Rapaport Weekly Market Comment July 18, 2014

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

RapNet Data: July 17

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed

Rapaport  Melee Auction 

New York & Dubai

www.rapaportauctions.com

Aug-Sep 27-4 Wed-Thu

Rapaport Single Stone Auction

New York & Israel

View Details.

September 8-9 Mon-Tue

RapNet Symposium: CONNECT 2014

The Diamond Business is Changing
Are You Ready?

W Hotel | Ft. Lauderdale, Florida

Register Now.

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

Charlie Munger | Berkshire Hathaway

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

INDUSTRY 	  

De Beers Production +7%

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

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

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

Rio Tinto Production -7%

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

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

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

RETAIL & WHOLESALE 	  

U.S. Jewelry Store Sales +6%

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

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

Hong Kong’s Jewelry Sales Drop

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

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

Christies Jewelry Auction Total Rises

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

Sothebys, eBay Partner for Live Auctions

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

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

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

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

Movado Appoints Quintero as President

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

Forevermark Expands in U.K.

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

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

GENERAL 	  

HRD Adjusts Cut Grade

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

New U.S. Trademarks Approved

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

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

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

Myanmars Jade Exports Surge

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

WDC Seeks New Executive

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

Dealers Face Loss From Tanzanite Scam

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

Winsome Approves Delisting Shares

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

LVMH, eBay Drop Litigation to Cooperate

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

MINING 	  

Lucara Tender Achieves $40M

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

Gem Upgrades Letseng Reserves

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

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

Rockwell Returns a Profit

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

Kennady Beings Drill Program

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

STATS 	  

Belgium

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

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

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

ECONWATCH
Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment July 25, 2014

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

RapNet Data: July 24

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed
Rapaport Melee Auction

New York & Dubai

www.rapaportauctions.com

Aug-Sep 27-4 Wed-Thu

Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon

RapNet Symposium: CONNECT 2014

The Diamond Business is Changing
Are You Ready?

W Hotel | Ft. Lauderdale, Florida

Register Now.

QUOTE OF THE WEEK
The digital transformation is a significant movement where daring business leaders venture into tomorrows markets today. It isnt an initiative owned by a particular role or department in the organization; instead, it is a cross-enterprise realignment of resources to unify and enhance the digital customer experience at every touch point in order to be competitive in todays era of connected markets.

Brian Solis | Altimeter 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 and Mumbai. View jobs now.

INDUSTRY

Global Diamond Production By Value +11%

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

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

IIJS Reports Minimal Diamond Trading

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

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

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

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

Swiss Watch Exports +1%

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

RETAIL & WHOLESALE 	  

LVMHs Profit -4%

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

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

Swatchs Profit -12%

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

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

Retail Survival Requires Culture Change

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

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

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

Speed, Agility Drive Digital Transformation

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

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

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

Physical Stores Are a Cornerstone to Digital Success

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

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

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

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

KGK Licenses Judith Ripka

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

GENERAL 	  

Sofisti to Head Gucci Jewels

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

Cumenal to Replace Kowalski

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

De Beers Revises Sightholder Model

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

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

MINING

ALROSAs Production -16% 

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

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

First Nation Deal Signed

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

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

Walsh Sets Pace for Bunder

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

Trans Hex Sells Subsidiary

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

STATS 	  

India

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

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

Net diamond account ($678) ($1,753)

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Aug. 1, 2014

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

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

RapNet Data: July 31

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

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed

Rapaport  Melee Auction 

New York & Dubai

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

Rapaport Single Stone Auction

New York & Israel

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

Robert Arditi | Norwest Venture Partners

Careers@Rapaport 	  

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

INDUSTRY 	  

De Beers Profit +59%

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

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

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

Slower Trade Marks JA NY Show

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

Diamond wholesaler Krishna Vedawala of Diacenter Inc. attributed the lack of buyers to the overall change in how they shop, saying more buyers turn to online services, such as RapNet. Fifteen years ago, "people didnt have as many tools to compare prices as they do now. They are more hesitant to buy right away at these shows. Its easier to shop around online for the right product," Vedawala said.

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

RETAIL & WHOLESALE 	 

Kering Reports Profit +7%, Acquires Ulysse Nardin

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

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

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

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

Birks Records Loss, Plans Consolidation

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

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

Norwest Backs Kendra Scott

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

Investors Bank on BaubleBar

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

Equity Firm Acquires John Hardy

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

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

Stuller, Toscow Receive Trademarks

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

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

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

De Beers Debuts New Signature

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

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

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

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

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

Reasons why the omnichannel strategy may fail certain retailers include a poorly managed business model; difficulty integrating backend systems with new technology designs and the inability to share customer data across all platforms. Human problems included team conflicts, limited associate training and departments that cant break out of the silo mentalti.

Blommaert Joins Panama Exchange

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

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

Saurashtra Workforce Grows

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

Suit Alleges Silver Price Fixing 

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

MINING 	  

Petras Revenue +17%

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

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

Letsengs Revenue +14%

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

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

Lace Tenders Achieve $910K

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

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

ZELA Calls for ZMDC Audit, Guidelines

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

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

Mountain Province Names Lenders

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

Brazil Minerals Builds Mgmt. Team

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Aug. 8, 2014

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

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

RapNet Data: Aug. 7

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

August 6-13 Wed-Wed
Rapaport Melee Auction

New York & Dubai

www.rapaportauctions.com

Aug-Sep 27-4 Wed-Thu
Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon

RapNet Symposium: CONNECT 2014

The Diamond Business is Changing
Are You Ready?

W Hotel | Ft. Lauderdale, Florida

Register Now.

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

Howard Archer | IHS Global Insight

Careers@Rapaport 	  

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

INDUSTRY 	  

Polished Prices Decline in July

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

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

RETAIL & WHOLESALE 	  

U.S. Jewelry & Watch Sales +3%

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

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

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

Titans Profit -3%

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

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

Blue Niles Profit -2%

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

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

Charles & Colvards Loss Widens

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

TBZs Profit Falls

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

Gitanjali to Raise Expansion Funding

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

Damiani, Rocca Merge Operations

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

Walmart Chief Outlines Growth Initiatives

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

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

GENERAL 	  

U.S. Jewelry Crime Incidents -13%

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

PDEs Board Adds Four Members

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

Martin Joins GIA

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

JA Adds Two Board Members

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

MINING 	  

Rio Tinto Diamonds Revenue +7%

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

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

Gem Diamonds Recovers 198-Ct. Diamond

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

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

Faradays Sample Grade Impresses Evans

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

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

Zimbabwe Seeks Payment at Point of Sale

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

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

Namdeb Strike Enters Sixth Day

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

STATS 	  

USA

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report 

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

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

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

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

Rapaport Weekly Market Comment Aug. 15, 2014

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

RapNet Data: Aug. 14

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

Aug-Sep 27-4 Wed-Thu

Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon

RapNet Symposium: CONNECT 2014

The Diamond Business is Changing
Are You Ready?

W Hotel | Ft. Lauderdale, Florida

Register Now.

September 8-18 Mon-Thu
Rapaport Melee Auction

New York & Hong Kong

www.rapaportauctions.com

QUOTE OF THE WEEK

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

David Lauren | Ralph Lauren Corp.

Careers@Rapaport 	  

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

INDUSTRY 	  

Gold Jewelry Demand Declines

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

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

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

NY Hosts India Diamond Week

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

RETAIL & WHOLESALE 	  

U.S. Jewelry Store Sales +3%

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

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

Gitanjalis Profit +34% 

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

Ralph Lauren Preps for China

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

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

Jewelry Sales Decline at QVC

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

HSN Reports Lower Jewelry Sales

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

Sothebys Profit +3%

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

Shrenujs Profit +21%

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

Pandoras Profit +54%

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

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

Asian Stars Profit +56%

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

GENERAL 	  

New York Widens Ivory Ban

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

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

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

Sarines Profit +4%

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

MINING 	  

Lucaras Profit -31%

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

Gemfields Auction Achieves $16M

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

Shore Gold Narrows Loss

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

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

PL/117 Drill Targets Set for Sept.

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

Permit Issued for Gahcho Kue

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

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Aug. 22, 2014

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

RapNet Data: Aug. 21

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
Aug-Sep 27-4 Wed-Thu

Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon
RapNet Symposium: CONNECT 2014

Book now -- space is limited.

W Hotel | Ft. Lauderdale, Florida

September 8-18 Mon-Thu

Rapaport  Melee Auction 

New York & Hong Kong

www.rapaportauctions.com

September 15-19 Mon-Fri

Rapaport at HK Jewellery & Gem Fair 

Exhibitors may upload show diamonds here for display on RapNets show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo

QUOTE OF THE WEEK

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

Vladlen Nogovitsyn | ALROSA

Careers@Rapaport

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

RETAIL & WHOLESALE 	  

U.S. Jewelry CPI -5% 

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

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

DGSE Notes Higher Jewelry Sales

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

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

De Beers Explores Reselling Methods

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

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

Tiffany & Co. Introduces T

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

Sterne Agee used the launch as an opportunity to reiterate Tiffany & Co.s price target of $108 and rating of "Buy." The company added that even if the collection falls outside of entry-level budgets, the story surrounding Tiffany T generates a sought-after luxury halo that drives traffic and aspirational customers. Tiffany & Co. reports financial results on August 27.

Signet Launches Sofia Vergara Collection

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

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

Seiko Opens in Manhattan

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

U.S., India Issue Trademarks

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

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

Scott Kay Hires Three Executives 

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

Panama Exchange Appoints Two Directors

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

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

Armenia Bank Accepts Diamond Collateral 

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

MINING 	  

Dominions 2Q Revenue +6%

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

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

Gem Diamonds Doubles Profit

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

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

ALROSA Observes Stronger Prices

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

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

STATS 	  

Japan

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

Belgium

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

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

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

India

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Aug. 29, 2014

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

RapNet Data: Aug. 28

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
Aug-Sep 27-8 Wed-Mon

Rapaport Single Stone Auction

New York & Israel

View Details.

September 7-8 Sun-Mon
RapNet Symposium: CONNECT 2014

Book now -- space is limited.

W Hotel | Ft. Lauderdale, Florida
September 8-18 Mon-Thu
Rapaport Melee Auction

New York & Hong Kong

www.rapaportauctions.com
September 15-19 Mon-Fri

Rapaport at HK Jewellery & Gem Fair 

Exhibitors may upload show diamonds here for display on RapNets show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo

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

Pam Danziger | Unity Marketing

Careers@Rapaport

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

INDUSTRY

De Beers Sight Estimate at $715M

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

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

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

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

RETAIL & WHOLESALE 	  

Signets Profit -14%

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

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

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

Chow Sang Sangs Profit -15%

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

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

Tiffanys Profit +16%

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

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

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

Movados Profit -4%

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

Affluent Spending Hits a Bump

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

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

Pam Danziger, the president of Unity Marketing, said, "The mass-affluent HENRYs are watching their pennies and saving their discretionary income, rather than spending it. As a result, HENRYs are trading down to less premium brands and shopping in more mass-market oriented stores. Ultra-affluents, on the other hand, are turning to inconspicuous consumption. They are confident enough to pay premium and luxury prices, but they dont want to make a spectacle of their wealth. So, their spending is going undercover toward purchases that are private, like things for their home, or less showy, such as brands with subtle logos and markings, or to luxury purchases made online where the FedEx truck delivers the goods and nobody sees them walking down the street with a Neiman Marcus, Barneys or Bergdorf Goodman bag."

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

Malak Jewelers Opens New Showroom

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

Embee Diamonds Schedules U.S. Tour

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

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

IDE Cancels Diamond Week

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

SA Police Nab Dealers

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

GJEPC, Panyu to Boost Trade With China

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

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

MINING 	  

ALROSA Begins Contract Screening

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

Grib to Hold First Auction

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

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

Kimberley Diamonds to Raise $10M

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

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

Debswana Extends Life of Mine Plan

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

DiamondCorps Loss Widens

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Sept. 5, 2014

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

RapNet Data: Sept. 4

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

Aug-Sep 27-8 Wed-Mon

Rapaport Single Stone Auction

New York & Israel

View Details.

September 8-18 Mon-Thu

Rapaport  Melee Auction 

New York & Hong Kong

www.rapaportauctions.com

September 15-19 Mon-Fri

Rapaport at HK Jewellery & Gem Fair 

Exhibitors may upload show diamonds here for display on RapNets show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo

QUOTE OF THE WEEK
Our job is to do a good job with the business and at the end of the day, if somebody sees value then theres a conversation to be had. Im not anti-takeover. Im very open. Im not scared by it (but) thats not what were setting this business up for.

Mark Cutifani | Anglo American

Careers@Rapaport

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

INDUSTRY 	  

ALROSAs Profit +58%

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

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

RETAIL & WHOLESALE 	  

U.S. Jewelry, Watch Sales +4%

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

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

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

Swiss Watch Exports +2%

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

Lazare Kaplans Revenue Gains From Licensing

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

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

Juwelo, Silverline Form elumeo

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

Fortunoff Fine Jewelry Opens a Store

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

Mehta, Bin Sulayem to Receive Industry Awards

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

Mugabe Seeks Partners in China

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

LVMH, Hermés Make Up

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

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

Citizen Extends Deal With U.S. Open

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

Birks Pays Tribute to Women in Film

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

Security Increasingly Important for Omnichannel

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

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

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

Gujarat Okays Surat Diamond Bourse Project

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

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

MINING 	  

Dominion Diamond Reports Profit

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

Diamond Mine to Open on Bushmen Land

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

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

NUM Opposes New Licenses for Petra

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

Letseng Mine Unaffected by Lesotho Turmoil

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

Zaamwani-Kamwi Receives Accolade

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

McFarland Joins Botswana Diamonds

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

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

STATS 	  

Russia

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

USA

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

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

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

Japan

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Sept. 12, 2014

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

RapNet Data: Sept. 11

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

September 8-18 Mon-Thu

Rapaport  Melee Auction 

New York & Hong Kong

www.rapaportauctions.com

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

Exhibitors may upload show diamonds here for display on RapNets show listing page.

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

Rapaport Single Stone Auction

New York & Israel View Details.

QUOTE OF THE WEEK

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

Bill Dunkelberg | NFIB

Careers@Rapaport

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

INDUSTRY

Polished Prices Decline 

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

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

RapNet Drops EGL Reports

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

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

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

Gem Opens Ghaghoo

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

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

Petra Recovers 232-Carat Diamond

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

RETAIL & WHOLESALE 	  

LVMH, Google Sign Pact

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

Winsome Says No Synthetics

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

FTC Clarifies Made in the USA

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

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

U.S. Regulations Swamp Smaller Firms

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

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

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

Is Your Shop Flex Ready?

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

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

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

Jewelers Debut Collections in Paris

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

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

Damas Opens in Ladies Club

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

Tissot Opens in New York

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

MINING 	  

Angolas Diamonds Sales Jump

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

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

Trans Hex Rough Prices +21% 

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

De Beers Denies Miners Claims

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

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

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

Pangolin Sample Program Underway

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

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

True North Signs Finance Deal

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

Stellar Commissions Baoule Plant

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

STATS 	  
Belgium 

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

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

Net diamond account ($768) 11% $608 36%

ECONWATCH

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Sept. 19, 2014

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

RapNet Data: Sept. 18

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

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

New York & Israel

View Details.

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

Alison Turner | Panmure Gordon

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

INDUSTRY 	  

Petra Sells 122.52-Ct. Blue Diamond

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

Hong Kong Show Meets Dealer Expectations

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

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

RETAIL & WHOLESALE 	  

Richemont Observes Weaker Growth

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

U.S. Jewelry Store Sales +8%

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

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

U.S. Jewelry CPI -5%

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

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

Invest to Sustain Long Term Growth

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

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

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

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

CARE Reaffirms Rating on Suashish

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

Chow Tai Fook Debuts Reflections of Siem

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

Parikh Bros. to Manufacture GSR Stones

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

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

Quadamas Introduces AsscherQueen

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

New Tiffany Masterpieces Debuts

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

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

Pandora Steps Up Expansion in Japan

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

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

Court Seizes Zimbabwe Goods in Belgium

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

MINING 	  

Petras FY Profit Surges

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

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

Stornoway Reports 1Q Loss

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

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

Kennady to Raise $5M

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

Diamcor Receives Mining Rights

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

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

Lucara Receives Licenses

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

BD, ALROSA Begin Drilling

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

Gemfields to Explore Sri Lanka

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

STATS 	  

India

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

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

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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