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Rapaport TradeWire May 15, 2015
May 14, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
May 15, 2015
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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.).
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RapNet Data: May 14
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| Diamonds |
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1,374,464 |
| Value |
$8,200,042,668 |
| Carats |
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1,309,966 |
| Average Discount |
-24.81% |
www.rapnet.com
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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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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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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 | Christie's
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INDUSTRY
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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.
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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.
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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 group's 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 China's 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.
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RETAIL & WHOLESALE
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Sotheby's Jewelry Sale Totals $161M
Sotheby's 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.
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Christie's Jewelry Sale Totals $98M
The Christie's 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.
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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 group's 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 April's 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 Street's 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.
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Blue Nile's 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.
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Pandora's 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.
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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, DGSE's 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 declines.”
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Sarine's 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 company's 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.
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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.
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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 store's 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.
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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 brand's 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.
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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.
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GENERAL
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India Approves Industry Trademarks
India's 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 India's 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.
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Pirie Joins Scott Kay
Scott Kay appointed Nick Pirie to the role of East Coast regional account executive, joining the company's 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.
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U.S. Must Avoid Zim's 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.
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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.
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MINING
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Lucara's 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, Lucara's profit jumped 17.6% to $6 million, cash on hand surged 54% to $87.5 million and the company's 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 company's forecast, due to lower liberation when processing the harder fragmental kimberlite. This issue is expected to be corrected as part of Lucara's 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.
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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 since.
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Peregrine Completes Program at CH-7
Peregrine Diamonds Ltd. completed its large diameter reverse 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.
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ECONWATCH
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Diamond Industry Stock Report
View the detailed industry stock report.
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May 14 |
May 7 |
Chng. |
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| $1 = Euro |
0.876 |
0.880 |
-0.004 |
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| $1 = Rupee |
63.38 |
64.11 |
-0.7 |
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| $1 = Israel Shekel |
3.82 |
3.87 |
-0.05 |
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| $1 = Rand |
11.79 |
12.04 |
-0.25 |
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| $1 = Canadian Dollar |
1.20 |
1.21 |
-0.01 |
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| Precious Metals |
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| Gold |
$1,221.10 |
$1,183.70 |
$37.40 |
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| Platinum |
$1,157.00 |
$1,129.00 |
$28.00 |
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| Stock Indexes |
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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% |
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INDIA MARKET REPORT
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Polished Trading Activity
Trading activity remains slow, but steady, with some stability in prices emerging in the sector due to shortages of certain goods. The liquidity crunch persists as does delayed overseas payments. Read the polished diamond trading report.
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