Rapaport Weekly Market Comment June 21, 2013

Diamond trading weak with very low expectations for Hong Kong show and Indian market under pressure due to record low rupee (59.9/$1) and tight liquidity. Far East market very slow and selective with Chinese buyers moving to memo. Chow Tai Fook projects continued economic uncertainty as FY2013 revenue +2% to $7.4B, profit -17% to $730M. ALROSA 1Q sales +6% to $1.2B, profit -59% to $162M, production -8% to 7.5M cts. Catoca mine 2012 sales -5% to $579M, profit -7% to $132M, production -1% to 6.7M cts. India’s May polished exports +43% to $1.8B, rough imports +45% to $1.6B, polished imports +172% to $537M.

RapNet Data: June 20

Diamonds 1,051,818
Value $6,670,864,863
Carats 1,133,942
Average Discount -27.19%

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QUOTE OF THE WEEK
Angola is very determined to eradicate strongly any violation of human rights, which directly would be linked to the production of diamonds. The eviction of illegal workers coming to search diamonds on Angolan territory is a delicate exercise but can and will in no way compromise our living up to the high standards on the compliance with fundamental human rights.

Rui Mangueira | Minister of Justice, Angola

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INDUSTRY 	  

De Beers Sight

The De Beers June sight had an estimated value of $540 million and signaled cautious cutting-center sentiment as the rupee’s depreciation has weighed on the Indian market and overall liquidity. Feedback from the sight indicated that De Beers maintained stable prices in June with minor adjustments. Manufacturers claim margins are nil and rough is becoming less available, so they are focusing on trading more polished goods anyhow. Rapaport estimates that for the first six months of 2012, De Beers rough sales have fallen about 6% to $2.89 billion.

Angola Hosts Centenary Conference

Angolas vice president Manuel Domingos Vicente (pictured) said the country desires to become vice chair of the Kimberley Process (KP) for 2014, a measure that will be considered during the next plenary. Additionally, he said Angola’s objectives for the diamond sector including bringing added value to mining and diversifying the sector to explore diamond-cutting, polishing and jewelry manufacturing. After 100 years of diamond mining, Angola has only developed three kimberlite mines, meaning the potential is very high for the discovery of new diamond mines.

Mining partner ALROSA, contended that the geology in the Lunda-Norte region is similar to that of Russia’s Nakyn territory, where kimberlite pipes were discovered in the past 15 years.

Earlier in the week, Angola condemned a report by non-governmental organization (NGO) BICC that alleged the country was involved in human rights abuses. The BICC published ‘’Legacy of a resource-fueled war: The role of generals in Angola’s mining sector,’’ alleging that Angola’s army generals operate in Angola’s mining sector and practice abusive measures. The government noted that the last KP review in 2009 even commended Angola for its positive contribution to the living standards of its people, following increased revenue from diamond mining activities. Furthermore, the KP confirmed that Angola’s investment climate is favorable. There is peace and freedom of movement of the country’s people, services and judicial protection of private investments and legal guarantees to protect reinvestment and repatriation of financial assets.

Jewelry CPI Flat in May

The U.S. consumer price index (CPI) for jewelry was unchanged in May compared with one year ago at 175.4 points. The monthly reading was the first so far this year that did not register a decline, following a 1% drop in April, a 3% contraction in March and February and a 4% decline in January. Nonetheless, the CPI in May maintained a historically strong trend, registering the 29th consecutive month of more than 170 points.

The CPI for jewelry reached a record 183 points in January 2012, but then prices for polished diamonds, gold and platinum remained under pressure throughout the year. Diamond prices, in particular, have since stabilized, according to Rapaport Research. But gold plummeted in April and remained volatile throughout May.

RETAIL & WHOLESALE 	  

Chow Tai Fooks FY Revenue +2%, Profit Drop

Chow Tai Fooks revenue climbed 1.5% year on year to $7.4 billion for the fiscal year that ended on March 31; however, same-store sales fell 3.3%. Cost of goods increased 2.6% to $5.4 billion and gross margin fell to 28.4% from 29.1% one year earlier. Profit fell 17.1% to $730 million, or 7 cents (HKD 0.551) per share.
By product segment, Chow Tai Fook recorded a 14% decline in gem-set jewelry sales at $1.7 billion, but gold product sales jumped 11% to $4.3 billion. Platinum and gold item sales improved almost 7% to $1 billion. Watch sales dropped 18% to $387 million.

The company noted that the Hong Kong and Macau markets faced considerable business challenges in the year, due to weakening consumer sentiment in both Hong Kong and from Mainland Chinese visitors. Consumers tended to purchase a higher ratio of jewelry items necessary for special events and festive celebrations, such as gold wedding jewelry. Their purchases also shifted from high-end luxury jewelry pieces to mass jewelry products with an average selling range of $255 (HKD 2,000) to $1,300 (HKD100,000). Additionally, revenue settlement currencies indicated that Mainland Chinese visitors out-purchased Hong Kong locals and became the major source of revenue in Hong Kong and Macau.
Signet Approves Share Buy Back

Signet Jewelers Ltd. intends to repurchase $350 million of its common shares. The repurchase program will be funded through the company’s existing cash reserves and liquidity sources. The company has also approved a quarterly dividend of 15 cents per share, which will be paid on August 28 to shareholders of record on August 2.

Low Margins Threaten Surat Firms

India’s Gem & Jewellery Export Promotion Council (GJEPC) warned that Surats factories face closure if manufacturing profit margins don’t improve. The GJEPC urged the industry to ensure profitability across the pipeline given that rough prices have increased by an average 12% so far in 2013, while polished prices have been out of step, even by global inflation.

Already, Surats manufacturers report downsizing their operations. One large Surat-based manufacturer told Rapaport News recently that cutters are frustrated that there has been no profit at the manufacturing level. Indian cutters supplying goods to the domestic market have been further impacted by the recent sharp depreciation of the rupee against the U.S. dollar. The rupee hit a record low of 59.9/$1 on Thursday and has now declined by more than 8% in the current quarter.

Retail Execs Eye Growth Opportunities

U.S. retail executives are planning to increase capital spending this year and they placed a strong emphasis on the use of technology to manage the enterprise, according to the 2013 Retail Outlook Survey by KPMG LLP. The survey noted that 58% of retail executives will increase capital outlays in 2013 and 27 percent expect capital investment to remain the same as it was in 2012. Fifteen percent plan to reduce capital spending. More than 60% expect to focus capital on geographic expansion plans, while 40% will invest in technology and 24% will add to their advertising and marketing programs, according to the surveys results.

The most important technology-related trend that is having a significant impact on retail businesses, was social media, cited by 71% of executives, followed by mobile and online shopping at 52%, and mobile and online promotions and coupons at 51%. Additionally, KPMG found a 13% jump in the number of executives who said their companies are using social media to reach more customers and explore new ways of doing business compared with 2012.

Only 32% of executives said the use of instore mobile technology was having a great impact on their business, while 18% said the ability to scan QR codes and 16% said mobile payments were resulting in a positive impact at stores. Showrooming was having a significant impact on just 12% of those surveyed.

KPMG confirmed that data and analytics provided a great opportunity for retailers; for example, executives most frequently cited that data analytics played a key role in helping provide customer insight (72%), as well as in the areas of branding and product management (67%) and pricing decisions (56%). Executives also said they used data to drive operational excellence and actionable insights (50%), and acquire customers (36%). However, a gap exists between this opportunity and retailers ability to realize opportunity, as 43% of respondents rated their companies data analytics literacy as only average, according to the survey.

Opposition Grows for Online Tax

The Marketplace Fairness Act, which passed the Senate in May, faces growing opposition in the House as opponents argue the online sales tax would be unconstitutional in forcing online merchants to collect sales taxes for other states. House Rep. Ron DeSantis, a Florida Republican, labeled the Act taxation without representation and requires online businesses to pay in jurisdictions where they are not permitted to vote. Opponents of the measure also argue that collecting sales tax from nearly 10,000 different jurisdictions would overburden small retailers.

However, the National Governors Association supports the measure as it would shut down virtual showrooms online in favor of local brick-and-mortar shops in their states. Jewelers of America and the National Retail Federation, among others, support the bill, claiming that added taxation levels the playing field for retailers on and offline. Internet retailers by in large are challenging the measure, including auction behemoth eBay Inc., whose CEO strongly condemned the measure and urged Congress to vote against the bill, saying that compliance costs would impossible for small retailers.

House Speaker John A. Boehner, an Ohio Republican, has not yet confirmed if hell take up the bill this year, but he is expected to require a majority of Republicans to support the measure before calling for a vote.
Analysts Upgrades Blue Nile

William Blair upgraded its rating for Blue Nile to "Outperform" from "Market Perform" and noted that improving economic conditions and solid second-quarter trends could benefit the online jewelry company. Analyst Milke Miller noted that he is also upbeat on the second quarter, as it includes Mothers Day known to be Blue Niles third most-significant holiday of the year behind Christmas and Valentines Day.

PPR Changes to Kering

Shareholders of luxury retail group PPR approved the companys name change to Kering. The company announced the intent to change its name in March to reflect a new identity. Kering operates the Gucci, Bottega Veneta, Saint Laurent, Alexander McQueen, McQ, Balenciaga, Brioni, Christopher Kane, Stella McCartney, Sergio Rossi, Boucheron, Girard-Perregaux, JeanRichard, Qeelin, Puma, Volcom, Cobra, Electric and Tretorn brands. Fiscal revenue for the most recent reporting year totaled $13 billion. Kerings new ticker on Euronext Paris is KER.PA.

GENERAL 	  

Onex Completes Acquisition of JA, Couture Parent

Private equity firm Onex Corporation completed a $950 million purchase of Nielsen Expositions from its parent company Nielsen Holdings N.V. and will name the group Emerald Expositions. Nielsen Expositions is the parent of JA New York, Special Delivery, the Couture show and National Jeweler, among other trade show and media properties. Onex Partners III, Onex’ $4.7 billion private equity fund, contributed approximately $350 million towards the purchase, $85 million of which was Onex’s share as a limited partner.

Chen Names Briolette Diamond The Star of China

Tiffany Chen, the vice chairman of China Star Entertainment Limited, is the new owner of the 75.36-carat briolette diamond that Christies Hong Kong sold in May for a record of $11,151,245. Chen named the diamond The Star of China in honor of China Star Entertainment, Christies revealed.

The Star of China was the top lot sold at Christies sale of magnificent jewels in Hong Kong on May 28, and it is certified by the Gemological Institute of America (GIA) to be D color and type IIa. The diamond is part of a pendant necklace that includes a marquise-cut purplish pink diamond suspended above the briolette.

Graff Makes Queen’s Honor’s List

Queen Elizabeths annual birthday honors list included a few of the U.K.s jewelry industry members for 2013. Laurence Graff (pictured), founder of Graff Diamonds topped the list and received an OBE, or Officer of the Order of the British Empire, for his services to the jewelry industry. Members of the Order of the British Empire (MBEs) were awarded to Rebecca Astley-Clarke, founder of Astley Clarke Luxury Jewellery and jewelry artisan Pippa Small for their services to the jewelry industry and charitable causes. Two wardens of The Birmingham Assay Office were also recognized.

MINING 	  

ALROSA’s 1Q Sales Rise, Profit Plunges

ALROSA reported that sales rose 6.4% year on year to $1.2 billion for the first quarter that ended on March 31, and as filed under International Financial Reporting Standards (IFRS). ALROSAs cost of sales jumped 12.1% to $625 million. Profit plunged 59% to $162 million.

Revenue from the sale of diamonds that were exported rose 11.2% to $936 million and domestic diamond sales fell 18.5% to $180 million. Revenue from diamonds for resale inched up 2.9% to $8.9 million. Meanwhile, revenue from other businesses and construction improved slightly, but decreased for the categories of social infrastructure, transportation and trading.

Inventory levels rose 1.7% to $1.7 billion, short term debt was $1.2 billion (RUB 39.6 billion) in March compared with $1 billion (RUB 32.3 billion) in December and long term debt was $2.9 billion (RUB 92.7 billion) in March, which was up from $2.8 billion (RUB 90.4 billion) in December.

Following the results, Yakutia’s President Yegor Borisov said that ALROSA would remain in federal ownership and the government is drafting a decree to exclude the diamond miner from being privatized.

Rio Tinto Happy to Keep Diamond Unit

Rio Tinto is in no rush to sell its diamond unit and would rather focus on cost-cutting other parts of its business, the companys chief executive Sam Walsh said. In his first interview since taking the helm of Rio Tinto, Walsh told The Telegraph that he would be quite happy to keep the companys diamond unit.

Recent media reports indicated that, following unsuccessful attempts to attain a compelling offer from an outside buyer, the company was looking to float its diamond division on the London Stock Exchange. There was even speculation that such an offering would take place as early as the third quarter of this year, and was part of a wider effort at Rio Tinto to divest from its underperforming and non-strategic assets.

True North Closes Partial Tranche

True North Gems Inc. confirmed the partial closing of its second tranche on a previously announced financing arrangement for $2,441,964 through the sale of 27,132,938 class A shares. The remainder of the second tranche is expected to close by the end of June and will see Lenomi Holding Limited hold approximately 19.9 percent of True Norths issued and outstanding shares. This week, shareholders approved True North Gems third tranche of the financing, which is expected to take place on or before August 1. Upon completion, Lenomi will hold approximately 45 percent of True Norths issued and outstanding shares. Proceeds will advance the development of True Norths Aappaluttoq ruby project in Greenland as well as general working capital.

Diamcor Raises $2M

Diamcor Mining Inc. closed a non-brokered private placement of up to 1.5 million units, which was oversubscribed by 87,784, at a price of $1.25 per unit for gross proceeds of $1,984,730. Each unit consists of one common share and one-half of one common share purchase warrant. Proceeds from the offering will be used in support of the continued advancement of the companys Krone-Endora at Venetia diamond project in South Africa.

Cuthbert Joins Diamond Fields 

Diamond Fields International Ltd. appointed Michael Cuthbert as its new chairman to replace Wayne Malouf who is leaving the company. Cuthbert is a former partner of Clifford Chance LLP and served as regional managing partner and a member of its management committee responsible for its Russian and Central European operations as well as a managing partner of its New York office. Cuthbert specialized in corporate finance, mergers and acquisitions, and equity capital markets, with specific emphasis on the mining industry.

ECONWATCH 	  

Diamond Industry Stock Report

Broad-based selloff across all geographies. All industry stocks were lower except for Goenka (+1%), Lypsa (0%), Rajesh (+6%), Titan (+6%), Michael Hill (+1%), Lucara (+2%), Mountain Province (+1%), Peregrine (+2%), Rockwell (+12%), Firestone (+3%) and Gemfields (+1%). View the extended stock report.

June 20 June 13 Chng.
$1 = Euro 0.758 0.748 0.010
$1 = Rupee 59.58 58.00 1.6
$1 = Israel Shekel 3.64 3.61 0.03
$1 = Rand 10.29 9.86 0.43
$1 = Canadian Dollar 1.04 1.02 0.02

Precious Metals
Gold $1,281.00 $1,384.50 -$103.50
Platinum $1,361.00 $1,453.00 -$92.00

Stock Indexes Chng.
BSE 18,719.28 18,827.16 -107.88 -0.6%
Dow Jones 14,758.32 15,176.08 -417.76 -2.8%
FTSE 6,159.51 6,304.63 -145.12 -2.3%
Hang Seng 20,382.87 20,887.04 -504.17 -2.4%
S&P 500 1,588.19 1,636.36 -48.17 -2.9%
Yahoo! Jewelry 910.76 904.88 5.88 0.6%

Rapaport Weekly Market Comment June 28, 2013

CAUTION: Polished prices coming under severe pressure due to Indian currency and liquidity difficulties and very weak Chinese, Far East and Indian demand. U.S. holding up the market. 25,000 Indian cutters lose jobs as weak rupee forces diamond manufacturers to stop buying rough at unsustainable high prices. Indian jewelry companies slump in value with Gitanjali shares down 43% in past week. Gold, silver fall to three year lows. ALROSA, ENDIAMA form joint venture for Angola exploration. Rio Tinto to keep diamond unit following one-year review.

RapNet Data: June 27

Diamonds 1,058,398
Value $6,671,749,231
Carats 1,134,625
Average Discount -27.39%

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QUOTE OF THE WEEK
The medium to long-term market fundamentals for diamonds remain robust, fuelled by growing demand for luxury goods in Asia and continuing strong demand in North America. We have valuable, high-quality diamonds businesses that are well positioned to capitalise on the positive market outlook. After considering a number of alternative strategic ownership options it is clear the best path to generate maximum value for our shareholders is to retain these businesses.

Alan Davies | Rio Tinto Diamonds

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INDUSTRY 	  

Jewelry Maintains Investment Allure

Capgemini and RBC Wealth Management released its annual World Wealth Report for the year 2013 and found that the world’s high-net-worth-individuals (HNWIs), or those with $1 million or more in investable assets reached a new high of 12 million in 2012. HNWIs benefited from strong stock market returns and they expressed a high degree of confidence in being able to generate new forms of wealth this year and in the future.

Already for the first quarter of 2013, jewelry, gems and watches remained the HNWIs most preferred investment of passion for a second year, representing 31.6 percent of allocated funds. According to the report, collectibles, such as coins, wine and antiques, accounted for 24.4 percent of investment, while luxury automobiles, boats and jets accounted for 19 percent of allocated passion investments. HNWIs reserved 16.9 percent of allocated passion funds for artwork and 8 percent for sports-related investments.

The report concluded that art remains one of the most dynamic passion markets, especially in the emerging economies and is increasingly becoming a meaningful element of HNWI portfolios.

Rapaport Fair Trade Conference

WATCH NOW: How can you make sure the diamonds and gold you sell are legitimate and legally sourced? The Rapaport Source Certification Framework and the Responsible Jewellery Councils chain-of-custody certification offer real world solutions that will enhance your reputation. The Rapaport Fair Trade Jewelry Conference hosted an expert panel to address these important issues.

Morgan Stanley Lowers Guidance for Gold 

Morgan Stanley lowered its 2013 gold price guidance by 5 percent to $1,409 an ounce and slashed its forecast for 2014 by 16 percent to $1,313 an ounce. Morgan Stanley also dramatically revised its guidance lower for silver, dropping the price 14 percent this year to $23.39 an ounce and the forecast contracts another 29 percent in 2014 to $21.01 an ounce.

RETAIL & WHOLESALE 	  

Birks & Mayors FY Sales -3%

Birks & Mayors Inc. reported that revenue fell 3 percent year on year to $292.8 million for the fiscal year that ended on March 30, however, same-store sales rose 4 percent. Comparable-store sales in Canada surged 7 percent during the fiscal year and rose 2 percent for the companys U.S. operations. Profit rose to $1.5 million, or 11 cents per share, from $219,000, or 2 cents per share, one year earlier. During the fiscal year, Birks & Mayors lowered the level of inventory 4 percent to $137 million, primarily due to store closures and changes in the product mix, and reduced its longterm debt 16 percent to $38.1 million.

Neimans Eyes IPO

Luxury retailer Neiman Marcus Inc. filed the necessary regulatory plans to launch an initial public offering (IPO) for as much as $100 million in stock, which is a standard filing figure. The number of shares to be offered and the price range for the proposed offering have not yet been determined. The offering will be made only by means of a prospectus.

TPG and Warburg acquired Neiman Marcus in early October 2005 for $5.1 billion and took the luxury retailer private at that time.

Neiman Marcus no longer reports monthly sales figures, but for the most recent quarter that ended on April 27, revenue rose 3.7 percent year on year to $1.1 billion and same-store sales increased 3.6 percent. Operating earnings increased 2.5 percent to $150.3 million and profit rose 13 percent to $70.8 million.

Richline Receives Tax Incentive

Richline Group Inc., a subsidiary of Berkshire Hathaway Inc., received $400,000 in tax credits in support of advancing its Attleboro, Massachusetts, jewelry plant. Richline plans to invest $3.6 million in new manufacturing equipment and interior building improvements, along with adding 100 new jobs. Richline purchased the plant from the Cookson Group in 2012 and the Massachusetts Economic ¬Assistance Coordinating Council approved the tax breaks.

Choksi Weighs Gold Import Issue

Mehul Choksi, the chairman and managing director of the Gitanjali Group, said that recent Indian policy on gold imports had a major impact, while domestic supply has virtually been wiped out, very few banks are delivering gold for exports. The Gitanjali Group believes that measures for reducing gold imports need to be supported.

However, the government needs to address the issue of how the current account deficit can be reined in without impacting the jewelry industry, he said.

Gitanjali plans to increase its diamond jewelry sales, which have better value addition of 25 percent to 30 percent. Although this change in category mix will have impact on sales, the margins are expected to not only remain intact but also be better than estimates. Gitanjali also plans to introduce lower category of 9-karat or 11-karat gold and diamond jewelry in the Indian market. The company also plans to increase its store presence in the U.S., Middle East, China and Japan, which have a positive outlook and have grown by nearly 15 percent in the past year.

Forevermark Expands U.S. Offerings 

WATCH NOW: Forevermark U.S. is adding numerous options to its offerings in terms of diamond cuts (including colored stones) and jewelry designs, and it continues to expand its retail partner network. Charles Stanley, the president of Forevermark U.S., provides insight into diamond jewelry trends and marketing efforts underway as it measures new campaigns targeting various demographic groups in both bridal and post-bridal segments.

De Beers Unveils Moments of Light

De Beers unveiled its “Moments in Light” exhibition in Shanghai to celebrate talented women. De Beers invited Chinese artists Cui Xiuwen, Liang Yuanwei, Han Yajuan and Peng Wei, to express the “Moments in Light” in their own lives through artwork. Additionally, Xiang Jing, a renowned sculptor and photographer, captured each of these women in unique photos that reflect the personalities of the artists, which are also on display at the exhibition.

During the opening of the exhibition, actress Zhang Jingchu showcased a teaser of the first film she has written and directed as well as performed in: a short film created for De Beers to illuminate her “Moments in Light.”

Lazare Kaplan Wins Appeal

The United States Court of Appeals for the Second Circuit issued a summary order in support of Lazare Kaplan International, vacating the judgment of the District Court and remanding the case for further proceeding. In December 2011, Lazare Kaplan sued KBC Bank and Antwerp Diamond Bank in the United States District Court, Southern District of New York, under the Racketeer Influenced and Corrupt Organizations (RICO) Act and state law. But in September 2012, the court motions made by the defendants to dismiss Lazare Kaplans complaint pursuant to the doctrine of forum non conveniens were awarded. Lazare Kaplan appealed.

Hearts On Fire Launches Two Collections

Diamond brand Hearts On Fire debuted two new fashion-focused collections recently. Modern design elements are featured in the Lorelei and Atlantico collections, both of which marry diamonds with bold yellow and rose gold metals, as well as provide women with the aspiration to layer different Hearts On Fire necklaces, bracelets and more across the various collections. In addition, Hearts On Fire is also introducing more than 25 new bridal designs, including engagement rings in classic solitaire, vintage halo and large luxury styles, that all feature the new Hearts On Fire hidden heart signature.

GENERAL 	  

Kaufman Re-Elected as DDC President

Reuven Kaufman was re-elected the president of the New York Diamond Dealers Club (DDC), the nations largest diamond trading exchange. Kaufman thanked the voters for their support and confidence in his administration. DDC officer Basant Johari was re-elected as the clubs vice president, and Jacob Zupnick was re-elected as club treasurer. Elliot Krischer was elected as the DDCs secretary.

In other election news, Israel Ashkenazy, Shmuel Isaac Bornstein, Solomon Cohen, Gary Dimenstein, Abraham Einhorn, Meilech Fastag, Jack Friedman, Dov Fruchter, Michael Gross, Isaac Jacob, Moshe Lax, Robert Moskovitz, Efraim Reiss, Sol Rybak, Aaron Vagdani and Moshe Zwiebel were elected to the DDCs board of directors. Gershon Fruchter, Isaac Lesser and Charlie Oh were elected to the DDCs control committee.

Rupee Falls to New Low

Indias rupee touched a new record low of nearly 61 to the dollar today and despite government efforts to quell the currencys plunge. In evening trade, the partially-convertible Indian currency hit a new record low of 60.76, before finally ending at 60.72 on Wednesday. The rupee has dropped about 11 percent so far this year. Foreign investors have become net sellers of Indian equities, selling $1.39 billion on balance in June after buying stock worth $4 billion in May. They have also pulled out $4.8 billion from Indias debt markets in June, partly to take advantage of U.S. yields.

AWDC Launches Tigerkidnapping Scheme

In collaboration with Antwerps Police Department, the Antwerp World Diamond Centre Security Office (AWDC SO) launched an integrated anti-tigerkidnapping program and security seminars. The primary objective of the integrated anti-tigerkidnapping program is to explain and assist in the prevention and the procedures that need to be applied in a tigerkidnapping in progress. The program was tailor-made for the Antwerp diamond industry.

Meeus Slams NGOs

Peter Meeus, the chairman of the Dubai Diamond Exchange, which is part of the Dubai Multi Commodities Centre, lashed out at non-government organizations (NGOs) for over scrutinizing the diamond industry. While there was a time when NGOs and the industry worked together, he said, relations have degraded as diamonds became the most controlled commodity in the world, yet NGOs began to fabricate stories that do not have factual substance.

Stories of a torture camp in Zimbabwe’s Marange fields and daily killings in Angola’s Luanda province, are disseminated to the media for publicity and for raising funds, but are blatantly untrue, he said.

“Can anyone give me any other reason why the NGOs do not exercise the same due diligence they ask from rough diamond buyers over their own story suppliers,” he concluded. Moving forward, human rights violations must be verified by financially independent institutions that already have the structures and experience to judge cases of human rights abuses.

Zim Parliament Report Uncovers Issues

A three year long investigation by Zimbabwes parliamentary portfolio committee on the diamond mining industry revealed that the countrys Mines Minister, Obert Mpofu (pictured), conceded the industry is run like "a mafia" globally. The report disclosed irregularities in licensing agreements, lack of transparency and accountability in production and the absence of fiscal contributions.

The report highlighted alleged abuse of office by Mpofu, militarization of the Marange diamond fields, leakages of diamonds and fraudulent partnering processes as some of the problems bedeviling the sector.

In other news, Meikles formed a new mining company called Meikles Centar Mining. The company has long been reported to be eying the lucrative diamond mining sector of Zimbabwe. Earlier this year it applied for a joint venture in diamond mining with the Zimbabwe Mining Development Corporation (ZMDC), which faces U.S. sanctions

Angola Vows Ethical Practices

Angolas President José Eduardo dos Santos assured Africa mining ministers and world diamond leaders of Angolas commitment to uphold the highest possible standards of compliance in the country’s diamond business and confirms the country’s open attitude to foreign investment to benefit the Angolan people.

Santos reaffirmed Angolas commitment to the Kimberley Process and he underlined Angolas open attitude towards foreign investment and a favorable tax regime for diamonds.

Meanwhile, environmental campaigners are urging Angola to halt plans to mine diamonds inside the Luando Reserve, home to the world’s last wild population of a rare antelope, the Giant Sable. The species is listed as “critically endangered” on the Red List of the International Union for Conservation of Nature. The dwindling population of Sables is now under threat following the allocation of prospecting rights to a group of private Angolan diamond companies.

MINING 	  

De Beers to Name Chairman

De Beers expects to appoint a new chairman at its next board meeting in mid-July, according to its CEO, Philippe Mellier. The company has not appointed a replacement since Cynthia Carroll stepped down as CEO of parent company Anglo American in April. The De Beers board meeting will precede the publication of Anglo American’s first half results scheduled for July 26, which will include De Beers financials for the period.

Mellier also confirmed that De Beers has cleared its operational challenges at Jwaneng in Botswana and the Venetia mine in South Africa. A slope failure at Jwaneng in June 2012 caused disruptions in production, which has resumed, and production resumed at the Venetia mine’s main K1 pipe after severe flooding due to rain.

ALROSA, Endiama Strike a Deal

ALROSA and Angolans Endiama signed an agreement to establish a joint venture for prospecting and exploration on diamond deposits in Angola. The cooperative effort will begin work at predetermined diamond targets in 2014. ALROSA has been a strategic partner of Endiama for many years in development of the Catoca diamond mine, which accounts for 6 percent of world diamond production. ALROSA believes there is a huge geological upside in Angola and the probability of new findings is high.

Gem Discovers 100Ct. Rough

Gem Diamonds recovered a 100-carat white, type IIa diamond from the Letšeng mine in Lesotho. During May, the company recovered a 164-carat, D type IIa diamond that sold for $9 million into a partnership arrangement and a 103-carat yellow diamond that was sold at the companys tender.

Gem Diamonds reported that revenue from Letšengs June production achieved a total of $22 million, or an average price of $2,087 per carat, compared with an average price of $1,599 per carat achieved at the first three tenders of the year.

Peregrine Raises $4M

Peregrine Diamonds Ltd. completed its non-brokered private placement of 10 million common shares at a price of 35 cents per share for gross proceeds of $3.5 million. The common shares issued under the private placement are subject to a hold period of four months plus 1 day. No commissions or finders fees were paid on the placement. Proceeds from the private placement will be used for exploration and development of Peregrines projects in Canada and for general working capital purposes.

Diavik Team Wins Event

A Diavik diamond mine rescue team won two events at the 56th annual Workers’ Safety and Compensation Commission mine rescue competition held in Yellowknife, Canada on June 14 and 15. Diavik’s team took first place for the underground obstacle and underground bench/field test events. The underground competition included firefighting, underground obstacle, rope rescue, first-aid, underground bench/field test, underground smoke and written exam tasks. Teams from Diavik, Ekati, Snap Lake and Cantung mines participated in the underground competition with Ekati winning the overall underground competition.

ECONWATCH 	  

Diamond Industry Stock Report

Broad-based selloff continued in India, especially of Gitanjali Gems (-49%), while U.S. was mixed, and Europe strong. Birks & Mayors (+21.8%), Walmart (+3.1%), Movado Group (+2.1%) performed the best in the U.S., while in India, Vaibhav Gems (+7%), C.Mahendra (+4.6%), Goenka Diamond (+4.5%) and Goldiam Intl. (+1%), managed to buck the down trend. View the extended stock report.

June 27 June 20 Chng.
$1 = Euro 0.766 0.758 0.008
$1 = Rupee 59.97 59.58 0.4
$1 = Israel Shekel 3.63 3.64 -0.01
$1 = Rand 9.95 10.29 -0.34
$1 = Canadian Dollar 1.05 1.04 0.01

Precious Metals
Gold $1,199.80 $1,281.00 -$81.20
Platinum $1,314.00 $1,361.00 -$47.00

Stock Indexes Chng.
BSE 18,688.28 18,719.28 -31.00 -0.2%
Dow Jones 14,921.28 14,758.32 162.96 1.1%
FTSE 6,165.45 6,159.51 5.94 0.1%
Hang Seng 20,375.40 20,382.87 -7.47 0.0%
S&P 500 1,606.44 1,588.19 18.25 1.1%
Yahoo! Jewelry 879.93 910.76 -30.83 -3.4%

Rapaport Weekly Market Comment July 12, 2013

Polished trading quiet with Rapaport Melee Index -1% in 2Q. Rough markets cautious ahead of next week’s De Beers and ALROSA sales. Global 2012 rough production -10% in value to $12.6B, volume +4% to 127.9M cts., average price -14% to $98.81/ct. De Beers announces forward contracts for auction clients and will relocate auction HQ to Singapore. Botswana government Okavango auction brings high rough prices challenging De Beers sightholder price levels. Chow Tai Fook 1Q revenue +63% as Chinese gold purchases soar. U.S. May polished imports +22% to $3.2B, polished exports +13% to $1.5B. Dubai 1H rough exports +3% to $3.7B, rough imports +7% to $2.5B.

RapNet Data: July 11

Diamonds 1,069,968
Value $6,793,365,354
Carats 1,158,563
Average Discount -27.64%

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RAPAPORT ANNOUNCEMENTS

July
23-25
Tue-Thu

Rapaport Melee Auction 

New York

www.rapaportauctions.com
August
14
Wed

Rapaport Intl. Diamond Conference 

9:00 a.m. - 7:00 p.m.
Taj Lands End Hotel
Bandra Mumbai, India

Register Now.
August
20-28
Tue-Wed

Rapaport Single Stone Auction

New York & Israel

View details.

QUOTE OF THE WEEK
Offering forward contract sales through our auction platform and moving the base of our auction sales to Singapore, will further enhance our compelling proposition to a diversified global customer base, support our position as the leading distributor of rough diamonds via online auctions, and deepen our insight into rough diamond demand.

Philippe Mellier | De Beers

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 	  

Global Diamond Production -10%

Kimberley Process data for 2012 indicated that global diamond production fell 10 percent by value to $12.64 billion as rough diamond prices slumped. By volume, production rose 10 percent to 127.962 million carats. The average price achieved from global production fell 14 percent to $98.81 per carat.

Botswana ranked No. 1 by value, which fell 24 percent to $2.98 billion, while volume production dropped 10 percent to 20.554 million carats. Russia maintained steady production to retain its position as the top producer by volume and closed the gap toward becoming the No. 1 by value. The country’s production jumped 7 percent to $2.87 billion, while volume fell 0.6 percent to 34.927 million carats. Canada ranked No. 3 with production of 10.450 million carats valued at $2 billion, Angola was No. 4 after mining 8.330 million carats valued at $1.11 billion, followed by South Africa with 7.077 million carats valued at $1.03 billion. The total rough exports by all Kimberley Process member states fell 4 percent to $50.27 billion, while rough imports were flat at $50.92 billion.

Rapaport Melee Index -1%

The Rapaport Melee Index (RMI™) for small diamonds decreased by 1 percent to 134.24 during the second quarter of 2013, however, the index is up 9.6 percent year on year. Overall melee diamond prices increased during the first half of 2013 but have started to decline in the past two months due to tight liquidity and the sharp rupee depreciation. Indian diamond cutters, who are the primary manufacturers of small diamonds, have reduced production and are laying off workers.

Diamond markets are cautious, prices are under pressure, but the market should pick up for small diamonds towards the end of the summer with healthy U.S. demand and as foreign buyers shift to lower qualities and smaller sizes. Rapaport Diamond Auctions sold over 100,000 carats of diamonds for $19.9 million during the second quarter of 2013. Rapaport Auctions continue to provide a safe and reliable platform for sellers to achieve fair market value for their recycled diamonds, while attracting the strongest buyers in the market.

India Extends Duty Exemption

India extended the range of diamonds that can be re-imported for certification without duty charges to include diamonds between sizes of 0.10 carats and 0.25 carats. The amended law states that an exporter with annual export turnover of about $831,289 (INR 50 million) for each of the past three years may export cut and polished diamonds of 0.10-carat and larger to authorized laboratories with re-import facilities at zero duty within three months of the date of export. In January 2012, the government introduced a 2 percent import duty on polished diamonds.

De Beers Starts Forward Contract Sales

De Beers will begin providing customers of its rough diamond auctions with an opportunity to determine the volume of goods they wish to purchase, over a given period, through the introduction of forward contract sales. The company stated that approximately 10 percent of rough diamonds are sold through its auction platform, and while De Beers will continue to hold spot auction events for clients to purchase the type and quantity of the goods they need, forward contract sales will enable customers to engage in more planning and help them to meet their business requirements, according to the firm.

In addition, De Beers will relocate the purchasing, production and sales base for its auctions to Singapore in November 2013. De Beers will also continue to operate its existing network of auction viewing offices in Antwerp, Israel, Dubai and Hong Kong, through which customers can view diamonds being auctioned and engage with their account managers.

RETAIL & WHOLESALE 	  

Stuller On Diamond Demand, Jewelry Trends

WATCH NOW: Stuller Inc. discusses U.S. market conditions, which loose stone sizes and price-points are in demand mid-year as well as the latest jewelry trends. Stuller has also launched specialized programs for its retailers to improve the selling experience, while keeping inventory levels in check.

Chow Tai Fook Sales Rise

Chow Tai Fook reported that group revenue surged 63 percent year on year in its first fiscal quarter that ended on June 30, however, it did not provide figures. Chinese consumers rushed to buy gold products as prices for the metal tumbled in April. Revenue in Mainland China grew 45 percent and by 85 percent in Hong Kong and Macau during the quarter. Group same-store sales during the quarter increased 48 percent with China up 32 percent and Hong Kong and Macau rising 68 percent. Same-store sales of gold products grew 78 percent, while gem set jewelry increased 8 percent.

Michael Hill’s FY Sales +7%

Michael Hill International Ltd. reported that fiscal year revenue increased 6.8 percent year on year to $425 million for the 12 months that ended on June 30. However, same-store sales were nearly flat, up 0.4 percent, at $387 million. The jeweler noted that sales during the final quarter of the fiscal period were difficult, especially in the key Australian market. Nonetheless, all markets finished the year with positive sales growth in local currency and on a same-store basis.

Cash flow remained strong and Michael Hills Professional Care Plan product continued to deliver solid growth to the group’s results, nearly doubling to $9.5 million (NZD 12 million). The revenue from these plans is carried on the balance sheet as deferred revenue and is then brought to income over the life of the plans.

Shareholders Approve LJ Merger

Shareholders in LJ International Inc. voted in favor of a proposal to merge with Flora Bloom Holdings, an exempted company with limited liability incorporated under the laws of the Cayman Islands, Flora Fragrance Holdings Limited, a limited liability business incorporated under the laws of the British Virgin Islands, and take the company private upon closing the deal. The company expects the merger to complete before the end of July, after which shares will no longer be listed on the Nasdaq Global Market.

Moissanite Expands Offerings, Cuts

Charles & Colvards Moissanite.com subsidiary expanded its signature Forever Brilliant Collection adding many new jewelry designs featuring the moissanite stone in rings, earrings and pendants. The company also introduced more moissanite ring sizes and there are more products in stock, thereby expanding design choices and overall availability.

The expansion included a new emerald cut gemstone shape, which had not been previously available in the Forever Brilliant Collection. Moissanite.com now offers loose gemstone inventory in 12 shapes including, round brilliant, cushion, radiant, square brilliant, castle, heart, marquise, octagon, oval, pear, triangle and trillion.

Zale Signs New Private Label Deal

The Zale Corporation signed a new, multi-year private label credit card program agreement with Alliance Data Systems Corporation. Under the terms of the agreement, Alliance Data, through its Comenity Capital Bank (CCB) subsidiary, will provide private label credit cards to customers of Zale in the U.S., beginning no later than October 1, 2015, following the scheduled expiration of Zale’s current U.S. private label credit card agreement on September 30, 2015.

CCB has the option to participate in certain special financing programs for Zale’s U.S. customers. Following the completion of program implementation during the first half of fiscal 2014, Zale will begin to receive marketing, analytical and technical services from Alliance Data, as well as a portfolio of tablet and mobile marketing solutions.

USPTO Grants New Industry Trademarks

The U.S. Patent & Trademark Office (USPTO) issued the trademark Vanilla Diamonds to diamond and jewelry manufacturer Le Vian Corporation on June 25 with the registration number 4361484. The USPTO also issued the trademark The Juliet Cut Diamond to JCB Creations Inc. of New York on July 2 with the registration number 4361740, and The Original Push Gift to the Merit Diamond Corporation of Florida with the registration number 4362527.

Signet Names Exec. Changes

Signet Jewelers Limited reported that Rob Anderson, the CEO of the jewelers U.K. division will step down from his post at the end of July. The company appointed Sebastian Hobbs to the new position of managing director for the U.K. division, effective immediately. Hobbs will report to Signets CEO Mike Barnes.

Additionally, the company appointed Helen E. McCluskey as an independent director to the board with an effective date of August 1, and Eugenia M. Ulasewicz and Robert J. (Bob) Stack as independent directors with an effective date of September 1.

In other news, Goldman Sachs maintained a Buy Rating on Signet Jewelers and increased the price target to $89.80 per share from $77.91. The analyst noted that Signets $350 million share buyback pointed to a continued focus on balance sheet management, even though its Ultra Diamond business is not meeting expectations.

Element Six to Open in Harwell

Element Six will soon open its consolidated synthetic diamond research and development facility at the Global Innovation Center (GIC) at Harwell, near Oxford in the U.K. Element Six announced the project in May 2012 and it now expects the facility will employ more than 100 scientists and technologists, while it consolidates the companys global innovation teams into one integrated center. The complex will develop a pipeline of innovative synthetic diamond and related supermaterial products for Element Sixs customers, in industries from oil and gas drilling to precision machining and electronics.

The GIC was created with support of the government in an effort to foster investment in research and development to advanced manufacturing in the U.K.

FBI Arrests Former Tiffany Exec.

The Federal Bureau of Investigation (FBI) arrested Ingrid Lederhaas-Okun, 46, a former vice president of Tiffany & Co.s product development, for stealing more than $1.3 million worth of jewelry. The FBI alleged that she abused her access to valuable jewelry in order to steal and then resell the goods as she falsely represented ownership. It was further alleged that she engaged in a series of lies to Tiffanys management in order to cover up thefts between November 2012 and February 2013. In addition, Lederhaas-Okun also told management that approximately $1.5 million worth of jewelry that she had checked out would have to be written off. She separated from Tiffany in March, but specific details were not provided.

MINING 	  

De Beers, NUM Reach Agreement

De Beers Consolidated Mines (DBCM) and the National Union of Mineworkers (NUM) in South Africa reached a settlement in their wage dispute whereas employees in the A, B and lower C band bargaining unit will receive a 9 percent increase retroactive from May 2013. The parties also agreed to phase out 25 remaining A band positions, which still exist at the Kimberley mines operation and at the trading office in Kimberley.

The agreement follows a breakdown in negotiations earlier this month. NUM had requested a wage increase of 13 percent across the board, while De Beers offered 6 percent with an option to negotiate. Another part of the approved agreement stipulated that NUM and De Beers will engage housing issues and develop a plan to promote home ownership for employees who fall between the governments reconstruction and development program (RDP) housing schemes and the formal home-loan market.

Rockwell’s Production Drops

Rockwell Diamonds’ fell 33 percent year on year to 4,824 carats in the first quarter that ended on May 31. The lower level of production resulted from operations at the Tirisano mine being placed on care and maintenance and due to the sale of the companys Klipdam mine. Production at the companys Saxendrift mine declined 4 percent to 2,036 carats. The company noted that it recovered nine stones exceeding 20 carats in April, four of which were larger than 50 carats. A total of 1,118 carats were produced from Saxendrift tailings operations.

Namdeb Updates Sendelingsdrif

Namdeb confirmed that construction of its $27.6 million (NAD 280 million) Sendelingsdrif mine located near the Orange River is progressing and that ramp-up phase of the operation is expected by the end of 2013. Full production is anticipated to start early in 2014. Sendelingsdrif is expected to replace production from Daberas mine, yielding 45,000 carats annually and extending Orange River operations beyond 2022.

Gahcho Kue Operators Agree to Local Framework

De Beers Canada and Mountain Province Diamonds entered into an impact benefit agreement with the North Slave Metis Alliance for the Gahcho Kué diamond project in Canada. The agreement sets in place a framework for De Beers and the North Slave Métis Alliance to optimize local participation in the Gahcho Kué mine for the purposes of employment, business opportunities, training and development and financial benefits.

Diamcor Tender Nets $415K

Diamcor Mining sold 3,123.32 carats of rough diamonds for proceeds of $415,495, or $133 per carat from Krone-Endora at Venetia. The company estimated that approximately 50 percent of the rough diamonds sold were recovered from the re-treatment of previously processed ore. The dollar per carat rate achieved from the sale exceeded their expectations given that the challenging operating circumstances during the quarter.

Brazil Minerals Launches Diamond Sales Portal

Brazil Minerals Inc., which holds a 55 percent stake in the diamond and gold Duas Barras mine in Brazil, launched a beta version of its Diamond Sales Portal, calling it an online marketplace focused on pre-qualified institutional buyers. The current launch is limited to rough gems, but the company expects to add polished gems in the future.

STATS 	  

U.S.

May $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $3,192 22% $10,031 13%
Polished exports $1,485 13% $7,558 12%
Net Imports $1,707 32% $2,473 18%

Rough imports $53 4% $192 -6%
Rough exports $15 -44% $110 -28%
Net imports $38 34% $82 61%

Net diamond account $1,745 32% $2,555 17%

Israel

1H $Mil. %Chng.
Polished exports $3,233 -2%
Polished imports $2,084 -5%
Net exports $1,149 4%

Rough imports $2,037 3%
Rough exports $1,639 8%
Net imports $398 -15%

Net diamond account $751 19%

ECONWATCH 	  

Diamond Industry Stock Report

Retail shares in the E.U. and U.S. powered ahead, while Indian shares were mostly lower. Birks (+80%), Movado and Sothebys (both +5%), Tiffany (+6%), LVMH, Kering and Richemont (all +7%) led the way. Gitanjali dropped 26% and Winsome down 10% but Goenka up 18% and Titan jumped 11%. Mining shares were mostly higher. View the extended stock report.

July 3 June 27 Chng.
$1 = Euro 0.770 0.758 0.012
$1 = Rupee 60.23 59.58 0.6
$1 = Israel Shekel 3.64 3.64 0.00
$1 = Rand 10.12 10.29 -0.17
$1 = Canadian Dollar 1.05 1.04 0.01

Precious Metals
Gold $1,250.80 $1,281.00 -$30.20
Platinum $1,342.00 $1,361.00 -$19.00

Stock Indexes Chng.
BSE 19,177.76 18,719.28 458.48 2.4%
Dow Jones 14,988.55 14,758.32 230.23 1.6%
FTSE 6,299.87 6,159.51 140.36 2.3%
Hang Seng 20,147.31 20,382.87 -235.56 -1.2%
S&P 500 1,615.41 1,588.19 27.22 1.7%
Yahoo! Jewelry 865.11 910.76 -45.65 -5.0%

Rapaport Weekly Market Comment July 19, 2013

Chinese market cold and quiet with very little inventory demand and increasing memo availability from India. U.S. market good with May jewelry store sales +8% to $3B. Large $600M De Beers sight with price hike poorly timed and challenging the market. De Beers 2Q production +10% to 7.9M cts. Rio Tinto production +47% to 4.1M cts. Dominion’s Ekati and Diavik 2Q production at 1M cts. Okavango sells 123K cts. for $20M ($163/ct.) at pilot auction. India’s June polished exports +22% to $1.5B, polished imports +150% to $695M, rough imports +15% to $1.4B. Belgium’s polished exports +3% to $1.4B, rough imports +17% to $1.1B. Mark Cutifani, CEO of Anglo American, named chairman of De Beers.

RapNet Data: July 18

Diamonds 1,079,160
Value $6,861,893,432
Carats 1,171,240
Average Discount -27.77%

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RAPAPORT ANNOUNCEMENT
July
23-25
Tue-Thu

Rapaport Melee Auction 

New York

www.rapaportauctions.com
Jul-Aug
26-8
Fri-Thu

Rapaport  Jewelry Sale

New York & Atlanta

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August
14
Wed
Rapaport Intl. Diamond Conference

9:00 a.m. - 7:00 p.m.
Taj Lands End Hotel
Bandra Mumbai, India

Register Now.

QUOTE OF THE WEEK
De Beers is delighted to gain a chairman with Mark Cutifani’s operational experience and track record for leading large organizations. Mark is clearly a highly respected leader and the employees of De Beers join with me in welcoming him into a great company. I look forward to working with Mark as we find new ways to enhance De Beers leadership position across the diamond pipeline and create value for our shareholders, partners, customers and consumers.

Philippe Mellier | De Beers 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

De Beers 2Q Production +10% 

Anglo American reported that its second quarter diamond production from De Beers grew 10 percent year on year to 7.931 million carats. The increase reflected improved grades at the Orapa and Jwaneng mines, offset by lower recovery from the Venetia mine following flooding in January 2013. During the first half of 2013, De Beers group production rose 6 percent year on year to 14.295 million carats. Debswanas production rose 6 percent to 10.904 million carats, while production at Namdeb increased 10 percent to 852,000 carats. Production in South Africa remained flat during the first six months of the year at 1.641 million carats, while production at De Beers Canada jumped 22 percent to 898,000 carats.

U.S. Jewelry Store Sales +8%

U.S. jewelry store sales jumped 7.6 percent year on year in the month of May to $3.014 billion. Excluding the month of December, which historically records the highest monthly total for jewelry sales, Mays figure was the largest month to date for any previous January through November total. Mays figure also benefited from benign consumer price inflation (CPI), which was flat. U.S. jewelry store sales for the January through May cycle have improved 10.5 percent to $12.661 billion.

In other retail news, advanced estimates for the month of June reflected poor performance at department stores, where sales plunged 5.7 percent year on year to $13.6 billion. Total retail and food services sales, excluding the auto industry, rose 2.7 percent to $339.1 billion. Nonstore retail sales surged 13.8 percent. Retail trade sales rose 6 percent.

RETAIL & WHOLESALE 	  

Chinas 1H Retail Sales +13%

Chinas nominal retail sales grew 12.7 percent year on year to $1.8 trillion in the first half of 2013, according to the National Bureau of Statistics (NBS). In June alone, retail sales totaled $310 billion, up 13.3 percent year on year, marking the fastest growth since the start of the year. The accelerating retail sales were boosted by steady growth in residents income, according to the NBS. In the first half, urban residents per capita disposable income expanded 9.1 percent to reach $2,224, while the per capita cash income for rural residents jumped 11.9 percent to $785.

Swiss Watch Exports -4%

Swiss watch exports fell 3.9 percent year on year to $1.958 billion in May, according to the Federation of the Swiss ‎Watch Industry.‎ The decline was mainly attributed to a 13.9 percent drop in gold watch exports during the month coupled with a double-digit decline to main export markets of Hong Kong, China and France. Exports of wristwatches decreased by 3.8 percent to $1.905 billion during the ‎month, while the number of units shipped fell 7.9 percent to 2.3 million. The value of other products exported ‎dropped 5.3 percent to $109.5 million.
U.S. Jewelry Inflation +1%

The U.S. consumer price index (CPI) for jewelry rose 1 percent year on year to 178.73 points in June, which was the first notable increase since September 2012. The jewelry CPI has fallen 1.6 percent for the first half of 2013, primarily as a result of lower prices for gold and platinum. Nonetheless, the CPI in June maintained a historically strong trend, registering the 30th consecutive month of more than 170 points.

Group Approves David Yurman Incentive

The New Jersey Economic Development Authority approved a $631,223 grant for David Yurman Inc., based upon the companys taxes, to establish a logistics center in Lyndhurst. The jewelry manufacturer anticipates spending about $5 million developing the facility, which it stated would eventually provide cost savings and much-needed work space. David Yurman estimated that it would create 85 jobs during the first year of operations, followed by 35 new jobs in the second year, with an average wage of about $45,000.

Stifel Nicolaus Raises Tiffany & Co.

Stifel Nicolaus raised Tiffany & Co.s rating to "buy" from "hold" and set the target price at $92 per share. Tiffanys shares are up about 51 percent year on year. The analyst concluded that Tiffanys comparable-store sales should rise given the dramatic increase in U.S. consumer wealth and economic confidence so far this year coupled with the retailers new colored gemstone jewelry collection. Stifel Nicolaus target price was the highest of brokerages summarizing Tiffany.

USPTO Grants New Industry Trademarks

The U.S. Patent & Trademark Office (USPTO) issued the trademark Ten Table Diamond on July 9 to diamond brand Hearts On Fire Company LLC of Boston, with the registration number 4363086. The USPTO also issued the trademark The Fifth C Is For Conflict Free to Market Street Diamonds Inc. of Washington D.C., with the registration number 4365487.

GENERAL 	  

ODC Concludes $20M Test Auction

The Okavango Diamond Company (ODC) concluded its pilot auction of approximately 123,000 carats of Debswana rough diamond production as part of a wider test of the companys core systems and processes during a sale in Gaborone. All diamond lots offered were sold for approximately $20 million. ODC expects to fully launch its commercial sales operation in the third quarter, with viewing scheduled to begin on September 23 followed by the auction on October 9. ODC was created to provide Botswana with its own sustainable, commercial diamond sales channel and to provide the government with insight into diamond market trends.

De Beers Appoints Cutifani as Chair

The board of directors for De Beers Société Anonyme appointed Mark Cutifani, the CEO of Anglo American plc, as the chairman of the De Beers Group. Cutifani said that De Beers 125-year heritage, experienced management team and unparalleled understanding of the unique nature of the diamond market, make it the world’s leading diamond company.

From De Beers production and projects portfolio, to its iconic brand and proven ability to open new markets, the company is poised to capture the considerable opportunities in front of us as diamond demand outpaces supply for years to come. I look forward to working with the board and continuing its support of the De Beers leadership team, headed by Philippe Mellier, Cutifani said.

DETC Re-accredits DCA

The Diamond Council of America (DCA) was re-accredited by the Distance Education and Training Council (DETC), maintaining the status continually since 1984. Reviews of DETC’s national accreditation occur every five years. Since the previous review, DCA created a new membership category, added courses to its curriculum and moved to online delivery.

Hong Kong Show Splits Venue

Beginning in March 2014, organizers of the HKTDC Hong Kong International Jewellery Show will split the event into two venues: the HKTDC Hong Kong International Jewellery Show and the HKTDC Hong Kong International Diamond, Gem and Pearl Show. Finished jewelry products will be exhibited at jewelry show at the Hong Kong Convention & Exhibition Centre from March 5 to 9, loose stones and raw materials will be featured at the diamond, gem and pearl show in the AsiaWorld-Expo from March 3 to 7. The initiative will provide dedicated sourcing trade platforms, which are more professional and focused for the product categories concerned, according to the organizers.

S&P Affirms Botswanas Ratings

Standard & Poors Ratings Services affirmed Botswanas A- long-term and A-2 short-term sovereign credit ratings and affirmed a stable outlook, adding that the diamond-producing nation has a reasonably well-managed minerals-based economy and a record of political stability. Botswanas ratings are constrained by its narrow economic base, primarily diamonds. Standard & Poors expects diamond production to remain steady this year and the nations gross domestic product (GDP) to improve about 2.6 percent per year through 2016.

Assay Office Creates Watch Course

The Birmingham Assay Office in the U.K. created a new training course titled Understanding Watches. The class is delivered by watch industry expert Peter Tales, MBHI, and is intended for retail staff or enthusiasts who already have some experience in the watch industry. The one day course will be taught on September 18, October 23 and November 12 and provides an in-depth understanding of the technical aspects and benefits of different types of watches with the goal of improving confidence when selling or assessing a watch.

MINING 	  

Rio Tintos Production +47%

Rio Tinto’s diamond production rose 47 percent year on year to 4.135 million carats in the second quarter of 2013. Growth was driven by higher grades and a rise in ore processed at its fully-owned Argyle mine in Western Australia, where underground mining was commissioned in April 2013. Production at Argyle jumped 87 percent to 3.13 million carats, while production at the Canada-based Diavik mine, in which Rio Tinto owns a 60 percent stake, fell 13 percent to 936,000 carats. Rio Tinto also owns 78 percent of the Murowa mine in Zimbabwe where its share of production grew 21 percent to 69,000 carats.

Dominions Production Hits 1M Carats

Dominion Diamond Corporation recovered approximately 1.04 million carats of diamonds from its Ekati and Diavik assets during the second quarter of 2013. Production at Ekati, which Dominion acquired from BHP in April, reached about 400,000 carats between April 10 and June 30. Rapaport records indicate that Ekati production amounted to 413,000 carats in the equivalent period of 2012. Dominion also has a 40 percent stake in the Diavik mine, where production fell 13 percent year on year to 1.6 million carats so that Dominion’s share amounted to about 640,000 carats. Rio Tinto and Dominion recently approved a plan for Diavik production of 7.3 million carats, up from its original plan of 6 million carats.

Citigroup Reaffirms Petras Rating

Citigroup Inc. reaffirmed a buy rating on shares of Petra Diamonds Limited. Citigroup basically maintained its target price on Petras shares from 152 pence to 151 pence or $2.30 to $2.28 per share. Numis Securities Ltd. increased its target price for Petra to 160 pence and upgraded shares from hold to buy. Bank of America maintained a buy rating on Petra this month as well with a target price of 170 pence.

Canada Authorizes Renard Development

Stornoway Diamond Corporation received a green light from the Canadian Environmental Assessment Agency for its Renard diamond project, clearing the way to commence construction. Operating permits can now be sought for site specific activities. Stornoway expects to open the Renard mine road later this year, which will make Renard the first fully-permitted diamond mining project in Canada with a permanent road.

Firestone Raises $6M

Firestone Diamonds raised $6 million through a private placement. The funds will be used for working capital purposes and further development at its flagship Liqhobong mine in Lesotho, as well as for debt repayment. Firestone placed 198.5 million new ordinary shares in the company through Mirabaud Securities LLP and a direct subscription with institutional and other investors, as well as certain existing shareholders at a price of 2 pence per share.

True North Ruby Project Hearings Begin 

The public hearing period is open for True North Gems Inc.s exploitation permit application for the Aappaluttoq ruby deposit in southwest Greenland through September 12. All relevant documents are accessible through Greenlands Bureau of Minerals and Petroleum (BMP) and True North Gems. As part of True North Gems efforts to pursue an open and transparent process, the company will host its own information meetings on August 12, in Qeqertarsuatsiaat (Fiskenaesset), August 13, in Paamiut and August 15 in Nuuk. These presentations were scheduled ahead of BMPs formal public hearing, and True North stated that it would present the proposal and discuss the opportunities of the project in much less technical form to facilitate an informal dialog with the relevant communities.

Kennady to Raise New Funds

Kennady Diamonds Inc. announced a non-brokered private placement to raise approximately $1.5 million. Proceeds from this private placement, along with current cash reserves, will be sufficient to fund the companys 2013 summer exploration program. Kennady Diamonds major shareholder, Bottin International Investments Ltd., which is controlled by Dermot Desmond, has indicated support for the private placement and its interest in participating to maintain their current shareholding, according to the explorer.

Meanwhile, preparations for the summer exploration program at the Kennady North diamond project in Canadas Northwest Territories are at an advanced stage, with drilling scheduled to commence this week.

North Arrow Acquires Mel, Luxx

North Arrow Minerals Inc. acquired the Mel and Luxx diamond projects in Nunavut, Canada. The junior exploration firm acquired the projects to cover unexplained kimberlite indicator mineral trains identified from public datasets. The purchase is subject to separate agreements with Anglo Celtic Exploration Ltd., a private company.

STATS 	  

Belgium

June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,363 3% $7,141 5%
Polished imports $1,438 -4% $6,979 -2%
Net exports ($75) $162

Rough imports $1,084 17% $7,013 7%
Rough exports $1,261 17% $7,595 8%
Net imports ($177) ($581)

Net diamond account $102 $743 108%

India

June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,478 22% $10,959 19%
Polished imports $695 103% $3,827 18%
Net exports $783 -16% $7,132

Rough imports $1,373 15% $8,655 11%
Rough exports $112 -1% $1,032 24%
Net imports $1,261 17% $7,623

Net diamond account ($478) ($491)

ECONWATCH 	  

Diamond Industry Stock Report

Most U.S. retail shares were lower or flat with Birks (-10%) and JCP (-6%) showing the biggest declines. Euro shares mixed with Damiani (+3%) and Theo Fennell (-7%) defining the spread. Indian shares and miners mostly lower Gitanjali (-22%) led declines, Anglo (+3%) got a boost from production numbers before financial results on Friday. View the extended stock report.

July 18 July 11 Chng.
$1 = Euro 0.762 0.760 0.002
$1 = Rupee 59.68 59.83 -0.1
$1 = Israel Shekel 3.58 3.60 -0.02
$1 = Rand 9.93 9.99 -0.06
$1 = Canadian Dollar 1.04 1.04 0.00

Precious Metals
Gold $1,284.30 $1,285.10 -$0.80
Platinum $1,413.00 $1,407.00 $6.00

Stock Indexes Chng.
BSE 20,128.41 19,676.06 452.35 2.3%
Dow Jones 15,548.77 15,461.45 87.32 0.6%
FTSE 6,634.36 6,543.41 90.95 1.4%
Hang Seng 21,345.22 21,437.49 -92.27 -0.4%
S&P 500 1,689.37 1,675.11 14.26 0.9%
Yahoo! Jewelry 915.21 908.25 6.96 0.8%

Rapaport Weekly Market Comment July 26, 2013

Polished trading cautious ahead of summer vacations in Israel and Belgium. Rough dealers giving long-term credit on the secondary market after high priced De Beers sight. Positive U.S. sentiment compensating for weakness in India and China as Dow Jones index hits new high. Indian government requires 20% of all gold imports to be re-exported. Chow Tai Fook, Chow Sang Sang, 11 other Chinese jewelers deny gold price fixing allegations. Swatch Group 1H sales +9% to $4.3B, profit +6% to $818M. Antwerp and Israel bourses to close next week for vacations. Rapaport International Diamond Conference (IDC) to be held in Mumbai on August 14, 2013.

RapNet Data: July 25

Diamonds 1,069,147
Value $6,871,989,786
Carats 1,170,199
Average Discount -27.37%

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RAPAPORT ANNOUNCEMENTS

Jul-Aug
26-8
Fri-Thu

Rapaport  Jewelry Sale

New York & Atlanta

View details.

August
14
Wed

Rapaport Intl. Diamond Conference 

9:00 a.m. - 7:00 p.m.
Taj Lands End Hotel
Bandra Mumbai, India

Register Now.
August
20-28
Tue-Wed

Rapaport Single Stone Auction 

New York & Israel

www.rapaportauctions.com
QUOTE OF THE WEEK
Jewelry exporters were affected after the gold import ban was imposed on consignments by the nominated agencies. We welcome the revised gold import scheme of Reserve Bank of India, which is aimed at boosting jewelry exports. Exports should benefit from the measure as supplies will now be guaranteed from any imports. Even, such imports shall be linked to financing of exporters by the nominated agencies.

Sabyasachi Ray | GJEPC

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INDUSTRY 	  

De Beers Sight Estimate $600M

De Beers sold an estimated $600 million worth of rough diamonds at its July sight after making slight increases to prices, on average. Sight participants confirmed that many boxes were rejected but there were firms eager to take up the slack and bought goods in an attempt to create a position for themselves. Sightholders noted tight profitability from manufacturing, and while De Beers boxes are selling at very low premiums on the secondary market, it is occurring with very long credit terms.

Sightholders observed a cautious mood in the rough market as polished trading has slowed in the past month. The RapNet Diamond Index (RAPI) for 1 carat certified polished diamonds fell 1.8% in the period July 1 to July 24 and downward adjustments were made to the Rapaport Price List this past week. Sightholders expressed frustration from the contrasting price trends between the polished and rough markets, adding that De Beers expects the market to bounce back in the next couple of months. Manufacturers added that other mining companies were also garnering strong prices at their tenders and contract sales.

China Investigates Gold Price Fixing

China’s National Development and Reform Commission named a number of jewelers it alleged had been fixing gold prices in Shanghai, including Chow Tai Fook Jewellery Group and Chow Sang Sang International along with a number of others. Chow Tai Fook denied the charge and stated that gold product prices are reasonably set based on the cost of raw materials and various operating costs such as design and craftsmanship, while taking the international gold price as a major reference. Chow Tai Fook added that its gold jewelry prices were uniform across the country and that there were no regional differences.

A spokesperson for Chow Sang Sang told the Peoples Daily that the company shouldnt have been targeted in the probe because it sets the gold price every day based on the New York market closing price. The gold price is the same within the whole region of China and Chow Sang Sang doesnt have districting price differences, according to the quote.

RBI Updates Gold Restrictions

The Reserve Bank of India (RBI) implemented additional restrictions on gold imports for use in the domestic market. Under the new guidelines, 20% of all gold imports in any form or purity, including unrefined gold, must be made exclusively available for export purposes. The nominated banks / nominated agencies shall make gold available for domestic use only to entities engaged in jewelry business or bullion dealers supplying to jewelers. The bank noted, however, that the restriction will not apply to gold imported by entities who import gold specifically for export purposes. The banks plan is meant to curb gold imports in order to reduce Indias countrys current account deficit.

RETAIL & WHOLESALE 	  

LVMHs Profit -6%

LVMH reported that revenue rose 6% year on year to $18 billion (EUR 13.7 billion) for the first half that ended on June 30. However, the groups profit fell 6% to $2.1 billion. Revenue from the watches and jewelry segment declined 3% to $1.7 billion, representing the only decline across all product segments, while at a constant exchange-rate, sales rose 1%. Profit from recurring operations for the watches and jewelry segment fell 2% to $206 million. LVMH contended that economic resilience was good in Europe, sustained in Asia, the U.S. and Japan, and it observed restrained purchasing from watch retailers, which when coupled with the voluntary closure of certain multi-brand points of sale, the jewelry segments growth was lower than expected.

Swatchs 1H Profit +6% 

The Swatch Group reported that net sales rose 8.9% year on year to $4.3 billion (CHF 4 billion) for the first half that ended on June 30. Sales returns, allowances and discounts increased 4.8% to $186 million. Profit improved 6.1% to $818 million.

This year, the Swatch Group redefined and modified its segment reports, combining the “Watches & Jewelry” and “Production” segments into a new “Watches & Jewelry” segment. It also stated the benefit from acquiring Harry Winston Inc. will only really become noticeable in the second half. Watch and jewelry net sales rose 9.3% year on year to $4.1 billion, while electronic systems sales fell 6.3% to $158 million. Swatch added that Harry Winstons infrastructure was upgraded to better utilize a huge potential offered by the brand and its organization. Furthermore, in the first few months following the acquisition, all debt was settled, the equity capital base was expanded and, during this process, the inventory was increased.

IBM, Forrester Advise Best Practices for Retail

Ecommerce trends signal that most online growth comes from consumers who are already spending online, according to IBM Enterprise Marketing Management and Forrester Research. Personalized email campaigns remain extremely relevant and successful for retailers in reaching consumers, especially as more shoppers turn to their mobile devices for engagement. Data revealed that 47% of email and 25% of website traffic are viewed on a mobile device, of which the iPad is most popular followed by the iPhone. It is therefore paramount that retailers test and perfect their layout across mobile devices, the report showed.

Online tools that retailers can use to engage and improve sales, while personalizing consumers experience, include producing product details with video and high-quality photography, recommendation options to share favorites, cross-sell alternatives based on inventory availability and offering alternative payment options. When personalizing, retailers must avoid sending the same message to everyone. It is important to treat consumers differently and base marketing on an individuals identity and/or website behavior, but ideally blend both.

In preparing for the 2013 Christmas shopping season, IBM and Forrester advised retailers to ensure that their email campaigns are optimized for mobile devices, especially since 65% of large retailers already do so. Use digital analytical programs to measure traffic and monitor trends for personalization. It is possible to meet omni-channel requirements by tying in-store inventory with websites, social media and email with campaign metrics and make sure to compare ecommerce success rates to industry benchmarks.

Retailers should also focus on e-receipt service in the store and mobile checkout, allow for scheduling of store visits to maximize the shoppers time and enable instant texting or live chat from inside the store as consumers may prefer texting with store staff rather than face-to-face contact.

BVC Partners With Brinks India

BVC Group Logistics entered into a strategic partnership with Brinks India to provide what it calls a seamless service throughout India and internationally for the gems and jewelry sector. BVC Group will handle the pan-India diamond and jewelry export and import of Brinks India, making it the countrys largest diamond and jewelry supply chain management company. BVC stated that it handles more than 45% of the international trade of gems and jewelry in India. BVC Group will be using Brinks Global Services network for its secure door-to-door diamond and jewelry shipments to more than 100 countries.

Fairmined Gold Offering Expands

Fairmined gold will be available in North America through the authorized seller FairSources, a partnership between the Canadian Fair Trade Jewellery Company and S&P Trading (Gold by Gold group-France). The variety of gold available includes 18-karat (yellow, nickel white, nickel free white with palladium) and 14-karat (yellow and nickel white). FairSources will also sell finished semi-mounts and wedding bands to retailers and will do white-label contract manufacturing. Eventually, Fairmined silver and other gold alloys will be offered, as demand requires. Fairmined gold was first made available in the U.K. two years ago.

Ritani to Offer Private Label Credit Card

GE Capital Retail Bank and jewelry brand Ritani signed a multi-year agreement to provide a branded private label credit card program, the Ritani Credit Card, for jewelry customers. GE Capital’s Retail Finance business will manage the relationship and service the account. Ritani cardholders will be able to access and manage their account with a suite of digital tools, including the online consumer center and mService, a mobile servicing platform available on iOS, Android, Blackberry and Windows devices.

GENERAL 	  

Peacekeeping Mission Remains Essential

While the United Nations (UN) praised Côte dIvoire for engaging the right path to peace, following a violent post-election crisis in 2011, threats to the nations stability cannot be underestimated, according to a senior official. Rough diamonds remain under an embargo, pending long-term stability and peace in the country. The UNs peace mission in Côte dIvoire (UNOCI) remains essential, particularly with respect to its priorities of protecting civilians, disarming rebels, demobilization, reintegrating former combatants and security sector reform, stated the UNs under-secretary-general for peacekeeping, Hervé Ladsous.

Gemfields Emerald Auction Nets $32M

Gemfields achieved revenue of $31.5 million, or $54 per carat, for its latest auction of primarily high-quality emerald and beryl in Lusaka, Zambia from July 15 to 19. All of the rough production the company placed on offer sold and the auction yielded the companys highest per carat value to date, beating the previous high of $42.71 per carat. There were 37 companies participating in the auction, which tendered 583,448 carats in total. The company’s 13 auctions held since July 2009 have generated $207.3 million in aggregate revenue.

Dominion Names Directors

Dominion Diamond Corporations shareholders voted the following officers to its board of directors: Graham Clow, the chairman of the board of Roscoe Postle Associates Inc.; Robert Gannicott, the CEO and chairman of the board of Dominion Diamond; Noel Harwerth, the former chief operating officer of Citibank International PLC; Daniel Jarvis, the vice chair and chief financial officer of Concert Properties Ltd.; Tom Kenny, the chairman of the board of RTL Westcan Group of Companies; Manuel Lino Silva de Sousa-Oliveira, the corporate finance director and director of De Beers Consolidated Mines Ltd.; and Chuck Strahl, the director of Canada’s Manning Centre for Building Democracy and chair of the Security Intelligence Review Committee of Parliament.

MINING 	  

Kimberleys Profit Beats Expectations

Kimberley Diamonds Ltd., which operates the Ellendale mine, reported that revenue from the sale of rough diamonds reached $24 million (AUD 25.5 million) in the second quarter that ended on June 30. Operating expenses totaled $18 million, leaving profit of $5 million. The company had projected profit of $4 million in April.

Additionally, Kimberley Diamonds concluded the purchase of Ellendale from Gem Diamonds with an early debt repayment of a $10 million. The companys acceptance into the Western Australian Department of Mines and Petroleum’s (DMP) Mining Rehabilitations Fund (MRF), allowed it to immediately retire an $11 million environmental bond, of which it in turn funded the payoff note. It will also acquire the online rough trading platform eDiamond Belgium BVBA, which is expected to provide improved pricing and distribution control for production.

Namakwa Raises $6M

Namakwa Diamonds raised $5.8 million from its July sale of rough diamonds from the Kao mine in Lesotho. The tender was 100% sold by lot with the goods achieving an average price of $495 per carat. Top lots from the sale included a 54.94-carat diamond that sold for $1.02 million and a 39.79-carat stone that fetched $1.1 million. The sale also included two natural fancy pink diamonds, weighing 1.20 carats and 1.90 carats, which achieved more than $30,000 per carat each.
Lucara Sets Auction for Sept. 2

Lucara Diamond Corporation recovered another round of exceptional rough diamonds from its Karowe mine in Botswana. The mining firm has selected 16 diamonds, including an exquisite small pink diamond and five diamonds that are larger than 100 carats, to create single diamond lots for its upcoming tender that is expected to close on September 2. Lucara organized a viewing date in Gaborone on August 19 and in Antwerp from August 26 to September 2.

Stornoway Updates Renards Estimates

Stornoway Diamond Corporation updated the mineral resource estimate for its Renard diamond project in Canada, which was projected by GeoStrat Consulting Services Inc. The update follows the successful completion of the Renard 65 bulk sample earlier in the year and incorporates refinements to the geological models and diamond content estimates of certain other kimberlites made since the project’s previous resource statement in January 2011.

The project update included a total indicated mineral resource of 27.1 million carats, representing an increase of 14% from the earlier estimate. The successful conversion of 2.3 million carats of near-surface Renard 65 inferred mineral resources to indicated resources, represented kimberlite amenable to open-pit mining to 150 meters depth. There is a total inferred mineral resource of 16.9 million carats, a 3.5% decrease compared with the previous estimate, as increased estimates of inferred resources at Renard 2, 4 and 9 partially offset the conversion of material from the inferred category to the indicated category at Renard 65.

Review Board Green Lights Gahcho Kue

The Mackenzie Valley Environmental Impact Review Board (MVEIRB) in Canada recommended approving the Gahcho Kué diamond mine, which is a joint venture between De Beers Canada and Mountain Province Diamonds. In a July 19 letter to the Minister of Aboriginal Affairs and Northern Development Canada, Bernard Valcourt, the MVEIRB stated that Gahcho Kué should be allowed to proceed subject to implementation of the measures and follow-up programs described in the mines environmental impact report.

Argyle Mine Reduces Headcount

Rio Tinto laid off 78 people, mainly employees of contractor Macmahon, at its Argyle diamond mine. The decision was made as the company focuses on improved efficiency and transitions to a fully underground mining operation. The headcount reduction came just weeks after Rio Tinto announced it would hold onto its diamond business, ending more than a year of speculation about a possible sell off.

ECONWATCH 	  

Diamond Industry Stock Report

U.S. retail was mixed with the biggest mover being Charles & Colvard (+6%), Hong Kong was higher and Europe mostly higher with Damiani (+7%) leading the way. Indian shares were mixed as Gitanjali (-23%) and Goenka (-10%) weighed on the industry. Mining shares were higher as Peregrine (+15%), Firestone (+11%) and Stellar (+14%) all popped. View the extended stock report.
July 25 July 18 Chng.
$1 = Euro 0.750 0.762 -0.012
$1 = Rupee 58.97 59.68 -0.7
$1 = Israel Shekel 3.58 3.58 0.00
$1 = Rand 9.70 9.93 -0.23
$1 = Canadian Dollar 1.03 1.04 -0.01

Precious Metals
Gold $1,334.20 $1,284.30 $49.90
Platinum $1,445.00 $1,413.00 $32.00

Stock Indexes Chng.
BSE 19,804.76 20,128.41 -323.65 -1.6%
Dow Jones 15,555.61 15,548.77 6.84 0.0%
FTSE 6,587.95 6,634.36 -46.41 -0.7%
Hang Seng 21,900.96 21,345.22 555.74 2.6%
S&P 500 1,690.25 1,689.37 0.88 0.1%
Yahoo! Jewelry 981.09 915.21 65.88 7.2%

RAPAPORT NEWS SERVICE | Aug. 9, 2013 www.rapaport.com | news@rapaport.com

Industry

Retail
Mining
EconWatch
India
General
Stats

Rapaport Weekly Market Comment Aug. 9, 2013

Mumbai show opens cautious as rupee falls to record low (61.8/$1). Belgian and Israeli dealers vacation while looking for discounted polished. Chinese heat wave freezes market with consumers too hot to shop. Tough rough market with dealers and manufacturers losing money. ALROSA 2Q production +16% to 9.6M cts. Rio Tinto’s 1H diamond revenue +15% to $403M, profit of $5M vs. loss of $24M. U.S. June polished imports -4% to $1.6B, exports +13% to $2.6B. Belgium July polished exports +6% to $1.3BM, rough imports +30% to $1B. U.S. extends ruby/jade ban on Myanmar.

RapNet Data: Aug. 8

Diamonds 1,062,847
Value $6,833,231,614
Carats 1,159,379
Average Discount -27.6%

www.rapnet.com
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RAPAPORT ANNOUNCEMENTS
August
14
Wed

Rapaport Intl. Diamond Conference 

9:00 a.m. - 7:00 p.m.
Taj Lands End Hotel
Bandra Mumbai, India

Register Now.
August
20-28
Tue-Wed

Rapaport Single Stone Auction

New York & Israel

View details.
August
26-29
Mon-Thu
Rapaport Melee Auction
New York

www.rapaportauctions.com
QUOTE OF THE WEEK
The financial incentive to smuggle and bring gold into India illegally is just increasing since the government’s actions have created a shortage.

Victor Thianpiriya | Australia and New Zealand Banking

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INDUSTRY 	  

RAPI -2% in July

Certified polished diamond prices fell in July as China’s economic slowdown significantly reduced demand, resulting in overstocked retail inventories. India’s jewelry market plummeted due to the weak rupee and government programs intended to curb gold consumption. Furthermore, diamond manufacturers are facing tight liquidity as banks become increasingly concerned about the high levels of industry debt and high rough diamond prices, which result in negative cash flow. The only bright spot has been the U.S., where demand has been steady but selective.

The RapNet Diamond Index (RAPI) for 1-carat certified polished diamonds fell 2.1% in July. RAPI for 0.30-carat diamonds declined 3.7%, while RAPI for 0.50-carat diamonds dropped 3% and RAPI for 3-carat fell 1.3%. Diamond prices in most sizes were relatively steady in the first half of 2013 but are now showing losses for the year. RAPI for 0.30-carat diamonds increased 3.5% in the first seven months of the year following strong gains in the first quarter. There is very little inventory demand from China and increasing memo availability to the Far East market from India.

Wholesale markets in the U.S., Belgium and Israel were closed during the month for the annual summer vacations, resulting in low diamond trading activity. Polished diamond prices are expected to remain under pressure for the rest of the third quarter. Demand is being driven by steady orders from the major U.S. jewelry retailers, and supported by the smaller independents, but very few are building up inventory.
JCK Returns Soar

U.S. polished diamond imports in June fell 3.6% year on year to $1.562 billion, while the average price dropped 4.4% to $1,661 per carat. The month of June historically records returns from the JCK Vegas show to major trading centers, and this year polished exports surged 12.6% to $2.555 billion, which was a record high.

Of the largest trading centers, Israel recorded the highest amount of returns. U.S. polished diamond imports from Israel were $563.5 million in June, but polished exports were $741.2 million. Polished imports from India were $510.3 million, however, polished exports were $527.7 million. Polished imports from Belgium were $276.5 million and exports were $378.5 million. Additionally, $562.8 million worth of polished diamonds were exported to Hong Kong. For the month of June the U.S. recorded a polished import deficit of $993 million compared with a deficit of $612 million one year ago.

RETAIL & WHOLESALE 	  

HKs Jewelry Category Sales +15%

Hong Kongs Census and Statistics Department reported that the value of retail sales in June rose 14.7% year on year to a provisional estimate of $5.1 billion (HKD 39.91 billion). The volume of items sold during the month rose 13.4%.

The volume in sales of jewelry, watches and clocks and valuable gifts increased by 43.7%, while the value of goods sold surged 42.5% to $1.38 billion. In contrast, the volume of items sold at department stores jumped 29.2% and in terms of revenue, sales jumped 28.3% to $508 million. For the first six months of 2013, Hong Kongs retail sales have risen 15% year on year to $32.6 billion with revenue from jewelry, watches, clocks and other valuable gifts up 32.5% to $8.1 billion.

U.S. Chain-Store Sales +4%

U.S. chain-store sales rose 4.4% year on year in July, according to the International Council of Shopping Centers (ICSC). The group concluded that sales were solid despite a slow start. ICSC expects the majority of consumers to begin back-to-school shopping in August, which bodes well for a continuation of the current sales pace. However, nine retailers tracked by Thomson Reuters reported comparable-store sales up 3.7%, which was lower than expected.

Barclays observed that mall traffic and sales were weak in July and they expect little change in August. The average school-related spending is expected to drop 8% to $635 for the average family. Most retailers have now stopped reporting monthly sales, although a few of the teen-clothing brands lowered their guidance today following a weaker-than-expected first half.
Tara Jewels Profit +32%

Tara Jewels Limited reported that its revenue jumped 15% year on year to $54.4 million (INR 3.3 billion) for the first fiscal quarter that ended on June 30. The companys expenses surged 16% to $49.8 million and its profit leaped 32% to $1.9 million. Tara Jewels expects to add 13 new stores across India this year, bringing the total number of showrooms to 50 in 37 cities. Rajeev Sheth, the chairman of Tara Jewels, said its international business is healthy, backed by orders from large retailers and it expects a strong return from its collections in the pipeline leading into festive season.

Jewelry Sales Decline for HSN

Revenue at HSN Inc. rose 6% year on year to $812.6 million for the second quarter that ended on June 30. HSNs sales climbed 5% to $526.2 million, while Cornerstones revenue jumped 8% to $286.4 million. Cost of sales rose 6% to $503.8 million. Profit surged 41% to $43.3 million. Digital sales grew 10% for HSN with penetration increasing 160 basis points to 35.4%. Overall, sales grew for home design, household goods, electronics and apparel and accessories, however, revenue declined from jewelry and culinary products.

Sothebys Profit +7%

Sotheby’s reported that revenue rose just slightly to $304.9 million in the second quarter that ended on June 30. Expenses rose 2.4% year on year to $171.6 million. Profit jumped 7.4% to $91.7 million. For the first half of the year, revenue slipped 0.6% to $406.6 million, expenses rose 4.8% to $294.6 million and profit fell 7.2% to $69.4 million. Auction commission revenue was positively impacted by the buyer’s premium rate increase that took effect on March 15, and contributed an additional $19.8 million of second quarter revenue.

Living Up To Diamonds

WATCH NOW: Encourage diamond sourcing responsibility as the best way to inspire ethical behavior across the jewelry industry, this according to panelists at the Jewelers of America-sponsored "Living Up To Diamonds" discussion in New York. Speakers included the U.S. Assistant Secretary for Economic and Business Affairs, Jose W. Fernandez; Ngomesia Mayer-Kechom, the manager for international programs at the Diamond Development Initiative International (DDI); Dr. Benjamin Chavis, the senior strategic advisor for the Diamond Empowerment Fund (DEF); Cecilia Gardner, the president, CEO and general counsel of the Jewelers Vigilance Committee; David J. Bonaparte, the president and CEO of JA and Martin Rapaport, the chairman of the Rapaport Group.

M. Geller to Offer Gemesis Stones

M. Geller Ltd. entered into an agreement with lab-created diamond brand Gemesis as an authorized distributor. M. Geller stated that lab-created diamonds were a great fit to expand its offerings to customers. Gemesis added that this relationship would be a springboard for creating a heightened presence for lab-created diamonds within the jewelry industry. M. Geller is a 30-year Chicago-based wholesaler of loose diamonds.

L2 Chides Zales, Cartier

Digital media must increase online and offline sales, according to a recent report by L2 Think Tank. Yet, many specialty retail companies, including jewelers, do not optimize the potential of their existing ecommerce and cross-channel influence. L2 determined the "digital IQ" of specialty retailers, such as Zales, Tiffany & Co. and Cartier by examining company websites, digital marketing strategy, mobile platforms and social media and by measuring cross-channel integration.

Overall, L2 ranked Sephora as the specialty retail industrys only Genius for the best execution of digital strategy and platform integration. Of retailers that sell jewelry, Coach, Tiffany & Co. and Kate Spade were ranked as Gifted, while Swarovski, Fossil, Swatch, Kay Jewelers and Michael Kors were just Average. L2 labeled Cartier and Zale as digitally Challenged with much improvement required to tap ecommerce opportunity. Vince Camuto and Massimo Dutti were scored Feeble. The study intimated several areas for improvement for underperformers.

Retailers must take note of the best of class and tap into new technologies that allow more customer personalization and follow-up. For instance, while more than half of retailers use personalization on their website to suggest products based on customer browsing, just 20% offer customers the opportunity to customize merchandise.

When customers abandon his or her shopping cart, only 31% of specialty retailers send a follow-up email to find out why. Also, while 86% of brands use an unsubscribe confirmation option, most do not have less severe possibilities such as reducing the frequency of emails or modifying content instead. Just 15% even collect data on why their users unsubscribed.

Online sales should reach $262 billion this year, with the Internet influencing $1.2 trillion in sales - and that number is only anticipated to increase over time. According to the study, the most successful retailers will be the ones who prioritize "technology investments, organizational incentives, and attribution metrics to drive online and in-store growth."

GENERAL 	  

U.S. Extends Myanmar Ban on Gems

President Barack Obama extended a ban on the import of rubies and jade from Myanmar through an executive order on August 7. The renewed ban reflected the Obama administrations growing concerns regarding Myanmars military involvement in the gems industry as well as human rights abuses against minorities despite recent democratic reforms. The ban includes jadeite and ruby (7103 of the Harmonized Tariff Schedule) and jewelry containing those gems (7113).
Zim Remains a Risky Biz

Zimbabwe remains a very high risk for business investment, according to The Economist. Analysts scored the country an overall risk of D, or one grade below the highest level, and a score of 73 out of the highest possible of 100 points. Security risks were graded a D and a score of 64. While unemployment has declined from its peak in 2009, it remains above 70%, and relatively petty crime is rampant. But mugging has become an increasingly problematic issue as are armed robberies targeted at foreign residents.

The Economist argued that the greatest threat to business, however, remains the government, which allows the police and army to operate as politically partisan institutions. Foreign businesses become prime political targets with moderate likelihood but with very high impact on operations, especially since President Robert Mugabe has long attacked foreign powers - and the countrys small remaining white community - for their alleged attempts to force him from office.

Poddar Faces Smuggling Charge

Indias Directorate of Revenue Intelligence (DRI) arrested Vihari Poddar, the managing director of Vihari Jewels Pvt. Ltd., and seized her belongings, charging her with smuggling gold and gems. Poddar faced the court on August 2 and remains in custody. According to the DRI, she arrived in Mumbai from Singapore, but indicated no items to declare. However, officials acted on a tip and frisked the suspect to find the items in question. DRI also suspects that the smuggling has occurred before and that there are others involved in the scheme.

Police Make Arrests in Tiger Kidnapping Ploy

Authorities in Antwerp determined that a tiger kidnapping was staged by an employee against his employer, Kiran BVBA, on October 11, 2012, resulting in a $13 million loss of goods. Police arrested the prime suspect, a 27-year-old employee of Kiran, a 29-year-old man of Indian origin, a 48-year-old Armenian and two Chechens of 30 and 43 years old. Additionally, a raid at one suspects home recovered $8.5 million worth of stolen gems. At the time of the alleged crime, three men entered the home of Kirans employee and held his wife hostage while he was to return to the office and empty Kirans vaults.

Lloyds Offers Reward in Cannes Heist

Lloyds of London plans to offer a reward of $1.3 million for information leading to the recovery of the $136 million in jewelry stolen on July 28 from a hotel in Cannes. An armed robber stole the jewelry, mostly creations and precious gems belonging to diamond house Leviev, from the InterContinental Carlton Cannes Hotel. The 72 pieces stolen were being exhibited at the July 20 to August 30 "Extraordinary Diamonds" show. The armed robber, who wore a mask and gloves, entered the hotel exhibition hall, where the jewelry was on display and forced employees to place the pieces into a bag.

MINING 	  

ALROSAs Production +16%

ALROSA’s diamond production rose 16% year on year to 9.627 million carats in the second quarter that ended on June 30. The company noted that improved output was driven by its Aikhal underground mine reaching full capacity, its acquisition of OJSC Nizhne-Lenskoye and improved grades at the Jubilee pipe. ALROSA reported that the amount of ore processed during the quarter increased 25% to 9.9 million tonnes, while the average grade achieved fell 7% to 0.97 carats per tonne. During the first half of the year, ALROSA’s total production grew 5% to 17.105 million carats.

Rios Diamond Unit Profit Jumps

Rio Tinto reported revenue from its diamond business rose 15% year on ‎year to $403 million during the first six months of 2013. Revenue growth was driven by‎ an increase in rough diamond prices, the company explained. Rio Tinto recorded an operating profit of $5 million from its diamond business, compared with a ‎loss of $24 million one year ago. ‎Rio Tinto Group’s consolidated sales revenue fell 3% to $24.51 billion during the period, while profit plunged 71% to $1.7 billion.‎

In July, the mining group reported that diamond production for the first half of the year rose 20% to 7.37 million carats across its three mines. Rio Tinto’s capital expenditures on the diamond business fell 32% to $184 million during the first half, as it commissioned the underground mine at Argyle in April 2013

Shore Gold Narrows Loss

Shore Gold Inc. recorded a loss of $1.6 million or 1 cent per share for the second quarter that ended on June 30. The loss was narrowed from $2.2 million one year ago, but both accounts were due to operating costs and exploration and evaluation expenditures. For the first half, Shore Gold reduced its loss by half, compared with 2012, to $3.1 million as lower exploration and evaluation expenditures were incurred.

During the second quarter, Shore Golds main focus was to prepare its final Environmental Impact Statement (EIS) for the Star-Orion South diamond project in Canada and continuing to seek development capital. The feasibility study from July 2011, included a cash flow model, base case net present value of $2.1 billion, using a 7 percent discount rate, for an internal rate of return of 16 percent before taxes and royalties.

Gemfields Production +42%

Gemfields reported that production increased 42% year on year to 29.99 million carats for the fiscal year that ended on June 30. The processed grade improved 38% to 283 carats per tonne and unit per carat production costs fell 26% to 55 cents per carat. During the fourth fiscal quarter alone, emerald production at the companys Kagem mine in Zambia jumped 22% year on year to 8.9 million carats.

Ian Harebottle, the CEO of Gemfields, said that demand for high-quality emeralds remained robust throughout the year. The company is still working with government of Zambia to negotiate global locations to host auctions from Kagems production. Zambia’s decision to force sales locally will impact the long term growth of this sector.

STATS 	  

Belgium

July $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,322 6% $8,440 2%
Polished imports $940 0% $7,918 -2%
Net exports $382 24% $522 187%

Rough imports $1,021 30% $8,035 10%
Rough exports $1,541 25% $9,114 10%
Net imports ($520) ($1,079)

Net diamond account $902 20% $1,601 44%

U.S.

June $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,562 -3% $11,593 11%
Polished exports $2,555 13% $10,113 13%
Net imports ($993) $1,480 0%

Rough imports $20 -62% $212 -17%
Rough exports $27 -4% $137 -24%
Net imports ($7) $74 -3%

Net diamond account ($1,000) $1,554 -1%

ECONWATCH 	  

Diamond Industry Stock Report

Birks & Mayors (+30%), Charles & Colvard (+43%) and Gemfields (+18%) outperformed this week. Otherwise, U.S. and European shares were mostly lower, led by JCPenney (-6%) even with the news it would fastpath the search for a CEO. Indian shares mainly lower led by Classic Diamond (-17%) and Gitanjali (-14%). Mining shares were volatile, but mostly lower led by Rockwell (-16%). View the extended stock report.
Aug. 8 Aug. 1 Chng.
$1 = Euro 0.747 0.757 -0.010
$1 = Rupee 60.73 60.58 0.1
$1 = Israel Shekel 3.53 3.56 -0.03
$1 = Rand 9.83 9.98 -0.15
$1 = Canadian Dollar 1.04 1.03 0.01

Precious Metals
Gold $1,313.00 $1,310.80 $2.20
Platinum $1,487.00 $1,436.00 $51.00

Stock Indexes Chng.
BSE 18,789.34 19,317.19 -527.85 -2.7%
Dow Jones 15,498.32 15,628.02 -129.70 -0.8%
FTSE 6,529.68 6,681.98 -152.30 -2.3%
Hang Seng 21,655.88 22,088.79 -432.91 -2.0%
S&P 500 1,697.48 1,706.87 -9.39 -0.6%
Yahoo! Jewelry 995.60 1,009.59 -13.99 -1.4%

Rapaport Weekly Market Comment Aug. 16, 2013

Diamonds weak but gold jewelry demand strong at Mumbai show. High rough prices, tight bank credit, squeezing manufacturing sector as small/medium size cutters shift to polished trading. Steady demand for inexpensive, lower-quality diamonds while large sizes and high-end goods remain weak. U.S. June jewelry store sales +2% to $2.3B, 1H sales +9% to $15B. Gitanjali 1Q revenue +16% to $640M, profit -76% to $6M. Asian Star 1Q revenue +11% to $105M, profit +9% to $2M. Gem Diamonds 1H revenue -21% to $97M, profit -43% to $9M. Rio Tinto appoints Jean-Marc Lieberherr managing director of diamond unit.

RapNet Data: Aug. 15

Diamonds 1,020,123
Value $6,657,437,480
Carats 1,121,376
Average Discount -27.61%

www.rapnet.com
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RAPAPORT ANNOUNCEMENTS
August
20-28
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Rapaport Single Stone Auction

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September
1
Sun

State of the Diamond Industry 

Presentation by Mordy Rapaport
Intl. Jewellery London Show
Inspiration Theater
11 a.m. to 1 p.m.
Email ijl@diamonds.net for info.

QUOTE OF THE WEEK
Walmart is a terrific operator...they didnt suddenly become stupid [and miss estimate. The U.S. economy is in collapse. Thats whats going on. I dont think were in a recession right now, but I think theres a 50% chance well be in one next year and theres nothing the government is going to be able to do about it. Weve spent all the money, weve borrowed all the money and were in the tank.

Howard Davidowitz | Davidowitz & Associates

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

INDUSTRY 	  

Global Gold Jewelry Demand +20%

Global gold jewelry demand surged 20% year on year to $26.179 billion, according to the World Gold Councils quarterly report Gold Demand Trends. But while demand for the metal strengthened across the jewelry sector, buying gold for technology purposes dropped 11% to $4.743 billion, it plunged 68% to $4.794 billion for investment demand and by 62% to $3.236 billion for central bank net purchases. Demand for gold bars and coins leaped 56% to $23.091 billion. Exchange-traded-funds and similar products recorded a net outflow of $18.297 billion. Overall, gold demand in the second quarter plummeted 23% to $38.952 billion. In terms of weight, gold demand fell 12% year on year to 856.3 tonnes, with demand for the jewelry sector up 37% to 575.5 tonnes.

Gold jewelry demand jumped 33% year on year to $8.6 billion in India and increased by 35% to $7.6 billion in Greater China during the second quarter. The value of gold jewelry demand slipped 12% to $205 million in Japan, declined 10% to $921 million in the U.S. and fell 25% to $324 million in Europe. But demand rose 17% to $2.5 billion in the Middle East.

The World Gold Council expects a notable dampening of Indian demand over the coming months, more than would normally be expected during the usual third quarter slowdown, as the market digests gold import regulations. Indications for the fourth quarter so far remain positive. In China, continued expansion of the domestic jewelry retail network and growth in production capacity has positive longer-term implications for jewelry demand, but the market faces possible shorter-term headwinds from a more material economic slowdown, the report stated.

Other trends in the report observed that Indonesias demand for gold by weight was the strongest since 2009 and Turkish jewelry demand by value in local currency reached a record high. Growth across the Middle East was almost purely price-related and the World Gold Council stated that demand in Dubai was heavily buttressed by the substantial ex-pat Indian community.

IDC Explores Opportunities, Challenges

The Rapaport Group held its annual International Diamond Conference (IDC) in Mumbai this week. Martin Rapaport, the chairman of the Rapaport Group, challenged manufacturers to refrain from buying high-priced rough diamonds as he contended that current market conditions are unsustainable. Miners are raising prices, so why manufacture diamonds when it is so hard to make money, he asked. It seems better to just buy polished, he said.

Russell Mehta, the managing director of Rosy Blue India, stressed that manufacturers have a responsibility to their workers to keep the factories operating with sufficient output. However, he added that factories are questioning how much rough they need and suggested that the time will come when manufacturers refuse rough supply if the recent rough price uptrend is maintained.

Vishal Doshi, a director at Shrenuj & Co., argued that manufacturers can make money but companies need to work more efficiently and change their mindset that there is easy money to be made. Doshi estimated that gross margins achieved by mining companies have grown by 4% -- approximately $700 million worth-- in the past year, while manufacturers have recorded a decline in gross margin of about 2% – also estimated at $700 million.

Arnav Mehta, a director at Blue Star Diamonds, explained that the rough supply scenario is changing as mining companies are increasingly focused on driving short-term profit. He noted that mining companies have become quick to respond to increasing prices and are reluctant to reduce prices in order to protect their bottom line.

The IDC was attended by approximately 300 people and fostered a discussion on India’s regulatory and banking environment. Suresh Surana, the founder of RSM Astute Consulting, cautioned that India’s gem and jewelry industry should expect to face tighter credit and liquidity due to recent banking and capital market defaults.

Rapaport called upon Indias government to pay closer attention to the diamond industry and to work to stop foreign exchange losses, put an end to transfer pricing and for banks to stop fueling the fire with credit for unprofitable manufacturing. “The government must let free market forces develop by creating an enabling environment and then get out of the way,” Rapaport said.

RETAIL & WHOLESALE 	  

IIJS Meets Low Expectations

Diamond trading met exhibitors low expectations at the India International Jewellery Show (IIJS) as sales fell below 2012 levels. While the weak rupee affected buying trends and prices, traffic was steady and buyers were looking for goods. In general, exhibitors reported that a compromise was reached with prices softening slightly as suppliers sought to close deals.

Trends:
Good demand
• 0.30ct. to 0.40ct., I-J, VS-SI
• Small melee, G-H, VVS and H-J, SI
• Larger fancy shapes 3ct.+
• Round matching pairs
Steady demand
• 1ct., I-K
Weak/Slow demand
• 0.70ct. and 0.90ct.
• Round 3ct+ and VVS+

Jewelry Price Inflation Rises

The U.S. consumer price index (CPI) for jewelry posted its largest increase in 16 months, rising 4.3% year on year to 180.9 points in July. However, the jewelry CPI has fallen 0.8% for the first seven months of 2013, primarily as a result of lower gold prices. The CPI reading in July was the ninth to exceed 180 points and it continued to maintain a historically strong upward price trend, marking the 31st consecutive month with a reading of more than 170 points.

The CPI for jewelry reached a record 183 points in January 2012, but then prices for polished diamonds, gold and platinum began to decline. The price of gold at the end of July was down about 18% year on year, however, platinum was up 3%. The RapNet Diamond Index (RAPI) in July for 1-carat certified polished diamonds plunged 6.5%.

Jewelry Store Sales +2%

U.S. jewelry store sales increased 2% year on year to $2.3 billion in June, representing the weakest performance so far in 2013. U.S. consumer inflation for jewelry in June was fairly mild, increasing just 1% compared with prices in June 2012. Following strong sales increases in November and December, jewelry store sales surged 15% in January, improved 4% in February and then resumed high-single- or double-digit increases in March, April and May. Jewelry store sales for the first six months of 2013 have risen 9.1% year on year to $14.952 billion.

Gitanjalis Profit -76%

Gitanajli Gems Ltd.s revenue jumped 15.8% year on year to $640 million (INR 39.19 billion) for the first fiscal quarter that ended on June 30. Cost of sales, depreciation and other expenses rose 19.1% to $617 million. Gross margin rose to 15.5% from 14.3% one year earlier, however, profit plunged 76.4% to $5.7 million. The dramatic profit decline was the result of several factors, including a depreciating rupee currency, a plunge in gold prices during the quarter and provisions for doubtful receivables.

Revenue by segment during the quarter reflected strong diamond sales, which jumped 33.8% to $364 million, while jewelry sales rose 13% to $338 million. Inter-segment revenue, which is subtracted from reported revenue, surged 228% to $65 million.

Asian Stars Profit +9%

Asian Star Co. Ltd.s revenue improved 11.4% year on year to $105 million (INR 6.4 billion) for the first fiscal quarter that ended on June 30. Cost of sales, including materials, depreciation and other expenses, rose 11.5% to $102 million. The companys profit jumped 8.5% to $2 million. By business segment, cut and polished diamond sales rose 2% to $87 million, while jewelry sales surged 88.8% to $26 million and sales of other products leaped 112% to $630,000. Inter-segment sales, which are deducted from total revenue, increased 63.3% to $8.4 million.

Pandoras Profit +584%

Pandora reported that revenue jumped 53.3% year on year to $343 million in the second quarter that ended on June 30. The jewelry retailers profit leaped 584% to $77 million. The volume of sales rose 40% and the average sales price per unit increased $1 to $23 compared with one year ago. By region, sales in local currencies rose 54.3% in the Americas, but revenue surged 59.8% across Europe. Sales in the Asia Pacific jumped 42.4% based upon local currencies.

Kingolds Profit -26%

Kingold Jewelry Inc. reported that revenue surged 36.7% year on year to $367 million for the second quarter that ended on June 30. However, cost of sales, including depreciation, leaped more than 40% to $355.9 million, resulting in a gross profit decline of 26% to $11.1 million. Profit fell 34% to $6.3 million or 10 cents per share. As a result of lower gold prices, Kingold Jewelry incurred a $2.4 million write-down on the value of its inventory. Gross margin fell to 3% compared with 5.6% one year earlier, largely as a result of inventory write-down.

DGSE Narrows Loss 

Revenue for DGSE Companies Inc. rose 3.3% year on year to $29.5 million for the second quarter that ended on June 30. Cost of goods sold increased 2.8% to $25.4 million. The company reported $2.7 million in cash and cash equivalents compared with $4.9 million a year ago. Total expenses and depreciation decreased 12.7% to $5.3 million and its net loss dropped to $1.1 million compared with $2.4 million a year ago. Gross profit margin was steady at 14%. DGSE reported strong sales of bullion and wholesale watches.

Charles & Colvard Reports a Loss

Charles & Colvard reported that revenue rose 28.8% year on year to $6.5 million for the second quarter that ended on June 30. However, costs and expenses surged 63% to $7.4 million, leaving an operating loss of $858,311. The company recorded a loss of $491,585, or 2 cents per share, compared with a profit of $548,572, or 3 cents per share, one year ago.

Loose moissanite gemstone net sales were flat at approximately $4.1 million. Finished jewelry sales jumped 151% to approximately $2.4 million. The company sold slow moving inventory at reduced margins, negatively impacting overall gross margin percentage in the second quarter.

Macys Profit +1%

Macys Inc. reported that revenue dropped 0.8% year on year to $6.07 billion for the second fiscal quarter that ended on August 3. Same-store sales also fell 0.8%. Cost of sales contracted 0.6% to $3.53 billion and gross margin came to 41.8% compared with 41.9% one year earlier. Profit rose 0.7% to $281 million or 72 cents per diluted share. Results missed expectations and disappointed Wall Street.

Desktop Ecommerce +16%

Digital metrics firm comScore Inc. estimated that desktop-based ecommerce retail sales jumped 16% year on year to $49.8 billion for the second quarter that ended on June 30. The figure excludes travel, auctions, automobiles, corporate purchases and retail sales made through a mobile device. Additionally, U.S. consumers spent $4.7 billion with retailers through a mobile device such as smartphones and tablets, an increase of 24% from one year ago. Ecommerce accounted for 9.6% of consumers’ discretionary spending during the period, representing the highest second quarter share on record.

Sterne Agee Raises Outlook on Tiffany

Sterne Agee analysts Ike Boruchow and Tom Nikic raised their earnings outlook for Tiffany & Co. as lower material costs and improving sales for the brands silver business are expected to boost margins. Sterne Agee maintained a rating of Neutral on the stock, but it increased profit estimates to a range of $3.50 to $4 per share from $3.46 to $3.95. Additionally, Sterne Agee raised its price target on Tiffanys shares to $86. The analysts opined that headwinds in 2012, particularly on Tiffanys gross margins, were likely to be reverse this year given lower raw material costs, the retailers ability to implement price increases and the performance of its silver business. The potential exists for significant margin inflection and improved profit generation in 2013 and 2014. Tiffany reports its second quarter results on August 27.

Swatch Expands Tourbillon Store Count

The Swatch Group Ltd. opened a new Tourbillon store in Seattle at the Fairmont Olympic Hotel and it features The Swatch Group Service Center. In Dallas, Tourbillon will open in time for the Christmas season at the NorthPark Center in October. Along with these new stores, Swatch Group relocated and reopened the Tourbillon boutique in Las Vegas at the Crystals, which now features a 3,800-square-foot space and represents the largest boutique of all 22 worldwide.

GENERAL 	  

Rio Tinto Promotes Lieberherr

Rio Tinto promoted Jean-Marc Lieberherr as its new managing director of the diamond business. Lieberherr, who currently serves as chief commercial officer at Rio Tinto Diamonds, will start his new position on September 1. Rio Tinto is consolidating its diamond business after making the decision to remain in the sector following an 11-month review of its operations. As part of a broader restructuring strategy, the group is consolidating its diamond mining operations under Kim Truter, the current managing director of the Argyle Diamond mine and former president of the Diavik mine. Truter will serve as chief operating officer of the diamond business, reporting to Lieberherr.

GIAs CEO Search Begins

The Gemological Institute of Americas (GIA) board of governors retained DHR International, an executive search firm, to undertake a global search for its new president and CEO, following the departure of Donna M. Baker (pictured) in June. DHR will conduct an executive search based upon GIA’s legacy of professionalism, integrity and innovation, reviewing candidates with experience from the gem and jewelry industry, related sectors and those with applicable global experience.

Firestone Appoints Stuart Brown

Firestone Diamonds appointed Stuart Brown as an executive director effective September 2 and he will become the CEO on December 1 when Tim Wilkes steps down from the role. Wilkes will remain with the company as an executive director. Brown, 49, is the former joint acting CEO and chief financial officer of the De Beers Group. Earlier in his career, Brown held positions in the finance divisions of Teemane Diamond Manufacturing in Botswana and at the Premier Mine in South Africa. In 1999, Stuart was appointed as finance manager for De Beers and in 2001, he was appointed general manager for De Beers geological services in South Africa. In 2006, he was appointed chief financial officer.

Ackman Backs Down, JCP Appoints Tysoe

Hedge fund activist William Ackman, the founder of Pershing Square Capital Management, resigned from J.C. Penney Companys board following an extremely contentious 72-hour public battle over the retailers CEO appointment. Ackman was the chair of JCPenneys finance and planning committee and a member of its human resources and compensation committee and the committee of the whole. Ackman’s resignation was the result of a disagreement with decisions made by the board related to the timing and process surrounding the CEO search, according to the boards statement.

JCPenneys board appointed Ronald W. Tysoe, a retail industry executive who spent 16 years as vice chairman at Federated Department Stores Inc., which is now Macys Inc., as a director. In addition, the board intends to name another new director in the near future. Tysoe was also appointed to the committee of the whole, the finance and planning committee and the human resources and compensation committee of the board.

MINING 	  

Gem Diamonds Profit -40%

Gem Diamonds Limited reported that revenue fell 21.3% year on year to $96.5 million for the first half that ended on June 30. Cost of sales contracted 15% to $49.3 million. Profit slumped 40% to $8.6 million or a little more than 6 cents per share. The mining company recorded cash on hand of $61.4 million as of June 30. The company recovered three diamonds that were greater than 100 carats at its Letšeng mine during the first half and it installed four cone crushers, which are expected to reduce diamond breakage moving forward. Already this month, Gem Diamonds has recovered two large undamaged diamonds as a result of the new equipment.

Petra Firms Output Guidance

Petra Diamonds Limited projected rough diamond output of 3 million carats for the fiscal year that ends on June 30, 2014, which is at the high end of earlier guidance and represents a 12% increase from fiscal-year 2013. Petra also expects rough diamond prices to remain firm, with guidance supported by constrained supplies, a firmer U.S. market and continued growth in China. The guidance for weighted average price per carat was highest at Petras Koffiefontein diamond mine at $518 and lowest at the Finsch mine at $113. Cullinans guidance came to $139 per carat, Kimberley underground guidance totaled $301 per carat, Helams was $145 per carat and Williamson guidance amounted to $254 per carat.
In an updated guidance document published today, Petra added that it anticipates long-term production will reach 5 million carats by fiscal-year 2019

ALROSA Secures Two New Licenses

ALROSA won bids for the rights to use subsurface mineral resources of two diamondiferous license areas in the western region of Yakutia, Russia. The two licensed areas, Piropovy Ruchey and the Zakonturnaya deluvial placer of Udachnaya pipe, are located close to ALROSA’s functioning deposits and will enable the mining giant to extend its resource base, according to the firm. ALROSAs winning bid of $754,350 secured the Zakonturnaya deluvial placer of the Udachnaya pipe, and $3.17 million secured rights to develop the Piropovy Ruchey deposit.

Lucara Reports a Profit

Lucara Diamond Corporation reported revenue of $47.2 million for the second quarter of fiscal 2013 that ended on June 30. The company began selling rough diamonds in the third quarter of fiscal 2012. Lucara sold 89,619 carats at an average price of $527 per carat during its second quarter. Operating costs totaled $102 million and capital expenses came to $1.7 million. Profit totaled $22.7 million, or 6 cents per share, compared with a loss of $7.6 million, or 1 cent per share, one year ago.

True North Secures Project Funds

True North Gems Inc. signed option and related agreements with LNS Greenland A/S, allowing its new partner to earn 20% of the issued and outstanding Class A shares of True North Gems Greenland (TNGG) in exchange for approximately $23 million. The amount covers the majority of True North Gems Aappaluttoq ruby mine capital costs. LNS is predominantly owned by arctic contractor Leonhard Nilsen & Sonner A/S of Norway. The Leonhard Nilsen Group operates 15 companies and is a major mining and construction company with more than 70 years of experience in logistics and mining in arctic environments.

ECONWATCH 	  

Diamond Industry Stock Report

U.S. retail largely lower this week led by Birks (-5%), Macys (-4%) and Walmart (-4%). Hong Kong shares higher with Chow Sang Sang (+6%) and Chow Tai Fook (+4%) leading the way. European shares mainly flat. Indian shares advanced led by Gitanjali (+16%) and Winsome (+15%). Big gains for some miners Rockwell (+25%), True North (+17%), Firestone (+21%) and Gem (+11%). View the extended stock report.
Aug. 15 Aug. 8 Chng.
$1 = Euro 0.748 0.747 0.001
$1 = Rupee 61.45 60.73 0.7
$1 = Israel Shekel 3.56 3.53 0.03
$1 = Rand 9.99 9.83 0.16
$1 = Canadian Dollar 1.03 1.04 -0.01

Precious Metals
Gold $1,363.90 $1,313.00 $50.90
Platinum $1,522.00 $1,487.00 $35.00

Stock Indexes Chng.
BSE 19,367.59 18,789.34 578.25 3.1%
Dow Jones 15,112.27 15,498.32 -386.05 -2.5%
FTSE 6,483.34 6,529.68 -46.34 -0.7%
Hang Seng 22,539.25 21,655.88 883.37 4.1%
S&P 500 1,661.32 1,697.48 -36.16 -2.1%
Yahoo! Jewelry 1,005.59 995.60 9.99 1.0%

Rapaport Weekly Market Comment Aug. 30, 2013

Sentiment improves with firm prices at busy Israel diamond week. Bigger, better goods holding up nicely, with very strong demand for 10ct.+, better-to-medium quality, excellent-cut, rounds and fancies. Indian retail jewelry sales fall as rupee continues to plummet and gold prices surge 3% this week. Imperfect polished for U.S. market doing well. Signet 2Q revenue +3% to $880M, profit -5% to $67M. Tiffany 2Q revenue +4% to $926M, profit +16% to $107M. Zale 4Q revenue +3% to $417M, loss of $8M vs. loss of $20M. India’s July polished exports +51% to $1.6B, rough imports +39% to $1.7B. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED SEPT. 6 DUE TO ‎JEWISH NEW YEAR.

RapNet Data: Aug. 29

Diamonds 1,067,290
Value $6,861,839,167
Carats 1,177,980
Average Discount -27.58%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

September
1-4
Sun-Wed

Intl. Jewellery Show London

Visit Rapaport at Earls Court
Booth J98
September
1
Sun

State of the Diamond Industry 

Presentation by Mordy Rapaport
Intl. Jewellery London Show
Inspiration Theater
11 a.m. to 1 p.m.
Email ijl@diamonds.net for info.
September
3-11
Tue-Wed

Rapaport Single Stone Auction

New York & Israel

View details.
September
3-15
Tue-Sun

Rapaport Melee Auction 

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September
11-15
Wed-Sun
Rapaport at the Hong Kong Show

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QUOTE OF THE WEEK
The U.S. luxury goods segment has recently smoothed out, specifically, it is not as volatile as it has been in the previous 18 months. Whether it continues its slow upward trend to pre-2008 levels is a matter of speculation, but overall, it is a fairly good omen. There are some signs that the economy is thawing - and this forecast takes into account the expectations of the luxury consumer for the next three months.

Tom Bodenberg | Unity Marketing

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 	  

Second Diamond Week Concludes in Israel

The U.S. and International Diamond Week boosted Israeli diamantaires confidence ahead of the Christmas-buying season even though sales remained modest with the strongest trading conducted between Israeli dealers. Most dealers who spoke with Rapaport News were satisfied that the event helped lift the mood in the bourse.

Representatives of U.S.-based companies felt that the show fostered new relationships and rekindled former connections; however, sales were short of expectations. More than 500 foreign buyers from 22 countries attended the event, while around 360 Israeli and 28 U.S. companies exhibited on the trading floor.

Dealers observed a lot of old inventory on display with the Israeli industry showing strength in larger certified goods. There was good demand for 0.30-carat to 5.00-carat, G-J, VS-SI quality diamonds. Suppliers held their prices relatively firm, spurring confidence for the upcoming September Hong Kong show. A large contingent of Israeli suppliers and buyers are expected to attend the Hong Kong show with 90 exhibitors participating in the Israel Diamond Pavilion and 30 others throughout the exhibit.

Why Manufacture High-Priced Rough?

WATCH NOW: Refrain from purchasing high-priced rough diamonds and avoid unsustainable subsidies from banks and government -- those were two of many strategies Martin Rapaport, the chairman of the Rapaport Group, offered during his presentation on how to survive a global recession and changes in the jewelry industry, at The Rapaport International Diamond Conference (IDC) on August 14 in Mumbai, India.

Rapaport surmised that since miners are raising prices and rough is ahead of polished, why manufacture when it is so hard to make money? He described the market as a "three-ring circus," in part, for the current environment, made up of "peacockers," who pay anything for rough; "ponzi players," individuals that pony up the higher prices to protect their inventory; and "down-streamers," who purchase expensive rough and try to make it up "downstream" with polished goods. "A diamond is not worth what you paid for it," advised Rapaport, "your inventory is not worth your cost. Your inventory is worth replacement cost."

RETAIL & WHOLESALE 	  

Tiffanys Profit +16%

Tiffany & Co. reported that revenue rose 4.4% year on year to $925.9 million in the second quarter that ended on July 31, while comparable-store sales rose 1%. Cost of sales rose by only 1.6% to $393.8 million and gross margin as a percentage of sales increased to 57.5% from 56.3% in large part due to diminishing product costs. Profit jumped 16.3% to $106.8 million or 83 cents per diluted share. In response, Tiffany improved guidance for the fiscal year that ends on January 31, 2014 to forecast net earnings in the range of $3.50 to $3.60 per diluted share, compared with an earlier prediction of $3.43 to $3.53 per diluted share.

By region and measured by growth at constant exchange-rates, revenue improved 2% to $444 million across the Americas, however, same-store sales were flat. In the Asia-Pacific, sales jumped 20% to $208 million and comparable-store sales rose 13%, while revenue and same-store sales rose 7% to $136 million in Japan. Meanwhile, Europe recorded a revenue increase of 10% to $111 million and same-store sales rose 7%.

Tiffany & Co. reported that a stronger dollar had a negative currency translation of 4% worldwide, which was driven by a 21% contraction effect from sales in Japan. Other sales increased 33% to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates (UAE) from independently-operated to company-operated. As of July 31, Tiffany & Co. recorded inventory of $2.3 billion, which was up 4% from one year ago.

Signets Profit -5%

Signet Groups revenue rose 3% year on year to $880.2 million for the second quarter that ended on August 3. Same-store sales rose 3.6% and sales from the companys ecommerce channels jumped 28.9% to $31.2 million. Cost of sales rose 5.2% to $570.5 million and gross margin slipped to 35.2% from 36.4% one year earlier. Profit fell 4.7% to $67.4 million or 84 cents per share.

U.S. division revenue improved 5.6% to $741.1 million, while comparable-store sales increased 4.9%. Signet observed stronger sales from bridal, colored diamonds and watches. Kay and Jared experienced increases in both transaction counts and average transaction value. In the U.K., revenue fell 6.1% at a constant exchange rate to $139.1 million and same-store sales fell 2.4%. Sales declines at H. Samuel and Ernest Jones were primarily due to the impact of closed stores and currency fluctuation. In Ernest Jones, the number of transactions increased driven primarily by strength in branded bridal and watches.

Signet Groups cash and cash equivalents contracted by 10.4% year on year to $212.9 million, in large part due to the retailers share repurchase program and the acquisition of Ultra Stores. Inventory rose 8% to $1.42 billion, primarily due to the Ultra acquisition and rough diamond purchases of $32.3 million.

Zales Loss Narrows to $8M

Zale Corporation reported that its revenue improved 2.5% year on year to $417.1 million for the fourth fiscal quarter that ended on July 31. Same-store sales, which included online sales, rose 5.6% with Zales brand stores up by 8.1%. Furthermore, Zale reduced costs of sales slightly, by 0.8%, which improved gross margin to 53.1% compared with 51.6%. Interest expenses totaled $6 million, compared with $15 million in the fourth quarter of fiscal 2012. Zales loss in the fourth quarter improved to $7.98 million, or 25 cents per share, compared with a loss of $19.75 million, or 61 cents per share, one year ago.

During Zales fiscal year 2013, revenue improved 1.1% year on year to $1.89 billion as same-store sales rose 3.3% and cost of sales were kept in check at $903.6 million. Interest expenses fell to $23 million compared with $45 million one year earlier. Gross margin improved to 52.1% compared with 51.5%. Zale recorded a profit of $10 million, or 31 cents per share, compared with a loss of $27.3 million, or 85 cents per share, in fiscal year 2012. Inventory levels for Zale rose 3.5% to $768 million and outstanding debt fell 9.5% to $410 million as of July 31.

Movados Profit +55%

Movado Group reported that revenue increased 17% year on year to $138.3 million for the second quarter that ended on July 31. Cost of sales jumped 21% to $63.5 million and gross margin slipped to 54.1% compared with 55.7%. However, earnings surged 55% to $12.5 million. Topline growth was fueled by Movado and licensed brands, which included the continued introduction of the Scuderia Ferrari and a newly repositioned Coach watch brand.

Movado reiterated its guidance for the current fiscal year and expects sales growth of approximately 13%, a gross margin of approximately 54% and earnings improvement of around 28% to $49 million or $1.90 per diluted share. Movados board authorized a cash dividend of 8 cents per share to be paid on September 20.

Swiss Watch Exports +2%

Swiss watch exports rose 2% year on year to $2.187 billion in July, according to the Federation of the Swiss Watch Industry. The increase was mainly attributed to a 4% improvement in steel watch exports as well as a 13% surge in exports of watches made from other metals. The federation noted that the month of July was the fourth best month for watch exports on record as the CHF 2 billion ($2.165 billion) mark has never been reached so early in the fiscal year. Exports of wristwatches rose by 2% to $2.072 billion, while the number of units shipped grew by 4% to 2.7 million. During the first seven months of 2013, total Swiss watch exports rose by 1% to $13.281 billion, with the number of wristwatch units sold falling by 6% to 15.7 million units.

Chow Tai Fooks Signs Deal With Crossworks

Crossworks Manufacturing Ltd. and Chow Tai Fook Jewellery Group Ltd. entered into a long-term supply and licensing agreement for Crossworks’ patented hearts and arrows ideal-cut square diamond. Crossworks will supply the retail giant with the patented diamond cut and Chow Tai Fook will have the exclusive distribution rights to sell and market this diamond under the Forevermark brand on Mainland China, Hong Kong, Macau and Taiwan.

Crossworks designed the square-cut hearts and arrows diamond to enhance the brilliance, fire and scintillation of the stone. This Crossworks patent has achieved the grade of “ideal” for light performance from leading gemological laboratories, which includes an eight-sided square-cut diamond that exhibits eight hearts and eight arrows to form perfect symmetry.

USPTO Awards Trademarks to Sterling

The U.S. Patent & Trademark Office (USPTO) assigned the trademark Artistry Diamonds (registration number 4389571) and Shades of Wonder (registration number 4389393) to Sterling Jewelers Inc. of Ohio, the U.S. subsidiary of Signet Group, on August 20.

Additionally, the USPTO awarded Ozs Jewelers Corporation of North Carolina the trademark Steal Her Heart with the registration number 4386612.

Ackman Sells JCP Stake

Activist investor William Ackman, the founder of Pershing Square Capital Management, sold his entire stake in J.C.Penney Company, representing 39.1 million shares or about 18%, to Citigroup Inc., according to a filing notice. Pershing Square stated that Citigroup offered $12.90 per share and the sale is expected to close on August 30. Two weeks ago, Ackman went head-to-head with JCPenneys board, mostly through contentious press announcements, on how best to move forward in finding a permanent CEO. The board stood its ground and the exchange eventually led to Ackman stepping down. Ackman reached a deal with the board that enabled him to sell his shares, and the board followed with introducing a shareholders rights plan, preventing use of coercive or abusive takeover techniques.

Cash America Adds 34 PawnMart Stores

Cash America International Inc. signed a purchase agreement to buy all of the assets of a chain of 34 pawn lending locations from PawnMart Inc. for approximately $62 million cash. When completed, the transaction will add 31 pawn lending locations in Georgia and three locations in North Carolina to Cash America’s presence in both states. The closing is subject to the satisfaction of certain closing conditions and licensing and regulatory approvals. The 34 locations had approximately $10.7 million in pawn loan balances as of December 31, which was the most recently reporting period, according to Cash America.

Two weeks ago, Cash America completed a planned acquisition of a chain of 41 pawn lending locations in Texas for approximately $103 million in cash. Those locations were operated as Top Dollar Pawn and owned by TDP Superstores Corporation.

Cash America reported a profit of $25.1 million for the second quarter that ended on June 30, down from a profit of $29.8 million in the prior year. Revenue was flat for the period at $411 million.

U.S. Affluent Outlook Improves

Unity Marketings latest consumer spending survey of affluent consumers in the U.S. rose in July, and had all the markings of a sustainable recovery that will give wealthy shoppers the confidence to spend more freely through the Christmas season, according to the groups president, Pam Danziger. Affluent consumers, average income $273K, account for 40% of all consumer spending. Danziger concluded that stronger affluent consumer confidence was boosted by a more stable financial direction of the country and an improved perspective on their own financial status.

Still, Unity Marketing warned jewelers to examine their marketing position, evaluate product mix and pricing and make sure that services line up with the expectations of todays affluent consumer. The same old strategic marketing plan does not work, Danziger said, brands need to provide value addition to services and attract younger affluent shoppers to survive.

Richland Opens Online Tanzanite Shop

Richland Resources Limited, the parent company of TanzaniteOne Mining Ltd., opened its www.tanzaniteoneonline.com retail website for selling tanzanite and jewelry directly to consumers. For the most part, loose stones and jewelry are available for up to about $18,000 initially; however, the company noted that exceptional pieces are also available upon request.

TanzaniteOneOnline is a newly formed subsidiary of Richland Resources Ltd. and the ecommerce channel marks the first time the mining company has offered these gemstones directly to consumers outside of Africa. All of TanzaniteOneOnlines pieces include the Tanzanite Foundation’s Mark of Rarity™ and a TanzaniteOne certificate of authenticity and origin. The company prides itself on offering tanzanite as conflict-free and responsibly-sourced.

Pathlight to Service Birks Loan

Pathlight Capital LLC, a portfolio company of Sycamore Partners, will serve as the administrative and co-collateral agent on a $28 million secured term loan facility to retailer Birks & Mayors Inc. The loan, which matures in August 2018, amends the companys $18 million term loan and provides additional liquidity for the Canada-based jeweler. The junior capital division of Wells Fargo Capital Finance, part of Wells Fargo & Company, will serve as the co-collateral agent on the facility.

Titan Rebrands

Titan Industries Limited, the parent of several top brand names in India, including Tanishq, created a new corporate identity and will be known as Titan Company Limited. The new corporate logo, the Titan Star, was inspired from the companys core values: drive innovation, nurture talent, create value and delight consumers by maintaining highest global standards.

Titans new star logo reflects the companys many brands with a counter-form in the center creating a ‘T’ representing the common, value-driven culture of one company. The facets of the star are geometrical and precise to communicate Titan’s commitment to the highest global standards, according to the firm. The new corporate identity will be soon transitioned across Titan’s stores, sales and marketing collateral, stationery, the website and social media channels.

Titan Company Limited is a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO). In 1994, Titan diversified into jewelry and watches and recently it added eyewear with Titan Eyeplus.

MINING 	  

          ZMDC Anticipates Production of 17M Carats 

The Zimbabwe Mining Development Corporation (ZMDC), which is under U.S. and E.U. sanctions, projects that the Marange diamond fields will produce 16.9 million carats in 2013. The AFRASIA Kingdom bank in Zimbabwe concluded from these projections that diamonds would dramatically improve the countrys economy and become a top diamond-producer as early as next year. In 2012, Zimbabwe reportedly produced 12.06 million carats of diamonds that were valued at $644 million, according to the Kimberley Process.

Canada Approves GEM Funding

The Mining Association of Canada (MAC) welcomed the federal governments renewal of a special Geo-mapping for Energy and Minerals (GEM) program that has helped to facilitate exploration activities in Canadas north. Building on a 2008 federal budget allocation of $100 million for five years, the governments renewed commitment of $100 million over seven years will carry forward important exploration work, according to MAC.

To date, the GEM program has produced more than 700 maps and reports and the new round of funding, which the government titled Phase II of GEM will further develop modern geological maps and data sets that will completely cover Canadas northern reaches by year 2020. These geo-maps will then be made accessible to industry investors, land-use planners, government and community agencies to inform resource exploration and development.

North Arrow Secures Funding

North Arrow Minerals Inc. intends to complete a non-brokered private placement of up to 7 million shares at a price of 50 cents per share for proceeds of $3.5 million. North Arrow also intends to complete a non-brokered private placement of up to 3 million flow-through shares at a price of 60 cents per share for proceeds of $1.8 million. Proceeds from the private placement will be used to finance exploration programs at the companys diamond properties in Canada and for working capital purposes. The company expects that insiders will participate in the private placement on the same terms and conditions as arms length subscribers.

Kennady Intersects Kimberlite

Kennady Diamonds Inc. intersected more than 70 meters of kimberlite in a step-out drilling exercise to the northwest of its main Kelvin kimberlite. Delineation drilling, which has been taking place approximately 100 meters from Kelvin Lake, and more than 300 meters from the main Kelvin kimberlite, is increasing confidence in the tonnage potential of the Kelvin kimberlite, according to the junior explorer. Kennady Diamonds reported that more than 3 tonnes of kimberlite have been recovered to date from approximately 3,000 meters of drilling, which is well in excess of the targets set for this current program.

Tawana Sells Diamond Assets

Tawana Resources sold its interest in the Kareevlei diamond project in South Africa and the Flinders Island diamond project in Australia for about $384,000 (AUD 430,000) as the explorer divested from the diamond business to focus on core mining assets. BlueRock Diamonds agreed to purchase Kareevleis mining rights and equipment for $384,000, and meet certain requirements. Tawana sold its 80% stake in the Flinders Island diamond project to Kalyan Resources Pty. Ltd. for $1 plus a 2.5% gross revenue royalty on future production.

ECONWATCH 	  

Diamond Industry Stock Report

Predictably, gold (up $32) gained traction as tensions flare in the Middle East; investors were not pleased enough with jeweler results (Birks -10%, Nile -3%, Signet -5%, Tiffany -5%) except for Movado (+10%) and Zale (+38%). Chow Sang Sang (+8%) and Chow Tai Fook (+9%) led Hong Kong shares. Damiani (+19%) led Europe as shares in larger luxury retailers fell across the board. Indian shares were mixed with Vaibhav (+13%) and Goenka (-7%) defining the spread. View the extended stock report.
Aug. 29 Aug. 22 Chng.
$1 = Euro 0.755 0.748 0.007
$1 = Rupee 66.60 64.58 2.0
$1 = Israel Shekel 3.62 3.59 0.03
$1 = Rand 10.36 10.29 0.07
$1 = Canadian Dollar 1.05 1.05 0.00

Precious Metals
Gold $1,406.90 $1,375.40 $31.50
Platinum $1,519.00 $1,536.00 -$17.00

Stock Indexes Chng.
BSE 18,401.04 18,312.94 88.10 0.5%
Dow Jones 14,840.95 14,963.74 -122.79 -0.8%
FTSE 6,483.05 6,446.87 36.18 0.6%
Hang Seng 21,704.78 21,895.40 -190.62 -0.9%
S&P 500 1,638.17 1,656.96 -18.79 -1.1%
Yahoo! Jewelry 1,148.62 958.55 190.07 19.8%

Rapaport Weekly Market Comment Sept. 13, 2013

Hong Kong show opens with steady traffic and cautious buying. Dealer, retailer and consumer demand very price sensitive with strong focus on SI-I1 goods and continued shift to lower qualities. IF-VVS qualities relatively weak. Manufacturers moving to 3X cut quality as buyers become selective and top cuts bring greater premiums. Rough trading weak as sightholders rejected expensive De Beers goods. Dominion 2Q sales +48% to $262M, loss of $19M vs. $5M profit. Hong Kong 2Q polished imports +6% to $4.4B, exports +3% to $2.8B. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED SEPT. 20 & 27 DUE TO SUCCOT HOLIDAY. Visit diamonds.net/TradeScreen for continuously updated RapNet prices.

RapNet Data: Sept. 12

Diamonds 1,056,689
Value $6,770,271,283
Carats 1,170,905
Average Discount -27.85%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

The Rapaport Group wishes all of our friends and clients a happy, healthy, prosperous and peaceful Jewish New Year.

Our offices will be closed for the following Jewish holidays:

Sukkoth: Sept. 19-20 and 26-27

With best wishes for the new year,
The Rapaport Group
September
10-15
Tue-Sun

Rapaport Melee Auction 

Hong Kong

www.rapaportauctions.com
September
11-15
Wed-Sun

Rapaport at the Hong Kong Show

Visit us at Asia World Expo
Booth 7K32
October
3-9
Thu-Wed

Rapaport Single Stone Auction

New York & Israel

View details.
QUOTE OF THE WEEK
We are deeply concerned that Dominions board and management seem to be too focused on long-term mining investment considerations and far too little focused on the company’s long suffering shareholders. Accordingly, we urge the board to rethink this aversion to returning cash to shareholders and to approve a substantial share re-purchase commitment in the very near future.

Ward Davis & Brian Agnew | Caerus Global Investors

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 	  

Indias Gold Imports Decline

Drastic measures that were taken to reduce gold imports in India have resulted in a 78% decline in imports for August at $650 million, according to the State Bank of India (SBI). Since the countrys fiscal year began on April 1, gold imports have plummeted 59% to $21.9 billion. SBI concluded that if gold imports continue to wane and fail to reach $40 billion, or the level of imports in 2011, the nations current account deficit may drop to around 3.8% of the gross domestic product (GDP) for fiscal 2014 against 4.8% in fiscal 2013.

Buyers Cautious at Hong Kong Show

The September Hong Kong Jewellery & Gem Show closes the week with largely mixed sentiment but very cautious buying activity. AsiaWorld Expo (AWE) hosts one of two venues and showcases diamonds, jewelry, raw materials, equipment and packaging from September 11 to 15, while the Hong Kong Convention & Exhibition Centre exclusively showcases finished jewelry from September 13 to 17. UBM Asia reported that 3,633 exhibitors from 48 countries and regions are participating in the show, 1,350 of which are Hong Kong companies. UBM Asia expects more than 52,000 buyers to attend the event throughout the week.

In economic news, Hong Kong’s polished diamond imports rose 6% year on year to $4.398 billion in the second quarter, while polished exports grew 3% to $2.841 billion. During the first half, polished imports rose 5% to $8.884 billion and exports decreased 4% to $5.803 billion.

RETAIL & WHOLESALE 	  

LKIs FY Sales Decline

Lazare Kaplan International (LKI) Inc. notified the Securities and Exchange Commission (SEC) of its intention to file the most recent fiscal year report late, for the period that ended on May 31, 2013, following ongoing litigation or material uncertainties. Lazare Kaplan has been unable to file its quarterly and annual financial statements since the fourth quarter of fiscal year 2009 that ended on May 31, 2009.

Nonetheless, the company estimated that sales fell nearly 36% year on year to approximately $68 million for fiscal year 2013. The decrease was attributed to a significant drop in rough trading volume and a decrease in sales of commercial (non-branded) polished diamonds. In July, the companys board agreed to sell 625,000 shares that were held in its treasury to Leon Tempelsman at a price of $1.40 per share, for an aggregate consideration of $875,000 for the purpose of working capital.

LKI continues its $500 million RICO lawsuit and criminal complaint against KBC Bank and subsidiary Antwerp Diamond Bank for the alleged theft of over $135 million worth of diamonds and money laundering. An Antwerp Civil Litigation court postponed full hearings until December 20, but an Antwerp Commercial Court hearing underway this month could alter the date. In the U.S., meanwhile, the criminal courts have instructed LKI and the banks to engage in limited discovery, which is in progress.

Christies Features Trio of Diamonds

Christie’s New York scheduled its magnificent jewels sale for October 15, highlighting a trio of colored diamonds of superior quality, depth of color, tone and saturation. Leading the auction is an 8.77-carat, rectangular‐cut fancy intense pink diamond ring with presale estimate of $5.5 million to $6.5 million, a 3.81-carat, cushion‐cut fancy vivid blue diamond ring with a presale estimate of $2.5 million to $3.5 million and a 5.13-carat, square‐cut fancy vivid yellow diamond ring with a presale estimate of $200,000 to $300,000, all of which have been consigned by gem collectors. The auction includes 400 lots and Christies anticipates the sale to achieve at least $40 million.

Sothebys Highlights 118Ct. Oval Diamond

Highlighting the Hong Kong Sotheby’s upcoming auction on October 7, is a 118.28-carat, D flawless, type IIa oval shaped diamond that is expected to sell for $28 million to $35 million. The diamond, which has excellent symmetry and excellent polish is, according to Sotheby’s jewelry experts, the largest oval shaped, D color, flawless or internally flawless, diamond ever graded by the Gemological Institute of America (GIA). The stone sparkles brilliantly, has no bowtie and fits perfectly in the palm of the hand. Only four other diamonds of this quality over 100 carats have been sold at auction and three were sold by Sotheby’s.

In other news, Sotheby’s informed shareholders that it would review its capital allocation and financial policies with the intent of releasing its findings in early 2014. Sotheby’s has undertaken restructuring projects in the past couple of years that helped to boost financial performance and generate additional capital to invest in new strategic growth initiatives, strengthen the balance sheet and build liquidity to pursue transaction opportunities such as lending and auction guarantees. Bill Ruprecht, the chairman of Sothebys, explained that the firm continues to evaluate return on capital, while considering such measures as share buy back programs and/or increasing dividends, keeping in mind a need to invest in the future to strengthen Sothebys competitive position.

“In that context, our assessment will take into account some key considerations including, but not limited to, the potential use of incremental debt to fund segments of our operations, the company’s credit rating, ongoing funding requirements for certain strategic initiatives both announced and contemplated, the value of our real estate properties and our unique premises requirements and the potential tax implications of any of the actions we are considering,” he added.

Sterling, Zale End Skirmish

Signet Groups U.S. subsidiary, Sterling Jewelers Inc., and its rival Zale Corporation agreed to resolve a truth in advertising lawsuit challenging Zales Celebration Diamond tagline: the most brilliant in the world. The resolution will go into effect on March 1, but the terms of the settlement are sealed. The rivals were ordered to negotiate and report progress to the court by the end of September. Sterling initially sued Zale over the tagline claim the week before Thanksgiving 2012.

Zale Receives Two Trademarks

The U.S. Patent & Trademark Office (USPTO) granted the trademark Celebration 102 to TXDC L.P. collectively with Zale Delaware Inc. (Zale Corporation) on August 27 with the registration number 4393835. On September 3, it approved the trademark The Celebration Diamond Collection to Zale with the registration number 4397639. Both trademarks refer to goods and services including jewelry and diamonds.

The USPTO also issued the trademark Daniels Making Diamond Dreams Come True to Sherwood Management Co. Inc. of Culver City, California, with the registration number 4394262. In addition, the USPTO issued the trademark Bijoux Luxury Jewelers to Deaton Investments Inc. of California with the registration number 4394850.

Bulgari Prepares to Open in India

Bulgari completed the necessary paperwork to open jewelry stores in India and reportedly signed up a silent business partner. LVMH Group brands, including Louis Vuitton and Christian Dior, already operate independently in the country. Indias Economic Times reported that Bulgari leased space in south Delhis DLF Emporio mall. The application to operate in India is pending government approval.
Pandora Reaches 64% of Share Buy Back Fund

Pandora repurchased another $1.74 million (DKK 9.76 million) worth of shares this past week and has increased its share buy back purse to 64.4% of the original $124.8 million (DKK 700 million) goal that was established in February. The jewelry retailer implemented a share buy back program with the intent of reducing Pandoras share capital and to meet obligations arising from employee share option agreements. Under the current program, the company has about $44.4 million (DKK 249.1 million) in remaining funds allocated for share repurchasing before it expires on December 31.

Neiman Marcus Sells for $6B

TPG and Warburg Pincus agreed to sell luxury retailer Neiman Marcus to an investment group led by Ares Management LLC and the Canada Pension Plan Investment Board in a deal worth $6 billion. A portion of the purchase price will be used at the closing to repay outstanding credit facilities, other than its debentures. Ares and Canada Pension Plan will hold an equal interest in the luxury retailer and current investors will retain a minority stake. The transaction is expected to close in the fourth quarter of 2013, subject to regulatory approvals and other customary closing conditions.

Neiman Marcus operates 41 stores in the U.S. as well as two Bergdorf Goodman locations and 36 Last Call outlets. Neiman Marcus no longer reports monthly sales figures, but for the most recent quarter that ended on April 27, revenue rose 3.7% year on year to $1.1 billion and same-store sales increased 3.6%. Operating earnings increased 2.5% to $150.3 million and profit rose 13% to $70.8 million.

CRISIL Measures Stress on Gem Sector

Indias gems and jewelry sector is not the industry that is most vulnerable to the economic issues plaguing the country, according to CRISILs State of the Nation report. CRISIL defined the sources of economic stress to include demand pressures, liquidity and working capital challenges, indebtedness, the ability to service debt and foreign currency volatility.

By sector, 24% of the gems and jewelry firms CRISIL interviewed for its report were facing two or more of those stress factors and 29% were facing at least one degree of stress. However, 48% of the gem sectors firms were experiencing no stress, according to the report.

In contrast with the gemstone sector, Indias real estate industry has come under great pressure this year with 36% of those firms monitored by CRISIL experiencing two or more forms of economic stress, followed by the infrastructure sector, automotive industry, transportation and capital goods. CRISIL found that the industries that were least impacted by economic stress were education (the lowest at 3%), healthcare, packaging and paper products, software and services, chemicals and textiles.

CRISIL found that by and large, stretched working capital cycles are aggravating liquidity pressures on Indias companies with 16% claiming this problem is a great source of stress. Contrary to belief, however, CRISIL concluded that foreign exchange (forex) volatility is a source of material vulnerability for only 6% of the firms that account for 32% of banks corporate lending and 82% of debt rated by CRISIL. The greatest stress factor across all sectors was a slowdown in product/service demand. CRISIL lowered its GDP forecast to a growth rate of 4.8%, the lowest since 2003, as it expects industrial growth to remain tepid or flat.

Safety Tips From JSA

WATCH NOW: With the Christmas season approaching fast, safety is of increasing concern to jewelry retailers and their staff and traveling salesmen. The Jewelers Security Alliance (JSA) provides life saving tips as the industry enters the final stretch in preparing for the busiest season of the year. Scott Guginsky, the vice president of JSA, discusses the latest nuances criminals use to gain access to merchandise and the best ways to ensure the safety of our industrys personnel.

GENERAL 	  

Fairtrade Gold Interests Meet 

Fairtrade International will unveil its new standard and pricing for gold, silver and platinum and new ways of working with the jewelry industry at a roundtable discussion in London on October 9 and 10. The group expects to host seven Fairtrade gold mining interests and members of the jewelry trade to work on how to pioneer and grow the Fairtrade gold program in order to bring greater benefits to impoverished and marginalized small-scale miners.

The organization distributed new design labels for Fairtrade gold, platinum and silver, using a green accented tab with the name of the precious metal set in black. The Fairtrade marks can also be applied to certified gold, platinum and silver that must adhere to eco standards, while Eco Marks can be used for precious metals that have been extracted without the use of chemicals, following strict ecological restoration requirements.

Group Favors Zim Sanctions

Global Witness (GW) stated that Belgiums push to remove the last remaining sanctions on Zimbabwe were premature and added that the European Union (EU) should not rush into lifting the measures imposed on the Zimbabwe Mining Development Corporation (ZMDC), which remains under U.S. sanctions. Emily Armistead, of GW, suggested that recent presidential elections, which handed President Robert Mugabe another term, were fraught with fraud particularly around discrepancies in the electoral roll.

"We also need the EU to look carefully at some of the allegations that have appeared publicly, that some of the mining companies such as Mbada and Anjin partly funded the activities that influenced electoral fraud. The EU shouldnt be coming to an immediate decision on sanctions without carrying out proper investigations into these concerns," she added.

Mugabes rival Morgan Tsvangirai, the British ambassador to South Africa, Nicola Brewer, and some human rights groups have claimed that the elections were not credible. However, African leaders overseeing the polls and a senior South African official, Lindiwe Zulu, called the election fair and concluded that the west should lift remaining sanctions.

MINING 	  

Dominion Diamond Reports a Loss

Dominion Diamond Corporation reported a loss of $19.1 million in the second fiscal quarter that ended on July 31, compared with a profit of $4.8 million one year earlier, due to refinancing associated with its newly acquired Ekati mine. However, the companys revenue jumped 48% year on year to $261.8 million, driven by additional rough sales from Ekati, which more than offset a loss of sales from the companys former retail arm, Harry Winston Inc., which was sold to the Swatch Group earlier this year. The company reported that steady U.S. demand for mid-range polished diamonds and significant growth in Japan helped to drive sales. However, restricted demand for higher-end diamonds, especially from China, led to discounting in these categories. The company noted that the market remains cautious due to economic uncertainty, combined with deteriorating conditions in India with the rupee devaluation and tightened liquidity.

In other news, Dominion shareholder Caerus Global Investors urged the board to rethink its capital allocation and buyback shares, which the group estimated to be trading at half market value. The principals believe Dominion could generate at least $200 million in excess free cash flow annually by the end of 2015 and for several years thereafter, over and above expected capital expenditures anticipated on Ekati and Diavik.

There seems little question that Dominion could commit to acquiring a material amount of the shares outstanding with excess cash on hand without compromising the (Ekati) Jay pipe investment opportunity in any meaningful way. The value of the diamond resource owned by Dominion would not be diminished. The Jay kimberlite would still be there for investors to prize and to be developed when diamond prices hopefully are much higher in the future, according to the investment group.

Richlands Loss Grows

Richland Resources Ltd., a producer of tanzanite, reported that its revenue slipped 10.5% year on year to $7.54 million and cost of sales was flat at $4.32 million for the first half that ended on June 30. The mining companys gross margin fell to 43% compared with 48% one year earlier. Richland Resources recorded a loss of $546,000 compared with a loss of only $55,000 in 2012. Gemstone production rose 28% year on year to 1.54 million carats as the miner improved its average recovery grade 52%. In other news, Richland Resources signed a supply agreement with Chow Tai Seng Jewellery Co. Ltd. of China for cut-to-order stones that would be sold through the retailer’s 2,200 jewelry stores.

Afri-Can Identifies 868,000Cts.

Afri-Can Marine Minerals Corporation completed its analysis of historical estimates from the Diamond Fields International Ltd. mining lease 111 off the coast of Namibia and estimated that 868,000 carats of diamonds remain. However, Afri-Can is not treating this report as a current mineral resource or mineral reserve as it will be followed by a National Instrument 43-101 resource estimate report, which is in preparation and expected to be completed within 45 days. The rough diamond estimate was derived from a resource estimate and a feasibility study prepared by MRDI and AGRA-Simons for Diamond Fields in 2000 and another resource estimate prepared by SRK Consulting on a small area of 111 called the Diaz prospect 1, in 2006. The NI 43-101 report is expected to identify and classify these areas and define which will support immediate mining.

Chidliaks Kimberlites Rise to 64

Peregrine Diamonds Ltd. reported that its Chidliak summer exploration program, operated by De Beers Canada Inc., was completed on August 19 and included the discovery of two new kimberlites and a possible kimberlite float, which is undergoing final petrographic confirmation. Concurrently, the Canada Nunavut Geoscience Office conducted a bedrock and surface mapping program over a portion of the Hall Peninsula of Baffin Island. During the course of their fieldwork, they reported the discovery of a new kimberlite dyke. In total, three new confirmed kimberlites have been discovered in 2013 bringing the total number of kimberlites at Chidliak to 64.

During this summer program, De Beers completed ground geophysical orientation surveys over 12 known kimberlites using gravity, electromagnetics, ground penetrating radar and magnetics. The results from these surveys will be used to determine the most effective geophysical technique for discovering additional kimberlites in future exploration programs.

Leaked Log File Alleges Marange Smuggling 

The Zimbabwean newspaper allegedly received one leaked log file from inside the Central Intelligence Organisation (CIO) listing numerous instances where rough diamonds from the Marange were permitted to leave the country in the hands of key figures from Zimbabwes secretive diamond-mining and military sector. Approximately 36,800 carats of diamonds were allegedly taken between April 4 and May 16 and moved to Angola, Dubai and Hong Kong. Payments of at least $58 million were made to the CIO during this period from parties who transported the stones elsewhere, according to the log file that was dated May 23.

ECONWATCH 	  

Diamond Industry Stock Report

Gold tumbles on technical selling. U.S. retailer shares mixed with Charles & Colvard (+21%) and Birks (-5%) defining the spread. European shares mainly higher, led by LVMH (+5%) and Indian shares mostly higher with Goenka (+64%) and Gitanjali (+3%) gaining ground on recent declines. Stornoway (+38%) led mining shares, Firestone (-8%) define the low. View the extended stock report.
Sept. 12 Sept. 4 Chng.
$1 = Euro 0.752 0.756 -0.004
$1 = Rupee 63.75 67.00 -3.3
$1 = Israel Shekel 3.55 3.64 -0.09
$1 = Rand 9.98 10.22 -0.24
$1 = Canadian Dollar 1.03 1.05 -0.02

Precious Metals
Gold $1,321.80 $1,390.50 -$68.70
Platinum $1,431.00 $1,491.00 -$60.00

Stock Indexes Chng.
BSE 19,781.88 18,567.55 1,214.33 6.5%
Dow Jones 15,300.64 14,953.72 346.92 2.3%
FTSE 6,588.98 6,474.74 114.24 1.8%
Hang Seng 22,953.72 22,326.22 627.50 2.8%
S&P 500 1,683.42 1,655.17 28.25 1.7%
Yahoo! Jewelry 1,188.31 1,143.38 44.93 3.9%

Rapaport Weekly Market Comment Sept. 25, 2013

Chinese retail sentiment improves ahead of Golden Week. Polished trading cautious with focus on lower-quality goods in carat and under sizes. Rough trading very weak due to tight liquidity. Sothebys NY important jewels sells $24M with 82% sold by lot. Government owned Okavango Diamond Co. opens in Botswana and will be auctioning 12% of their production. Lucara recovers 257ct. diamond from Karowe. August U.S. jewelry price index at 182 nears record high even with lower gold and diamond prices. EU lifts sanctions on Zimbabwe Mining Development Corp. while U.S. keeps diamond ban. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED SEPT. 27 DUE TO SUCCOT HOLIDAY. Visit diamonds.net/TradeScreen for continuously updated RapNet prices.

RapNet Data: Sept. 23

Diamonds 1,021,103
Value $6,703,256,313
Carats 1,142,287
Average Discount -27.92%

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holiday:

Succot: Sept. 26-27

With best wishes for the new year,
The Rapaport Group
October
3-9
Thu-Wed

Rapaport Single Stone Auction

New York & Israel

View details.
October
8-17
Tue-Thu
Rapaport Melee Auction

New York & Dubai

www.rapaportauctions.com

QUOTE OF THE WEEK
Shoppers researching their purchases electronically ― via their PC, tablet or mobile phone ― are increasingly influencing in-store sales, particularly as we see greater integration across retailers store, online and mobile channels. More retailers are offering services such as buy online and pick up in store, as well as inventory from other locations and price matching on the spot. The store is still a core element of Christmas shopping and U.S. retailers leading the way this season will be those that effectively bring together their pricing, promotions, merchandise and inventory management across both their physical and digital storefronts.

Alison Paul | Deloitte

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 	  

EU Lifts ZMDC Sanctions

The European Union (EU) lifted sanctions on the Zimbabwe Mining Development Corporation (ZMDC) and in so doing, permitted all Kimberley Process (KP) certified rough diamonds to enter Europe from Zimbabwe from September 25 onwards. The policy shift, which was fiercely lobbied by Belgium, also permitted diamond imports from other companies as well, including Marange Resources, Mbada Diamonds, Kimberworth Investments and the Diamond Mining Corporation (DMC).

Meanwhile, the U.S. maintains its sanctions on all goods and services from entities that are financially tied to President Robert Mugabe and others, including ZMDC, the Minerals Marketing Corporation of Zimbabwe (MMCZ), Marange Resources and Mbada Diamonds, all of which control the nations diamond trade. U.S. businesses are forbidden to trade diamonds from those firms even if the goods have accompanying KP certificates or were handled through a third party.

Sothebys NY Sale Achieves $24M

WATCH: Sotheby’s New York sale of important jewels totaled $23,738,439 and was 82.4% sold by lot. The top lots achieved $2,105,000 each: a 15.10-carat, D, VVS2, type IIa, pear-shaped platinum and diamond ring sold for $139,403 per carat and a 19.51-carat, E, VVS2, type IIa, emerald-cut diamond ring sold for $107,893 per carat. Colored stones featured prominently in the sale and jewelry specialist Quig Bruning highlighted (in the video link) some of the top lots.

RETAIL & WHOLESALE 	  

U.S. Consumer Confidence Rises

Consumer confidence in the U.S. rose 13% year on year to 79.7 points in September, according to the Conference Board. However, the Consumer Confidence Index® fell slightly from a reading of 81.8 points in August. The Present Situation Index jumped to 73.2 points from 50.2 points one year ago and the Expectations Index was basically flat at 84.1 points from 83.7 points in September 2012. While all three measures reflected fairly stable sentiment, there is room for a great deal of improvement given the indexes benchmark of 100 points.

Deloitte Expects Tepid Sales Growth

Deloittes retail and distribution practice expects U.S. Christmas-season retail sales to increase between 4% and 4.5% year on year in the range of $963 billion to $967 billion. The consulting firm defined the shopping season as November 2013 through January 2014 and it excluded motor vehicle sales in the estimate. U.S. retail sales for Christmas 2012 rose 4.5%, according to Deloittes final tally.

Non-store retail sales are expected to grow by as much as 13%, according to the firm, citing three-quarters of non-store sales result from the online channel with additional sales coming from catalogs and interactive TV. Deloitte anticipates that mobile-influenced retail store sales will account for 8%, or $66 billion, in retail store sales this Christmas season, driven by consumers store-related smartphone activity such as product research, price comparison or mobile application use.
Opportunity Knocks for Recycled Diamonds

WATCH: Ezi Rapaport, the director of global trading for the Rapaport Group, explains how recycled diamonds --the supply of polished goods coming from consumers-- is an increasingly important opportunity for the trade. In the U.S., as baby boomers age and the previous generation passes, their diamonds are returning to the market, so expect tremendous growth from this important source of polished supplies.

Conflict Mineral Rule is Impractical for Retailers

The National Retail Federation (NRF) urged the U.S. to exclude retailers from regulations requiring manufacturers to determine whether merchandise contains “conflict” gold and other minerals from the Democratic Republic of the Congo (DRC) under provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that take effect in 2014. The legislation is intended to reduce funding from gold, tin, tungsten and other minerals that ultimately supply rebel groups with cash to buy arms in the DRC, among other things.

In a friend-of-the-court filing, the NRF argued that the Dodd-Frank regulations make no practical sense to the industry as manufacturers and retailers have fundamentally different functions in the commercial world and they have fundamentally different obligations under the statute at issue. Manufacturers must know about materials and parts in their products, the NRF wrote, but retailers who are ordering products have “little more ability to learn about and control the source of their components than a consumer who custom orders furniture.”

Sothebys to Sell Pink Star for $60M

Sotheby’s Geneva will present the Pink Star, a 59.60-carat, internally flawless, fancy vivid pink, type IIa diamond for sale on November 13 with a presale estimate in excess of $60 million. The Pink Star originated from a 132.50-carat rough diamond that was recovered by De Beers in 1999 and then cut and polished by Steinmetz Diamonds over a period of two years into its present form. The diamond was first unveiled as the Steinmetz Pink in Monaco in 2003 and then it was sold and renamed in 2007.

The Pink Star is more than twice the size of the 24.78-carat Graff Pink diamond, which established a world auction record at $46.2 million at Sotheby’s Geneva in 2010.

Patino, Rochas Collections Highlight Christies 

Christies Geneva will auction jewelry from the collection of Bolivian tycoon Simón Itturi Patiño at its upcoming magnificent jewels sale in Switzerland on November 12. In addition, the sale highlights include jewelry from the private collection of Hélène Rochas, the wife of renowned French fashion designer Marcel Rochas. Top lots include an emerald and diamond necklace by Cartier estimated to fetch between $7 million and $10 million and a cushion-shaped 32.65-carat, F diamond ring by Chaumet with a presale estimate of $2.2 million to $2.8 million.

Baume & Mercier Introduce Worldtimer

Baume & Mercier will introduce its first limited-edition Capeland Worldtimer in October. This 44-millimeter, stainless steel watch features a blue dial and has the capacity to convey 24 time zones. It features Arabic numerals, "Breguet"-type hands with a sapphire crystal case back. The case back also indicates "Limited Edition 1 out of 100" engraving. The case is polished and satin-finished steel with an anti-glare face and it is finished with a premium-quality black alligator strap with a pin buckle. The watch will retail for $8,300 through select Tourneau stores in the U.S.

Gitanjali Opens in Kerala

Gitanjali Jewels, the flagship retail chain of the Gitanjali Group, debuted in Kerala by opening its 101st store in Pattom, Trivandrum. The new diamond and jewelry boutique was inaugurated by Malayalam movie actors Anoop Menon and Meghana Raj along with the jewelers managing director, Santosh Srivastava. In addition to celebrating the stores opening, Raj unveiled a new collection from Gitanjalis Ananya jewelry brand.

DDE Appoints Mupazviriho

The Dubai Diamond Exchange (DDE) appointed Prince Mupazviriho, the permanent secretary of the Ministry of Mines and Mining Development of Zimbabwe, to its board of directors. Mupazviriho earned his MBA from the University of Hull with special interest in organizational development, strategic management and performance measurement. For the past 20 years, he has been instrumental in implementing performance and results-based management in Zimbabwes public sector, managed the Youth Development Fund, the Employment Creation Fund, indigenization and empowerment and is a member of the National Indigenization and Economic Empowerment Board.

Tiffany Names Cumenal as President

Tiffany & Co.s board of directors appointed Frederic Cumenal as the retailers president and to a newly-created seat on the board. Prior to this appointment, Cumenal, 54, was the executive vice president of Tiffany & Co. He will retain his regional responsibilities, while assuming responsibility for the design, merchandising and marketing functions.

MINING 	  

ALROSA Updates Resource Estimates

ALROSA updated its JORC compliant reserves and resources report as part of an ongoing and long term development and capital investment plan. Proven reserves, as of July 1, totaled 7.33 million carats of rough diamonds, while probable reserves were 600.18 million carats, according to the JORC audit report prepared by Micon International Co. Ltd. In terms of total resources, ALROSA stated that measured and indicated diamond resources combined totaled 664.81 million carats, while inferred resources added 308.24 million carats for a combined total of 973 million carats.

ALROSA is targeting production of 36.4 million carats in 2013 and 41.3 million carats per year by 2021. The estimated capital expenditures set forth in the Micon report amounted to $1 billion (RUB 33 billion) in 2013 and a total of $8 billion (RUB 256 billion) by year 2021. In aggregate, ALROSAs long term development plan assumes production of 353.2 million carats between this year and 2023.

Lucara Recovers a 257Ct. Diamond

Lucara Diamond Corporation recovered a 257.24-carat rough diamond from its Karowe mine in Botswana. This very large stone makes 14 exceptionally large diamonds recovered this year that were more than 100 carats. There have been 47 rough diamonds recovered that were larger than 50 carats. Lucara described the diamond as beautiful and clear and it will be sold in the fourth quarter of 2013.

Kimberley to Acquire Mantle

Kimberley Diamonds Ltd. agreed to acquire full equity in Mantle Diamonds Ltd. for almost 13.6 million new ordinary shares. The agreement is dependent upon its own due diligence and Mantle Diamonds capital restructuring and other milestones. The deal gives Kimberley Diamonds full access to the Lerala diamond mine in eastern Botswana, which hosts five diamondiferous kimberlite pipes that were discovered by De Beers in the early 1990s. Indicated resource estimates were about 3.1 million carats and probable reserves were nearly 2.5 million carats.

Once this transaction is completed, Kimberley Diamonds expects to acquire Mantles 34% stake in a joint venture with Firestone Diamonds at the diamondiferous Lahtojoki kimberlite project in Finland along with the Slave and Superior projects in Canada.

Rockwell Recovers Four Large Stones

Rockwell Diamonds recovered four rough diamonds larger than 100 carats from its Saxendrift project in South Africa. The company recovered a 116 carat diamond and a 138 carat diamond at the Saxendrift extension pit, while a 126 carat diamond and 169 carat diamond were recovered from a recently opened mining area at the Saxendrift hill complex. The company noted that all four diamonds were discovered within a three week period and will be sold at market value through its beneficiation joint venture with Steinmetz.

Lamb Joins North Arrow Board

North Arrow Minerals Inc. appointed William Lamb, the CEO of Lucara Diamonds Inc., as an independent member of the board. The junior explorer now has five board members who are working toward diamond project development and financing. Lamb has more than 20 years of experience in mining operations and project development, having previously worked for Rand Mines, Kvaerner Metals and De Beers prior to joining the Lundin Group in 2008 as the general manager for Lucara.

ECONWATCH 	  

Diamond Industry Stock Report

Retail shares lost ground led by JCPenney (-25%) stateside and LVMH (-6%) in Europe. Indian shares were mixed as defined by Classic Diamonds (+7%) and Goenka (+20%) topside and Gitanjali (-13%) and Rajesh (-4%) on downside. Mining shares were mainly lower except for Lucara (+6%) and Gemfields (+3%). View the extended stock report.

Sept. 25 @ NY Noon Sept. 18 @ NY Noon Chng.
$1 = Euro 0.739 0.749 -0.010
$1 = Rupee 62.70 63.40 -0.7
$1 = Israel Shekel 3.55 3.53 0.02
$1 = Rand 9.95 9.83 0.12
$1 = Canadian Dollar 1.03 1.03 0.00

Precious Metals
Gold $1,335.10 $1,298.10 $37.00
Platinum $1,423.00 $1,416.00 $7.00

Stock Indexes Chng.
BSE 19,856.24 19,962.16 -105.92 -0.5%
Dow Jones 15,308.78 15,490.69 -181.91 -1.2%
FTSE 6,551.53 6,551.17 0.36 0.0%
Hang Seng 23,209.63 23,117.45 92.18 0.4%
S&P 500 1,696.42 1,701.75 -5.33 -0.3%
Yahoo! Jewelry 1,206.12 1,186.69 19.43 1.6%