Rapaport Weekly Market Comment May 1, 2015

Diamond market sentiment improving slightly as prices stabilize, but cutters still losing money on overpriced rough. Shortages developing with very low trading volume and reduced manufacturing activity. Good U.S. demand for commercial-quality diamonds. Lower gold prices raise expectations for good jewelry sales during China’s May Day holiday. Rough markets quiet as sightholders expect reduced prices at next week’s De Beers sight. U.S. March jewelry retail sales -2 % to $4.8B, watch sales -3% to $630M. India’s March polished exports -10% to $1.8B, polished imports -37% to $500M, rough imports +3% to $1.5B.

RapNet Data: Apr. 30

Diamonds 1,429,482
Value $8,448,070,657
Carats 1,332,069
Average Discount -23.64%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
May 13-20 Wed-Wed

Rapaport Single Stone Auction 

Israel & New York

www.rapaportauctions.com
May 19-28 Tue-Thu

Rapaport  Melee Auction 

New York & Dubai
Tel. 1.212.354.9100
www.rapaportauctions.com
May 31 Sun

Rapaport Breakfast & Conference at JCK Vegas

Mandalay Bay Resort

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

10 a.m. to 11:30 a.m. | Banyan Ballroom
Rapaport Diamond Grading Conference

3 p.m to 4:30 p.m. | Banyan Ballroom
Responsible Sourcing Conference

View conference details and register. These events are free but seating is limited.

QUOTE OF THE WEEK
Blackstone is excited to partner with Stornoway and Orion in the development of this high-quality diamond asset with significant resource potential. The Stornoway team are talented operators, uniquely situated to bring the Renard mine to production on time and on budget. Our partnership with Stornoway is consistent with our strategy of backing best-in-class managers and exceptional assets in the mining industry.

Jasvinder Khaira | Blackstone

RETAIL & WHOLESALE 	  

U.S. Jewelry & Watch Sales -2%

U.S. jewelry and watch sales across all channels fell 1.7% year on year to $5.386 billion in March, as estimated from preliminary government figures. According to Rapaport News calculations, jewelry sales dropped 1.5% to $4.756 billion, while sales of watches contracted 2.9% to $630 million during the month. In addition, March became the sixth consecutive month to reflect a decline in sales for the sector. As expected, given weaker consumer spending on jewelry, sales totals were revised lower for January and February. Jewelry sales for the first quarter of 2014 have fallen 1.4% year on year to $14.2 billion, while watch sales dropped 3.2% to $1.9 billion.

Jewelry sales at specialty jewelers have registered a more severe decline for the first two months of the year, falling 5.8% year on year to $4.673 billion. Totals for March will be released in May. As a point of reference, total U.S. jewelry sales in 2014 improved just slightly, or 0.5%, to $69.5 billion and watch sales rose 1.8% to $9.5 billion.

Swiss Watch Exports +6%

Swiss watch exports rose 6.3% year on year to $1.8 billion (CHF 1.753 billion) in March, according to the Federation of Swiss Watches. The group noted that watch exports for the first quarter of 2015 rose 3.1% to more than $5.2 billion, while watch exports by volume rose 13.2% to 2.3 million units. The federation explained that watch exports priced less than $209 grew 22.9% by value and 22.5% by volume in March, while price points of $3,141 and above increased 8.3% by value and 5.5% by volume. However, exports with price points between $210 and $523, fell 6.1% by value and 2.9% by volume, while watches priced between $524 and $3,140 rose 1.4% by value and fell 1.4% by volume.

Bonhams Sale Achieves $7M

Bonhams fine jewelry sale in London realized $6.6 million (GBP 4.3 million) with the top lot, a 9.05-carat, D, VS1, pear-shaped diamond ring by Harry Winston, selling for $533,846 to a U.S. bidder. A 21.27-carat sugarloaf cabochon Kashmir sapphire and diamond ring sold for $442,460 -- three times the presale estimate, followed by a 17.97-carat Burmese sapphire and diamond ring that fetched $277,965 against a high presale estimate of $91,385. Additionally, a 7.10-carat, fancy light pinkish brown, pear-shaped diamond ring sold for more than five times its presale estimate of $30,461 and achieved a final price of $179,268.

Graff Opens in Cyprus

Graff will open in Cyprus at the Limassol Marina in its progressive effort to expand in Europe, according to the Financial Mirror. Graff was founded in 1960 and has over 50 stores worldwide. Limassol Marinas shopping area is resident to an existing array of designer boutiques, a luxury spa and fitness club, yacht brokers and agents, a chandlery, showroom, restaurants, bars and cafes. It was the first super yacht marina in Cyprus, combining commercial and cultural facilities with elegant residences with private berths or direct access to the beach.

Bulgari to Develop Dubai Residences

Bulgari and property developer Meraas announced plans for 188 living spaces in Dubai, according to the Associated Press. Bulgari anticipates building 165 apartments, eight penthouses and 15 mansions at the Jumeira Bay Island development complex, where a Bulgari already plans to build a resort, marina and a yacht club. Bulgari is a subsidiary of LVMH and in addition to jewelry boutiques, it operates hotels in Milan, Bali and London.

LG Releases Smartwatch

LG Electronics began selling its LG Watch Urbane in the U.S. on Google Play and through AT&T and Verizon. The LG Watch Urbane smartwatch is powered by the latest version of Android Wear and features a full-circle Plastic OLED (P-OLED) display. The watch offers a stainless steel body that is available in polished rose-gold and silver and a stitched leather strap. Wi-Fi connectivity enables the smartwatch to connect with a smartphone, access apps, receive notifications and, with LG Call, users can access recent calls and make calls directly from the watch. Other features include LG Pulse to measure heart rate during exercise.

Campaigns Begin for ArtCarved, TRITON

Frederick Goldman Inc. partnered with integrated marketing firm ion+radarworks to create an online presence for the ArtCarved and TRITON jewelry brands. Frederick Goldman enlisted ion+radarworks to develop individualized social media strategies for the brands that are meant to engage consumers with content that focuses on experiences, community and personalization. For ArtCarved, the marketing firm will focus on establishing campaigns across Facebook, Instagram and Pinterest, while it will launch a brand new presence for TRITON on both Facebook and Instagram.

Boucherons CEO Departs

Boucherons president and CEO, Pierre Bouissou, resigned to "follow new professional challenges," according to a statement filed by the jewelers parent company, Kering Group, which will name a successor at a later time. Bouissou joined Kering in 2011 from rival luxury retailer LVMH where he served as managing director of Berluti. Until a replacement is hired, Kering assigned executive responsibility for Boucheron to Albert Bensoussan, the CEO of the luxury watches and jewelry division.

Pure Gold Jewellers Tops Index

Pure Gold Jewellers was named the "Best Consumer Friendly Retailer" for the gold jewelry retail category by the Department of Economic Development in the United Arab Emirates. The retailer garnered the highest rating across the seven retail categories measured in the annual Consumer Friendliness Index, which also included electronics, hypermarkets, furniture, retail, coffee shops and automotive dealers.

Firoz Merchant, the founder and chairman of Pure Gold Jewellers, said, "Consumer Friendliness Index is a great government initiative to improve customer satisfaction levels and raise consumer confidence in Dubais retail offerings. It is an honor to receive the award. I strongly believe customers are the focal point of any business, and therefore providing great customer service is part of our business philosophy."

Cheng Joins WDMF Board

Peter (Kar Shing) Cheng, the chairman of the Chow Tai Fook Foundation and a director of Chow Tai Fook, joined the board of the World Diamond Mark Foundation (WDMF), an industry group that assists in the promotion of diamonds to consumers. Cheng, 62, holds positions as executive director for New World China Land Ltd. and deputy managing director of New World Development (China) Ltd. He is also a director of New World Development Company Ltd., NWS Service Management Ltd., New World Hotels (Holdings) Ltd., Hip Hing Construction Company Ltd. and Polytown Company Ltd. Chengs non-profit roles include chairman of Hong Kong Renal Centre Ltd., chairman of The Welfare Fund Ltd., vice chairman of Hong Kong Economic Exchange and director of Green Council.

Zalemark Debuts Crayola Jewels

Zalemark will debut its Crayola Fine Jewelry collection during the JCK show in Las Vegas. The line features jewelry designed by Steven Zale using unique Crayola colors in each piece. Warren Schorr, Crayolas vice president of business development and global licensing, said, "This new line celebrates the deep connection and emotion people have with color and we are confident it will resonate with people everywhere." The Zalemark jewelry line compliments Crayolas recently launched clothing line at Bloomingdales department store.

Luxury Varies by Age Group

The Shullman Research Centers latest series of insight reports for luxury marketing revealed how three generations (boomers, generation X and millennials) define U.S. luxury using word choices. Participants in Shullmans reports are defined as affluent households with incomes of at least $75,000.

Baby boomers, who are generally in their early 50s to almost 70 years of age, defined luxury as "expensive," "quality" and "non-essential" and -- to a lesser extent -- two products made their list: "cars" and "jewelry." GenXers, who represent the age range of mid-30s to early 50s, listed the words "expensive," "high-end," "quality," while "cars" and "jewelry" featured more prominently than it had with boomers. However, jewelry did not appear as a word choice for millennials -- late teens to mid-30s -- as they felt luxury meant "expensive," "high-end," "quality," "classy" and the only product was "cars."

When asked to name the top 20 luxury brands, a few jewelry firms resonated with millennials, including Cartier, Gucci, Rolex and, barely making the list, Hermes and Tiffany & Co. Meanwhile, genXers named Cartier and Tiffany & Co. and Rolex on their list, while Hermes and Gucci just made the cut. Boomers very prominently named Tiffany & Co., Cartier, Rolex and Gucci as luxury brands, and barely making the list -- luxury department store Neiman Marcus.

CIBJO Issues Coral Blue Book

CIBJOs Coral Commission will release its special report at the 2015 CIBJO Congress, slated to take place in Salvador, Brazil, on May 4. The Coral Blue Book was prepared by the Coral Commission led by Vicenzo Liverino and will be presented for consideration at the event. The purpose of the CIBJO Coral Commission is to both preserve and develop trading in coral and jewelry comprised of coral, through the development and codifying of regulations and standards that promote consumer confidence and fair trade.

MINING 	  

Petra Increases Debt Facilities

Petra Diamonds Ltd. announced a $300 million notes issue and an increase to its senior lender debt facilities to prepare for the construction of a modern processing plant at its Cullinan mine in South Africa. Petras lender group has agreed, in principle, to increase the miners debt facilities - subject to the closing of the issue - from $81.6 million to $302.4 million, along with certain amended availability and repayment terms. Petra stated that it will use the proceeds to settle (not cancel) certain existing debt and, together with future drawdowns from the expanded facilities, fund the construction at Cullinan. The new fit-for-purpose processing plant at Cullinan carries a capital cost of $142.8 million and is expected to improve the recovery of a full spectrum of diamond sizes, protect large stones from breakage and improve efficiency in order to lower operating costs.

Firestone Secures Standby Facility

Firestone Diamonds plc agreed to a $15 million standby debt facility with Resource Capital Fund VI L.P., subject to shareholder approval, which would satisfy one of the remaining conditions to the drawdown of its Absa debt facility. Firestone has also agreed to a restructuring of its existing $30 million mezzanine facility, with no changes to its commercial terms. The $15 million standby debt facility is expected to fund any potential cost over-runs or delays in respect to the development of a main treatment plant at its Liqhobong diamond project in Lesotho. Firestones board of directors did not currently anticipate a need to draw down on the facility. The project currently remains within budget and on schedule, Firestone confirmed. The mine is expected to achieve initial production before the middle of 2016.

Blackstone Invests in Stornoway

Blackstone Tactical Opportunities, an affiliate of Blackstone, invested in Stornoway Diamond Corporation and acquired a minority ownership interest in the Renard diamond stream, by way of a secondary market transaction with Orion Mine Finance. The Renard diamond stream was concluded in July 2014 by FCDC Sales and Marketing Inc., which is a subsidiary of Stornoway and by which FCDC agreed to sell a 20% undivided interest in diamonds produced from the Renard diamond project for an up-front payment of $250 million.

Following this Blackstone-Orion transaction, Orion remains the majority owner of the Renard stream interest and continues to be the second largest shareholder with an approximate 20% stake in Stornoways issued and outstanding common shares. The Renard diamond project is fully funded and ready to develop an open-pit and underground diamond mine that is expected to produce an average of 1.6 million carats per year over an 11-year lifespan. The project remains on schedule for plant commissioning beginning in late 2016 and commercial production in the second quarter of 2017.

Diamcor Sale Achieves $5M

Diamcor has achieved $4.72 million in revenue from the sale of 25,627.59 carats it sold at tenders since June 2013. The diamonds were sourced from the companys Krone-Endora alluvial project in South Africa and sold for an average price of $185.54 per carat. The company also recovered and sold a 91.72-carat diamond for $817,920 and a 43.90-carat diamond for $317,924. The information was part of the companys update of the initial technical report for the project previously filed on July 30, 2009.

Debmarine Names New Vessel

Debmarine Namibia has named its new $194 million (NAD 2.3 billion) vessel after founding president, Sam Nujoma, according to The Namibian newspaper. The MV Nujoma, which is a diamond exploration and sampling vessel, will be constructed in Norway and is expected to be delivered in July 2017. Debmarines CEO, Otto Shikongo, said that Debmarine will cover 25% of the cost, while Standard Bank Namibia and RMB Namibia, a unit of FNB Namibia, will cover the balance.

STATS 	  

India

March $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,749 -10% $5,840 8%
Polished imports $500 -37% $1,278 -32%
Net exports $1,249 60% $4,561 30%

Rough imports $1,453 3% $3,425 -18%
Rough exports $156 -15% $351 -17%
Net imports $1,297 5% $3,074 -18%

Net diamond account ($48) $1,487

Belgium

March $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,234 -7% $3,808 -3%
Polished imports $1,814 24% $3,927 8%
Net exports ($580) ($119)

Rough imports $1,401 5% $3,280 -19%
Rough exports $1,303 -5% $3,209 -21%
Net imports $98 $71 446%

Net diamond account $678 ($190)

ECONWATCH 	  

Diamond Industry Stock Report

Widespread declines for U.S. stocks with only Tiffany & Co. (+1%) ahead of last week. Far East shares higher, led by Chow Tai Fook (+4%) and Europe mainly lower. Indian shares mixed with Gitanjali (-7%) leading declines and Classic Diamond (+8%) ahead of gains. Miners mainly lower, led by Petra (-7%). View the detailed industry stock report.

.
Apr. 30 Apr. 24 Chng.
$1 = Euro 0.891 0.923 -0.032
$1 = Rupee 63.58 63.28 0.3
$1 = Israel Shekel 3.87 3.93 -0.06
$1 = Rand 11.90 12.15 -0.25
$1 = Canadian Dollar 1.21 1.21 0.00

Precious Metals
Gold $1,183.40 $1,194.40 -$11.00
Platinum $1,141.00 $1,135.00 $6.00

Stock Indexes Chng.
BSE 27,011.31 27,735.02 -723.71 -2.6%
Dow Jones 17,840.52 18,058.69 -218.17 -1.2%
FTSE 6,960.63 7,053.67 -93.04 -1.3%
Hang Seng 28,133.00 27,827.70 305.30 1.1%
S&P 500 2,085.51 2,112.94 -27.43 -1.3%
Yahoo! Jewelry 1,324.93 1,364.52 -39.59 -2.9%

Rapaport Weekly Market Comment May 8, 2015

Polished diamond trading improving as steady U.S. demand raises expectations for Las Vegas Shows. Far East demand soft despite improved China jewelry sales during May Day holiday. Polished prices stabilizing with shortages of good quality X3 diamonds. April 1ct. RAPI +0.4%. Fancy shapes weak. Rough markets cautious. De Beers reduces prices about 3% at small May sight, but rough still highly unprofitable. Titans FY revenue +9% to $1.8B, profit +11% to $127M. U.S. March polished imports +9% to $2.2B, polished exports -8% to $1.7B.

RapNet Data: May 7

Diamonds 1,408,165
Value $8,423,768,995
Carats 1,318,256
Average Discount -24.07%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
May 13-21 Wed-Thu

Rapaport Single Stone Auction 

Israel & New York

www.rapaportauctions.com

May 19-28 Tue-Thu

Rapaport  Melee Auction 

New York & Dubai
Tel. 1.212.354.9100
www.rapaportauctions.com

May 31 Sun

Rapaport Breakfast & Conference at JCK Vegas

Mandalay Bay Resort

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

10 a.m. to 11:30 a.m. | Banyan Ballroom
Rapaport Diamond Grading Conference

3 p.m to 4:30 p.m. | Banyan Ballroom
Responsible Sourcing Conference

View conference details and register. These events are free but seating is limited.

QUOTE OF THE WEEK
We believe that buyers and sellers must have access to fair price information in declining markets and refuse to restrict the flow of our information to suit the needs of suppliers who wish to protect their profit margin.

Martin Rapaport | Rapaport Group

INDUSTRY 	  

Polished Prices Stabilize in April

Diamond markets were quiet in April. Many polished diamond suppliers did not lower their prices even though liquidity and profitability remain tight. Sentiment improved slightly as shortages helped stabilize prices toward the end of the month. The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds rose 0.4% in April, while RAPI for 0.30-carat diamonds fell 1.9% and RAPI for 0.50-carat diamonds declined 1%. RAPI for 3-carat diamonds dropped by 1.5% during the month.

Diamond manufacturers are still losing money on overpriced rough and refused about 30% of rough supply in the first quarter. Diamond mining companies are realigning their production with weaker rough demand. De Beers lowered its planned production for 2015 as sightholder refusals suggest that the company is holding a relatively large rough diamond inventory. Polished production has been significantly reduced since the October Diwali break and factories are maintaining lower output and extending the ongoing summer vacation period in India.

Diamantaires are focused on buying polished rather than rough for manufacturing. However, polished trading has been soft as demand was weak from jewelry retailers. Diamond buyers have limited their buildup of inventory in a downward-trending market and demand has been order specific.

Rapaport Publishes Market Correction Editorial

Martin Rapaport, the chairman of the Rapaport Group, published a comprehensive editorial titled “Market Correction” that calls on the diamond trade to end unsustainable business practices. Citing the imbalance between high rough and low polished diamond prices, Rapaport calls on the banks to stop financing unprofitable diamond manufacturing until polished prices rebound and profitability returns. He urges the trade to prioritize the purchase of polished diamonds over rough. Rapaport encourages the industry to promote confidence in diamonds by supporting competition among buyers who provide transparent, firm bid prices. Download the article as a PDF.

“While we sympathize with the difficult market situation that suppliers are experiencing, Rapaport remains firmly committed to maintaining transparent competitive markets and honest pricing at all times. We believe that buyers and sellers must have access to fair price information in declining markets and refuse to restrict the flow of our information to suit the needs of suppliers who wish to protect their profit margin. We believe in fair markets and reject the notion that the interests of suppliers are more important than those of buyers,” said Rapaport.

Members of the trade are encouraged to distribute the article and comments may be sent to martin(at)diamonds.net.

RETAIL & WHOLESALE 	  

Titans Profit Rises

Titan Company Ltd.s revenue fell 11% year on year to $389 million (INR 25 billion) in the fourth quarter that ended on March 31; however, profit improved 4.2% to $32.8 million as expenses fell 11.1% to $350 million. Jewelry segment sales fell 15.3% to $285 million in the fourth quarter, while watch segment sales rose 1.8% to $80 million. Revenue from Titans other products, such as precision engineering and eyewear, jumped 12.8% to $26 million.

Titans consolidated revenue during the fiscal year rose 9% to $1.86 billion (INR 119 billion), while profit rose 11.1% to $127 million. Jewelry segment sales increased 9.2% year on year to $1.5 billion, watch sales rose 7.3% to $299 million and other product sales jumped 12.4% to $90 million.

Kerings Jewelry Sales Mixed

Luxury group Kering reported that revenue improved 11.4% year on year to $3 billion (EUR 2.65 billion) in the first quarter that ended on March 31; however, sales measured by comparable exchange-rates fell 0.6%. Sales from luxury items, including jewelry, fell 2.6% on a comparable-basis, while revenue from the companys sports and lifestyle brands rose 3.7%. Kering stated that revenue from its jewelry and watches division recorded "mixed sales performance" during the quarter and that its third-party watch distributors are exercising caution.

Berkshires Earnings +10%

Berkshire Hathaway, the parent company of Ben Bridge Jeweler, Borsheims Fine Jewelry, Helzberg Diamonds and the Richline Group among many other diverse product and services brands, reported that net earnings rose 9.6% year on year to $5.2 billion in the first quarter that ended on March 31. Net earnings per class A shares, attributable to Berkshire Hathaways shareholders, jumped to $3,143 per share compared with $2,862 per share one year ago.

Total company revenue rose 7% year on year to $48.6 billion, while costs and expenses rose 5.5% to $41 billion. Berkshire’s services and retail division sales, which include the jewelry ‎companies mentioned as well as numerous other products and brands, experienced a 34.6% year on year increase to $4.5 billion. The company explained that higher revenue during the quarter reflected the impact of acquiring The VanTuyl Group, now named Berkshire Hathaway Automotive, and strong sales from electronics component firm TTI as well as from home furnishings brands. Operating earnings from this division rose 33.8% to $384 million.

Cash Americas Profit Jumps

Cash America Inc. reported that its consolidated revenue fell 4.5% year on year to $271.8 million, while net revenue dropped 3.4% to $147.1 million during the first quarter that ended on March 31. Expenses were reduced 5.6% to $130.9 million. Net income from continuing operations rose 142% to $7.8 million; however, the total also reflected a drop of 82.8% year on year for net income that was attributable to the company. The value of jewelry being held for one year or less, as of March 31, rose 3.6% to $111 million, while it fell 7% to $4.7 million for jewelry held for more than one year.

HSNs Jewelry Sales Stall

HSN Inc.s revenue rose 8.3% year on year to $841.9 million in the first quarter that ended on March 31, with every division experiencing sales growth except jewelry. The companys gross margin improved 20 basis points to 35.7%. Profit jumped 39.3% to $33.7 million or 63 cents per share. The average price point per item sold during the period improved 3.2% to $61.83, while the number of units shipped rose 4.1% to 15.2 million. HSNs return rate fell to 16.5% compared with 17% one year earlier.

Charles & Colvards Loss Widens

Charles & Colvard Ltd. reported that sales jumped 38.1% year on year to $8.4 million in the first quarter that ended on March 31. Total costs surged 38.9% to $10.1 million and the company widened its quarterly loss 57.9% to $1.7 million, or 8 cents per share. The company ended the quarter with no outstanding debt.

Wholesale revenue in the first quarter jumped 15% to $5.9 million, while the direct-to-consumer home party business, Lulu Avenue®, increased 562% to $1.4 million. Direct-to-consumer ecommerce sales at Moissanite.com increased 56% to $1.1 million. Finished jewelry sales nearly doubled to $4.6 million, while loose jewel sales, including Forever Brilliant® moissanite, rose 2.7% to $3.8 million. Inventory on March 31 was valued at $37.5 million compared with $38.9 million on December 31, 2014.

Kingold Opens on Tmall

Kingold Jewelry Inc. launched an online store on Tmall.com, a business-to-consumer (B2C) retail platform owned by Alibaba Group, which is considered to be the largest B2C platform in China, according to iResearch Consulting Group. Kingold will sell 24-karat gold jewelry, including rings, necklaces, bracelets and pendants and gold products through Tmall.com, with additional product categories planned in the future, the manufacturer stated.

Tara Opens on Snapdeal

Tara Jewels Ltd. expanded its ecommerce reach by introducing the latest collection on Snapdeal, India’s largest online marketplace. Tara Jewellers, through its distributor, has partnered with Snapdeal to launch new collections, with the intention of attracting consumers from tier I, tier II and tier III markets. With budget shoppers in mind, Taras collections on Snapdeal are priced from about $50 (INR 2,999) and up and include Anisa, a gold jewelry collection, which is a range of rings and earrings in 22-karat BIS-hallmarked gold. Tara is also launching its International Bestsellers collection, crafted in silver with created sapphires and other colored stones.

Lypsa Adds Two New Brands

Lypsa Gems & Jewellery Ltd. will launch the Lypsa Atelier and Oropel brands to enter the diamond-studded jewelry marketplace, according to a company statement on the Bombay Stock Exchange. The group intends to offer the brands through ecommerce channels.

The Lypsa Atelier brand will primarily focus on creating "moderately priced" fashion diamond jewelry, set in 9-karat and 14-karat gold to attract a younger, female demographic. The product line will be initially marketed online at various ecommerce channels, and then Lypsa intends to sell the collection through its own ecommerce solution, using augmented reality-based trials. The Oropel brand will feature higher-quality diamond jewelry, set in 18-karat gold, with options for customers to design their own pieces with Lypsa design experts

Bulova Extends Use of UHF

Bulova extended it propriety high-performance ultra high frequency (UHF) movement to its Sea King and Military watch collections. UHF incorporates a three-prong quartz crystal, producing a vibrational frequency of 262 kHz to provide "unparalleled accuracy" and features a continuously sweeping second hand. Bulovas president, Gregory Thumm, stated that the brands strength over these past 140 years lies in the continued pursuit of technological advancements.

In other news, Bulova relocated its headquarters to the 29th floor of the Empire State Building in New York. The space features a collaborative, open design, with ample natural light and 360-degree Midtown panoramas, a shop-in-shop environment and a reception area with displays set up as a rotating exhibit. Its hand-painted floor features the exposed-dial design of the original Bulova Accutron Spaceview.

Dont Face ERP Alone

There are four challenges that jewelry retailers must not face alone as they implement enterprise resource planning (ERP) solutions, according to Eric Kimberling of Panorama Consulting Solutions.

Dont create an IT strategy that fits your business, because it is critical to work with an outside expert who will develop a technology-agnostic ERP strategy and roadmap to define the best path forward (three to five years out) based on the companys overall direction, he said.

Dont underestimate organizational changes required by adopting new systems. Even seemingly simple technological implementations can result in direct and indirect changes to employees’ jobs, so, Kimberling said to engage an organizational change consultant to help navigate "this vital pain point of any IT initiative."

Dont just align new technology with current business processes, since IT alone would be of little use. Engage ERP experts who are certified Six Sigma to facilitate the process. "Even before selecting which technology to implement within your organization, it is important to define how you envision your business processes looking into the future," he said. Focus on pain points, opportunity for improvement and “to be” business processes that will best support the organization.

Dont just expect ERP to realize a return on investment (ROI). Jewelers must go beyond developing a business case for an IT initiative and develop a robust benefit plan to truly realize meaningful ROI, he said.

Robbers Strike Cartier in Cannes

Four robbers, one wearing an old-man mask, held up Cartier in Cannes and stole approximately $20 million in jewelry just as the city prepares to welcome film festival attendees next week. Police stated that the masked man burst into the store with a pistol in hand, followed by two accomplices with scarves obscuring their faces, while a fourth male stood guard outside. The robbers grabbed jewelry and watches, stuffed them into leather satchels and exited the store, using a Mercedes to leave the area. The vehicle was later found in flames in a residential neighborhood.

Mothers Day Jewelry Spending Avg. at $103 

Approximately 84% of U.S. shoppers celebrate Mothers Day by gifting to a mother, step-mother, wife, sister or others, according to a survey conducted by the National Retail Federation (NRF) and Prosper Insights & Analytics. Of those who do mark the occasion with a gift, 34% anticipate purchasing jewelry.

The average amount shoppers expect to spend on jewelry this year is $102.91, with those earning more than $50,000 spending an average of $125.20 and those earning less than $50,000 spending $75.05. The survey also revealed that male shoppers anticipate spending an average of $129.63 on a jewelry gift, while female shoppers expect to spend $69.20. Since 2012, the percentage of those planning to buy jewelry as a gift for Mothers Day has held relatively constant, with the average expected spending at $97.19 in 2012, $100.55 in 2013 and $94.38 in 2014.

MINING 	  

Paragon to Buy Mothae Stake

Lucara Diamond Corp. signed a memorandum of understanding with Paragon Diamonds Ltd. to sell its 75% stake in the Mothae diamond project based in Lesotho. The sale is subject to approval by the government of Lesotho. Paragon agreed to pay Lucara $8.5 million in cash upon closing the acquisition and plans to polish a selection of diamonds from the property, for which Lucara will receive 5% of the profits from the sale of the polished stones. Lucara will also receive a payment equal to 5% of the profits achieved from the sale of rough diamonds that are not selected for polishing.

North Arrow Recovers 384Cts.

North Arrow Minerals Inc. recovered 384.28 carats of rough diamonds from a bulk sample at the Qilalugaq diamond project, the Q1-4 kimberlite, located nine kilometers from the Hamlet of Repulse Bay (Naujaat) in Nunavut, Canada. The overall sample grade was 28.40 carats per hundred tonnes (cpht) and the sample included 30 diamonds that were larger than 3 grainers and 15 diamonds larger than 1 carat. Yellow diamonds, representing a range of hues and tones, comprised of approximately 9 percent by stone count and 21.5% of carat weight.

Shore Golds Loss Widens

Shore Gold Inc. recorded a loss of $1.2 million in the first quarter that ended on March 31, compared with a loss of $1 million one year earlier. Losses have been primarily due to operating costs and exploration and evaluation expenditures, all of which exceed interest income earned on cash, cash equivalents and short-term investments. As of May 6, the company had approximately $5.5 million in cash and cash equivalents and short-term investments (excluding $1.1 million in restricted cash). Shore Gold continues to focus on the 2015 drilling program at the Star-Orion south diamond project and the environmental assessment process. The project is situated in the Fort a la Corne kimberlite field in central Saskatchewan, Canada.

Miner Training Program Gains Support

The Surface Miner Training Program Development project in Canada will enable the Northwest Territories Mine Training Society and Aurora College to launch a new training program this summer that is geared toward preparing the northern population for a wave of employment opportunities in the mining sector beginning in 2016. The region already hosts three diamond mines and a fourth, Gahcho Kué, is expected to begin production as early as 2016. Aurora College and the Mine Training Society identified a collaborative approach in support of a new Surface Miner Training Program that will build on an existing Underground Miner Training Program, according to the government.

STATS 	 	USA 

March $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $2,151 9% $5,726 5%
Polished exports $1,732 -8% $4,896 -2%
Net imports $419 360% $829 72%

Rough imports $25 -70% $54 -74%
Rough exports $9 -84% $26 -82%
Net imports $16 -39% $28 -58%

Net diamond account $435 272% $857 56%

ECONWATCH 	  

Diamond Industry Stock Report

U.S. shares recovered (from last weeks broad decline) led by Charles & Colvard (+12%) and Blue Nile (+7%) ahead of its earnings on May 8. Far East and Europes shares all lower, led by Sarine (-4%) in Singapore and Swatch (-7%). Indian shares all lower except for Rajesh (+1%) and mining stocks mainly lower with Shore Gold (-11%) heading declines and Stornoway (+11%) leading gains. View the detailed industry stock report.
May 7 Apr. 30 Chng.
$1 = Euro 0.880 0.891 -0.011
$1 = Rupee 64.11 63.58 0.5
$1 = Israel Shekel 3.87 3.87 0.00
$1 = Rand 12.04 11.90 0.14
$1 = Canadian Dollar 1.21 1.21 0.00

Precious Metals
Gold $1,183.70 $1,183.40 $0.30
Platinum $1,129.00 $1,141.00 -$12.00

Stock Indexes Chng.
BSE 26,599.11 27,011.31 -412.20 -1.5%
Dow Jones 17,924.06 17,840.52 83.54 0.5%
FTSE 6,886.95 6,960.63 -73.68 -1.1%
Hang Seng 27,289.97 28,133.00 -843.03 -3.0%
S&P 500 2,088.00 2,085.51 2.49 0.1%
Yahoo! Jewelry 1,320.37 1,324.93 -4.56 -0.3%

Rapaport Weekly Market Comment May 15, 2015

TRADE ALERT: GIA recalls 424 grading reports for diamonds treated to temporarily improve their color by up to three grades. Buyers are cautioned not to buy these diamonds based on their GIA grading reports. Markets stabilizing. Sentiment improves amid better expectations for Vegas shows. Shortages developing but rough prices have not come down sufficiently to enable profits and new polished is being manufactured. Rough demand stable after $470M De Beers sight. Sotheby’s jewels sells $161M (94% by lot) with cushion, 8.72ct., fancy vivid pink, VS2 sold for $16M ($1.8M/ct.), Christie’s sells $98M (77% by lot) with rectangular-cut, 5.18ct., fancy vivid pink sold for $11M ($2.1M/ct.).

RapNet Data: May 14

Diamonds 1,374,464
Value $8,200,042,668
Carats 1,309,966
Average Discount -24.81%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
May 13-21 Wed-Thu

Rapaport Single Stone Auction 

Israel & New York

www.rapaportauctions.com

May 19-28 Tue-Thu

Rapaport  Melee Auction 

New York & Dubai
Tel. 1.212.354.9100
www.rapaportauctions.com

May 31 Sun

Rapaport Breakfast & Conference at JCK Vegas

Mandalay Bay Resort

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

10 a.m. to 11:30 a.m. | Banyan Ballroom
Rapaport Diamond Grading Conference

3 p.m to 4:30 p.m. | Banyan Ballroom
Responsible Sourcing Conference

View conference details and register. These events are free but seating is limited.

QUOTE OF THE WEEK
The inexorable rise in demand for colored gemstones and pearls continued this week. A 35.09-carat Kashmir sapphire established a new world record of over $200,000 per carat. A single strand of natural pearls changed hands for $3.8 million and a 5.18-carat vivid pink diamond sold for $10.7 million.

Rahul Kadakia | Christin

INDUSTRY 	  

Trade Alert

The Gemological Institute of America (GIA) issued a laboratory alert recalling 424 diamond grading reports, citing diamonds were treated with a process that temporarily improved their color by up to three grades. A full list of the grading report numbers and the companies that submitted the diamonds to GIA are listed here.

The GIA “terminated submissions” from the following clients who submitted treated diamonds without disclosure: LYE Diamonds, E.G.S.D. Diamonds, Abramov Romok and Yair Matatov. Pending further investigation, RapNet and the Rapaport Group suspended service to these companies and to the following individuals who are believed associated with the firms: Nati Yizrov, Gavriel Yelizarov and Yair Matatov. RapNet will also delist all diamonds with recalled grading reports and will be contacting those listing such stones for sale.

Members of the trade that have access to such reports are asked to urgently email us at GIA@Diamonds.Net. If the reports are in their possession they should cut them in half. The diamonds and the canceled reports may be sent to GIA for expedited free re-grading service. They may also be delivered to Rapaport offices in Israel, India and Belgium for this free service. Buyers should be careful not to buy these diamonds based on the GIA grading reports and sellers should not sell the diamonds with these grading reports. The best course of action is to cut the canceled grading reports in half and return the diamond to the supplier against a full refund. If any RapNet members have difficulty returning diamonds please email Service@RapNet.com. Additional information and updates about this Trade Alert will be posted on Diamonds.Net.

De Beers Sight Estimated at $470M

The De Beers May sight closed with an estimated value of $470 million as it reduced its rough diamond prices by an average of 3%. Sightholders noted that prices for many boxes fell by even more as the quality of the assortments declined in many categories. Sightholders said that rough prices are close to the bottom but that manufacturers are still struggling to achieve sustainable profit margins.

One sightholder told Rapaport News that he would consider the market healthy again once sightholders are able to sell De Beers boxes for cash at a 3% premium on the secondary market. Currently, De Beers boxes were trading on the secondary market at premiums below 3% and with credit terms that averaged 90 days. The amount of goods deferred or refused at the sight was much lower than previous sights and De Beers believed that there was now less of an imbalance between the rough and polished markets than was the case in preceding months.

Gold Jewelry Demand -9%

Global gold jewelry demand fell 9% year on year to $23.53 billion in the first quarter of 2015, according to the World Gold Council (WGC). By volume, gold jewelry demand declined by 3% to 600.8 tonnes, the groups quarterly demand trends report noted. Weakness in China was offset by growth in gold jewelry demand from India, where it rose 22% to 150.8 tonnes, but the WGC added that the sharp increase was a reflection of unusual weakness in the market during the previous year. WGC did not publish separate country data for demand by value.

China’s gold jewelry demand by volume fell 10% to 213.2 tonnes, ranking as the largest market for the quarter. Slowing economic growth, rallying stock markets as investors shifted to equities over physical assets, and a cautious outlook for gold prices all weighed on jewelry demand. As a result, jewelry demand was relatively restrained during the Chinese New Year. The WGC observed that Chinas anti-corruption campaign continues to restrain demand although the main impact of the policy has already been felt and is likely to have less of an impact going forward.

Other notable markets were Hong Kong, where demand fell 26% to 13.6 tonnes as inventory restocking was restrained due to the quiet Chinese New Year season, and as retailers are shifting to lower karat, higher margin products. In Turkey, gold jewelry demand slumped 28% to 10.4 tonnes largely due to a sharp depreciation in the lira currency against the dollar. U.S. demand rose 4% to 22.4 tonnes due to ongoing inventory replenishment and as consumers continued to express a preference for higher karat jewelry, the WGC explained.

RETAIL & WHOLESALE 	  

Sothebys Jewelry Sale Totals $161M

Sothebys magnificent jewels auction in Geneva on May 11 achieved the highest total to date for any jewelry auction at $160,914,902. The sale was 94% sold by lot and broke a total of six new world auction records. The top lot was The Sunrise Ruby, a cushion-shaped Burmese ruby of 25.59 carats, which sold to an anonymous buyer for $30,335,698, or $1,185,451 per carat. It set three records: a world auction record for any ruby, a world auction record per carat for a ruby and a world auction record for a jewel by Cartier. auction, record, ruby The second top lot of the sale was The Historic Pink Diamond, an 8.72-carat, VS2, cushion brilliant-cut, fancy vivid pink type IIa diamond. It sold to a bidder in the room for $15,903,422, or $1,823,787 per carat. Four jewels by Cartier achieved the top 10 list of highest selling lots, totaling an outstanding $47,166,909.

Christies Jewelry Sale Totals $98M

The Christies Geneva sale of magnificent jewels achieved $97,515,535 and was 77% sold by lot, with the top lot, a 5.18-carat, VS2, rectangular-cut fancy vivid pink diamond ring, selling for $10,709,442 or $2,067,459 per carat. The second top lot, a 55.52-carat, D, flawless, pear-shaped type IIa diamond, sold to an Asian private for $9,033,721, or $162,711 per carat. A new world auction record was set for a 35.09-carat, cushion-shaped Kashmir sapphire and diamond ring at $7,357,999, or $209,689 per carat. Two natural pearl lots and a Burmese ruby ring made the top 10 list of highest-selling lots.

U.S. Jewelry Store Sales -6%

U.S. specialty jewelry store sales slumped 5.8% year on year to $2.019 billion in March, reflecting the sixth consecutive monthly decline. Jewelry store sales during the first quarter of 2015 have fallen 5.6% to $6.266 billion. As reported earlier by Rapaport News, jewelry and watch sales across all channels fell 1.7% year on year to $5.386 billion in March, as estimated from preliminary government figures. According to Rapaport News calculations, jewelry sales dropped 1.5% to $4.756 billion, while sales of watches contracted 2.9% to $630 million during the month.

Advanced retail sales estimates for April failed to grow as well. Department store sales contracted 4.6% year on year to $12.492 billion, while total retail and food sales, excluding motor vehicles and parts, slipped 0.3% to $341.2 billion. There are conflicting opinions on why U.S. consumers are holding back. The National Retail Federation (NRF), said “sales disappointed in April,” according to Jack Kleinhenz, the groups chief economist. “Sales were virtually unchanged, following an upwardly revised gain in March." Kleinhenz added that an earlier Easter did not play a major factor in igniting greater consumer spending as expected, either; however, the NRF anticipates that employment gains, wage and salary increases, greater savings and low gas prices will factor into greater consumer spending the rest of the year.

In a note to clients, Lindsey M. Piegza, the chief economist with Sterne Agee, confirmed that Aprils retail sales fell short of even the very muted forecast of 0.2%. Recall retail sales were negative from December to February, year-over-year retail sales are up just 0.9% and contrary to Wall Streets previous consensus, "any lingering claim that retail weakness at the start of the year was solely the result of unseasonably cold winter weather has now officially been squashed. Clearly the consumer remains under pressure resulting from fundamental weakness as opposed to Mother Nature, including lackluster job opportunities and minimal income growth," Piegza said.

Blue Niles Profit +10%

Blue Nile Inc.s sales improved 2.6% year on year to $106.4 million in the first quarter that ended on April 5. Cost of sales rose 2.2% to $86.5 million and profit jumped 10% to $1.2 million or 10 cents per share. For the trailing 12 months, through April 5, net cash provided by operating activities totaled $10.5 million compared with $24 million one year earlier. Engagement sales in the U.S. rose 2.1% to $61 million during the quarter; however, non-engagement sales declined slightly, or 0.3%, to $26 million. International sales jumped 8.6% to $19.5 million. Gross profit as a percentage of sales in the first quarter increased to 18.8% compared with 18.4% one year earlier. Looking ahead, Blue Nile anticipates a small improvement during its second quarter, projecting sales of between $110 million and $113 million. By comparison, the company recorded sales of $107 million in the second quarter of 2014.

Pandoras Profit -46%

Pandora reported that revenue rose 36.8% year on year to $541 million (DKK 3.547 billion) in the first quarter that ended on March 31. The retailer observed a positive impact of 14.5 percentage points due to favorable currency fluctuations in the Americas and Asia Pacific. The sales volume rose 5.6% and the average sales price per unit jumped 29% to $26. In addition, 50% of sales growth was derived from Pandora products that had just been introduced to the market within the past 12 months. Nonetheless, profit plunged 45.6% to $58 million due to a tax expense of $55 million and higher financing costs, the company stated. Revenue as measured by local currencies rose 12.8% across the Americas, 28.5% across Europe and 34.9% in the Asia Pacific region. On a same-store basis in select markets, sales increased 8.9% in the U.S., 20.6% in the U.K., 3.8% in Germany and 24.6% in Australia.

DGSE: Challenging Quarter for Jewelry

DGSE Companies Inc. reported a loss of $798,000 in the first quarter that ended on March 31. Revenue fell 29% year on year to $12.9 million, which DGSE attributed to continued sales declines from its bullion and scrap businesses coupled with "an unusually challenging quarter" for jewelry sales. Nonetheless, DGSE improved gross profit as a percent of revenue to 18.1% compared with 17.8% one year earlier. Dusty Clem, DGSEs chairman of the board and CEO, said, “The first quarter of 2015 was an extremely challenging quarter. In 2014, we successfully focused our marketing, merchandising and operating efforts on growing our jewelry, watch and diamond businesses and were rewarded with double-digit growth in those areas. In the first quarter of 2015, for the first time in several quarters, we were not able to grow these lines, and in fact saw declin

Sarines Sales, Profit Plummet

Sarine Technologies Ltd.s revenue plummeted 50.1% year on year to $12.2 million in the first quarter that ended on March 31. The cost of sales fell 37.3% to almost $4.2 million. The companys comprehensive profit declined to $947,000 compared with $9.2 million one year earlier. Sarine stated that the decrease in revenue was largely due to negative sentiment in the midstream market, squeezed manufacturing margins due to disproportionately high rough prices (to lower polished prices) and weaker diamond demand. The company delivered five Galaxy family of products during the quarter, bringing the installed base to 195 systems.

De Beers Acquires Stake in Synova

The De Beers Group of Companies acquired a 33.4% equity stake in Synova SA (Synova), a Swiss-based owner and supplier of patent-protected laser micro jet (LMJ) technology. The innovative technology has the potential to help diamantaires achieve higher yields, reduce the risk of damage to stressed stones and generate higher throughput due to faster cutting time and easier processing. De Beers will work with Synova to develop a fully automated cutting and shaping technology, with LMJ at its core, which will offer further efficiencies to cutting and polishing businesses

Robbins Brothers Opens in Scottsdale

Robbins Brothers will celebrate the opening of its Scottsdale, Arizona location with a charity event to benefit the Future for KIDS organization and a grand opening weekend. The jeweler opened its doors on May 14 to area dignitaries, the media and bloggers for a sneak peek prior to opening day. Attendees at the soirée will be treated to a fashion show by stylist Rochelle York and have a chance to benefit Future for KIDS. The stores general manager, Ray Golden, said, "We already feel welcomed by the community and look forward to engaging with many, many couples in this great city." Robbins Brothers operates freestanding stores across Southern California, in Houston, Dallas and Fort Worth Texas and Seattle, Washington.

Harry Winston Opens in Miami Design District

Harry Winston is opening a new retail salon in the Miami Design District, a historic part of the city that is known for its innovative art, architecture and design. The new boutique is located at 166 NE 39th Street and features a 7,168 square foot retail space. The boutique was designed with the elegance and intimacy of a private estate in mind, while drawing references from the brands iconic Fifth Avenue flagship store in Manhattan. Interior designers used a soft taupe and gray color palette to complement custom designed black lacquer and antique bronze furniture, hand-beaded silk walls and antique accents.

Anglo Holdings Sells Union Diamond Brand

Anglo Holdings Limited Inc. sold its Union Diamond brand to Union Diamond Holdings LLC, effective May 1. Union Diamond is headquartered in the Paces Summit building in the Historic Vinings section of Atlanta, Georgia. Jason Nance, the CEO of Union Diamond Holdings, stated that it blazed a trail for online jewelry sales and exceptional customer service that countless others are still following. "We are excited to bring fresh, new ideas, product lines and innovations to grow Union Diamond and bring them to even further prominence and prestige in the diamond and jewelry industry,” he said.

GENERAL 	  

India Approves Industry Trademarks

Indias Office of The Trade Marks Registry approved the trademark "Mahendra Diamonds & Jewellers" for Mahendra Diamonds and Jewellers of Bangalore under the Class 14 trademark classification on April 15 with registration number 2013568. The Carat Club Sdn Bhd of Kuala Lumpur, Malaysia received approval for the trademark "The Love Diamond" under the Class 99 trademark classification from Indias Office of The Trade Marks Registry on March 30 with registration number 1495000. Sonika Jewellers of Gujarat received approval from the Office of The Trade Marks Registry for "Sonika Jewellers" under the Class 35 trademark classification on March 30 with registration number 2205301.

The U.S. Patent & Trademark Office (USPTO) approved the trademark "The Royalty of Diamond Simulants" for e-MarketingUSA Inc. of East Wenatchee, Washington on April 28 with registration number 4728566. Sandeep Diamond Corporation of New York City received approval from the USPTO for the trademark "Fairytale Diamonds" on April 28 with registration number 4728917.

Pirie Joins Scott Kay

Scott Kay appointed Nick Pirie to the role of East Coast regional account executive, joining the companys newly formed sales team that also includes recent hires Bruce Lake and Cathy Marsh. Previously, Pirie was the founder and president of Xvoke Conceptual Marketing and "the executive rockstar," or vice president, at SCVNGR, a start-up focusing on a geo-specific cloud-based mobile platform for marketing. Scott Kay added that Pirie is known for exploring new and innovative strategies within the jewelry industry.

U.S. Must Avoid Zims Gems

Diamond wholesalers and traders were dismayed to learn that even if a green diamond was certified as Kimberley Process compliant and originated from Zimbabwe, trading the diamond would still be in violation of U.S. sanctions. The Natural Color Diamond Association (NCDIA) and the Jewelers Vigilance Committee (JVC) held a seminar in New York City to teach diamantaires how to acquire green diamonds without running afoul of U.S. law.

The best way a trader can be protected when dealing with green diamonds, according to the JVC, is to request a certificate stating the stone is Kimberley Process compliant as well as its country of origin. The same holds true for polished green diamonds; traders should ask for a warranty stating that the stone was Kimberley Process compliant and for verification of origins. If the diamond was sourced from Zimbabwe, it is best to avoid it -- and ignorance of the law offers no protection, according to the JVC.

MJSA Expo Changes Venue

The MJSA Expo New York will be held at the Jacob K. Javits Convention Center, running concurrently with the JA New York Spring Show, from March 13 to 15, 2016. Organizers of the trade shows also agreed to honor attendee badges from either event, thereby enabling access to all exhibitors and educational sessions. MJSA stated that the opportunity to move from the Hilton to the Javits Center on the same dates as the JA show presented a win for the buyers and the exhibitors of the two shows.

MINING 	  

Lucaras Profit +18%

Lucara Diamond Corp. reported that revenue fell 9.8% year on year to $29.6 million in the first quarter that ended on March 31. The average price for rough diamonds that sold during the period fell 9.2% to $277 per carat. Nonetheless, Lucaras profit jumped 17.6% to $6 million, cash on hand surged 54% to $87.5 million and the companys Scotiabank line of credit for $50 million remains undrawn. At the Karowe mine in Botswana, production declined 18.9% to 90,077 carats, which was 7% below the companys forecast, due to lower liberation when processing the harder fragmental kimberlite. This issue is expected to be corrected as part of Lucaras plant optimization project with the commissioning of a tertiary crusher in the second quarter of 2015. There were, however, 153 special stones of greater than 10.80-carat in size, recovered during the quarter, with the average size of 27.70 carats. Looking ahead, Lucara expects to sell between 400,000 and 420,000 carats from Karowe this year, maintaining a revenue forecast of between $230 million and $240 million.

Brazil Seeks Return of Bahia Emerald

A civil court battle in Los Angeles (LA) over the ownership of The Bahia Emerald, a 180,000-carat gemstone that has been valued at $372 million, resumes this week. Brazil claimed ownership last year, arguing that the emerald was mined illegally and smuggled out of the country. Eight men originally filed ownership claims, but all that remains to take on Brazil is a group led by Kit Morrison, who was last to be in possession of the gem.

The gem was discovered in 2001 and made its way to the U.S., where it changed hands and vanished several times, was allegedly submerged by floods from Hurricane Katrina in New Orleans, reported missing from a vault near LA and reappeared in vault in Las Vegas in 2009. Since the LA Sherriff’s office was unable to determine ownership at the time, the gem was confiscated and has been secured in an undisclosed location ever sinc
Peregrine Completes Program at CH-7

Peregrine Diamonds Ltd. completed its large diameter reve

rse circulation drilling component and bulk sampling program at the CH-7 kimberlite on the Chidliak diamond project. Samples will enable Peregrine to determine the grade and diamond value and this information would be used to declare an inferred resource. Earlier, the company stated that the CH-6 kimberlite is one of the highest grade kimberlites in the world with an inferred resource of 8.57 million carats and a value of $213 per carat.

ECONWATCH 	  

Diamond Industry Stock Report

View the detailed industry stock report.
May 14 May 7 Chng.
$1 = Euro 0.876 0.880 -0.004
$1 = Rupee 63.38 64.11 -0.7
$1 = Israel Shekel 3.82 3.87 -0.05
$1 = Rand 11.79 12.04 -0.25
$1 = Canadian Dollar 1.20 1.21 -0.01

Precious Metals
Gold $1,221.10 $1,183.70 $37.40
Platinum $1,157.00 $1,129.00 $28.00

Stock Indexes Chng.
BSE 27,206.06 26,599.11 606.95 2.3%
Dow Jones 18,252.24 17,924.06 328.18 1.8%
FTSE 6,973.04 6,886.95 86.09 1.3%
Hang Seng 27,286.55 27,289.97 -3.42 0.0%
S&P 500 2,121.10 2,088.00 33.10 1.6%
Yahoo! Jewelry 1,303.86 1,320.37 -16.51 -1.3%

Rapaport Weekly Market Comment May 22, 2015

All eyes on Vegas with rising expectations for JCK Show. Far East demand weak. Polished shortages supporting prices and improving dealer demand as Indian factories close for summer vacation. Rough stable even though cutting center profit remains problematic. Letšeng Jan.-May sales -9% to $77.1M, average price -21% to $2,146/ct. Asian Star 4Q sales -12% to $138M, profit -1% to $4M. India April polished exports -11% to $1.6B, rough imports -31% to $1.4B. Belgium April polished exports +1% to $1B, rough imports -32% to $907M. Hong Kong 1Q polished imports -2% to $4.8B, polished exports -1% to $3.5B. Rapaport Vegas Breakfast, Sunday May 31, 8-10 a.m.; register diamonds.net/jck.

RapNet Data: May 21

Diamonds 1,393,564
Value $8,392,736,318
Carats 1,329,584
Average Discount -24.65%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
May 19-28 Tue-Thu

Rapaport  Melee Auction 

New York & Dubai
Tel. 1.212.354.9100
www.rapaportauctions.com
May 28-31 Thu-Sun

Rapaport at Antique Jewelry & Watch Show 

Paris Hotel
Visit us at booth 1500

Show website and information.

May-Jun 29-1 Fri-Mon

Rapaport at JCK Vegas 

Mandalay Bay Convention Center
Visit us at booths B5447 & B5547

Show website and information.

May 31 Sun

Rapaport Breakfast & Conference at JCK Vegas

Mandalay Bay Resort

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

10 a.m. to 11:30 a.m. | Banyan Ballroom
Rapaport Diamond Grading Conference

3 p.m to 4:30 p.m. | Banyan Ballroom
Responsible Sourcing Conference

View conference details and register. These events are free but seating is limited.

June 8-11 Mon-Thu

Rapaport Melee Auction 

New York

www.rapaportauctions.com
QUOTE OF THE WEEK
The disappearance of U.S. consumer spending in early 2015 has now become even more mysterious, as some of the excuses shopped around earlier, like bad weather, are looking more stretched with the passage of time.

Paul Ashworth | Capital Economics

INDUSTRY 	  

Trade Alert - Update May 21

As a follow up to the May 12th Rapaport Trade Alert, the Gemological Institute of America (GIA) has issued a laboratory alert recalling 424 diamond grading reports, which can be viewed here with shape, size, color and clarity of the diamonds.

The GIA suspects that the diamond were treated with a process that temporarily improved their color by up to three grades. The Israel Diamond Exchange says that they have received reports that some of the diamonds on the list were not over-graded.

The GIA has “terminated submissions” from the following clients who submitted treated diamonds without disclosure. LYE Diamonds, E.G.S.D. Diamonds, Abramov Romok, Yair Matatov. Pending further investigation, RapNet and the Rapaport Group has suspended service to these companies and to the following individuals are believed to be associated with the companies. Nati Yizrov, Gavriel Yelizarov, Yair Matatov. All the diamonds with recalled grading reports have been delisted from RapNet.

Members of the trade that have access to such reports are asked to urgently email us at GIA@Diamonds.Net. If the reports are in their possession they should cut them in half. The diamonds and the canceled reports may be sent to GIA for expedited free re-grading service. They may also be delivered to Rapaport offices in Israel, India and Belgium for this free service. Buyers should be careful not to buy these diamonds based on the GIA grading reports and sellers should not sell the diamonds with these grading reports. We advise that in the event the diamonds were over-graded the best course of action is to cut the canceled grading reports in half and return the diamond and the cut report to the supplier against a full refund. If any RapNet members have difficulty returning diamonds please email Service@RapNet.com.

Platinum Jewelry Production -3%

Thomson Reuters “GFMS Platinum & Palladium Survey 2015” revealed that the platinum market recorded a production deficit in 2014, prior to inventory movement, of 1.02 million ounces, mainly due to significant workers strike action in South Africa. Platinum production plunged 21% year on year to a 15-year low of 4.7 million ounces, the report stated. Nonetheless, inventory remains "abundant."

Palladium has held to a deficit since 2007; however, the imbalance turned more severe at 1.58 million ounces -- the largest in more than a decade, GFMS stated. Palladium production dropped 7% to 6.04 million ounces, which was a 12-year low. GFMS anticipates that prices for platinum will average at $1,170 per ounce this year, a drop of 16% compared with the average for 2014, while the average price for palladium is forecast to remain the same year-on-year at $800 per ounce. Jewelry scrap platinum increased 5% in 2014, while jewelry manufacturing declined 3% to 2.57 million ounces, marking the first decline in three years. Palladium jewelry scrap increased 8% and jewelry demand fell for a sixth consecutive year, dropping 9% to 470,400 ounces.

RETAIL & WHOLESALE 	  

Asian Stars 4Q Profit -1%

Asian Star Co. Ltd. reported that revenue declined 11.6% year on year to $137.5 million (INR 8.73 billion) in the fourth quarter that ended on March 31. Standalone revenue slipped 16.4% to $94 million. Company-wide sales of diamonds fell 12% during the period to $129.5 million, while jewelry sales dropped 8.8% to $12 million. At the end of the fourth quarter, the value of diamond inventory rose 15.7% year on year to $78 million, while the value of jewelry inventory jumped 18.1% to $13 million. Expenses during the period were reduced by 11.9% to $131.4 million. Profit fell 1.4% $4.1 million.

During the fiscal year, Asian Star reported that revenue fell 0.9% to $507.5 million, while standalone sales dropped 0.6% to $437 million. Diamond sales were basically flat at $457.2 million, while jewelry sales fell 1.2% to $74 million. Expenses were reduced by 0.9% to $488 million and profit rose 5.1% to $12.9 million.

Kingolds Profit -59%

Kingold Jewelry Inc. reported that revenue fell 32.9% year on year to $206.2 million in the first quarter that ended on March 31. The company contended that sales were dramatically reduced by $85.9 million from weak demand for gold products and they fell $13.2 million as a result of lower gold prices. Kingold also took a $3 million write-down on inventory due to the decrease in gold prices during the period. Gross margin fell to 5.2% compared with 8.7% one year earlier. Profit fell 59% to $6.6 million or 10 cents per share. In an update on the companys Jewelry Park, the company is solely focused on completing all exterior and interior design elements and confirmed it was on track to open in December.

Heritage Jewel Auction Achieves $5M

Heritage Auctions sale of fine jewelry achieved $5 million earlier this month with the top lot, a 5-carat, fancy light pink diamond ring by Chopard, selling for $605,000. The company stated that multiple bidders competed for large, single diamonds and exceptional pieces by top designers, including a 6-carat fancy pink diamond bracelet, also by Chopard, which sold for $485,000. One 8-carat, H, internally flawless, unmounted diamond sold for $221,000 and a 16.87-carat unmounted diamond, from the Kelsey Lake Mine in Colorado, hammered for $185,000. Heritage stated that the Kelsey stone set a record as the largest polished diamond of North American origin and it was offered with a letter from Diamond Company N.L. describing the discovery of the 28.20-carat rough diamond.

Police Charge 8 in London Heist

Londons Metropolitan Police arrested 10 men this week in connection with the April Hatton Garden diamond and jewelry heist and recovered an undisclosed amount of goods. On May 21, eight men appeared before the Westminster Magistrates Court and were charged with conspiracy to burgle and remain in custody pending a June 4 court date. A ninth suspect, who is 43 and still under investigation, was released on bail and a tenth suspect, who is 42, was arrested on May 21 and taken into custody. Charges were brought against Terry Perkins, 67, John Collins, 74, Daniel Jones, 58, Hugh Doyle, 48, William Lincoln, 59, Brian Reader, 76, Paul Reader, 50, and Carl Wood, 58

Komehyo Opens in Hong Kong

Komehyo Hong Kong Ltd., a subsidiary of Komehyo Co. Ltd. of Japan, opened a showroom in Hong Kong as part of the companys expansion plans. The new location will offer preowned jewelry, watches, brand named handbags and other accessories. The company contended that in the past few years, it has been
trading preowned jewelry and watches at Hong Kong trade fairs. "We have seen strong demand for luxury watches and diamond jewelry from overseas buyers. The opening of the showroom shows our growing confidence in Hong Kong," said Toshio Sawada, the president of Komehyo Hong Kong.

Royal Asscher Kicks Off New Campaign

Royal Asscher developed a new global advertisement campaign, featuring supermodel, actress and philanthropist Nicola Breytenbach as the face of the brand ahead of the JCK Vegas show. The campaign was shot by Anthony Friend and will appear in worldwide advertisements. The advertisement campaign reflects the combination of the contemporary beauty of Breytenbach with the heritage of the iconic Royal Asscher company. The new patented Royal Asscher Brilliant Cut and the Royal Asscher Seventy Four collection® are featured in the campaign, next to the Stars and other fine jewelry collections. An online video commercial and “the making of” video will be released as well. The campaign was shot with Breytenbach and her two daughters to invoke emotion and a spectacular image, according to the brand.

GENERAL
Mojica Joins Hearts On Fire

Mike Mojica joined the Hearts On Fire team as the director of business development. With 38 years of experience under his belt, Mojica has sold and marketed loose stones for De Beers sightholders, introduced the Krieger Fine Jewelry line and launched Cushette for Michael Werdiger among other accomplishments. Mojica’s career began in corporate marketing with Zale Corporation more than 30 years ago, he has served on the board for the Southwest chapter of the 24Karat Club and as an advisor for AGS.

Rahaminov Appoints Regional Sales Dir.

Rahaminov Diamonds of Los Angeles appointed Zach Buss as its new southern regional sales director. Previously, Buss was the district manager for Riddles Jewelry in Wyoming. Rahaminov added that Buss and his family recently relocated to Southern California to be closer to relatives. Outside of the office, his passions include hockey, golf and cooking.

Scott Kay Appoints Pres.

Scott Kay appointed Michael Benavente as the companys president. Benavente brings more than 25 years of experience in sales, marketing, distribution and luxury brand management to the jewelry brand and most recently was the managing director for the Americas region at Gucci Groups watches and jewelry division. Earlier in his career, Benavente re-launched the Longines Watch brand in the U.S. and brought the ESQ Watch division to market for the Movado Group.

GIA Plans Career Fair in NY

The Gemological Institute of Americas (GIA) jewelry industry career fair will be held in New York at the Javits Center on July 27, from 8 a.m. to 1 p.m. As always, this event hosts representatives from gem and jewelry companies, many of whom are seeking a variety of professional skills such as marketing, sales, design, manufacturing and more. To begin the day, GIAs CEO, Susan Jacques, will moderate a panel discussion titled “Job Success in Today’s Market,” featuring Jeremy Dunn of The Rephinery; Rhonda Edelman of Tiffany & Co.; Myriam Gumuchian of Gumuchian; Michael O’Connor of Style & Substance Inc. and Lee Siegelson of SIEGELSON. GIA hosted its first jewelry career fair in 1991 in Santa Monica, California and has now held more than 50 events.

Group Plans Industry Summit in NY

The upcoming Jewelry Industry Summit secured its first sponsor, the JA New York Show, which will provide registration services and the use of its discounted hotel block to conference attendees. Organizers of the event also announced a date change, scheduling the summit for March 10 to 13, 2016 in Manhattan, in advance of JA New York. Summit attendees will gain entry to the trade show with their registration. The Jewelry Industry Summit is designed to be an interactive event and facilitate discussions on sustainability and responsible sourcing. The goal is to create awareness of supply chain challenges, develop tools to take actions that benefit the jewelry industry, create business opportunities and open new sources of value for suppliers and the consumer to ensure that the industry will thrive in the 21st Century.

NY Antique Jewelry Show Begins July 24

The New York Antique Jewelry & Watch Show, which is schedule for July 24 to 27 at the Metropolitan Pavilion in Manhattan, confirmed at least 100 "elite dealers" will participate in the show, presenting sought after collections and gems. The show runs concurrently with the JA New York summer show at the Javits Convention Center and attendees at JA New York will receive complimentary access to the New York Antiques Jewelry & Watch Show on July 27 at 9 a.m., two hours before the show opens to the public, according to the organizers. U.S. Antique Shows, a division of Emerald Expositions, produces antique and antique jewelry trade events in Las Vegas, Los Angeles, Miami, Miami Beach and New York. The jewelry portfolio is comprised of trade and consumer events including the U.S. Antique Shows division, Couture, JA New York (summer and winter), and JA Special Delivery.

U.S. Updates Diamond Trade Participants

The U.S. Department of State published an update on participating countries and entities in the Kimberley Process Certification Scheme (KPCS) for the purposes of the Clean Diamond Trade Act of 2003. The latest revision follows an update from August 11, 2014 to reflect some changes to country trade bodies and to add Mali and to reiterate the suspension of Venezuela and the Central African Republic (CAR) from trading rough diamonds. Section 4 of the Clean Diamond Trade Act requires the sitting U.S. president to prohibit the importation into, or the exportation from, the U.S. of any rough diamond, from whatever source, that has not been controlled through the KPCS. Section 6(b) requires the president to publish a list of all participants, and all importing and exporting authorities, while section 3(4) defines "importing authority" as one or more entities designated by a participant to enforce the laws and regulations of the KPCS.

The following list names countries and their approved rough diamond trading entity.

MINING 	  

Gem Diamonds Sales -9%

Gem Diamonds reported that diamond sales from the Letšeng mine in Lesotho garnered $77.1 million at an average price of $2,146 per carat during the first three tenders of the year that took place between January and May 20. The average price was 21% below those recorded one year earlier, while total sales fell 9%. Prices were flat compared to the preceding fourth quarter of 2014. Production at Letšeng reached 31,369 carats during the period January to April, which was 8% lower than the preceding four month period. The average grade recovered fell 3% between the periods to 1.58 carats per hundred tonne. Gem Diamonds is also developing the Ghaghoo mine in Botswana, where it has recovered 16,174 carats of diamonds from 67,330 tonnes of treated ore to date. The mine is on track to ramp up to full production in the second half of 2015, the company stated.

De Beers to Sell Tailings Op.

De Beers has placed its Kimberley mines tailings operation on the market and has been investigating ways to extend the economic life of the operation, which is located in South Africa. The company stated that over the course of the past decade, it has taken steps to sustain the operation and did succeed in maintaining production during the economically challenged period. De Beers anticipates securing a sales agreement in just a matter of months, after which the transfer of the operation to a new owner must meet all regulatory requirements, and be handled with appropriate care to avoid unnecessary delay, according to the companys statement.

Zimbabwes Diamond Sales Plummet

Zimbabwes Mines and Mining Development Deputy Minister Fred Moyo told Parliament that a planned diamond mining company merger should be completed by the end of 2015, according to The Herald. The new company, which would control diamond assets in the Marange fields and be 50% owned by the government, will have to establish a strategic plan for competitive marketing and production. He also stated that diamond output fell 34% year on year by volume to 5.9 million carats and dropped 23% by value to $350 million in 2014.

However, The Zimbabwean reported that the consolidation plans are now in limbo as Anjin, Diamond Mining Co., Jinan, Marange Resources and Mbada Diamonds are resisting the merger, citing their original contractual agreements with the government.

Lucapa Parcel Achieves $2M

Lucapa Diamond Company Ltd. sold a fourth parcel of diamonds from its Lulo diamond concession in Angola, achieving $2.3 million or $1,500 per carat. The parcel included a 63.05-carat, D, type IIa stone. Lucapas proceeds from the four parcels, totaling 3,856 carats, reached $7.7 million, or nearly $2,000 per carat. Next, Lucapa is moving its alluvial mining operations to the high-grade diamond zones of BLK 08, 06 and 19, where several large stones have been recovered during bulk sampling. The company anticipates offering the next parcel of Lulo diamonds for sale in June.

Shore Gold to Raise $2M

Shore Gold Inc. intends to raise up to $2 million through a non-brokered private placement of common shares at a price of 20 cents per unit. Each unit will consist of one common share and one common share purchase warrant, with each warrant entitling the holder to purchase one common share at 25 cents for a period of 18 months from the date of issue. The offering is expected to close on or about June 12, 2015, provided that it may close in one or more tranches, but no later than July 3, and it is subject to the approval of the Toronto Stock Exchange. Proceeds from the placement are intended to advance the Star-Orion South diamond project and for general corporate purposes. Shore Gold is nearing the completion of its large diameter drilling program at the Orion South kimberlite and intends to re-estimate Orion Souths mineral resource.

ECONWATCH 	  

Diamond Industry Stock Report

U.S. retail shares were all higher except Charles & Colvard (-2%) and Walmart (-3%), while Far East firms were all lower except Luk Fook (+1%). Europes shares all rose except Kering (-1%) and Indias industry stocks were mixed with Classic Diamond (-9%) and Ren. Jewellery (+7%) defining the spread. Mining shares were mostly improved with Kennady (+18%) far ahead of other gains. View the detailed industry stock report.

May 21 May 14 Chng.
$1 = Euro 0.899 0.876 0.023
$1 = Rupee 63.57 63.38 0.2
$1 = Israel Shekel 3.87 3.82 0.05
$1 = Rand 11.84 11.79 0.05
$1 = Canadian Dollar 1.22 1.20 0.02

Precious Metals
Gold $1,206.10 $1,221.10 -$15.00
Platinum $1,153.00 $1,157.00 -$4.00

Stock Indexes Chng.
BSE 27,809.35 27,206.06 603.29 2.2%
Dow Jones 18,286.54 18,252.24 34.30 0.2%
FTSE 7,013.47 6,973.04 40.43 0.6%
Hang Seng 27,523.72 27,286.55 237.17 0.9%
S&P 500 2,130.84 2,121.10 9.74 0.5%
Yahoo! Jewelry 1,316.94 1,303.86 13.08 1.0%

Rapaport Weekly Market Comment May 29, 2015

Sentiment improves as JCK Las Vegas show opens. Stable prices for select categories with shortages supporting the market. Poor makes are still in over-supply. U.S. demand good but not great as jewelers experience mixed 1Q: Signet Jewelers same-store sales +4%, sales +45% to $1.5B, profit +23% to $119M; Tiffany & Co. revenue -5% to $962M, profit -17% to $105M. Richemont FY revenue +4% to $11.5B, jewelry sales +4% to $6.2B, group profit -36% to $1.5B. Shrenuj & Co. FY revenue +18% to $858M, profit -20% to $11M. Dominion 1Q sales +7% to $188M, production +9% to 1.4M cts. Miners form Diamond Producers Association with $6M budget for industry research and marketing.
RapNet Data: May 28

Diamonds 1,391,399
Value $8,411,880,081
Carats 1,334,918
Average Discount -25.08%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.
Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
May 28-31 Thu-Sun

Rapaport at Antique Jewelry & Watch Show 

Paris Hotel
Visit us at booth 1500

Show website and information.

May-Jun 29-1 Fri-Mon

Rapaport at JCK Vegas 

Mandalay Bay Convention Center
Visit us at booths B5447 & B5547

Show website and information.
May 31 Sun

Rapaport Breakfast & Conference at JCK Vegas

Mandalay Bay Resort

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

10 a.m. to 11:30 a.m. | Banyan Ballroom
Rapaport Diamond Grading Conference

3 p.m to 4:30 p.m. | Banyan Ballroom
Responsible Sourcing Conference

View conference details and register. These events are free but seating is limited.
June 8-11 Mon-Thu

Rapaport  Melee Auction 

New York
Tel. 1.212.354.9100
www.rapaportauctions.com
June 16-25 Tue-Thu

Rapaport Melee Auction 

New York & Hong Kong

www.rapaportauctions.com

QUOTE OF THE WEEK
Our status as a sightholder of De Beers, demonstrates not only our market leadership and diamond credentials, but also our ability to meet De Beer’s stringent qualification criteria. This will increase public confidence in our product quality.

Wong Wai Sheung | Luk Fook Holdings

INDUSTRY

Miners Form Diamond Producers Assoc.

ALROSA, De Beers, Rio Tinto, Dominion Diamond Corporation, Lucara Diamond Corporation, Petra Diamonds and Gem Diamonds will form part of the Diamond Producers Association (DPA), a body that will fund campaigns to drive consumer demand since De Beers narrowed its marketing to just focus on its own branded products. The DPA will have an initial budget of $6 million, funded by the seven member companies, and is in the process of recruiting an executive director who will be responsible for operational activity.

The group intends to enhance consumer demand for and confidence in diamonds; provide a reliable source for industry information, including trade and consumer research; act as a unified voice for diamond producers; communicate the role and contribution of diamond producers and share best practices in health and safety, license to operate, supply chain integrity and environment management.

U.S. Jewelry CPI -3%

The U.S. consumer price index (CPI) for jewelry dropped 3.3% percent year on year to 163.96 points in April, which was the lowest reading since December. Comparatively, the CPI for watches rose 1.6% percent to 123 points, reflecting a new high for the month of April. Meanwhile, prices for diamonds and precious metals experienced broad declines in April.

The RapNet Diamond Index (RAPI), the global benchmark for polished prices, dropped 13.9% year on year for 1.00-carat certified diamonds, while RAPI for 0.30-carat plunged 21.2%, RAPI for 0.50-carat contracted 9.5% and RAPI for 3.00-carat diamonds declined 14.5%. Gold prices in April averaged about 9% lower from one year ago. Platinum, on the other hand, remained under tremendous pressure and fell 21%, while silver declined 14% compared with April 2014. The CPI for all consumable product categories in April was basically unchanged, down just 0.2% from one year ago, at 236.6 points.

RETAIL & WHOLESALE 	  

Signets Profit +23%

Signet Jewelers reported that sales rose 44.9% year on year to $1.531 billion in the first quarter that ended on May 2. The increase was driven by the addition of Zale, which added $437.1 million to overall revenue. Same-store sales rose 3.6% and ecommerce sales jumped 98.7% to $76.9 million. Gross margin fell to 37% compared with 38.6% one year earlier, primarily due to lower gross margins with Zale. Profit rose 23% to $118.8 million.

Across the companys Sterling Jewelers division, sales increases were driven by Kay and select diamond jewelry collections as well as watches. The average transaction price at Sterling increased by 4.7%, while the number of transactions fell 3% due to merchandise mix, including bridal and higher price-point fashion collections. Sterlings same-store sales rose 2.3%. Zale division sales were boosted by branded bridal and branded diamond fashion merchandise and comparable-store sales rose 5.6%. In the U.K., sales were driven by branded bridal as well as fashion diamond jewelry and fashion watches. The number of transactions and average transaction price in the U.K. increased by 2.6% and 3.6% respectively. Same-store sales in the U.K. jumped 6.2%.

Tiffany & Co.s Profit -17%

Tiffany & Co.s revenue fell 4.9% year on year to $962.4 million in the first quarter that ended on April 30. Same-store sales fell 7%. Cost of sales declined 6.9% to $393.4 million and gross margin as a percentage of sales increased to 59.1% compared with 58.2% one year earlier. Profit slipped 16.5% to $104.9 million. The company stated that net sales and earnings declines reflected the negative effects from a stronger U.S. dollar and difficult comparisons in Japan. Sales by region and on a constant-exchange-rate basis, fell 18% in Japan, but they increased 3% in the Americas, 4% in Asia Pacific and 21% in Europe. Inventory as of April 30, fell 2% to $2.4 billion and capital expenditures increased 5.7% to $37 million during the quarter.

Frederic Cumenal, Tiffany & Co.s CEO, said, “Our plans this year include expanding existing jewelry collections with new designs and opening stores in a number of important markets, all intended to further enhance Tiffany’s position as a leading global luxury brand. Despite these plans and the better-than-expected first quarter results, our forecast for minimal earnings growth for the full year continues to reflect caution regarding our expectations for fiscal 2015 in light of the strong dollar and other global economic uncertainties. However, we believe we can return to a healthier rate of double-digit earnings per share growth over the long-term.”

Richemonts Profit -36%

Richemonts revenue increased 3.9% year on year to $11.5 billion (EUR 10.41 billion) in the year that ended on March 31. Sales measured at constant-exchange-rates rose 1%. Revenue from the retail division rose 4.1% to $6 billion, while wholesale revenue increased 3.6% to $5.5 billion. Profit fell 35.5% to $1.5 billion, which the company attributed partly to ongoing foreign exchange hedging activities.

The company stated that jewelry maisons Cartier, Van Cleef & Arpels and Giampiero Bodino observed a "challenging environment," however, the division managed to still improve sales 4% to $6.2 billion and operating margin to 34.9% compared with 34.8% one year earlier. Revenue from the companys specialist watchmakers increased 4.6% to $3.5 billion but operating margin fell to 23.4% compared with 26.1%.

Movados Profit -51%

The Movado Group reported that its sales were flat year on year at $120.4 million during the first quarter that ended on April 30. The company said that the lack of sales growth was due primarily to the impact of fluctuating exchange-rates between the dollar and the Swiss franc and euro. Sales during the quarter rose 5% on a constant-exchange-rate basis. Profit fell 51% to $3.6 million, due primarily to a $2.7 million pre-tax charge related to operating efficiency initiatives and other items implemented in early on.

Forevermark Relaunches A Diamond is Forever

De Beers Forevermark diamond brand will relaunch its "A Diamond is Forever" campaign, timed with the Christmas 2015 season. First coined for De Beers in 1947 by copywriter Frances Gerety, A Diamond is Forever has influenced popular culture for decades and was named “the best advertising slogan of the century” by Advertising Age Magazine. To this day, the slogan is still associated with timeless love and commitment, the pillars upon which the Forevermark brand stands.

Forevermarks CEO, Stephen Lussier, said, “We are thrilled to bring this incredible equity back to Forevermark where it truly belongs. After all, our name is built on the line. But it is not enough to simply bring it back. We need to recharge it with meaning and most importantly fuse it with the Forevermark brand promise.” Be sure to attended the Rapaport Breakfast on May 31 from 8 a.m. to 10 a.m. in the Banyan Ballroom of the Mandalay Bay Resort, where Lussier will be a guest speaker.

Luk Fook Signs De Beers Contract

Luk Fook Holdings signed its three-year sightholder rough diamond sales contract with the De Beers Group of Companies for the period that ends on March 31, 2018. Luk Fook was established in 1991 and operates 1,350 retail stores, with shops in Mainland China, Hong Kong, Macau, Singapore, Canada, Australia and the U.S. In addition, the company manufactures jewelry at its 350,000-square-foot facility in Nansha, Guangzhou, China. The firm attained ISO 9001 Quality Management Systems – Requirements and ISO 14001 Environmental Management System certifications for the facility and has entered a second phase of expansion, expecting to double jewelry manufacturing capacity when construction has completed.

IGI Certifies 10ct. Lab-Grown Diamond

The International Gemological Institute (IGI) Hong Kong certified a lab-grown, 10.02-carat, E, VS1, type IIa, square, emerald-cut stone produced by New Diamond Technology LLC of St. Petersburg, Russia. The lab stated that the stone was fashioned from a 32.26-carat piece of man-made rough and received "very good-excellent finish grade." Marc Brauner, the co-CEO of IGI Worldwide, stated that the 10-carat stone is "unique in all aspects" and that the science and technology behind the processes synthesizing this stone are significantly more advanced than other man-made diamonds currently on the market.

Excelsior Seeks to Fill a Capital Void

Excelsior Capital Ventures said it would raise capital to provide loans securitized by diamond and precious metal inventories for the trade given the decline in lending across the sector. According to the companys chairman, David Barr, Excelsior will fill a "capital void" and be a catalyst for clients’ business growth. The companys CEO, Nehal Modi, added that the industry is at a critical juncture where companies must re-evaluate their capital structures, systems, and willingness to demonstrate transparency to lenders, for which Excelsior can greatly assist meeting those goals.

elumeo to Launch an IPO

Berlin-based electronic and broadcast jeweler elumeo Group plans an initial public offering (IPO) on the Frankfurt Stock Exchange, with Société Générale Corporate & Investment Banking and Baader Bank AG managing the IPO as joint global coordinators and bookrunners. At the present time, the company targets the value of the IPO in a range of $44 million to $66 million (EUR 40 million to EUR 60 million) and intends to use proceeds to broaden its product offerings and invest in digital and international expansion.

According to elumeos filing, it plans to launch additional localized TV channels and web stores in various languages. The company was founded in 2008, but renamed elumeo in September 2014, and reported that since 2009, its average compound annual growth rate from sales has been about 30%. Revenue in 2014 totaled $78 million, while adjusted EBITDA was $4.5 million. For the first quarter of 2015, elumeos sales rose 26.6% year on year to $21.5 million and adjusted EBITDA more than doubled to $771,000.

Frederick Goldman Names COO

Frederick Goldman Inc. promoted John Orrico, the executive vice president of operations, to a newly created role of chief operating officer (COO). Orricos key areas of oversight include manufacturing, product development, supply chain management, procurement, inventory planning and quality control for the companys global operations. Before joining Frederick Goldman in 2012, Orrico served as senior vice president at Birks & Mayor’s and group vice president of supply chain at Tiffany & Co.

GJF Adds Seven Committee Members

The All India Gems & Jewellery Trade Foundation (GJF) added seven new members to its committee of administration (COA), joining 15 existing members. The larger committee is expected to now address specific challenges or roadblocks facing a particular region or sector. In addition to the COA, the GJF formed new sub-committees to address various initiatives and issues that may come up from time to time. New members include Shankar Sen (the zonal chairman for the Eastern region), Anil Talwar, D. D. Karel, Manoj Soni, Rajkumar Jain, Raman Solanki and Sumeet Anand. In addition, existing members Nitin Khandelwal was appointed the zonal chairman for the Western region, Vijay Khanna was appointed zonal chairman for the Northern region and Anantha Padmanaban was selected as zonal chairman for the Southern region.

MINING 	  

Dominions Sales +7%

Dominion Diamond Corp.s rough diamond sales rose 7% year on year to $187.7 million in the first quarter that ended on April 30. Revenue from the companys Ekati diamond mine jumped 37.3% to $127.4 million for 710,000 carats sold, while the companys 40% share of sales from the Diavik mine fell 27.1% to $60.3 million for 544,000 carats sold. The company excluded from the Ekati total approximately 100,000 carats of material from the Misery satellite and northeast pipes that were produced during the pre-commercial period and garnered $6.9 million.

Production from Ekati jumped 43.3% year on year to 804,000 carats during the first quarter. Dominions share of production at the Diavik mine fell 17.7% to 604,000 carats. Rough diamond inventory that was available for sale at the close of the quarter was approximately 700,000 carats with a market value of $140 million, according to the companys calculations. In addition, Dominion held approximately 800,000 carats in inventory that it defined as "work in progress."

ALROSA Recovers 78ct. Stone

ALROSA recovered a 78.02-carat diamond from its Mir kimberlite pipe. The company stated that the diamonds dimensions are 28.5 by 28.4 by 24.2 mm. This crystal has a regular shape with minor technogenic damages on two tops and some small inclusions. The stone is transparent with yellowish and greenish hues. According to analysts at ALROSA’s Diamond Sorting Center, this diamond may be valued at more than $600,000 if it were put up for auction.

Stellars Rough Sale Achieves $505K

Stellar Diamonds achieved $505,000 from its recent sale of rough diamonds from the Baoulé project in Guinea. Six of the lots, representing 48.12 carats of rough stones greater than 5 carats, achieved $3,510 per carat. So far this year, Stellars diamond sales totaled $922,000, of which $700,644 worth of goods was derived from the trial mine evaluation of Baoulé.

Peregrine Joins Diamond Bourse of Canada

Peregrine Diamonds Ltd. joined the Diamond Bourse of Canada and is being represented by Jennifer Pell, the mining companys chief geoscientist. Peregrine is the first junior mining company to become a bourse member. Diamond major De Beers Canada is also a member. Bourse president David Gavin said that many of the Canadian mines that are moving into the production stage in the next few years are located in the Northwest Territories and Peregrine is very well-positioned to contribute to the worlds diamond supply in the years to come.

ECONWATCH 	  

Diamond Industry Stock Report

Most U.S., Europe and Far East stocks were little changed this week, except Movado (-7%), Tiffany & Co. (+9%) and Swatch (-6%). Indian shares all lower except Gitanjali (+4%), Goldiam (+29%) and Titan (+1%). Mining shares were mixed with Peregrine (-12%) leading declines and Stellar (+11%) ahead of gains. View the detailed industry stock report.

May 28 May 21 Chng.
$1 = Euro 0.914 0.899 0.015
$1 = Rupee 63.78 63.57 0.2
$1 = Israel Shekel 3.87 3.87 0.00
$1 = Rand 12.14 11.84 0.30
$1 = Canadian Dollar 1.24 1.22 0.02

Precious Metals
Gold $1,188.20 $1,206.10 -$17.90
Platinum $1,115.00 $1,153.00 -$38.00

Stock Indexes Chng.
BSE 27,506.71 27,809.35 -302.64 -1.1%
Dow Jones 18,126.12 18,286.54 -160.42 -0.9%
FTSE 7,040.92 7,013.47 27.45 0.4%
Hang Seng 27,454.31 27,523.72 -69.41 -0.3%
S&P 500 2,120.79 2,130.84 -10.05 -0.5%
Yahoo! Jewelry 1,316.99 1,316.94 0.05 0.0%

Rapaport Weekly Market Comment June 5, 2015

JCK Vegas show meets low expectations and creates healthy positive mood even though sales were slow for many suppliers. Antique show very good to excellent with strong sales and traffic. Demand for branded estate jewelry improving. U.S. market is stable and consistent. De Beers, ALROSA expected to maintain low volume, steady prices at next week’s sales. Weak ruble boosts ALROSA 1Q revenue +31% to $1.4B, profit +272% to $405M. Christie’s HK sells $118M (90% by lot) with rectangular, 9.07ct., IF, fancy intense pink, type IIa diamond selling for $13M ($1.4M/ct.). U.S. April jewelry sales -1.4% to $4.8B, polished imports -12% to $1.8B, polished exports -25% to $1.2B.

RapNet Data: June 4

Diamonds 1,352,299
Value $8,196,976,162
Carats 1,273,731
Average Discount -23.45%

www.rapnet.com

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June 8-11 Mon-Thu

Rapaport  Melee Auction 

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June 16-25 Tue-Thu

Rapaport Melee Auction 

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June 17-24 Wed-Wed

Rapaport Single Stone Auction 

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QUOTE OF THE WEEK
We focus on what is special about natural diamonds: their inherent attributes. You cant make a natural diamond that is billions of years old. Synthetics are not rare and have no enduring value; they are two separate products and operate in different worlds.

Stephen Lussier | Forevermark

INDUSTRY 	  

U.S. Jewelry, Watch Sales -2%

U.S. jewelry and watch sales across all channels fell 1.5% year on year to $5.427 billion in April, as estimated from preliminary government figures. According to Rapaport News calculations, jewelry sales dropped 1.4% to $4.792 billion, while sales of watches contracted 2.7% to $635 million during the month. In addition, April became the seventh consecutive month to reflect a decline in sales for the sector.

If there was any good news from revised data for January through March, it was that jewelry sales totals were not lower than previously posted and increased just a touch from earlier estimates. Nonetheless, jewelry and watch sales for 2015 are lower across the board. U.S. jewelry sales for the first four months of 2015 have fallen 1.2% year on year to $19.018 billion, while watch sales dropped 2.9% to $2.52 billion, according to Rapaport News estimates.

Jewelry Sales Decline in Hong Kong

Hong Kongs retail sales fell 2.2% year on year to $4.9 billion (HKD 38 billion) in April, Hong Kongs statistics department told Xinhau news. The value of sales of jewelry, watches and clocks and valuable gifts decreased by 19.5%, whereas sales of fuel dropped 12.8%, Chinese drugs and herbs fell 7.7%, wearing apparel declined 5.9% and medicines and cosmetics slipped 3%. The value of sales of electrical goods and photographic equipment rose 8.6%, followed by sales of food, alcoholic drinks and tobacco, up 4.2%, and books, newspapers, stationery and gifts rose 4.1%.

JCK Vegas Mirrors the Economy

Some exhibitors said that sales and/or orders from JCK Vegas exceeded their goals, while just as many were disappointed that demand for diamonds and jewelry was less than last year. Both sets of observations are correct -- in the same way Wall Street analysts believe the U.S. consumer is or isnt spending. (Blame the weather, or as John Crudele of the New York Post concluded on June 3: Consumers just dont have the money to spend more.)

Nonetheless, diamond traders who spoke with Rapaport News at the show were aware that the U.S. market has been in a soft patch since the third quarter of 2014. The general exception has been for demand in high-end goods. Pluczenik was cautiously optimistic and said that demand for very large stones at JCK was "good" and that the U.S. is moving toward "quality" once again. However, there is much greater pressure on margins. The brands Integré collection was also popular with buyers.

One major diamond wholesaler said that JCK met their "low expectations;" however, compared with 2014, the volume of orders was less and the average was down to $65K versus $100K. Buyers were primarily seeking better-quality stones above 1-carat. Another wholesaler said the show was a little better than last year, with demand in the 1-carat to 3-carat range. A large diamond manufacturer from India confirmed that JCK missed their expectations as the value of orders was much lower and buyers at the show were unwilling to negotiate on price. "They think prices will drop further," the trader said. "But I cant sell less than 27% below Rap and they demand 33%."

To that end, many in the trade felt as though U.S. retailers are in a holding pattern and buying only what they need to stave off carrying costs of inventory as consumer jewelry spending has weakened. Still, for some of the jewelry manufacturers, JCK met or exceeded their expectations. Rahaminov Diamonds said the show was stronger than last year, while Frederick Goldman Inc. stated that JCK met their expectations and they signed new clients. Gabriel & Co. New York met its show goals on the first day and designer Erich Zimmermann said he was very pleased with the outcome after taking a six-year hiatus from exhibiting at JCK.

RETAIL & WHOLESALE 	  

Christies Sale Achieves $118M

Christie’s Hong Kong sale of magnificent jewels achieved $117.8 million (HKD 909.7 million) and was 89.5% sold by lot. The family collection of K’ung Hsiang-Hsi sold for $14.6 million, which was seven times its pre-sale low estimate. The top lot was a Burmese ruby and diamond necklace of 120 carats by Etcetera that sold to an Asian private for $13 million. A rectangular-shaped, 9.07-carat, IF, fancy intense pink, type IIa Harry Winston diamond ring sold for $12.6 million. Other diamond pieces that made the top 10 at the sale were a rectangular-shape, 15.15-carat, D, IF diamond ring by Graff that sold for $3.6 million and a pear-shape, 3.00-carat, IF, fancy intense blue diamond ring by Moussaieff, which sold for $2.6 million.

Gitanjalis Loss Narrows

Gitanjali reported that its revenue rose 27% year on year to $544.1 million (INR 34.87 billion) during the fourth quarter that ended on March 31. The groups loss narrowed to $5.9 million compared with $14.2 million one year earlier. Revenue from the group’s loose diamond manufacturing segment increased 13% to $222.7 million, while the jewelry manufacturing segment reported that revenue grew 53% to $370.9 million. Within the loose diamond segment, operating profit plummeted 64% to $342,000 but the jewelry divisions operating profit almost quadrupled to $3.1 million.

Special Notified Zone in India Begins July 1

The Special Notified Zone (SNZ) at the Bharat Diamond Bourse (BDB) in Mumbai will begin operations on July 1 for rough diamond imports, re-exporting and trading. Sanjay Shah, the director of Gold Star Diamond Pvt. Ltd., said, “This is a positive move. It will help India to be a rough trading center, especially when we have more direct imports coming from various mines.”

A circular published by the government stated that it will permit the trading of rough diamonds from leading diamond mining companies at the SNZ. It will house facilities for the receipt, storing and viewing of imported rough, in addition to auctions and sales. The GJEPC and the BDB will establish the India Diamond Trading Centre company, which will be entrusted to log and monitor the carat weight with the import invoice, packing list and Kimberley Process certificate. Thereafter, the parcel will be sealed and transferred to the strong room at the SNZ. The SNZ will be accessible to traders for viewing goods and any auctions and/or sales that take place. The GJEPC shall define the eligibility conditions for visitors, as guided by Customs rules. All persons permitted to visit the SNZ shall be issued a photo identity card by India Diamond Trading Centre.

Dillon Gage Extends Trading Hours

Dillon Gage Metals of Dallas, Texas extended trading hours for precious metals to 24 hours a day, five days a week, matching the Globex market hours business model. Registered clients will now have continuous access to the physical metals electronic trading platform at any given time the world financial markets are open. Trading options for registered Dillon Gage Metals clients begin on Sunday at 5 p.m. CDT and continue unabated through Friday at 4:15 p.m. CDT.

Encourage Customer Feedback

Nearly half of U.S. shoppers said they experienced a problem with a retailer, but 81% of those consumers kept their frustration to themselves, according to a study of dysfunctional retail touchpoints conducted by LoyaltyOne and Verde Group with Dr. Deborah Small of the Wharton School of the University of Pennsylvania. Common issues that flustered shoppers the most were long check-out wait times, retail staff who said “not my department” or any variations of that phrase, and lack of flexibility for "shipping dates."

Roughly one-third of those frustrated shoppers said they were unlikely to recommend a retailer publically. But the studys authors noted that shoppers who did express their dissatisfaction with a retailer and resolved the issue were 84% less likely to decrease spending in the future. Given the data, retailers must be proactive in identifying and resolving all potentially damaging customer experience issues before they occur, the authors noted. “In a very robust platform, these partners have taken the psychology of shopping and married it with the economics of shopping. Insights around the impact of the silent customer could prove to be valuable tools for retailers looking to minimize the risk of attrition created from weak customer experiences,” said Small.

Dominion Launches B2B Platform

Dominion Diamond Corporation launched its online trading platform for CanadaMark hallmarked diamonds during the JCK Vegas show. The business-to-business (B2B) portal was developed to accommodate a sizable number of requests for the stones at the retail level. Dominion acquired the CanadaMark as part of its 2013 acquisition of the Ekati mine from BHP Billiton, which initially developed the hallmark. Dominion re-launched the hallmark at last year’s JCK Vegas show, providing a guarantee that the diamonds were responsibly mined in Canada, either at Ekati or the Diavik mine. Dominion currently has 15 diamond manufacturers that are in the CanadaMark program and approximately 2,500 diamonds per day being certified with the hallmark. Polished diamonds above 0.30 carats are commercially best suited for the CanadaMark, while quality standards are set to include I2 and better clarities and M and better colors.

Ensure Authenticity and Transparency

Two separate panel discussions on the opening day of JCK Vegas were designed to help retailers expand their view of natural colored diamonds and branded diamonds; the first of which was hosted by the Natural Colored Diamond Association (NCDIA) and the second by De Beers.

NCDIA stated that natural colored diamonds are the highest growth segment for the jewelry business and retailers can achieve "unprecedented profit" from colored stones in its "How to Capitalize on the Growing Consumer Desire for Natural Color Diamonds" seminar. In summary of the key points from the panel discussion: retailers should accept that consumers desire uniqueness in jewelry but most cannot afford natural colored stones; retailers must educated customers on the differences between color ranges and price points and "have the goods" in the store. On the supply side, dealing in colored stones is highly competitive and it is most important that retailers build relationships with reputable suppliers, dealers and designers to ensure authenticity and supplies.

De Beers executives discussed opportunities and challenges facing the diamond sector, but as far as U.S. retail -- demand for diamond jewelry will continue to expand, driven in large part by affluent households, a number of which is expected to expand 10 million by 2019. Furthermore, De Beers projects that tourism from China will flourish in the U.S., growing by 20% at a compound annual growth rate by 2019, presenting an opportunity for diamond retailers given that Chinese tourists typically spend on luxury goods overseas.

De Beers said that retailers must instill consumer confidence in diamonds, ensure that diamonds are authentic and that they are selling value along with a diamond jewelry purchase. Brand store offerings to create new choices for consumers who are willing to pay more for a differentiated product. Show, dont just tell, consumers how diamonds are an ethical product and take a long-term view on how to grow the business.

ASA Issues New Appraisal Handbook

The gems and jewelry discipline of the American Society of Appraisers (ASA) issued the eighth edition of the "Jewelry Appraisal Handbook" in both PDF and hard copy versions. ASA stated that the book brings together essential information drawn from authoritative sources and it helps gemologists and jewelry store personnel identify, categorize and describe gems and jewelry. The handbook features field-tested tables for estimating weights of the various shapes of mounted melee diamonds by their measurements and the latest information on the Gemological Institute of Americas diamond cut grading system and plotting symbols.

Hearts On Fire Partners With Webster

Hearts On Fire is collaborating with jeweler Stephen Webster on a high-end, all diamond jewelry collection for the brand, which will be sold in select Hearts On Fire and Stephen Webster retail locations in North America, Europe and Greater China. Webster will also design a bridal collection as part of the Hearts On Fire collaboration. The first collection is expected to debut in the first quarter of 2016. Webster said that over the past 25 years hes strived to bring creative jewelry to a wider audience. "By collaborating with Hearts On Fire we will be able to build on our achievements and be better equipped to expand globally," he said.

JTV Invites Opportunity

Jewelry Television (JTV) created the "JTV Invites You" initiative to encourage amateur and professional jewelry designers, as well as jewelry manufacturers, to present collections to JTV merchants for retail consideration. Interested parties must complete a brief online application (at jtv.com/connect) and submit images of jewelry designs or sketches, which executives from JTVs merchandising team will review and issue invitations. Those who receive an invitation will have an opportunity to visit JTV headquarters in Knoxville, Tennessee for a one-on-one meeting with JTVs buyers. The network will then choose designers or companies whose products make a good fit for JTV audiences.

Thomas Sabo Opens in Singapore

Thomas Sabo opened a jewelry and watch boutique at VivoCity in Singapore on May 29, hosted by supermodel Georgia May Jagger and attended by VIPs Rebecca Tan, Jaymee Ong, George Young and Alan Wong. The new 565-square-foot store is located in the newly opened B1 retail area of VivoCity, which is Singapores largest shopping mall, and highlights Thomas Sabo jewelry and accessories. The company is headquartered in Lauf an der Pegnitz, Germany and operates almost 250 shops across all five continents.

Black, Starr & Frost to Open in Phoenix

Black, Starr & Frost, which is based in Newport Beach, California and intends to expand its reach into Arizona, anticipates constructing a new store in Phoenix at the Biltmore Plaza Shopping Center to open in the fall of 2015. Alfredo J. Molina, the president and chairman of both Molina Fine Jewelers and Black, Starr & Frost, planned the new store within the existing Molina Fine Jewelers building. The southern portion of the structure will be renovated to accommodate a new two-story, 2,000-square-foot Black, Starr & Frost.

JCK Awards J.R. Dunn

J.R. Dunn Jewelers received the 2015 LUXURY Retailer of the Year Award during the JCK Vegas show, based upon the jewelers dedication and innovation in enhancing the jewelry shopping experience. J.R. Dunn Jewelers is a family-run enterprise in South Florida that has been in business for more than 46 years. With an 8,000-square-foot showroom, it serves clients in Miami, Fort Lauderdale, Deerfield Beach, Boca Raton, Delray Beach, Boynton Beach and West Palm Beach and it operates an ecommerce channel at JRDunn.com.

MINING 	  

ALROSAs Profit Jumps

ALROSA’s revenue rose 31% year on year to $1.36 billion (RUB 74.58 billion) with diamond sales up 34% to $1.26 billion during the first quarter that ended on March 31. Profit tripled to $405 million. The ruble lost approximately 40% in value between April 1, 2014 and the end of the first quarter. In addition to the effect of the weaker ruble, growth was driven by a better product mix. Sales volume decreased, while the company reported that the average price achieved rose 4% year on year to $161 per carat. However, the company noted that market prices fell by about 5% from the preceding fourth quarter.

Trans Hexs Profit Soars

The Trans Hex Group reported that revenue grew 35% year on year to $76.1 million (ZAR 939.7 million) in the fiscal year that ended on March 31. Revenue was given a boost from higher rough sales, the disposal of several assets and a weaker rand. The companys profit grew almost nine-fold to $15.4 million. Trans Hex’s group production rose 26% to 156,171 carats, driven by higher recovered ore grades at its mines in Angola and South Africa. Production at the Somiluana mine in Angola, in which Trans Hex’s owns a 33% stake, increased 31% to 94,483 carats. Similarly, production grew 18% at the group’s South African alluvial mines to 61,688 carats.

Okavangos Rough Sales Decline

Okavango Diamond Company reported that rough diamond sales by volume fell 20% year on year to 1.02 million carats ($193 million by value) during the first five months of 2015. Okavango is a Botswana-owned company that currently receives 14% of rough diamonds produced by Debswana, the diamond mining joint venture between De Beers and the government.

Rockwell Widens Loss

Rockwell Diamonds reported that revenue rose 19% year on year to $13.6 million (CAD 17.1 million) during the fourth quarter that ended on February 28. Rough diamond sales during the quarter grew 16% to $12.4 million, driven by the sale of two diamonds that were larger than 120 carats each. As a result, the average price increased 22% to $1,544 per carat during the period. Revenue from the company’s diamond polishing beneficiation activities jumped 60% during the quarter to $1.2 million. The companys loss rose 6% to $6.5 million. By volume, rough sales dropped 12% to 8,467 carats during the quarter, caused primarily by declining ore grades at the Saxendrift mine and a below mine-plan ore grade for recoveries at the Niewejaarskraal mine.

ECONWATCH 	  

Diamond Industry Stock Report

U.S. and Europes shares were little changed except for Charles & Colvard (+10%), Movado (+5%) and Richemont (-4%). Far East and Indias shares were all lower, led by Luk Fook (-7%) in Hong Kong and Ren. Jewellery (-12%) in Mumbai. Mining shares were mostly lower with ALROSA (-10%) and Stellar (-10%) leading declines. View the detailed industry stock report.

June 4 May 28 Chng.
$1 = Euro 0.889 0.914 -0.025
$1 = Rupee 63.98 63.78 0.2
$1 = Israel Shekel 3.83 3.87 -0.04
$1 = Rand 12.39 12.14 0.25
$1 = Canadian Dollar 1.25 1.24 0.01

Precious Metals
Gold $1,176.00 $1,188.20 -$12.20
Platinum $1,098.00 $1,115.00 -$17.00

Stock Indexes Chng.
BSE 26,813.42 27,506.71 -693.29 -2.5%
Dow Jones 17,907.58 18,126.12 -218.54 -1.2%
FTSE 6,859.24 7,040.92 -181.68 -2.6%
Hang Seng 27,551.89 27,454.31 97.58 0.4%
S&P 500 2,095.96 2,120.79 -24.83 -1.2%
Yahoo! Jewelry 1,290.15 1,316.99 -26.84 -2.0%

Rapaport Weekly Market Comment June 12, 2015

Diamond trading activity slow. Polished prices coming under pressure due to continued sluggish demand. Some improvement in caraters with good U.S. demand. Better-quality 30s-40s weak as Chinese demand remains soft amid concerns that some Chinese firms are not making payments. RAPI May 0.30 ct. -1%, 1ct. +0.3%. Big stone supply and prices tight, demand spotty, sales weak. De Beers raises some prices and improves assortments. Chow Tai Fook’s FY revenue -17% to $8.3B, profit -26% to $714M. Dominion Diamond Corp 1Q sales +7% to $187.7M, profit -48% to $7.7M.

RapNet Data: June 11

Diamonds 1,418,352
Value $8,502,694,139
Carats 1,359,708
Average Discount -25.46%

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The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS

June 16-25 Tue-Thu

Rapaport Melee Auction 

New York & Hong Kong

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June 17-24 Wed-Wed

Rapaport Single Stone Auction 

New York & Israel

Call: +1-212-354-9100

June 25-28 Thu-Sun
Hong Kong Jewellery & Gem Fair

Hong Kong Convention & Exhibition Centre

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QUOTE OF THE WEEK
How is society going to cope with structural unemployment and the envy, hatred and social warfare? We are destroying the middle classes at this stage and it will affect [high-end retailer. It’s unfair. So that’s what keeps me awake at night. [The luxury goods industry] is in for a huge change in society. Get used to it. And be prepared.

Johann Rupert | Richemont

INDUSTRY 	  

Polished Prices Stabilize

Diamond markets were stable in May as reduced supply supported polished prices in select categories. Consistent U.S. demand is compensating for sluggish Far East markets. The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds rose 0.3% during May. RAPI for 0.30-carat diamonds fell 1% and RAPI for 0.50-carat diamonds declined by 1.1%. RAPI for 3-carat diamonds increased 0.4%.

Diamond manufacturers have maintained lower polished production as they hope to create shortages that would support diamond prices. There remains an oversupply of 0.30-carat to 0.40-carat diamonds, partially as a result of the 2014 backlog of goods graded at the Gemological Institute of America (GIA). Dealers are working with old inventory and there is a shortage of newly-produced fine-quality, triple-EX diamonds available in the market. Rough trading is subdued as manufacturers remain concerned about profitability, despite price reductions implemented at the De Beers May sight. This week’s June sight is expected to be larger than last month’s small sight but rough supply and demand remains restrained.

RETAIL & WHOLESALE 	  

U.S. Jewelry Store Sales Slip Again

U.S. specialty jewelry store sales fell 2.4% year on year to $2.221 billion in April, according to government calculations. The decline at specialty stores was more pronounced than the sector as a whole, whereas jewelry and watch sales across all channels in April fell only 1.5% to $5.427 billion. Specialty jewelry store sales in the first four months of 2015 have declined 4.7% year on year to $8.498 billion. Total jewelry and watch sales in the same period, meanwhile, fell 1.2% to $19.018 billion, subject to several revisions.

Advanced sales estimates for May at U.S. department stores continued to slide, falling 3.2% year on year to $13.574 billion. But weak consumer spending also permeated across the retail and food sector -- excluding motor vehicles and auto parts -- as sales were flat at $364.03 billion. Retail trade sales improved 2%. Nonstore retail sales rose 6% to $37.681 billion.

Chow Tai Fooks Profit Plummets

Chow Tai Fooks profit slumped 25.7% year on year to $714 million (HKD 5.536 billion) for the fiscal year that ended March 31. As reported earlier, company revenue fell 17% to $8.3 billion. However, gross profit margin as a percentage of sales rose to 29.7% compared with 27.3% one year earlier. The company attributed weaker sales to an "exceptionally high base effect" following consumers rush to buy gold in early 2014, along with weaker consumer sentiment this year in Hong Kong and Macau. Margins improved, however, this year as a result of growth in gem-set jewelry, which carry a higher margin.

Ecommerce revenue during the period rose 29.3% year on year due to strong social media and mobile platform engagement. Chow Tai Food partnered with WeChat to deploy a Bluetooth-based iBeacon for location-based marketing that resulted in "resounding success" in generating sales. Wedding jewelry remained a core part of the mass luxury segment, contributing 40% of sales value during the period compared with 30% in previous years.

Attendance Rises at LV Antique Jewelry Show

Attendance Rises for LV Antique Jewelry Show Organizers of the 19th annual Las Vegas Antique Jewelry & Watch Show, conducted May 28 to 31, reported that attendance at this years show rose 6%. The number of international attendees declined, however, an increase of from U.S. buyers drove attendance growth.

Doug Liebman of Douglas M. Liebman Estate Jeweler confirmed that the show was his "all-time best" and delivered "significant sales on important consigned diamonds." Gus Davis of Camilla Dietz Bergeron Ltd. added that the company recorded "extremely strong sales of important signed pieces." The next show for the group will be the New York Antique Jewelry & Watch Show from July 24 to 27 at the Metropolitan Pavilion in Manhattan. U.S. Antique Shows is a division of Emerald Expositions, which also operates the Couture and JA New York shows and JA Special Delivery.

Minimal Impact From Weaker Rupee

A weaker rupee hasnt caused widespread havoc in Indias gems and jewelry trade so far. In the past week, $1 bought between INR 63.8 to INR 64.2, up from INR 59.2 one year ago. Vipul Shah, the chairman of the Gem & Jewellery Export Promotion Council (GJEPC), confirmed a lack of "panic" as the Reserve Bank of Indias (RBI) governor, Raghuram Rajan, was "doing a good job in controlling the volatility. I am sure it shall stabilize soon.”

Dinesh Navadia, the president of the Surat Diamond Association (SDA), added that minor currency changes can be absorbed. "Only if it is a fluctuation where there is a difference of 5% to 6% in the rates, then probably it shall affect the industry as such.”

Joyus Raises $24M

Joyus, a direct response online video shopping platform, secured $24 million in new financing, led by Marker LLC and Steamboat Ventures, which is a capital firm affiliated with The Walt Disney Company. Current investors, Accel Partners, InterWest and Time Warner Investments, also participated in the round, according to the company. So far, Joyus has raised $44 million. The shopping channel will use the capital to invest in product, engineering and expanded video distribution.

In addition, Joyus appointed David Lazar as president and chief customer officer, Kathy Samuels as chief content officer, Jennifer Sharp as vice president of partnerships, Sandra Szahun as head of sales and branded content and Jonathan Hoeh as vice president of operations. While Joyus is a private firm and doesnt disclose sales figures, it did confirm that in 2014, Joyus drove 99 cents in direct commerce revenue per view (RPV), which the company stated was up to 20 times higher than comparable current pre-roll video CPMs.

Approximately 35% of Joyus revenue comes from mobile devices and Joyus mobile app users consume disproportionately more video than equivalent desktop and mobile web users. Joyus offers more than 500 brands that offer products such as jewelry and watches, beauty, fashion, health and lifestyle items.

ONeal Collection Expands to All Zales

Zales Jewelers expanded the Shaquille ONeal mens collection to all of its 700-plus Zales and Zales Outlet stores in the U.S. The proprietary collection features a range of jewelry including, bracelets, cross pendants and diamond earrings, in black ionic plating and stainless steel designs. ONeal said, "Todays men want to look stylish and sharp in all aspects of their wardrobe. My goal with the Zales collection is to bring men fashion-forward jewelry designs that are as affordable as they are sleek."

Galatea Adds to Interactive Offerings

Galatea Momento added two jewelry lines to its repertoire of interactive jewelry: the Momento Gem and Momento Diamond Collections. With Momento NFC technology inside every piece of jewelry, engagement rings can save and replay a proposal, and a gemstone ring holds precious memories that can be stored, saved and played back with the touch of the jewelry to an Android phone. The company stated that its Momento Pearl with NFC technology enjoyed tremendous success this year. Galateas owner, designer and creative director Chi Huynh said, "To create beautiful jewelry that uses technology to become even more meaningful is the ultimate goal of our company."

James Avery Opens in Baytown

Retailer James Avery will open a boutique this month in Baytown, Texas at Baytown Plaza, marking the 71st location for the family-run jeweler. The firms new store design provides customers the opportunity to experience the inspiration, meaning and craftsmanship of jewelry with in-store imagery and messaging. Jewelry designs originate from artisans in the James Avery design studio and are made in one of five workshops.

Overstock Bundles Bidz Inventory

Overstock.com Inc. created a single lot of more than 1 million pieces of jewelry from its liquidation of Bidz.com for $1.13 million -- essentially pricing each item at $1. The online retailer stated that the lot includes diamond-inlayed titanium rings, jeweled music boxes and watches. According to the retailer, each piece is still in its original packaging, ready to sell in a brick-and-mortar store or online. Overstock.com added that the average purchase price for each unique stock-keeping unit in the lot, as listed, is nearly $20. The company will cover the cost of U.S. shipping for the lower 48 states.

GENERAL 	  

IDE Appoints Panel of Arbitrators

The Israel Diamond Exchange (IDE) will appoint a special panel of arbitrators to hear cases regarding the sale of diamonds determined by the Gemological Institute of America (GIA) to have undergone undisclosed color treatment. Shmuel Schnitzer, IDEs president, explained that the bourse decided it would enable arbitration hearings to restore business confidence and given the lack of any significant updates in the GIAs investigation.

The GIA issued a laboratory alert on May 12 recalling 424 diamond grading reports for diamonds suspected of having undergone a temporary, undisclosed color treatment. The GIA voided those reports and offered to re-grade any of the stones in question free of charge. Subsequently, the IDE banned members from trading the stones using the old GIA reports. However, no clear decision was made as to possible restitution for diamond buyers who purchased the stones before GIA canceled the original grading reports.

AWDC, China Reinforce Cooperation

The Antwerp World Diamond Centre (AWDC) and the Diamond Administration of China (DAC) signed a memorandum of understanding that aims to reinforce cooperation between the two diamond centers. The agreement oversees the bilateral exchange of market information and trends, jointly supporting Belgium and Chinas diamond trade and investments as well as developing marketing initiatives to drive the sale of diamonds and diamond jewelry.

AWDC and DAC will specifically support HRD Antwerp’s activities in China. Ari Epstein, AWDCs CEO, said, “The aim of the agreement is to strengthen cooperation and exchange between the two diamond sectors and to promote the development of the diamond industries in both countries.”

Antwerp Election Results

The following industry members were elected to the boards of the Antwerpsche Diamantkring and the Beurs Voor Diamanthandel.
Antwerpsche Diamantkring Board Beurs Voor Diamanthandel Board
Freddy Inzlicht, president Marcel Pruwer, president
Michel Schonfeld, vice president David Gotlib, vice president
Executive Directors: Executive Directors:
Charles Cyto Jacky Korn
Shlomo Hoffman Raphael Rubin
Michael Vaughan Board Members
David Wahl Kalpesh Bakhai
Directors: Nicole Decombes
Praveen Dasot Victor Gabel
Michel Grun Rajender Gehani
Albert Haberkorn Ziv Knoll
Ramesh Patel Michel Nasielski
Dilip Thakker David Pienica
Jacky Weisz Bernard Weinberg
Alain Zlayet
Auditors:
Serge Landau
Eddy Vleeschdrager

MINING 	  

Dominions Profit Slumps

Dominion Diamond Corporation reported that its profit fell 48% year on year to $7.7 million in the first quarter that ended on April 30. The profit decline was attributed to much lower gross margins, which fell to 12.2% from 21.6%. Dominion attributed the lower gross margins to the lower value of diamond recoveries from Ekati and lower output from Diavik in the preceding quarter.

As reported earlier, revenue rose 7% to $187.7 million, driven by a much larger volume of sales, which grew 49% to 1.253 million carats. Dominion adjusted its full-year production forecast to 3 million carats from an originally anticipated production of 3.3 million carats. The adjustment primarily reflected more mining and processing ore from the Misery south pipe and less from Misery southwest pipe.

North Arrow Parcel Valued at $36 Per Carat

North Arrow Minerals Inc. confirmed that a parcel of 383.55 carats recovered from a bulk sample at the Qilalugaq diamond project returned a value of $36 per carat and a modeled range "possible low" of $43 per carat and a "possible high" of $92 per carat. The diamond valuation was conducted by WWW International Diamond Consultants.

Ken Armstrong, the president and CEO of North Arrow, explained that the valuation was challenged by the presence of two distinct diamond populations, including type Ib yellow diamonds. The occurrence of two populations was not known to exist at Q1-4 when the 2014 sample program was conceived. "Additional evaluation of the project will require the recovery of a larger diamond parcel including sufficient carats from each of the two populations to allow for a more confident assessment," he said. North Arrow has been working toward earning an 80% stake in the Qilalugaq diamond project from Stornoway Diamond Corporation by completing the bulk sample. Now that the requirement is fulfilled, North Arrow anticipates notifying Stornoway of its intent to fully vest.

Gemfields to Sell Matching Pair of Rubies

Gemfields will sell a pair of matching rough rubies weighing a total of 45 carats at its next auction to be held from June 16 to 21 in Singapore. The gemstones were found at Gemfields Montepuez mine in Mozambique. The Singapore auction will be dedicated to selling Gemfields recent production of higher-grade rough rubies. “It is extremely rare to find two matching rubies of this size, color and quality," said Ian Harebottle, Gemfields CEO, confirmed the rarity of the matching rubies and their "discovery underscores the importance of the Montepuez deposit as a source of some of the highest-quality rubies the world."

Diamond Fields Restarts Marine Operation

Diamond Fields International Ltd. restarted offshore operations on its Namibian diamond concessions through a joint venture with International Mining and Dredging South Africa (Pty.) Ltd., which is a subsidiary of International Mining and Dredging Holdings Ltd. and an associate company of Nutam Pty. Ltd. of Namibia. The diamond development program, which Namibia approved on June 3, targets mining concessions ML-138, ML-139 and ML-111 to ascertain the grade and size of marine diamond deposits, the available quality and diamond carat sizes, the nature of the overburden, the soils and the hard layer and the economic and technical considerations for undertaking mining activities.

Sybrand van der Spuy, Diamond Fields CEO, said, "These are exciting times for Diamond Fields. Getting back onto the water is a major milestone which the company has worked toward for years. We have targeted a number of resource areas, with special interest in the palaeo-channel systems, that we intend to work up in the coming months with the intent of mining should results warrant."

ECONWATCH 	  

Diamond Industry Stock Report

Declines outnumbered gains across the global industry, although the U.S. and Europe were largely unchanged from a week ago. Blue Nile (+3%) shot ahead in the U.S., Chow Tai Fook (-10%) led declines in the Far East, Rajesh Exports (+8%) led gains in India while Classic Diamond (-14%) declined the most. Firestone (+12%) and Gemfields (+8%) topped mining gains and Dominion (-6%) led declines. View the detailed industry stock report.

June 11 June 4 Chng.
$1 = Euro 0.887 0.889 -0.002
$1 = Rupee 63.99 63.98 0.0
$1 = Israel Shekel 3.82 3.83 -0.01
$1 = Rand 12.34 12.39 -0.05
$1 = Canadian Dollar 1.23 1.25 -0.02

Precious Metals
Gold $1,181.30 $1,176.00 $5.30
Platinum $1,106.00 $1,098.00 $8.00

Stock Indexes Chng.
BSE 26,370.98 26,813.42 -442.44 -1.7%
Dow Jones 18,039.37 17,907.58 131.79 0.7%
FTSE 6,846.74 6,859.24 -12.50 -0.2%
Hang Seng 26,907.85 27,551.89 -644.04 -2.3%
S&P 500 2,108.86 2,095.96 12.90 0.6%
Yahoo! Jewelry 1,286.72 1,290.15 -3.43 -0.3%

Rapaport Weekly Market Comment June 19, 2015

Diamond markets quiet with select demand for fine-quality VS-SI. Slow polished sales resulting in significant excess inventory positions. Post Vegas show U.S. demand not as strong as previous years. Inexpensive small goods and 30s-40s weak. Trading expected to remain soft as U.S. vacation period approaches. Low expectations for June HK show. Rough trading stable after $550M June sight. De Beers 1H rough sales estimated -28% to $2.5B. India’s May polished exports -9% to $1.7B, rough imports -14% to $1.3B. Belgium’s May polished exports -16% to $1.1B, rough imports -7% to $1.1B. Tel Aviv Presidents Meeting highlights challenging diamond market.

RapNet Data: June 18

Diamonds 1,399,890
Value $8,496,988,907
Carats 1,346,467
Average Discount -25.42%

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The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

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RAPAPORT ANNOUNCEMENTS

June 16-25 Tue-Thu

Rapaport Melee Auction 

New York & Hong Kong

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June 17-24 Wed-Wed

Rapaport Single Stone Auction 

New York & Israel

Call: +1-212-354-9100

June 25-28 Thu-Sun

Hong Kong Jewellery & Gem Fair 

Hong Kong Convention & Exhibition Centre

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QUOTE OF THE WEEK
Millennials are sensible in their overall spending so that they can splurge on a few items that really express who they are or what they love (such as experiences). Don’t expect them to pay full price for that jewelry, watch, handbag, designer suit or other must-have piece that celebrities have exposed them to. They’ve been conditioned to never pay full price for anything — especially luxury items.

Jason Dorsey | Center for Generational Kinetic

INDUSTRY 	  

De Beers June Sight at $550M

The De Beers June sight closed with an estimated value of $550 million. Sightholder comments confirmed that diamond prices were stable, with a slight increase in the box price of larger goods and improved assortment quality on those same boxes. Still, sightholder sentiment remained negative as manufacturers contend polishing rough diamonds at current prices is unprofitable.

De Beers boxes were trading on the secondary market at small premiums and on credit terms that averaged between 60 days and 90 days. While many boxes are still being traded below cost, the prevailing prices and credit terms constitute a small improvement in the market compared with recent months. One buyer surmised that the market cant digest the overhang in polished goods, which should be addressed by reducing the volume of rough supplies and prices. Meanwhile, De Beers firmly believes manufacturing activity and retail demand for diamonds will pick up in the second half of the year.

Presidents Meeting Addresses Trade Issues

The presidents meeting of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA) concluded in Tel Aviv. De Beers CEO, Philippe Mellier, and ALROSAs CEO, Andrey Zharkov, each presented corporate perspectives on market conditions. In addition, attendees hosted Israels Prime Minister Benjamin Netanyahu for a briefing on the state of the diamond trade worldwide.

Ernie Blom, WFDBs president, confirmed that the meeting empowered networking, created new relationships and, through intensive discussions, addressed the lack of manufacturing profitability, reduced availability of financing and the impact that synthetics and overgrading have on the market. "We have put processes in motion and a number of committees will look at these issues in great depth and report back with proposals for how to deal with them," he said.

Israel Diamond Exchanges president, Shmuel Schnitzer, said that industry leaders vowed to work with diamond producers in order to address ways to improve manufacturing profitability. He also pointed out that banks are wrong to refuse working with the industry because "we have a lot more transparency in the trade now."

RETAIL & WHOLESALE 	  

U.S. Jewelry CPI -4%

The U.S. consumer price index (CPI) for jewelry dropped 3.6% year on year to 161.77 points in May, which was the lowest reading posted since December. Comparatively, the CPI for watches rose 1.8% to 122.51 points, reflecting a new high for the month of May. Meanwhile, prices for diamonds and precious metals experienced broad declines, which contributed to the overall CPI decline. The RapNet Diamond Index (RAPI), the global benchmark for polished prices, dropped 13.6% year on year for 1.00-carat certified diamonds, while RAPI for 0.30-carat plunged 22.2%, RAPI for 0.50-carat contracted 12% and RAPI for 3.00-carat diamonds declined 14.3%. Gold prices in May averaged about 8% lower from one year ago. Platinum, on the other hand, remained under tremendous pressure and fell 21%, while silver declined 18% compared with May 2014.

Tianchengs Jewelry Sale Achieves $38M

Tiancheng Internationals jewelry and jadeite spring sale in Hong Kong garnered nearly $38 million (HKD 300 million) and was 74% sold by lot. The top lot of the auction, a jadeite and diamond demi-parure, sold for $3.78 million against a presale estimate of between $3.2 million to $3.85 million. The set was comprised of eight intense emerald green jadeite cabochons, accentuated with diamonds of 73.55 total carat weight, highlighting what the auction house defined as a "perfect marriage" of Chinese and western culture.

Another top lot was titled “Eternity of Love,” a 25.72-carat, D, VS2 heart-shaped diamond ring, which sold at the high end of estimate for $3.18 million. “The Flare of Crimson,” a 52.22-carat, natural and unheated Mozambican “Pigeon’s Blood” ruby and diamond necklace achieved $3.18 million in the sale. In addition, “The Golden Splendor,” a 59.93-carat fancy deep orange-brown diamond ring sold for $2.3 million against a presale estimate of between $1.92 million and $2.44 million.
Christies NY Jewels Sale Achieves $28M

Christies New York sale of important jewels achieved $27,584,875 with the top lot, a 21.71-carat, cushion-cut sapphire, flanked by a trapeze-shaped diamond on either side, to the square-cut diamond hoop and mounted in platinum, selling for $4.197 million, more than twice its high presale estimate. An 80.73-carat, K, VS2, cushion-cut diamond ring sold for within estimate at $3.805 million and an art deco diamond pendant, suspending a detachable 16.24-carat, D, internally flawless pear-shaped diamond and set in platinum sold for just above estimate at $2.225 million. Rounding out lots that achieved prices above $1 million, a 9.97-carat, cushion-cut sapphire and diamond ring sold for within estimate at $1.145 million.

Eastern Gold Jade to Expand Services

Eastern Gold Jade Co. Ltd. anticipates raising $1.3 billion (CNY 8 billion) in a private placement with no more than 10 undisclosed investors by issuing up to 310 million shares. According to the companys filing on the Shanghai Stock Exchange, it intends to develop financial service projects for the jewelry industry, create a jewelry financial platform for small and medium jewelry merchants, consumers and investors and provide identification, assessment, pawn service, small loans and peer-to-peer (P2P) online lending and other ancillary financial services.

Gemfields Partners With Georg Jensen

Gemfields partnered with jewelry design house Georg Jensen to create a limited-edition collection that features rubies from Mozambique and emeralds from Zambia. The mining company, which also owns Fabergé, was attracted to Georg Jensen, citing the designers modern and minimalist designs. Vivianna Torun, a designer of some of Georg Jensens pieces, provided inspiration for the first Gemfields collaboration. The collection will be available exclusively at the Georg Jensen flagship boutiques.

Standouts include the Runa Necklaces, which highlight a cascade of generously-sized emerald gemstones set in yellow gold, and a reincarnation of Toruns Dew Drop necklace and matching earrings reimagined in rose gold with rubies. From its Dune collection, Georg Jensen is offering a sculpted bangle and ring crafted in rose gold and accented with rubies.

The First Le Vian by Jared Opens

Jared The Galleria Of Jewelry in Garden City, New York opened a Le Vian by Jared® store at the Roosevelt Field Mall. The new store offers Le Vians jewelry and timepieces, handbags and scarves with in-store boutiques devoted to each category. Future locations for this concept are planned in Knoxville, Tennessee, Dulles and Fairfax, Virginia and Charlotte, North Carolina. Ann-Marie Patton, a divisional vice president of Jared, which is owned by Signet, said the Le Vian by Jared retail concept is a celebration of everything that makes the Le Vian brand unique and desired, while also offering the superior service guests have come to expect from Jared.

Bruni Launches Giardini Segreti

Jewelry designer Pasquale Bruni launched the Giardini Segreti (Secret Garden) collection on June 18 with a live streaming of the event across his social media channels. The new collection was inspired by the secret gardens of Milan. Diamonds and gems, with a cut developed especially by the House, feature prominently, accented with pave. The rings dress hands in an unusual, intriguing and feminine way, so that every woman can create her own garden, forming new secret shapes with two or more rings.

Affluent Spending Eases Into a Luxury Drought

U.S. affluent consumer confidence eroded further in the second quarter of 2015, according to the Luxury Consumption Index (LCI), a propriety survey conducted by Unity Marketing. The five key measures of how affluents feel about economic health of the country and their personal financial situation all fell, lowering the LCI to just 9 points above the all-time low in the fourth quarter of 2008.

Pam Danziger, the president of Unity Marketing, explained, however, that the consumer climate today is very different from 2008. Affluents are in a "luxury drought" and have adjusted to a level of "lower expectations." While wealthy consumers may yearn to spend freely, they are finding new pleasures in small, everyday activities -- sidelining luxury goods shopping to a periodic occasion. What this means for jewelers is they, too, must adjust to a new normal. Danziger reminded luxury marketers that simply going after the very rich wont spur growth because the top 2% to 3% of wealthy households only account for 10% of all spending, whereas 40% of total consumer expenditures are made by the HENRYs -- defined by Unity Marketing as high-earners-not-rich-yet. Those consumers earn between $100,000 and $250,000 annually and represent the top 18% of all U.S. households.

These shifts in consumer habits, coupled with demographics (the boomers are finished driving luxury spending and there are not enough wealthy genXers to take up slack), require marketers to differentiate product, add value to purchases and engage precious customers by meeting their expectations.

MINING 	  

Report Targets CARs Conflict-Diamonds

Even though the Central African Republic (CAR) has been suspended from the Kimberley Process Certification Scheme (KPCS) since May 2013, rough diamonds are the largest source of export revenue for the country, according to the Enough Project, which valued the diamond trade at $39 million in 2014 and already $12.9 million between January and April of this year. In a report, "Warlord Business" by Kasper Agger, the Enough Project detailed how the ex-Séléka and the Anti-Balaka profit from a shadow economy where armed factions, warlords and illicit networks generate millions of dollars through robbery, extortion and the illegal trading of gold and diamonds.

The Enough Project called for a number of steps prior to the KPCS reauthorizing rough diamond exports. All armed groups must be removed from mining sites and control of diamond trading markets should be handed over to U.N. peacekeepers or local gendarmes. Secondly, establish "a credible" tracing and due diligence system for diamonds that are bought and sold by local diamond companies. The KPCS should facilitate the U.S. and E.U. helping CAR establish baseline production statistics for the conflict-free diamond mines and it should establish a multi-stakeholder team, based in CAR, to monitor whether conflict diamonds are entering the conflict-free supply. In addition, diamond companies buying from CAR, or neighboring countries, should commit to conducting strict due diligence on their rough purchases, while local authorities must secure CARs border crossings to counteract parallel taxation and extortion on those who trade diamonds, the group concluded.

Petra Warns of Lower Revenue

Petra Diamonds Ltd. reiterated its production target of 3.2 million carats for the fiscal year that ends on June 30 and it remains on target to achieve 5 million carats by 2019, according to a market update that was filed on the London Stock Exchange. However, due to the lower incidence of high-quality rough diamond production and with a higher volume of smaller diamonds being recovered, Petra anticipates reporting revenue of approximately $430 million for the fiscal year, which is down from $472 million one year earlier. The mining company defined the year as "a transitional period" due to late stage underground production at Finsch and Cullinan tapping mature and diluted resources. Petra did state, however, that reliance on production from heavily diluted ore will become less of an issue during the course of the current fiscal year as it increases production from less diluted areas and due to new mining areas providing access to undiluted ore and reduced waste development.

Stornoways Loss Widens Slightly

Stornoway Diamond Corporation closed its fourth quarter on April 30 with cash, cash equivalents and short-term investments of $363.6 million, compared with $27.4 million one year earlier. Current cash resources are sufficient to cover planned mine development expenses, financing and corporate costs during calendar 2015 at the Renard diamond project. The net loss for the fourth quarter totaled $8.5 million, up from a loss of $7.9 million one year earlier. Renards construction progress stood at 22.4% completed on April 30, based on man-hour estimates, compared to a planned 21.7%, with a key construction milestone being achieved -- the principal concrete pour for the foundations of the projects process plant, which was achieved three weeks ahead of schedule. Stornoway stated that construction of its 2.2 million tonne per year processing plant represents the projects critical path activity. The plant building is scheduled to be completed and heated by the fourth quarter of 2015, allowing the installation of the temperature-sensitive crushing and recovery circuits through the first half of calendar 2016.

Mustang Recovers Gems on the Save

Mustang Resources Ltd. recovered 16 gem-quality rough diamonds from a pit sampling program at its Save River diamond project in Mozambique, downstream from Zimbabwes Marange diamond fields. The program, which began on March 23, led the exploration company to believe that diamonds may have, over time, traveled from neighboring Zimbabwe via the Save and Runde rivers. Mustang Resources sampled five locations that were close to the production plant between March and June. Approximately 10 carats of quality diamonds were recovered from top gravels. The company intends to scale-up operations and its equipment to explore deeper and to expose bedrock, which would led to a systematic drilling and pitting program.

Shore Gold Raises $2M

Shore Gold Inc. raised $2 million at the close of its private placement of 10 million units at 20 cents each. Each unit consisted of one common share and one common share purchase warrant, whereas each warrant entitles the holder to purchase one common share at 25 cents for a period of 18 months from the date of issuance. Shore Gold completed core and large-diameter drilling programs on the Orion South kimberlite ahead of schedule. The core drilling team intersected 1,208 meters of Early Joli Fou (EJF) and Pense kimberlite, which Shore Gold said confirmed significant new intersections of kimberlite on the western flank and southern part of Orion South. The core will be logged by Shores geologists and the results will be added to the projects existing geological model, expanding it accordingly.

STATS 	  

India

May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,742 -9% $9,218 7%
Polished imports $196 -54% $1,717 -37%
Net exports $1,547 3% $7,501 26%

Rough imports $1,323 -14% $6,119 -21%
Rough exports $118 -17% $581 -13%
Net imports $1,205 -14% $5,538 -21%

Net diamond account $342 $1,963 83

Belgium

May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,061 -16% $5,910 -5%
Polished imports $864 -15% $5,740 -3%
Net exports $197 -19% $170 -44%

Rough imports $1,100 -7% $5,290 -19%
Rough exports $1,060 -18% $5,250 -23%
Net imports $40 $40

Net diamond account $157 -55% $130

ECONWATCH 	  

Diamond Industry Stock Report

U.S. and Far East shares were all higher except Birks (-7%), JC Penney (-1%) and ValueMax (-3%). Europes industry shares were down across the board. Indian shares mixed as Rajesh Exports (+8%) led gains and Goenka (-6%) headed declines. Mining shares mainly lower with Dominion (-14%) taking the biggest hit, followed by Petra (-8%) and Gem Diamonds (-7%). View the detailed industry stock report.

June 18 June 11 Chng.
$1 = Euro 0.879 0.887 -0.008
$1 = Rupee 63.62 63.99 -0.4
$1 = Israel Shekel 3.82 3.82 0.00
$1 = Rand 12.25 12.34 -0.09
$1 = Canadian Dollar 1.22 1.23 -0.01

Precious Metals
Gold $1,201.90 $1,181.30 $20.60
Platinum $1,081.00 $1,106.00 -$25.00

Stock Indexes Chng.
BSE 27,115.83 26,370.98 744.85 2.8%
Dow Jones 18,115.84 18,039.37 76.47 0.4%
FTSE 6,707.88 6,846.74 -138.86 -2.0%
Hang Seng 26,694.66 26,907.85 -213.19 -0.8%
S&P 500 2,121.23 2,108.86 12.37 0.6%
Yahoo! Jewelry 1,265.49 1,286.72 -21.23 -1.6%

Rapaport Weekly Market Comment June 26, 2015

Markets slow with low expectations for June Hong Kong show. Bargain hunters making low offers for popular VS-SI larger goods but suppliers holding back due to shortages and high replacement costs. Selective buyers filling orders forced to pay good prices, flexible inventory buyers getting very good deals. 30s and 40s weak and under pressure as China underperforms. Caraters showing life with improving demand. Indian liquidity tight and getting tighter with reports of approximately $100M Godhani Gems insolvency and additional smaller financial failures. U.S. May jewelry sales +0.5% to $6.3B, watch sales -0.7% to $831M. Luk Fook FY revenue -17% to $2.1B, net profit -13% to $209M.

RapNet Data: June 25

Diamonds 1,390,737
Value $8,508,655,313
Carats 1,354,585
Average Discount -26.04%

www.rapnet.com

The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

Get Current Price List | Subscribe to Rapaport | Join RapNet

RAPAPORT ANNOUNCEMENTS
June 25-28 Thu-Sun

Hong Kong Jewellery & Gem Fair 

Hong Kong Convention & Exhibition Centre

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July 15-22 Wed-Wed

Rapaport Single Stone Auction 

New York & Israel

Call: +1-212-354-9100
July 15-22 Wed-Wed

Rapaport Melee Auction 

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QUOTE OF THE WEEK
Due to the subjective nature of gem grading, it is widely accepted that a difference of up to one grade in color and clarity should be tolerated. This has already been established as the industry norm and we are reiterating the importance that our members should adhere to that norm to ensure continued consumer confidence in diamonds.

Ernie Blom | WFDB

INDUSTRY 	  

Video: Industry Insights From Rapaport and Lussier

The annual Rapaport "State of the Diamond Industry" presentation, hosted by the chairman of the Rapaport Group, Martin Rapaport, at the JCK Vegas show provided strategic insights that attendees need to understand, the outlook for diamond demand and supply, as well as a forecast of prices going into the Christmas season. In addition, a special presentation by Forevermarks CEO, Stephen Lussier, focused on “The Diamond Dream,” with insight and a thorough analysis of why consumers buy diamonds and how retailers can sell more diamonds by participating in the dream. Lussier also presented his views of what the diamond trade can and should do to increase consumer desire for diamonds. Watch Now.

KP Sets to End Vice Chair Dispute

At the Kimberley Process (KP) plenary this week in Angola, an eight-month long impasse for vice chair between Australia and Dubai continued and it was expected that Australia would deliver a message before the close of the meeting to "break the dispute," according to chairman Bernardo Campos. He stressed the need for continued consensus in supporting a single candidate for the vice chair role.

Radio France Internationale reported that the Central African Republic (CAR) requested a partial lifting of the diamond embargo so that companies in the western half of the nation may resume rough trading. CARs minister of mines, Joseph Agbo, told delegates that the western half of the nation met KP criteria for exporting rough. Stability had returned and the state has gained full control away from rebels. "We identified traditional miners, workers who are registered and who have updated their licenses and have their cards," he said.

RETAIL & WHOLESALE 	  

U.S. Jewelry, Watch Sales Flat

U.S. jewelry and watch sales across all channels were flat in May, up just 0.4% year on year, at $7.1 billion as estimated from preliminary government figures. According to Rapaport News calculations, jewelry sales rose a touch, up 0.5%, to $6.3 billion, while sales of watches fell 0.7% to $831 million during the month. Even though estimates were largely unchanged from May 2014, the very slight improvement broke a seven-month streak of sales declines for the sector.

Jewelry and watch sales for the first five months of the year have decline 0.6% year on year to $28.7 billion, according to Rapaport News estimates. Jewelry sales have fallen 0.5% to $25.4 billion, but watch sales have weighed more on the sector, contracting 1.9% to $3.4 billion. Meanwhile, sales just from U.S. specialty jewelry stores for the first four months of the year have registered a more severe decline, falling 4.7% year on year to $8.5 billion. Totals for the month of May are scheduled for release on July 14.

Advanced sales estimates for May at U.S. department stores continued to slide, falling 3.2% year on year to $13.6 billion. But weak consumer spending also permeated across the retail and food sector -- excluding motor vehicles and auto parts -- as sales were flat at $364.03 billion. Retail trade sales improved 2%. Nonstore retail sales rose 6% to $37.681 billion.

Luk Fooks Profit -13%

Luk Fooks revenue declined 17% year on year to $2.05 billion (HKD 15.92 billion) during the fiscal year that ended on March 31. Group profit fell 13% to $209 million as an economic slowdown in China, currency depreciation and relaxed visa requirements for Chinese tourists traveling to other luxury shopping destinations weighed on the retailer.

Luk Fooks revenue from Hong Kong, Macau and overseas slid 20% to $1.54 billion, while sales in Mainland China dropped 5% to $516 million. However, wholesale revenue in Mainland China increased 12% to $238.8 million. Luk Fook opened 111 stores (net) in Mainland China during the year, three shops in Hong Kong and its first store in South Korea. As a result, the group now has a sales network of 1,383 stores across Mainland China, Hong Kong, Macau, Singapore, South Korea, the U.S., Canada and Australia.

Indias Industry Outlook Stable

India Ratings & Research, a Fitch Group Company, maintained a "stable outlook" for the countrys gems and jewelry exporters and retailers for the fiscal year that ends in April 2016. But the group noted that the outlook overall is brighter for Indias retailers. Revenue growth for the sectors exporters is expected to remain muted given mixed global demand for jewelry and gems. India Ratings anticipates an average rate of growth of between 3% and 5%, while the average earnings before interest, taxes and amortization (EBITDA) margins could increase by 100 to 200 basis points as processing margins improve -- due to a "moderation" in rough diamond prices.

Across Indias jewelry retail industry, India Ratings anticipates revenue growth of between 10% and 12% as consumers increase spending and favor shopping at organized retailers. EBITDA margins are likely to improve 100 to 300 basis points on average, given the removal of the 80:20 gold scheme and the reinstatement of gold lease scheme, which lowers the price risk on inventory. India Ratings expects credit availability to remain constrained as banks have become selective in lending due to loan defaults and their own industrys restructuring.

London Bourse Secures Warehousing

The London Diamond Bourse (LDB) established a customs-approved warehouse facility for its members, in partnership with Malca-Amit U.K. Ltd. The facility enables customers to suspend the payment of customs duties at the point of entry, giving bourse members the flexibility to store goods for approval, to bring goods into free circulation (once duty and valued-added tax are paid) or to re-export goods to another destination. Victoria McKay, LDB’s chief operating officer, explained the new service will provide an economic boost to the diamond industry in the U.K. and begin a movement away from an approbation market.

Trade Groups Frame New Color Grade Policy

The World Federation of Diamond Bourses (WFDB), the International Diamond Manufacturers Association (IDMA) and CIBJO jointly adopted a new policy on color grading for polished diamonds. Industry standards and nomenclature are based on master color sets (D-Z scale) of the Gemological Institute of America (GIA) and the International Diamond Council, so the color grading of a diamond "more than one grade" from a broadly accepted industry benchmark is unacceptable.

In the event of a challenge to a grade, brought to the bourse (including through mediation or arbitration), the acceptable standard will be applied and, in addition, it will submit the diamond to a leading, respected laboratory or to three recognized expert gemologists or diamantaires who qualified to provide a report on any diamond in question. If an independent examination confirms that a breach occurred, all necessary measures will be taken, including possible disciplinary action. While local laws also prevail in all instances, the WFDB, CIBJO and IDMA are considering legal advice from different jurisdictions as to the integration of national, state and municipal laws in the policy.

UPS Capital Acquires Parcel Pro

UPS Capital, a subsidiary of UPS, acquired Parcel Pro, an independent logistics provider to the jewelry, wristwatch and collectibles industries. Ronald Chang, the president of UPS Capital, explained the acquisition enhanced its supply chain risk mitigation capabilities. "Many jewelry retailers have insurance policies that cover their inventory, but shipping losses are not always covered by these policies," he said.

UPS Capital and Parcel Pro together are able to insure shipping within the U.S. for up to $150,000 in value per package and internationally to selected countries for up to $100,000 per package. Parcel Pro’s proprietary technology platform provides online tracking and visibility, e-reporting, web access and shipping, including via smart phone applications and it has physical locations in New York, Los Angeles, San Francisco, Miami, Hong Kong, Tokyo and Singapore.

Gemfields Ruby Auction Earns $29M

Gemfields reported that it earned $29.3 million from the auction of 47,451 carats of higher-quality rough rubies in Singapore from June 16 to 21. The average price realized was $617 per carat, 10% lower than the December average price per carat. The untreated rubies offered this month were 66% sold by weight and demand "remains very healthy," according to Ian Harbottle, the CEO of Gemfields. Thailand-based Veerasak Gems purchased a pair of matching rough rubies that weighed a combined 45 carats, however, the selling price was not disclosed.

MINING 	  

ALROSA Lowers Debt

In the past week, ALROSA repaid Series 20–23 commercial bonds of $185 million (RUB 10 billion) that were placed on Moscow Exchange in June 2010. According to a company statement, the bonds were repaid through a liquidity source of cash that had accumulated earlier on bank deposits. As a result of the transaction, ALROSA reduced its loans and borrowings from $3.5 billion to $3.3 billion. In October, ALROSA intends to repay ruble bonds series BO-01 and BO-02 that were placed in October 2012, also totaling $185 million (RUB 10 billion). The payment will be possible through cash that is currently accumulating on bank deposits of more than $683 million (RUB 37 billion).

Namibia, De Beers Agree to New Terms

Namibia and De Beers reportedly negotiated new terms of its partnership, allowing for a greater amount of rough diamonds to be polished in the country. An official announcement was to be made at a later date. The Namibian newspaper reported that President Hage Geingob and the CEO of De Beers Group, Philippe Mellier, where "happy" with the new proposal that requires up to 30% of locally mined rough diamonds to be offered to local manufacturers.

Mellier confirmed there were dozens of years’ worth of diamond mining remaining for the nations seabed. Namibia’s Cabinet requested new terms, seeking to boost local diamond factory output and it requested an entire range of special-sized stones to be made available. Namibia and De Beers each hold a 50% stake in Namdeb and the standing agreement allows for 10% of rough diamonds to be supplied locally. Namdeb produced 1.8 million carats in 2014, while marine operations resulted in 1.2 million carats.

Rockwells Production, Sales Slide

Rockwell Diamonds production dropped 50% year on year to 4,614 carats in the first quarter that ended on May 31. Production declined for the companys contractor-run and owned diamond properties during the quarter. Diamond sales fell 23.7% to $6.69 million; however, the price of goods rose 9.1% to $1,432 per carat. During the period, Rockwell completed the acquisition of the Remhoogte/Holsloot project in the Middle Orange River region of South Africa.

James Campbell, the CEO, defined the quarter as "very challenging," given the closure of some operations; however, the focus remains on Remhoogte/Holsloot and advancing Lanyonvale and Wouterspan development projects with the objective of replacing Saxendrifts production as it reaches the end of its economic life. The company is finalizing a plan to raise equity funding to repay a bridge loan provided by Diacore and its chairman, Mark Bristow. With new operations in place "we have significantly derisked the financing aspect of the transaction. We believe that these new projects, together with our exciting development projects, present potential investors with an attractive entry point," Campbell said.

Paragon Seeks to Hasten Mothae Deal

Paragon Diamonds Limited raised $794,000 (GBP 500,000) in unsecured debt financing from an investment company to initiate a share buyback program and to support working capital needs as the junior mining company awaits approval to acquire the Mothae diamond project in Lesotho. While the Mothae purchase from Lucara Diamond Corporation is largely expected to proceed, Paragons chairman, Philip Falzon Sant Manduca, planned to meet Lesothos Minister of Mines, seeking "immediate approval" of the deal in order to begin diamond production as soon as possible.

Paragon agreed, in principle, to a $26 million funding package with International Triangle General Trading (ITGT) LLC of Dubai to fund Mothae and its existing Lemphane kimberlite simultaneously. Paragon believes that the two projects will create significant employment opportunities for local residents and generate substantial revenue for the government.

Firestone Reports Delay at Liqhobong

Firestone Diamonds delayed opening the Liqhobong mine in Lesotho to the fourth quarter of 2016, while confirming that construction costs would remain within budget. Previously, the mine was to be completed by the end of the first half of 2016 at a cost of $185.4 million. Firestone reported that $68.5 million (ZAR 830 million) had already been spent on the project as of May 31. Project costs would increase by $12.9 million as a result of the need to remove an increased quantity of overburden from the plant site and delays caused by uncooperative weather, but foreign exchange gains recover the differenc

ECONWATCH 	  

Diamond Industry Stock Report

Industry retail and wholesale shares mainly higher. Gains outnumber losses in the U.S., Far East, Europe and India led by JCPenney (+6%), Chow Sang Sang (+3%), LVMH (+7%) and Rajesh Exports (+18%). Mining shares mostly lower, however, as Dominion (-6%) and Gemfields (-5%) led declines. View the detailed industry stock report.
June 25 June 18 Chng.
$1 = Euro 0.893 0.879 0.014
$1 = Rupee 63.57 63.62 0.0
$1 = Israel Shekel 3.78 3.82 -0.04
$1 = Rand 12.10 12.25 -0.15
$1 = Canadian Dollar 1.23 1.22 0.01

Precious Metals
Gold $1,172.80 $1,201.90 -$29.10
Platinum $1,084.00 $1,081.00 $3.00

Stock Indexes Chng.
BSE 27,895.97 27,115.83 780.14 2.9%
Dow Jones 17,890.36 18,115.84 -225.48 -1.2%
FTSE 6,807.82 6,707.88 99.94 1.5%
Hang Seng 27,145.75 26,694.66 451.09 1.7%
S&P 500 2,102.31 2,121.23 -18.92 -0.9%
Yahoo! Jewelry 1,279.97 1,265.49 14.48 1.1%

Rapaport Weekly Market Comment July 4, 2015

Polished prices continue to decline with June RAPI 0.30ct. -2.6%, 0.50ct. -2.4%, 1ct. -0.8% and 3ct. -1.9%. Diamond markets weak as U.S. goes on vacation. Hong Kong show very slow reflecting poor Far East luxury demand. Chinese buyers are delaying payments to polished suppliers. Liquidity is tight and manufacturers continue to lose money and reduce activity. More Indian companies file for bankruptcy with estimated $200M outstanding debt. Birks FY sales +7% to $302M, loss of $8.6M vs. loss of $5.8M. RJC appoints Andrew Bone as executive director. Notable diamantaires Jacob Zupnick and Shlomo Moussaieff passed away this week.

RapNet Data: July 2

Diamonds 1,371,958
Value $8,200,434,878
Carats 1,321,260
Average Discount -26.53%

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The RapNet Diamond Index (RAPI) has been revised to reflect the average price of the 10 best priced diamonds in each category.

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QUOTE OF THE WEEK
[Central African Republics rough diamond recovered during the sanction period will not be allowed for export. Even if the country is compliant, those contaminated goods cannot be sold.

Edward Asscher | World Diamond Council

INDUSTRY 	  

KPCS Prepares CAR for Exports

The Kimberley Process Certification Scheme (KPCS) developed a framework to resume some rough diamond exports from the Central African Republic (CAR), which has been under a diamond embargo since May 2013. At the recent KPCS intersessional meeting in Angola, it was decided that government-controlled compliant zones in CAR would qualify to export rough only after implementing the framework and pending a clean review mission.

A monitoring team is being created to identify compliant zones, audit stockpiles and assess a diamond footprint. CAR is reported to be holding inventory of 66,000 carats valued at between $6 million and $12 million. Edward Asscher, the president of the World Diamond Council (WDC), said that diamonds recovered while sanctions were in place are not eligible for export.

In other news, Venezuela is preparing to rejoin the KPCS and negotiations continue on appointing the United Arab Emirates (UAE) as the next chair, a term that begins January 1, 2016. The UAE must submit to a review mission and agree to projects with civil society members that explore supply-chain management and study transfer pricing, among other topics of concern.

SNZ Facility to Open in August

The Special Notified Zone (SNZ) at the Bharat Diamond Bourse (BDB) was originally scheduled to open for trading on July 1, however, the time frame was delayed about 45 days to ensure that all issues related to taxation have been addressed, according to Vipul Shah, the chairman of the Gem & Jewellery Export Promotion Council (GJEPC).

Shah explained that a private meeting will take place on July 6 between Indias Ministry of Commerce, Rio Tinto, ALROSA and De Beers to bring greater clarity on matters related to the SNZ, primarily taxation. "For example, it is not clear what would be considered sales proceeds after the taxation proceeds -- what tax should be levied, etc. There are some gray areas. So, the Ministry shall meet with the mining companies, take their feedback and work on it."

RETAIL & WHOLESALE 	  

Rajesh Exports Approves Acquisition Funds

The board of directors at Rajesh Exports Ltd. approved spending between $250 million and $500 million to acquire assets in Europe that would strengthen the "backward integration" of its gold business both in India and abroad. While Indias press largely speculated on specifics of the plan prior to the boards vote, including citing insiders claiming the jewelry maker would acquire gold refiner Valcambi, Rajesh Exports filed a notice with the Bombay Stock Exchange (BSE) stating that no comments had been, nor would be, provided to the media on this matter. Still the news sent shares in the company soaring more than 20% for the week. The companys board authorized Rajesh Mehta, the companys chairman, to take all the necessary steps to complete a deal.

Hong Kongs Jewelry, Watch Sales Fall

Hong Kongs retail sales were flat in May, with a provisional estimate at $5 billion (HKD 39 billion), according to Xinhua news. However, sales of jewelry, watches and other valuable items plummeted 14.9% due in large part to a continuing decline in tourism. For the first five months of 2015, Hong Kongs retail sales have fallen 1.8% year on year.

Birks Groups Loss Rises to $9M

Birks Group reported that sales improved 7.3% year on year to $301.6 million in the fiscal year that ended on March 28. Comparable-store sales rose 16% in large part due to much higher average sale transactions. In the U.S., the average unit sales value rose 34%, while it increased 32% at stores across Canada. Cost of sales jumped 10.4% to $183.8 million and, in addition, the company recorded a $2.6 million restructuring charge. The retailer reported a loss of $8.6 million compared with a loss of $5.8 million one year earlier. At the close of Birks fiscal year, inventory was valued at $135.7 million, down from $144.6 million one year earlier, while bank indebtedness declined 13% to $64.3 million.

Video: Sell the Diamond Story

Watch Now: Stephen Lussier, the CEO of Forevermark, advised retailers to focus on "the story" of diamonds and improve the "quality" of diamond jewelry campaigns and digital outreach to attract customers. "What makes consumers buy diamonds is not the product and the price, it is the diamond dream, those emotional messages that make people want to engage in the category in the first place," he said. "I want to see more emotive communication...lets tell stories about diamonds."

Millennials shopping patterns come from a different place as "the rational work" has been done before that age group enters the store, he said. Jewelers must engage millennials emotionally to make them feel connected with the story. Lussier acknowledged that producing quality content can be expensive, but he suggested ways for independent jewelers, with minimal budgets, to create high-quality campaigns that drive up diamond sales.

DDRC Tests for Undisclosed Synthetics

The Diamond Detection and Resource Centre (DDRC), which the Gem & Jewellery Export Promotion Council (GJEPC) opened at the Indian Diamond Institute (IDI), completed a month-long screening test of stars and melee, concluding that no synthetic stones had been mixed with natural diamonds, according to the Times of India. The report stated that 100 traders submitted 10,000 stones in all for the test. The results alleviated fears of widespread mixing of natural and undisclosed synthetic stones of a similar size.

Omnichannel Done Right

The top 10 U.S. retailers in terms of annual revenue, and as ranked by STORES magazine, held their positions for a second year due to having implemented a customer-centric, omnichannel focused business model. “The biggest retailers continue to get bigger because they embrace change,” said Susan Reda, the editor of STORES. The top 10 maintained "razor-sharp focus" on changes in consumer behavior and technology this past year, she said.

Walmart topped the list, followed by The Kroger Co., which operates Fred Meyer and Littman jewelers. Of the top 30 retailers that sell jewelry, Costco was No.3, Target was No.5, Amazon.com was No.9., Macys No.15, Sears No.18 and Kohls No.23. Hudsons Bay debuted on the list at No.80 due to its acquisition of Saks and Signet moved up to No.77 from No.99 due to its acquisition of Zale.

Common omnichannel strategies that operate across the largest retailers include: buy online, pick up in store; direct-to-customer fulfillment; same-day shipping and mobile shopping. Bryan Gildenberg, Kantar Retail’s chief knowledge officer, said, “For most of these retailers, save Amazon, well over 90% of their business is still store-based, so omnichannel innovation needs to be integrated into the store and the online experiences seamlessly."

Strive for Sophistication, Exclusivity

Luxury consumers in all regions of the world have become smarter and "more opportunistic" when shopping, according to consulting group The Bridge to Luxury (TBTL) and jewelry brands must adapt to these changes in order to survive. Information across the Internet has driven consumers to be better informed about products and pricing just as that data empowers skepticism of marketing that is simplistic or "too commercialized," TBTL stated.

TBTL advised luxury brands to meet the needs of consumers directly: be transparent, show how the brand implemented ethical practices across the enterprise and offer sophisticated, "exclusive" product. Citing the proposed collaboration between rivals Richemont, LVMH and Kering to join the platform Yoox/Net-a-Porter, TBTL said the strategy makes sense. Still, if the industry, all together, fails to arrest digital challenges and meet consumer expectations, the risk of losing market share to the cacophony of other products on the Internet is very high.

Fairtrade Gold Jewelry Sales Jump

Cred Jewellery in the U.K. said that Fairtrade gold bridal jewelry sales surged during the first half of 2015 at stores in London and Chichester and on online. Engagement ring sales jumped 60%, eternity ring sales increased 50% and wedding ring sales rose 46%. Creds director, Alan Frampton, said that young consumers are seeking sustainable sources for their food, clothing and, more and more, couples want the same clean standards for their gold. "Fairtrade gold is the best ethical, transparent and independently certified source of gold and demand is growing fast,” he said.

U.S., India Issue Trademarks

The U.S. Patent & Trademark Office (USPTO) issued the trademark "Signet Direct Diamond Sourcing Ltd." to the Signet Group, the trademark "Captured Moments" to Michael Hill International and "Love. Brilliantly." to the Electronic Commodities Exchange LP, Abraham Klein and Martin Klein. Damiani International received USPTO approval for the trademark "D.Lace." In India, the Office of The Trade Marks Registry approved the trademark "Faberge" for Faberge Ltd.

GENERAL 	  

Child Labor Issues Persist

According to the latest U.S. government report on global human rights violations, forced child labor in some diamond-producing regions remained an issue in 2014. The annual "Country Reports on Human Rights Practices," which tracked human rights violations for the purpose of guiding foreign policy decisions, confirmed child labor at diamond mining regions of the Central African Republic (CAR), the Democratic Republic of the Congo (DRC), Cote dIvoire, Liberia and Sierra Leone.

The report found no child labor in Angolas diamond industry; however, forced labor was prevalent in the artisanal diamond sector (as well as others) and many migrant workers were subjected to rights violations at the hands of private security companies that were guarding foreign diamond mining concessions. The U.S. observed that Angola did not investigate human rights violations and found diamond trading transparency remained problematic.

The U.S. determined that treatment of the Bushmen (also Saan or Basarwa) in Botswana remained an issue as there were no programs addressing discrimination against them or agreements on defining cultural lands, generally considered to be the Central Kalahari Game Reserve (CKGR). NGOs have, for several years, criticized Botswana for opening the CKGR for diamond mining and forcing the Bushmen out.

In CAR, in addition to child labor, the U.S. said diamond monitoring efforts were insufficient, mine workers were subjected to unsafe working conditions and that illegal diamond sales were taking place. CARs rough exports have been under embargo since 2013 and the KPCS is reviewing this status.

While Europe has resumed diamond trading with Zimbabwe, the U.S. continues its sanctions on the Minerals Marketing Corporation of Zimbabwe, the Zimbabwe Mining Development Corporation, Marange Resources and Mbada Diamonds. The report noted widespread corruption at all levels of the government. In addition, nearly 3,000 households were resettled to make way for diamond mining and were promised compensation of $1,000, among other perks; however, only a handful of residents received payment and nearly all the families are struggling to survive without housing and means to support themselves. Zimbabwe also interfered with trade union activity, including the Zimbabwe Diamond Workers Union.

RJC Appoints Bone as Exec. Director

The Responsible Jewellery Council (RJC) appointed Andrew Bone as the executive director. Bone has worked 38 years in the diamond industry, at De Beers Group, and has been actively involved in industry initiatives such as the KPCS, the Diamond Development Initiative and the World Diamond Council. In his executive role at RJC, Bone will work with the board of directors and the management team to further drive the groups value proposition across the jewelry supply chain.

RJC has more than 640 members, 400 of which have been certified against the organizations code of practices, with some also having achieved third-party certification for RJCs chain of custody standards. James Courages role as board chair concluded June 30 and the vice chair, Charles Chaussepied, will assume the role of interim board chair July 1, pending the appointment of a new chairman of the board later this year.

Namdebs CEO Departs in July

Namdeb announced that its CEO, Inge Zaamwani-Kamwi, will leave her position at the end of July to serve as a public sector adviser to Namibias president. A replacement is expected to be announced at a later date. Elijah Ngurar, the chairman of Namdeb, praised Zaamwani-Kamwis leadership for cementing Namdebs position as the largest financial contributor to the nations treasury.

MINING

Rio Tinto Exits Zimbabwe

Rio Tinto sold its 78% stake in Murowa Diamonds and its 50% share of Sengwa Colliery Ltd. for an undisclosed sum to RZ Murowa Holdings Ltd. of Zimbabwe. RioZim Ltd., which is an independent mining company in Zimbabwe, holds a 22% interest in Murowa Diamonds and a 50% stake in Sengwa and will assume the overall management of both. Rio Tinto stated that the future of these assets can be best managed by companies with existing interest in Zimbabwe, while not specifically addressing the proposed diamond-mining consolidation efforts underway by the government. Rio Tintos diamonds and minerals CEO, Alan Davies, said that Rio Tinto remains committed to the Argyle and Diavik mines, while obtaining the approvals for its advanced Bunder diamond project in India.

Paragons Loss Widens

Paragon Diamonds Ltd. generated a $16 million (GBP 10.3 million) loss in the fiscal year that ended on December 31, up from a loss of just $2 million in 2013. The company recorded a $14.5 million non-cash impairment charge as a result of divesting from the Motete dyke, a non-core asset. During the year, Paragon secured a 10-year mining lease at the Lemphane kimberlite project in Lesotho, which is renewable for three consecutive 10 year periods. One test sale of stones that were recovered from a bulk sampling project achieved values as high as $2,500 per carat, the company stated. Overall, however, the average value forecast for the project is between $930 to $1,025 per carat, eventually generating annual revenue of approximately $9 million to $10 million.

Paragon has signed an agreement to acquire the Mothae kimberlite mine in Lesotho from Lucara Diamond Corporation for $8.5 million. Mothae is expected to generate a number of high-value diamonds and Paragon anticipates generating $60 million a year over a minimum of 12 years of full production.

Kimberley Diamonds Preps Lerala

Kimberley Diamonds Ltd. received $5 million under the terms of a loan agreement for $10 million with Zhejiang Huitong Auction Co. Ltd. of China to finance the Lerala diamond mine in Botswana. The junior miner expects to receive the remaining $5 million on or before July 31. The funds will be applied to recommissioning Lerala, which Kimberley Diamonds expects to be a key source of revenue.

Separately, Kimberley Diamonds placed its subsidiary, Kimberley Diamond Company (KDC) Pty., which operates the Ellendale diamond mine, into voluntary administration and suspended the mines operations. Ellendales revenue has been negatively impacted by a lower recovery grade and size distribution, driving down prices for rough diamonds at auction. The company specifically noted a much lower than expected auction result in Antwerp last week due to a "sharp, unexpected decline" in the rough diamond market. The Ellendale mine earned the reputation as a leading source for rare, fancy yellow diamonds.

ECONWATCH 	  

Diamond Industry Stock Report

Poor performance in the U.S. and Europe for diamond industry stocks this week, with Birks (-9%), Blue Nile (-2%), Signet (-3%), LVMH (-7%) and Swatch (-3%) all lower. In the Far East, Luk Fook (+3%) was ahead, while Indian shares were mainly higher except for C.Mahendra (-11%), Lypsa (-2%) and Vaibhav (-4%). Little change in mining shares, but Peregrine (-13%) and Anglo American (-8%) were the exception. View the detailed industry stock report.
July 2 June 25 Chng.
$1 = Euro 0.903 0.893 0.010
$1 = Rupee 63.39 63.57 -0.2
$1 = Israel Shekel 3.77 3.78 -0.01
$1 = Rand 12.23 12.10 0.13
$1 = Canadian Dollar 1.26 1.23 0.03

Precious Metals
Gold $1,166.00 $1,172.80 -$6.80
Platinum $1,084.00 $1,084.00 $0.00

Stock Indexes Chng.
BSE 27,945.80 27,895.97 49.83 0.2%
Dow Jones 17,730.11 17,890.36 -160.25 -0.9%
FTSE 6,630.47 6,807.82 -177.35 -2.6%
Hang Seng 26,282.32 27,145.75 -863.43 -3.2%
S&P 500 2,076.78 2,102.31 -25.53 -1.2%
Yahoo! Jewelry 1,242.72 1,279.97 -37.25 -2.9%