Rapaport Weekly Market Comment Sept. 24, 2014

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 THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED THIS WEEK DUE TO THE ‎JEWISH NEW YEAR.‎ Visit TradeScreen for continuously updated RapNet prices.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

RapNet Data: Sept. 24

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

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holidays:

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

With best wishes for the new year,
The Rapaport Group

Sep-Oct 23-1 Tue-Wed

Rapaport Single Stone Auction

New York & IsraelView Details.

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

Anish Aggarwal | Gemdax

Careers@Rapaport 	   	 

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

INDUSTRY 	  

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

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

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

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

KBC Prepares to Close ADB

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

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

Andreev Resigns as ALROSA CEO

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

RETAIL & WHOLESALE 	  

U.S. Data Reveals Consumer Stress

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

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

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

Deloitte: Expect Moderate Seasonal Growth

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

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

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

Fabrikant-Tara Partners With Zac Posen

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

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

Dillards to Offer James Avery Jewelry

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

RJC Recognizes Fairmined Standard 2.0

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

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

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

Dillards, Argyle, Alex Woo Receive Trademarks

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

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

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

Majhgawan Tender Achieves $1M

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

Denver Hosts Cartier Exhibit

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

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

MINING 	  

Rockwells Revenue +55%

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

Gemfields Profit Soars

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

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

Diamond Fields Ends Afri-Can Marine Deal

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

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

True North Beings Construction

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Oct. 3, 2014

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

RapNet Data: Oct. 2

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

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holiday:

Succot: Oct. 9-10, 16-17

With best wishes for the new year,
The Rapaport Group

October 3-7 Fri-Tue
Rapaport Melee Auction

New York (Closed Oct. 4 & 5)

www.rapaportauctions.com
October 12 Sun
New RapNet App

Download RapNets most advanced and user-friendly app for the iPhone.

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

Rapaport Single Stone Auction

New York & Israel View Details.

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

Luca Solca | Exane BNP Paribas

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INDUSTRY 	  

Gem Diamonds Sells 198ct. Stone for $11M

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

U.S. Jewelry & Watch Sales +5%

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

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

De Beers Sight Dates for 2015

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

RETAIL & WHOLESALE 	  

Neiman Marcus Acquires Theresa

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

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

Sears Raises Funds

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

Ultra-Wealthy Favor Spending on Leisure

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

Data Hints at Christmas Jewelry Spending

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

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

De Beers Briefs NY Bankers

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

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

Alex & Ani Move Up on Inc. 500

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

Todd Reed Opens Second Showroom

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

ALROSA Tenders Polished Diamonds

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

MINING 	  

Firestone Narrows Loss

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

Mountain Province Raises $89M

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

Catoca Production -2%

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

Zimbabwe Holds Rough Tender

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

Kimberley Diamonds Restates Reserves

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

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

ECONWATCH

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Oct. 8, 2014

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

RapNet Data: Oct. 8

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

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RAPAPORT ANNOUNCEMENTS

Our offices will be closed for the following Jewish holiday:

Succot: Oct. 9-10, 16-17

With best wishes for the new year,
The Rapaport Group

October 12 Sun

New RapNet App

Download RapNets most advanced and user-friendly app for the iPhone.

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

Rapaport  Single Stone Auction 

New York & Israel
www.rapaportauctions.com

November 11-19 Tue-Wed
Rapaport Melee Auction

New York & Dubai View Details.

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

Steven Barr | PwC

Careers@Rapaport 	  

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INDUSTRY

Polished Prices Drop

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

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

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

RETAIL & WHOLESALE 	  

Sothebys HK Jewels Sale Tops $75M

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

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

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

Retail Sales Slide in Hong Kong

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

Diamonds Boost NY & Canada Ties

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

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

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

Opposing Projections Season Christmas Outlook

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

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

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

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

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

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

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

Jewelers Select Raymark Omnichannel Solution

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

The consortium includes Finks Jewelers, Hamilton Jewelers, Hyde Park Jewelers, Lee Michaels Fine Jewelry, London Jewelers, Lux Bond & Green, Tappers Diamond & Fine Jewelry, Tivol and Traditional Jewelers.

MINING 	  

Severalmaz Begins Mining Project 

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

Rio Dismisses Glencore Speculation

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

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

Kennady Confirms Sample Grade

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

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

Brazil Minerals Completes Purchase

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

STATS 	  

U.S.

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Oct. 15, 2014

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

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

Succot: Oct. 16-17

With best wishes for the new year,
The Rapaport Group

New RapNet App

Download RapNets most advanced and user-friendly app for the iPhone.

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

Rapaport  Single Stone Auction 

New York & Israel
www.rapaportauctions.com
November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai View Details.

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

Dilip Mehta | Rosy Blue

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

INDUSTRY 	  

Rap Melee Index Edges Lower During 3Q

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

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

De Beers Sight Estimate at $460M

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

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

RETAIL & WHOLESALE 	  

U.S. Jewelry Store Sales +4%

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

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

Jewelry Sales +2% at LVMH

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

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

GJEPC: Heavy Discounts Havent Materialized

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

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

Signet Appoints Light as CEO

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

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

Dubais Banks Increase Trade Credit

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

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

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

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

MINING 	  

Diavik Production Flat

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

Rockwell Records 2Q Loss

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

Miners Adjust During Ebola Outbreak

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

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

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

STATS 	  

Belgium

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report

One day of panic doesnt make a week, although consumer spending fundamentals -- which dont look great -- are worrying retail investors who were planning on a strong fourth quarter. U.S. shares all down except for Movado (+1%), with Birks (-20%) and JCP (-13%) leading the drop. European shares were lower, led by Damiani (-7%) and all of Indias firms were down except for Classic Diamond (+3%) and Goenka (+15%). Mining shares were mixed, however, several firms were down by double-digits: Kennady (-13%), Rockwell (-19%), Shore (-13%), True North (-17%), Stellar (-11%). View the extended stock report.
Oct. 15 Oct. 8 Chng.
$1 = Euro 0.780 0.786 -0.006
$1 = Rupee 61.56 61.06 0.5
$1 = Israel Shekel 3.70 3.70 0.00
$1 = Rand 11.09 11.06 0.03
$1 = Canadian Dollar 1.13 1.11 0.02

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

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

Rapaport Weekly Market Comment Oct. 24, 2014

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

RapNet Data: Oct. 23

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

www.rapnet.com

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

New RapNet App

Download RapNets most advanced and user-friendly app for the iPhone.

www.rapnet.com

October 22-29 Wed-Wed

Rapaport  Single Stone Auction 

New York & Israel

www.rapaportauctions.com

November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai View Details.

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

Adrienne Yih-Tennant | Janney Capital Markets

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 no

INDUSTRY 	  

ALROSAs Production -2% in 3Q

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

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

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

De Beers Production +6% in 3Q

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

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

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

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

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

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

RETAIL & WHOLESALE 	  

Diwali Sales Point Higher

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

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

Sales Weaken at Chow Tai Fook

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

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

Revenue Falls at Luk Fook

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

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

Christies NY Sale Achieves $34M

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

Cash Americas Profit -79%

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

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

Kalyan Jewellers Secures Funding

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

NRF: 25% Have Jewelry on Wish List

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

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

Sothebys Plans Geneva Sale on Nov. 12

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

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

Sterling, Eurostar Receive Trademarks

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

Russia Considers Law on Synthetics

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

Core Jewels Adds NFC to Its One Collection

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

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

Fairtrade Gold Enters Swiss Market

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

Hari Krishna Rewards Employees

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

HRD Awards Four Retailers in China

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

MINING 	  

Lucara Tender Achieves $46M

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

Stornoway Optimizes for Large Diamond Recovery

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

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

Stellars Sample Beats Estimate

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

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

Rio Extends CEOs Tenure

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

Anjin Workers Strike

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Oct. 31, 2014

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

RapNet Data: Oct. 30

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

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

Dilip Mehta | Rosy Blue

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

RETAIL & WHOLESALE

Swiss Watch Exports +3%

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

Blue Niles Profit Sinks

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

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

Titans Profit Soars

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

Overstock Debuts Jewelry Vault Concept

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

Equity Firm Buys Christ

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

Crisis or Crying Wolf?

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

Rapaport Says Put America First

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

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

Chow Tai Fook Unveils Anniversary Diamond

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

JTV Taps Crowdsourcing for Top Gem

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

Price Matters, Walmart Weighs Matching

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

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

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

GENERAL 	  

Dubai Show Adds Exhibitors

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

Groups Decline to Attend WDC Meeting

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

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

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

WFDB Explores Strategic Initiatives

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

U.S., India Assign Trademarks

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

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

Strong Demand at Argyle Tender

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

MINING 	  

Petras Revenue +55%

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

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

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

Trans Hex Completes Acquisition

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

Kleven to Build Vessel for De Beers

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

STATS 	  

India

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

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

Net diamond account $236 ($1,410)

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Nov. 7, 2014

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

RapNet Data: Nov. 6

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

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RAPAPORT ANNOUNCEMENTS

New RapNet App

Features added include member directory and tradescreen!

Download RapNets app for the iPhone.
November 11-19 Tue-Wed
Rapaport Melee Auction

New York & Dubai

View Details.

November 12-19 Wed-Wed
Rapaport Single Stone Auction

New York & Israel

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

Paul Singer | Elliott Management Corp.

Careers@Rapaport 	  

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INDUSTRY 	  

Polished Prices Fall

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

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

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

Diamonds Fund Conflict in CAR

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

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

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

RETAIL & WHOLESALE 	  

TBZs Profit Drops

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

GIA Suspends Sealing Service

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

India Curbs Black Money Channel

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

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

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

JCP Promotes Diamond Vault

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

De Beers Debuts Diamonds in Ceramic

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

Jewelry Scores on Gift Lists

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

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

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

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

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

NPD Makes Sense of the Season

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

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

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

Affluent Consumers Signal Trouble

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

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

GENERAL 	  

Mokaila Maintains Ministerial Post

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

CIRCA Appoints CEO

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

Kring Hosts Rough Day

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

Indias Reforms Require Time, Cooperation

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

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

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

MINING 	  

Gem Diamonds Sales Jump

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

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

STATS USA

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

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

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

ECONWATCH

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Nov. 14, 2014

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

RapNet Data: Nov. 13

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

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RAPAPORT ANNOUNCEMENTS

RapNet App

New features added include member directory and tradescreen!

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November 11-19 Tue-Wed

Rapaport Melee Auction

New York & Dubai

View Details.

November 12-19 Wed-Wed
Rapaport Single Stone Auction

New York & Israel

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

Reuven Kaufman | Diamond Dealers Club

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 $550M

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

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

Buyers, Sellers Gather for Diamond Week

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

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

Reject Those Selling Over-Graded Diamonds

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

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

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

RETAIL & WHOLESALE 	  

Christies Jewels Sale Tops $150M

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

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

Sothebys Jewels Sale Tops $95M

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

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

Patek Philippe Masterpiece Sets Auction Record

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

Richemonts Profit Drops

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

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

Berkshires Retail Sales Rise

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

Pandoras Profit Jumps

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

By regional market, sales in local currency increased 13.9% in the U.S., while surging 28.4% across other "Americas." Revenue from the U.K. jumped 26.4%, while Europes sales surged 34.3%; however, Germanys growth was only 2.1%. Sales in Australia improved 15.6%, while revenue skyrocketed 69.3%t across other regions of the Asia Pacific. Revenue from Pandoras charms improved 22% year on year to $298 million, while silver and gold charm bracelets jumped 27.6% to $65 million and ring sales surged 97.7% to $57 million. The sale of other jewelry rose 4.5% to $54 million.

Tara Jewels Profit Declines

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

Shrenujs Profit Increases

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

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

Tips to Manage Robbery Risks

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

The groups stated that when your area is on lock down, which was the case on 47th Street Tuesday, bolt doors, close blinds and curtains, and lock up merchandise until law enforcement provide an all-clear. Monitor exterior cameras and confirm identities of everyone before allowing them entry. If you are the victim, cooperate with the criminals demands, dont make sudden movements, comply with the robbers instructions and move in a deliberate and methodical manner. Focus on keeping employees and customers safe, for merchandise and business assets are simple to replace.

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

Target Younger Adults for Jewelry Sales

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

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

James Allen Partners With Sears

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

Many Brands Have Room to Improve Online

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

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

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

PDE Appoints Vice President

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

MINING 	  

Lucaras Profit Soars

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

Dominion Diamond Posts Surety Bonds

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

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

PureDiamonds Secures Funds for Monastery

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

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Nov. 21, 2014

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

RapNet Data: Nov. 20

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

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RAPAPORT ANNOUNCEMENTS

RapNet App

New features added include member directory and tradescreen!

Download RapNets app for the iPhone.

December 1-4 Mon-Thu

Rapaport Melee Auction

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

Rapaport  Single Stone Auction 

New York & Israel

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

Doug Ramsey | Leuthold Group

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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 Store Sales +1%

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

U.S. Jewelry CPI -5%

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

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

Ultra-Wealthy Spend $25B on Jewelry, Watches

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

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

Chow Tai Fook Warns of Oct. Sales Impact

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

Birks 1H Loss Narrows

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

Kingolds Profit Drops

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

DGSE Reports Small Profit

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

Holiday Weekend Store Traffic Wanes

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

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

Wearable Tech Scores Gift Lists; Sales Count Most

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

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

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

Majors Slash Jewelry Prices for Black Friday

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

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

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

Best Omnichannel Retailers Will Win

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

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

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

Make the Shopping Chore a Breeze

The Integer Group® and M/A/R/C Research cited the top reason consumers choose a retailer is to complete the transaction easily and fast -- whether online or in a store. Mass retailers (such as Target and Walmart) edged out online stores (28% versus 26%) as the top destination for gift buying this year due to strong omnichannel investment, whereas department stores have ranked in third place for the past three years at about 20%. Even with attention focused on Thanksgiving weekend, the group found that 51% of consumers plan to conduct their gift shopping in December and 29% wont even plan before that time. Integer and M/A/R/C told retailers to know what is happening in the lives of a core customer -- aligning the shopping experience with their life stage brings a more inspiring and meaningful brand experience.

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

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

MINING 	  

ALROSA Sells Insurance Stake

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

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

Gannicott Takes Medical Leave

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

Gemfields Auction Garners $35M, Production -3%

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

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

STATS 	  Belgium 

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

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

Net diamond account ($19) $713

ECONWATCH 	  

Diamond Industry Stock Report

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

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

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

Rapaport Weekly Market Comment Nov. 26, 2014

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

RapNet Data: Nov. 26

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

www.rapnet.com

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RAPAPORT ANNOUNCEMENTS

RapNet App

New features added include member directory and tradescreen!

Download RapNets app for the iPhone.

December 1-4 Mon-Thu

Rapaport Melee Auction

New York

View Details.
December 5-10 Fri-Wed
Rapaport Single Stone Auction

New York & Israel

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

Mark Light | Signet

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 	  

ALROSA Reports 3Q Loss

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

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

U.S. Jewelry & Watch Sales Drop

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

Swiss Watch Exports +5%

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

RETAIL & WHOLESALE 	  

Chow Tai Fooks 1H Profit -23%

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

Signet Records 3Q Loss

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

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

Tiffanys 3Q Profit -60%

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

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

Luk Fooks 1H Profit -17%

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

Movados 3Q Profit -4%

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

Blue Diamond Sets Records

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

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

U.S. Consumers Tighten Spending Intentions Slightly

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

Palladium Equity Invests in Daniels

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

Bulova Unveils 24-Karat Watch

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

Citizen Opens Flagship Store

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

David Yurman Boutique Opens in SoHo

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

U.S. Consumer Confidence Rises

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

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

Gemfields Recovers Large Ruby

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

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

MINING 	  

Dominion Diamonds Sales Rise

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

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

Botswana Diamonds Widens Loss

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

Rockwell Raises $4M

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

Angola Grants 35-Year License to Lucapa

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

STATS 	 	India 

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

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

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

ECONWATCH 	  

Diamond Industry Stock Report

Birks (+13%) continued to lead U.S. shares and Movado (+7%) wasnt far behind. European shares all higher led by Damiani (+18%). India was mixed. Double-digit gains for miners Dominion (+12%), Rockwell (+21%), Firestone (+13%) and Petra (+10%). View the extended stock report.
Nov. 26 Nov. 20 Chng.
$1 = Euro 0.799 0.797 0.002
$1 = Rupee 61.77 61.93 -0.2
$1 = Israel Shekel 3.87 3.84 0.03
$1 = Rand 10.96 10.96 0.00
$1 = Canadian Dollar 1.12 1.13 -0.01

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

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