewelry segment. With Bulgaris revenue now included, sales for the category improved 133% to $1.6 billion. Profit from recurring operations of jewelry and watches increased by 87% to $195 million, notably as a result of Bulgari’s performance.

Zale Refinances; Swatchs Profits Soar

WATCH NOW: Zales refinancing arrangement of $665 million this week should save the company about $17 million in the new fiscal year and improve liquidity. Swatch Group sales and profit jump despite some headwinds. Gold prices have settled to just about where they were one year ago.

Charles & Colvard Reports a Profit

Charles & Colvard reported a 69% year on year increase in revenue of $5.1 million for the three months that ended on June 30. Profit rose to $548,572 from a loss of $103,314 one year ago. The company held $11.5 million in cash and investments and no long-term debt at the close of its second quarter. Loose moissanite sales increased 65% to approximately $4.1 million and finished jewelry sales rose 86% to approximately $968,000.

Thangamayil Profit +42%

Thangamayil Jewellery Ltd. reported that its fiscal first-quarter profit rose 42% year on year to $2.7 million and sales increased 61% to $64.7 million for the three months that ended on June 30. The company, which owns jewelry stores in the southern Indian city of Madurai and trades in gold, diamond and platinum jewelry, reported that expenditures grew 61% to $59.1 million.

DGSE Secures Credit Line

DGSE entered into a loan agreement for up to $7.5 million with its majority shareholder, NTR Metals LLC. The credit facility provides DGSE the flexibility to pursue growth in its core business lines and carries an interest rate of 2%. Proceeds from the first draw were used to repay Texas Capital Bank.

Goldenwest to Invest in EZ Diamonds

Goldenwest Diamond Corporation, which conducts business as The Jewelry Exchange, The Jewelry Source and The Jewelry Factory, announced that it was negotiating a financial interest in long-time partner EZ Diamonds. Goldenwest stated that the companies principals first met in 1987 and have a close personal relationship. Goldenwest had been actively seeking a major new investment for nearly three years. While EZ Diamonds will continue providing diamonds to Goldenwest, existing relationships and purchasing volume with other vendors should not be affected, according to the retailer.

USPTO Issues Trademark to De Beers

The United States Patent & Trademark Office (USPTO) approved the trademark The Worlds Most Carefully Selected Diamonds to De Beers Centenary AG of Switzerland on July 17. The trademark, registration number 4177237, was originally filed on March 17, 2011 and includes jewelry, imitation jewelry featuring diamonds, gemstones and diamonds, and horological and chronometric instruments featuring diamonds. The trademark will be used in retail and wholesale store services, advertising and marketing services, all in the field of jewelry and diamonds.

AURELSAs Fairtrade Gold Heads to U.K.

Ingle & Rhode and S&P Trading received a first batch of certified Fairtrade & Fairmined gold from The Comunidad Aurifera Relave S.A (The Relave Gold Community ) or AURELSA, a small community in Peru. AURELSA received Fairtrade & Fairmined gold certification in May 2012 following a series of independent audits by Fairtrade International (FLO), the certification body that is responsible for verifying compliance with the Fairtrade & Fairmined gold standards. AURELSA is only the fourth gold producer to obtain Fairtrade & Fairmined status, sharing the distinction with the Cotapata Mining Cooperative in Bolivia, SOTRAMI in Peru and Oro Verde in Colombia.

Rio Tinto Markets Sustainable Jewelry Line

Rio Tinto launched its inaugural sustainable jewelry collection "Natures Beauty," using gold from its Kennecott Utah Copper mine in the U.S. and white and champagne diamonds from the Argyle mine in Australia. Nature’s Beauty is a pilot project for the U.S. market and includes earrings, rings, necklaces and cuffs.

Dealfind Adds Jewelry Deals

Shopping deals website Dealfind launched "Jewelry Deals" to promote special savings on bracelets, earrings, necklaces and more. All of Dealfinds jewelry offerings will be showcased from a new Jewelry Deals tab and occur on a weekly basis for consumers in the U.S. and Canada. The company found that jewelry was an especially popular category with consumers so it created the new platform, which offers a select range of products from local retail partners.

RSBL SPOT Launches July 31

RiddiSiddhi Bullions Ltd. (RSBL) will launch its online trading system, RSBL SPOT, in Delhi on July 31. RSBL’s trading system enables jewelers to buy and sell precious metals such as gold, silver and platinum online. RSBLs online trading system is available in 16 centers across India. RSBL SPOT was introduced in 2008 and has a client base of more than 2,100 jewelers across India.

Stuller is Certified for Recycled Metals

Stuller Inc. was certified by the Scientific Certification Systems for producing 100% recycled metals. The certification process is specific and detailed with potential applicants having to comply with several requirements regarding environmental, social and supply chain management. Operating under its green initiative, Refined Karats, Stuller’s environmental commitment reaches out to all areas of its facility and production processes including water, waste and energy management.

MINING 	  

Namakwa Tender Nets $4M

Namakwa Diamonds sold all 14,495 carats of rough diamonds offered in Antwerp from its Kao diamond mine for $286 per carat. The largest diamond sold was 32.38 carats at $2,577 per carat. The sale realized approximately $4.2 million, with prices achieving about 3% above initial estimates. Since January 2012, the junior miner has sold 87,011 carats from Kao, generating $24.6 million in revenue.

Firestone Tender Nets $4M

Firestone Diamonds sold 45,773 carats from its Liqhobong mine for $4.14 million at ‎dual tenders held in Gaborone and Antwerp in July. The sale achieved an average price of $91 ‎per carat, compared with $71 per carat fetched during the June quarter. The company reported continued strong demand for higher-quality stones, while some ‎pressure remains on poorer quality and smaller stones. The tender included the sale of three ‎large stones with an average size of 138 carats and numerous fancy yellow diamonds with a ‎combined weight of 500 carats. ‎

Endiama Signs Exploration Deal

Angolas National Diamond Company (Endiama EP) and Endiama Mining, which is a subsidiary of a holding companies Sitramal, Jall, Saccir and Solaris, signed a $50 million exploration agreement this week. The deal focuses on prospecting in Cacuala in eastern Lunda Norte, according to Angola Press, and the project carries an initial investment of $25 million. The funds could be increased $15 million with certain milestones. A second contract will focus on exploring for diamonds in Yetyene with an investment of $10 million.

Gem Increases Resource Base

Gem Diamonds increased its resource base at the Letšeng mine by 10% due to ‎higher-resource grade estimates and raised its revenue estimate by 5% to $2,839 per carat. Sales from the mine ‎achieved an average price of $2,776 per carat in 2011. ‎Gem Diamonds maintained its resource base estimate at around 29 million carats ‎with its resource base for the developing Ghaghoo mine in Australia unchanged at 20.53 ‎million carats. The Ghaghoo revenue estimate increased by 16% to $259 per carat.‎

Stornoway Begins Program on Renard 65

Stornoway Diamond will begin a 5,000 tonne bulk sample program costing $2.3 ‎million at its Renard 65 kimberlite pipe in north-central Quebec. The program is scheduled to be completed by the end of the year and aims to collect a large ‎enough parcel of diamonds to ascertain whether the pipe can be classified as a mineral ‎reserve. The company expects to recover approximately 1,000 carats of diamonds, based on ‎previously measured grades at the sampling site, which will be sent to Antwerp, for ‎valuation. Renard is estimated to contain 18 million carats with the ‎project’s inferred mineral resources totaling another 17.5 million carats.

Teeling Says Cameroon Site is Viable

Botswana Diamonds recovered a 2 carat diamond from a sampling project at Libongo, Cameroon. The diamond is low value and near gem quality, but John Teeling, pictured, the chairman of the company, said the find proves the project is viable. Full results of the sampling project are expected in the third quarter of 2012.

ECONWATCH 	  

Diamond Industry Stock Report

U.S. shares were mixed with Zale (+10%) pulling ahead after it refinanced its debt and line of credit. Birks & Mayors, Blue Nile, Kohls, Movado, Signet and Tiffany were lower. Europe was mainly up on the week with Theo Fennell (+7%) leading the way followed by Swatch (+4%). Indian shares were mostly lower with Classic Diamonds (-16%) showing the largest decline. Diamond mining shares were mostly lower except for Firestone (+14%), Namakwa (+9%) and Stornoway (+4%). Read the extended industry stock report for this past week.
July 26 July 19 Chng.
$1 = Euro 0.814 0.814 0.000
$1 = Rupee 55.49 55.17 0.3
$1 = Israel Shekel 4.09 4.00 0.09
$1 = Rand 8.24 8.17 0.07
$1 = Canadian Dollar 1.01 1.00 0.01

Precious Metals
Gold $1,616.00 $1,582.10 $33.90
Platinum $1,402.00 $1,414.00 -$12.00

Stock Indexes Chng.
BSE 16,639.82 17,278.85 -639.03 -3.7%
Dow Jones 12,887.93 12,943.36 -55.43 -0.4%
FTSE 5,573.16 5,714.19 -141.03 -2.5%
Hang Seng 18,892.79 19,559.05 -666.26 -3.4%
S&P 500 1,360.02 1,376.51 -16.49 -1.2%
Yahoo! Jewelry 926.34 941.15 -14.81 -1.4

RAPAPORT NEWS SERVICE | Aug. 3, 2012 www.rapaport.com | news@rapaport.com

Industry
Retail
India
Mining
EconWatch
Stats
General

Rapaport Weekly Market Comment Aug. 3, 2012

All eyes on India as polished suppliers reduce prices while Belgium and Israel are on vacation. Indian market under pressure as weak rupee reduces domestic retail demand and tight credit limits purchasing power and export financing. RapNet Diamond Index (RAPI) for 1 ct. -5.4% in July. Rough markets problematic as De Beers limits supply by overpricing sights. Global 2011 rough production +26% to $14.4B, volume -3% to 124M Cts., average price +31% to $116/ct. Petra’s FY12 production +98% to 2.2M Cts. Gem Diamonds delays development plans as Letšeng 1H sales -22% to $125M, prices -30% to $2,133/Ct. Botswana declines purchase of extra 10% in De Beers as Anglo American to claim 85%. Blue Nile 2Q sales +13% to $91M, profit -44% to $1.6M.

RapNet Data: Aug. 2

Diamonds 975,723
Value $6,194,288,526
Carats 1,035,451
Average Discount -27.38%

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RAPAPORT ANNOUNCEMENTS

August
6-9
Mon-Thu

Rapaport Melee Auction

New York

View details.

Aug-Sep
29-5
Wed-Wed

Rapaport Single Stone Auction

New York & Israel

View details.

August
29
Wed

Rapaport Intl. Diamond Conference 2012

Mumbai, India
• Diamond Prices
• Diamonds as an Investment
• The Branding Opportunity

Registration is now open. Visit www.diamonds.net/idc for more details or call: +91-22-6627-2618

QUOTE OF THE WEEK
Lower prices are healthy and necessary for the diamond market as they allow trading to adjust to lower levels of demand. The diamond trade makes money by selling diamonds, not by holding them. Dealers must learn how to make profit when prices go down by selling and replacing inventory at lower prices. The value of inventory is its replacement cost.

Martin Rapaport | Chairman of the Rapaport Group

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. View jobs now.

INDUSTRY 	  

RAPI -5% in July

In July, the RapNet Diamond Index (RAPI™) for 1 ct. certified diamonds fell 5.4%, while RAPI for 0.3 ct. stones declined by 4.9%, RAPI for 0.5 ct. ‎diamonds ‎dropped 5.3% and RAPI for 3 ct. diamonds fell 5.1% during the month. During the first seven months of 2012, RAPI for 1 ct. diamonds fell 8.8% with the steepest declines occurring since May. RAPI for 1 ct. diamonds is down 18.3% from one year ago.

The Rapaport Research Report, “Tough Opportunities,” described diamond markets as quieter than usual in July, while demand in the U.S. remained stable; the Far East retailers noted caution among Chinese consumers as economic growth has slowed. Polished dealer trading slackened ahead of the summer vacations in Belgium and Israel and as India’s weak domestic market has curbed activity there. Depreciating currencies against the U.S. dollar, including the Indian rupee, euro and Israeli shekel, is raising operating expenses and adding uncertainty to diamond trading. Cautious trading is expected to continue through the remainder of 2012. Polished inventories are sufficient to see through the summer as buying remains custom-based for specific orders. Expectations are low for the Mumbai show in August and the Hong Kong September show.

Consumer Confidence Improves

U.S. consumer confidence rose 11% year on year in July to 65.9 points (1985=100), according to The Conference Board. The Expectations Index rose five points to 79.1 and The Present Situation Index increase nearly 10 points to 46.2. Lynn Franco, the director of economic indicators at The Conference Board, explained that readings in July were slightly better than those taken in June. Nonetheless, all three indexes remain at historically low levels.

What was hot at JA New York?

WATCH NOW: In this broadcast three exhibitors from the JA New York summer show describe which of their pieces were hot with retail buyers: Polly Wales of London; jewelry artist Pierre-Yves Paquette of Saint-Sauveur, Quebec, and the New York Diamond Districts own Leon Mege of Leon Mege Inc., and of Art of Platinum.

Rapaport Presents at NY DDC

WATCH NOW: Martin Rapaport, the chairman of the Rapaport Group of Companies, presented the State of the Diamond Industry to the New York Diamond Dealers Club (DDC) on July 24. Rapaports industry overview was the first in a series the DDC expects to schedule of guest speakers at the club in coming months.

RETAIL & WHOLESALE 	  

Blue Nile 2Q Profit -44%

Blue Niles revenue rose 13% year on year to $90.98 million in the second quarter that ended on July 1, however, cost of sales increased 16% to $73.79 million. As a percentage of net sales, gross profit was 18.9% compared with 21.3%. Blue Nile reported net income of $1.58 million or 11 cents per share, down from $2.8 million or 19 cents per share one year ago.

Net cash provided by operating activities totaled $18.7 million on July 1, compared with $33.4 million for the trailing 12-month period one year ago. Blue Nile reported that the number of new customers rose 32% year on year during the second quarter. By region, Blue Niles sales in the U.S. jumped 13% year on year to about $76.6 million, while international sales rose 13% to $14.4 million. The online retailer disclosed that U.S. engagement sales for the second quarter rose to $52.4 million from $43.9 million one year earlier. But non-engagement sales were basically flat at $24.2 million.

Titans 2Q Profit +9%

Titan Industries, which owns the Tanishq brand, reported sales of $397 million, net profit of $28.1 million and expenses of $361.1 million --all reflecting a 9% year-on-year increase-- for the three months that ended June 30. Jewelry sales, including those from its flagship Tanishq brand, ‎rose 8% to $319.6 million and watch sales increased 14% to ‎‎$64.9 million. Growth from the jewelry division was affected by higher gold prices in rupee along with fewer wedding dates during the quarter. The ‎company opened 20 stores during the quarter to end the period with a network of 847 ‎stores across its watch, jewelry and eyewear product divisions.

Renaissance Closes Quarter With a Loss

Renaissance Jewellery Ltd. reported sales rose 2% year on year to $33.4 million for three months that ended on June 30, as jewelry segment sales decreased by 3% to $28.3 million. The company recorded a net loss of $1.6 million compared with a net profit of $233,951. Total expenditures increased 7% to $34.7 million.

Roberto Coin Introduces Fifth Season

Roberto Coin debuted a new brand, The Fifth Season by Roberto Coin, which is a silver jewelry collection, and introduces the companys designs to an entirely new generation of consumers with price points of $100 to $1,500. The Fifth Season by Roberto Coin features pieces inspired by Coins tradition, while encompassing modernity and a youthful, fresh look. The collection is designed in sterling silver with yellow, white and rose gold finishes that features both diamond and semiprecious stone accents. The Fifth Season by Roberto Coin also bears the signature hidden ruby on each of the pieces.

GENERAL 	  

Drosos Joins Signet Board

Signet Jewelers Ltd. appointed Virginia (Gina) C. Drosos to its board of directors on July 25. Drosos is the group president for Procter & Gambles beauty, skin, cosmetics and personal care division. She intends to retire from that position on September 1. Drosos joined Procter & Gamble in 1987 and became group president of the companys global female beauty, beauty and grooming division in 2010 before assuming her current position in August 2011.

In a separate announcement out of the U.K., Signet plans to reduce its headcount at headquarters by 99 employees. Those involved in the resource-action are reportedly in a 30-day consultation period with the firm to determine severance.

Bonaparte to Head JA

Jewelers of America (JA) appointed David Bonaparte ‎to serve as its next president to replace Matthew Runci, who ‎retires at the end of 2012. Bonaparte will work with Runci starting October 1 before ‎officially taking over on January 1. ‎Bonaparte has been heading JCK brands for Reed Exhibitions and will be tasked to expand JA’s membership, strengthen the ‎organization’s influence and resources, and continue its leadership role in public and industry ‎affairs as an advocate for its members and the larger jewelry industry.

‎

RBI Backtracks on EEFC

The Reserve Bank of India (RBI) backtracked somewhat on guidelines for currency exchange trades held in Exchange Earners Foreign Currency (EEFC) accounts by restoring its previous provision of allowing full credit on foreign exchange earnings to the EEFC account after requiring a 50% conversion into rupee in May. However, even with the new provisions, the earnings are still subject to the conditions that the sum of accruals in the account during a calendar month should be converted into rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments. RBI said that will allow exporters to cancel and rebook forward contracts to the extent of 25% of the total contracts booked for hedging their currency exposure.

MINING 	  

Anglo to Hold 85% Interest in De Beers

Botswana declined to exercise a preemptive right to raise its stake in De Beers, which allows mining giant Anglo American to complete its planned purchase from the Oppenheimer family (CHL) for $5.1 billion. The decision was largely expected. As a result, Anglo American will acquire an incremental 40% interest in De Beers for cash, subject to adjustment as provided for in its agreement with CHL, taking its total interest to 85% at some point before the end of September.

Petras FY Revenue +44%

Petra Diamonds revenue grew 44% year on year to $316.9 million in the ‎fiscal year that ended on June 30, but the company did not provide profit figures. Petra’s total production rose 98% to 2.208 million carats, while the ‎quantity of goods sold increased 77% to 2.084 million carats. ‎Production was boosted by the Finsch mine, which Petra acquired from De Beers in ‎September 2011. Petra announced plans to sell its fissure mines, which include the Helam, Sedibeng and ‎Star mines in South Africa.

‎

Moodys Upgrades ALROSA

Moody’s improved its outlook on ALROSA’s ratings to positive from stable as analysts expects the mining giant to partially dispose of assets related to its Timir iron ore project by the end of the year, coupled with a strong pricing environment for rough diamonds. The positive outlook is further supported by the company’s substantial global market share and low cost reserve base, it noted. Moodys expects a relatively favorable diamond market to persist throughout 2012 due to strong jewelry sector demand driven by demand from the U.S. and Southeast Asia and underpin strong cash flow generation in 2012.

Gem Diamonds Reviews Capital Plans

Gem Diamonds is reviewing its capital investment plans and could delay the development of future projects in Lesotho and Botswana as rough diamond ‎prices fell in the second quarter due to weak economic conditions. ‎Diamond trading deteriorated since May as tight liquidity and ‎reduced demand in India and other emerging markets have resulted in increased rough ‎and polished inventory levels in the manufacturing sector.

‎Gem Diamonds expects continued short-term volatility and diamond prices to weaken ‎further given that traders have become more cautious and due to the traditional slowing ‎of the market in July and August. ‎ Sales from Letseng, including ‎goods extracted for internal polishing, dropped 22% to $125.2 million during the first six ‎months of 2012. Sales from Ellendale rose 73% to $57.5 million boosted by the sales contract for fancy yellow diamonds with Tiffany & Co.

Kennadys First Strike Encouraging

Kennady Diamonds Inc., a subsidiary of Mountain Province Diamonds, reported that the first drill hole at its Kelvin Lake property in the Northwest Territories of Canada intersected kimberlite more than 70 meters from a down-hole depth of approximately 102 meters. The current drill program is designed to provide an understanding of the size, shape and grade of the Kelvin and Faraday kimberlites. Core recovered from the Kennady North summer drill program will be sent to Saskatchewan Research Council analytical laboratory for microdiamond testing by caustic fusion.

Catoca Lowers Forecast

Angolas Catoca mining company reduced its revenue forecast 20% for 2012 to $400 million due to a 5% reduction in rough sales during the first half of 2012. The company has also reduced production approximately 9% to about 500,000 carats per month this year.

Stellars Tongo Renewed

Sierra Leone renewed Stellar Diamonds exploration license at the Tongo diamond project. The projects four diamondiferous kimberlite dykes represent an inferred resource of 660,000 carats with a modeled diamond value of $248 per carat. Drilling and evaluation is ongoing with the objective of increasing the resource estimate. Stellar Diamonds stated that discussions are continuing with the Ministry of Mines concerning the renewal of its Kono license.

Namakwa Lowers Production Outlook

Namakwa Diamonds commenced a technical review of its operations in July, with the primary focus on the Kao mine in Lesotho. While the review continues, Namakwa identified operational inefficiencies in the current mining operation and in the metallurgical plant. In order to address these issues, short term production will be negatively impacted and management downgraded market guidance on production for 2012 from 150,000 carats to 120,000 carats.

Anjin Penalizes Striking Workers

Anjin, which mines diamonds in Zimbabwes Marange, reportedly suspended more than 1,500 diamond workers who had engaged in a wage strike. Members of a workers’ committee told VOA Studio 7 that they were penalized with layoff for demanding at least $650 a month for the lowest paid worker instead of the $235 offered now. Some of the male workers also claimed they had been sodomized by three male managers after protesting against Anjin. Those managers reportedly apologized for their assaults.

Gemfields Opens in India

Gemfields opened sales offices in Mumbai and Jaipur to supply cut and polished Zambian emeralds to India and the greater Asian market. Gemfields stated that every emerald will be sourced directly from its distribution partners, which have successfully bid and acquired lots from the company’s rough auctions. The Mumbai office will be managed by Pinank Vora and the Jaipur office will be led by Rohit Kumar.

STATS 	  

Kimberley Process Stats for 2011

Top 10 Countries in 2011 $Mil. %Chng.
Angola $1,163 19%
Australia $221 -12%
Botswana $3,902 51%
Canada $2,551 11%
DRC $180 3%
Lesotho $359 81%
Namibia $873 17%
Russia $2,675 12%
South Africa $1,730 45%
Zimbabwe $476 40%
Global production total: $14,407 26%

ECONWATCH 	  

Diamond Industry Stock Report

U.S. shares were mainly lower with Movado (-7%), JCP (-8%), Signet (-3%), Tiffany (-5%) and Zale (-4%) the largest declines. European and Indians shares were mixed: Asian Star (-7%), Goenka (+13%), Vaibhav (+9%), Damiani (-6%). Mining shares were lower, Peregrine (-25%), Firestone (-9%), Petra (-8%). Read the extended industry stock report for this past week.
Aug. 3 July 26 Chng.
$1 = Euro 0.820 0.814 0.006
$1 = Rupee 55.80 55.49 0.3
$1 = Israel Shekel 4.02 4.09 -0.07
$1 = Rand 8.35 8.24 0.11
$1 = Canadian Dollar 1.00 1.01 -0.01

Precious Metals
Gold $1,588.90 $1,616.00 -$27.10
Platinum $1,385.00 $1,402.00 -$17.00

Stock Indexes Chng.
BSE 17,224.36 16,639.82 584.54 3.5%
Dow Jones 12,878.88 12,887.93 -9.05 -0.1%
FTSE 5,662.30 5,573.16 89.14 1.6%
Hang Seng 19,690.20 18,892.79 797.41 4.2%
S&P 500 1,365.00 1,360.02 4.98 0.4%
Yahoo! Jewelry 928.33 926.34 1.99 0

Rapaport Weekly Market Comment Aug. 10, 2012

Diamond trading very quiet with deep concern about Far East and Indian demand ahead of the Mumbai and Hong Kong shows. Indian cutters under pressure to keep workers while demand is below capacity and liquidity is tight. Unity Marketing reports U.S. luxury spending -27% in 2Q. Rio Tinto’s 1H diamond revenue +12% to $350M, loss of $38M vs. loss of $10M in previous year. Sarin Technologies’ 2Q revenue +16% to $18M, profit +31% to $7M. U.S. June polished imports -15% to $1.6B, exports -6% to $2.2B. Belgium’s July polished exports -20% to $1.3B, rough imports -45% to $785M. Japan’s June polished imports +28% to $91M. Botswana’s June diamond exports -51% to $353M.

RapNet Data: Aug. 9

Diamonds 975,412
Value $6,149,846,545
Carats 1,031,069
Average Discount -27.40%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

August
29
Wed

Rapaport Intl. Diamond Conference 2012

Mumbai, India
• Diamond Prices
• Diamonds as an Investment
• The Branding Opportunity

Registration is now open. Visit www.diamonds.net/idc for more details or call: +91-22-6627-2618

Aug-Sep
29-5
Wed-Wed

Rapaport Melee Auction

New York & Belgium

View details.

Aug-Sep
29-5
Wed-Wed

Rapaport Single Stone Auction

New York & Israel

View details.

QUOTE OF THE WEEK
When consumers choose to part with their jewelry in exchange for cash, it is often a difficult decision made during hard economic times. Our laws protect those consumers, by helping to ensure transparency by jewelers who price, weigh, and evaluate the precious metals brought in by individuals seeking to sell them. Jewelers who fail to comply with these laws will be held accountable.

Jeffrey S. Chiesa | NJ State Attorney General

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. View jobs now.

INDUSTRY 	  

Forevermark Prepares The Center Of My Universe

WATCH NOW: Charles Stanley, the president of Forevermark U.S., discusses how the diamond brand will engage retail partners and consumers heading into Christmas season for its new The Center of My Universe™ product concept. The Forevermark campaign includes video commercials online, on television and in stores, and cinema engagement. Spots will offer a variety of high-impact digital video placements and can be customized for partners. The Center of My Universe depicts the halo setting, anchored with a Forevermark center stone surrounded by small diamonds.

RETAIL & WHOLESALE 	  

Retail Sales

July Comps July Sales Total $Mil.
Bon Ton 0% -0.1% $173
Costco 7% 8% $7,250
Kohls 1.7% 3.4% $1,161
Macys 4.1% 5.1% $1,693
Nordstrom 0.9% 1.1% $1,000
Saks 3.5% 5.1% $201
Target 3.1% 3.2% $4,995
Quarterly Comps Quarterly Sales
Dillards 3% 2% $1,456
Kohls -2.7% -1% $4,210
Macys 3% 3% $6,118
Neiman Marcus 7.9% 9.3% $1,010
Nordstrom 4.5% 7.4% $2,920
Target 3.1% 3.5% $16,451
FY12 Comps FY12 Sales
Neiman Marcus 7.9% 8.6% $4,350

U.S. Affluent Consumer Spending -27%

Unity Marketing revealed that wealthy U.S. consumers are growing more nervous about their financial status and they dramatically reduced spending in the second quarter. The research and marketing firm will release its detailed report, including the latest Luxury Consumption Index (LCI), on August 21. The group observed that affluent consumers cut their luxury spending for the April through June period by 27% year on year. This level of spending was also down 8.2% from the first quarter. Spending by ultra-affluents this past quarter dropped to its lowest level since 2008. Unity Marketing expects challenges for luxury brands to continue for at least the next six months, especially as lower-income high earners not rich yet or HENRYs, have also reigned in their spending.

Pandoras Profit -90%

Pandora reported that sales fell 10 percent year on year to $210 million during the second quarter. Profit slumped 90% to $10.5 million. Pandora’s sales in the Americas plummeted 14.6% in local currency, European sales dropped 17.4% in terms of euro and sales dropped 14% across the Asia Pacific in local currency. Company profit was impacted by a stock re-balancing campaign that Pandora launched in the first quarter, during which it accepted returns of discontinued products valued at $30.5 million and replaced it with inventory worth $51.7 million.

TBZ Reports 2Q Results

Tribhovandas Bhimji Zaveri Ltd. (TBZ) reported sales of $50.6 million and a profit of $2.9 million during its first fiscal quarter that ended on June 30, and it was the first reporting period since the company went public. TBZ stated that it maintained a net profit margin of 5.7%, helped by a carefully monitored sales mix of gold and diamond jewelry. TBZ in April raised approximately $36 million through an IPO.

Sothebys Profit -33%

Sothebys reported an 18% year on year decline in second quarter revenue at $303.9 million and, subsequently, profit fell 33% to $85.4 million. Lower revenue and net income reflected a decrease in net auction sales when compared with one year ago. In particular, Sothebys noted a 67% decline in single-owner sales volume in the second quarter and a 55% decline for the first half. Revenue for the first six months of the year fell 16% to $408.9 million and profit declined 42% to $74.8 million.

Fitch Downgrades Indias Retail

Fitch Ratings downgraded its outlook for the Indian retail sector to “negative” from ‎‎“stable” for the second half of 2012. Fitch cited sustained ‎deterioration in discretionary spending, deceleration of same-store sales and tighter margins as the main factors. The agency warned retailers to contain debt levels and advised as an alternative to financing expansion, they should raise equity and sell non-core assets.

Banks Withdraw Capital From Classic Diamonds

Classic Diamonds (India) Ltd. reported that a consortium of bankers withdrew working capital and export financing facilities and demanding repayment of outstanding balances.‎ Classic Diamonds is in the process of negotiating arrangements with the banks, according to the company. The firm closed its diamond cutting and polishing factory in Surat and its jewelry manufacturing ‎facility in Mumbai’s SEEPZ location. Sales in fiscal 2012 fell 55% to $41 million and it posted a loss of $5.5 million compared with a profit of $1 million the previous year.

Neimans to Launch Rachel Zoe Jewelry

Neiman Marcus will add a new vintage-inspired costume jewelry line designed by Rachel Zoe to its offerings in the fall. The collection will be exclusively available at Neiman Marcus and Bergdorf Goodman and consist of statement rings, cuffs, necklaces, and earrings. Coinciding with the jewelry launch, NeimanMarcus.com created a clickable video from which customers can shop in addition to a special tab on Facebook with related content.

GENERAL 	  

Feds Arrest Jeweler for Fraud

Tejas Mehta, 36, the owner of Saritijediam Inc., doing business as Design Trends in New York, was arrested by federal official and accused of using a forged U.S. Customs and Border Protection seal to allegedly steal approximately $1 million in goods from dealers. Prosecutors alleged that Mehta would receive diamonds, jewelry and precious stones on memo, sell the goods, but then tell suppliers that the diamonds had been seized by U.S. authorities.

NJ Cites 12 Jewelers for Violations

Twelve jewelers in New Jersey face allegations that they violated laws protecting consumers who sought to trade precious metal for cash. The New Jersey Division of Consumer Affairs, State Office of Weights and Measures, the Passaic County Prosecutor’s Office, and the Wayne Police Department announced 171 state civil complaints and 30 municipal code violations against the dozen retailers, following a joint undercover sting operation dubbed “Operation Going for Gold.” Each state violation carries a maximum penalty of $500. The Wayne Township municipal code violations each carry a potential penalty of up to $2,000, as well as up to 90 days incarceration, or 90 days community service.

New Jersey law requires that the buyer must weigh the precious metals and test their fineness, within clear sight of the seller. The buyer must also use a scale that has been certified by the Office of Weights and Measures and must post a sign clearly showing the prices he or she offers, by weight and fineness, for various precious metals. New Jersey also requires that the seller must obtain proof of identification from the seller and create a serialized receipt that includes the date of the transaction; the name, address, and signature of the seller; the name and address of the buyer; and the types of precious metals purchased, their weight and fineness, and the prices paid. The buyer must give the seller a copy of the receipt, and must keep another copy for the buyer’s own records for at least one year. The buyer also must retain any precious metals in the form in which they were purchased, for no less than two business days.

USPTO Grants Patent to Gemshares

The U.S. Patent & Trademark Office (USPTO) issued patent number 08239211 to Gemshares LLC of Chicago, Illinois for a process in which investment-grade natural and synthetic gemstones can be identified for use in financial investments and commercial trading. The invention relates to a method of standardization of natural or synthetic diamonds, rubies, sapphires and emeralds in order to enable the delivery of a standardized, fungible and certified global investment-grade gemstone, or basket of gemstones, which then can be used in futures contracts, options, exchange-traded funds or any other regulated or unregulated financial vehicle.

The patented process involves grouping diamonds in an investment standard according to their gemological, proportional, optical and light behavior characteristics. Diamonds that conform to the investment-grade standard are interchangeable within a specific size range, according to an equivalent monetary bundling process, the filing stated. Diamond characteristics will be classified using the Gemological Institute of Americas (GIA) Diamond Grading Reports; however, other recognized gemological grading standards may be used as long as the characteristics are substantially similar to the standards used by the GIA or can be correlated, according to the inventors. The patented vehicle listed preferred sizes of 0.50 carats to 2.20 carats, but they remained flexible to include stones of 0.25 carats and those greater than 3 carats in order to keep consistent with a basket of gemstones.

Shabangu, Milovanovic to Speak at Congress

South Africas Minster of Mineral Resources, Susan Shabangu (pictured), and the Kimberley Process chair, Gillian Milovanovic, will present their viewpoints on key industry issues at the 35th World Diamond Congress organized by the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA). The congress will take place between October 14 and 17, in Mumbai and is being hosted by the Bharat Diamond Bourse (BDB) and the Gem & Jewellery Export Promotion Council (GJEPC).

MINING 	  

Rio Tintos Diamond Sales +12%

Rio Tintos diamond business revenue rose 12% year on ‎year to $350 million during the first six months of 2012. Diamond operations recorded a net loss of $38 million compared with a ‎loss of $10 million the previous year. Diamond production for the first half of 2012 rose 18% ‎to 6.167 million carats across its three diamond mines. Rio Tinto owns the Argyle mine in ‎Australia, a 60 percent stake in the Diavik mine in Canada, and 78 percent share in the ‎Murowa mine in Zimbabwe. The company did not provide an update regarding its ‎intention to sell its diamond assets.‎

Catoca Production -1% in 2011

Catoca mine production rose 1% year on year to 6.780 million ‎carats in 2011, but the volume of carats sold fell 1% to 6.758 million. Sales rose 16% to $611.3 million with ‎the average price per carat up 18% to $90.45. Catoca’s net profit increased 27% to $141.6 million. Prices for rough diamonds remained volatile during the year, with the average price achieved at its sale in January 2011 at ‎‎$88.09 per carat; by June it had increased to $95.22 per carat and then to $97.51 per carat in ‎September before falling to $89.55 at its final sale of the year in December. ‎

De Beers, Trans Hex Rework Agreement

De Beers entered into an amended sales agreement with Trans Hex for the Namaqualand Mines in South Africa. The parties agreed that De Beers will retain the Buffels marine mining rights and Trans Hex will acquire the balance of the Namaqualand Mines mining and prospecting rights and associated environmental rehabilitation liabilities. The transaction, excluding Buffels, is valued at $20 million. Both parties have also entered in to an option agreement whereas Tran Hexs subsidiary, Emerald Panther Investments, could take ownership of Buffels within the next four years and it will also have an additional two year preemptive period to acquire Buffels should a transaction not transpire.

Afri-Can Closes Financing

Afri-Can Marine Minerals Corporation closed a second tranche of a $1 million brokered private placement announced in April through Trinity Assets Management International Ltd. The closing of another $1 million is expected shortly, according to the company. The firm also raised $435,480 by way of a non-brokered private placement. To date, Afri-Can Marine has raised aggregate gross proceeds of $2,435,480 from private placements.

STATS 	  

U.S.A.

June $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,621 -15% $10,473 -7%
Polished exports $2,233 -6% $8,987 4%
Net imports ($612) $1,487 -22%

Rough imports $53 10% $255 -22%
Rough exports $28 -30% $183 -19%
Net imports $25 212% $75 -29%

Net diamond account ($587) $1,562 -23%

Belgium

July $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,252 -20% $8,268 -7%
Polished imports $943 -20% $8,085 0%
Net exports $309 -19% $183 -78%

Rough imports $785 -45% $7,330 -14%
Rough exports $1,230 -43% $8,259 -14%
Net imports ($445) 0% ($929) 17%

Net diamond account $754 -9% $1,112 -43%

Japan

July $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $91 28% $440 20%

Botswana

June $Mil. %Chng. YTD $Mil. %Chng.
Rough exports $353 -51% $1,890 -29%

ECONWATCH 	  

Diamond Industry Stock Report

U.S. retail shares rallied after weeks of poor performace. Several shares rose by double digits including Blue Nile (34.3%), Movado Group (18.2%), Sotheby’s (12.1%), and Signet (12.1%) Read the extended industry stock report for this past week.
Aug. 9 Aug. 3 Chng.
$1 = Euro 0.810 0.820 -0.010
$1 = Rupee 55.17 55.80 -0.6
$1 = Israel Shekel 3.99 4.02 -0.03
$1 = Rand 8.09 8.35 -0.26
$1 = Canadian Dollar 0.99 1.00 -0.01

Precious Metals
Gold $1,616.90 $1,588.90 $28.00
Platinum $1,409.00 $1,385.00 $24.00

Stock Indexes Chng.
BSE 17,560.87 17,224.36 336.51 2.0%
Dow Jones 13,165.19 12,878.88 286.31 2.2%
FTSE 5,851.51 5,662.30 189.21 3.3%
Hang Seng 20,269.47 19,690.20 579.27 2.9%
S&P 500 1,402.80 1,365.00 37.80 2.8%
Yahoo! Jewelry 970.01 928.33 41.68 4.5%

RAPAPORT... The Gemological Institute of America (GIA) held a jewelry career fair in New York on July 30, attracting 800 job seekers and 44 companies to the Javits Center. It was the first time since 2008 that GIA held a career fair in New York.

“I’m happy to report that our industry is wide and diverse – valued at over $160 billion last year; sila vo svete...... growing even through difficult times,” said Donna Baker, GIA’s president, during her opening remarks to attendees. “And the U.S. is only one market. China, India and the Middle East are expanding rapidly, and so are opportunities.”

The event kicked off with “Job Success in Today’s Market,” a special panel discussion moderated by Baker. Panelists David Yurman, founder of David Yurman Inc.; Ann Arnold, of Lieberfarb; Lex Graham, a recent GIA graduate and retail jeweler at Betteridge; and Rahul Kadakia, jewelry department head at Christie’s New York, shared their experiences in the gem and jewelry business and offered advice for newcomers.

GIA noted that companies recruiting at this event included Harry Winston, Ivanka Trump Fine Jewelry, Montblanc, Saks Fifth Avenue, Tiffany & Co. and Zale Corporation. The Jewelers for Veterans Foundation was also present to meet with and assist U.S. military veterans in their job search.

GIA hosted its first jewelry career fair in 1991 in Santa Monica, California. Since that time, the event has expanded and linked recruiters with future employees at more than 40 events worldwide in Bangalore, Las Vegas, Mumbai, New York and the current GIA world headquarters in Carlsbad, where the next career fair will take place on October 5.