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Rapaport TradeWire May 16, 2014
May 15, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
May 16, 2014
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Indian market optimism surging ahead of expected Modi victory. Surat lays foundation for diamond bourse in effort to shift trading from Mumbai. Rough markets stable following estimated $560M De Beers May sight. Auction markets for large stones booming. Christie’s Geneva sells $154.2M (85% by lot) with pear, 13.22ct., fancy vivid blue diamond selling for $23.8M ($1.8M/ct.). Sotheby’s Geneva sells $141.5M (89% by lot) as cushion, 100.9ct., fancy vivid yellow diamond fetches $16.3M ($163K/ct.). Gem Diamonds YTD sales +70% to $82M, average Letšeng price +70% to $2,723/ct. Sarine 1Q revenue +21% to $24M, profit +13% to $9M. Edward Asscher elected president of World Diamond Council.
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| RapNet Data: May 15 |
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| Diamonds |
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1,059,790 |
| Value |
$6,770,665,929 |
| Carats |
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1,176,834 |
| Average Discount |
-26.57% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
The board and I will give new energy to implement the Kimberley Process, which has been so successful in preventing conflict diamonds getting into the trade. Consumers must remain able to maintain confidence in our products and the wellbeing of all who are involved in the diamond trade must be the focus of our mission. That is the legacy which I want to be able to pass onto the next generation of young adults who work in the diamond industry, wherever they are in the world.
Edward Asscher | World Diamond Council
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.
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INDUSTRY
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De Beers Sight Estimated at $560M
De Beers May sight closed with an estimated value of $560 million as the rough diamond market remains steady. Sightholders reported that prices on some boxes were adjusted slightly; however, on average, prices and assortments were basically unchanged.
Overall market conditions signal high rough price levels, very little manufacturing profit margins but goods are selling and demand is stable. Dealers noted that rough trading on the secondary market has slowed with boxes selling at premiums of around 5%. The rough and polished markets have entered a more typical slow season pattern. Liquidity remains tight but the ability to sell a high volume of polished is also subdued from the backlog at the Gemological Institute of America (GIA).
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Rapaport Fair Trade Jewelry Conference
Leading organizations and members of the jewelry industry will be meeting in Las Vegas on June 1 to discuss what can and should be done to improve social responsibility in the diamond and jewelry trade. This is your opportunity to learn about what you can do to ensure the legitimacy of your supply chain and develop strategies that will help you increase your business with socially conscious consumers.
The conference is free and open to all. Rapaport is pleased to announce that Vipul Shah, the chairman of the Gem & Jewellery Export Promotion Council (GJEPC) of India will address attendees for the first time.
Panelists will include:
Ruben Bindra, AGTA
David Bonaparte, Jewelers of America
David Bouffard, Signet Jewelers
Eric Braunwart, Columbia Gem House
Gaetano Cavalieri, CIBJO
Douglas Hucker, AGTA
Ngomesia Mayer-Kechom, DDI
Christina Miller, Ethical Metalsmiths
Kenneth Porter, ARM
Martin Rapaport, Rapaport Group
Vipul Shah, GJEPC
Ronnie VanderLinden, WDC, IDMA, DMIA
Register now to reserve a seat and receive the agenda.
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RETAIL & WHOLESALE
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Christie's Jewels Sale Tops $154M
Christie's Geneva sale of magnificent jewels achieved a record $154,193,622 and was 85% sold by lot. Harry Winston Inc. bought the top lot, a 13.22-carat, pear-shaped blue diamond that sold for $23,795,372 or $1,799,953 per carat, an auction record price for a blue diamond. Harry Winston named the diamond "The Winston Blue."
Other top lots included a Belle Epoque diamond devant-de-corsage brooch made by Cartier in 1912 that sold for $17,581,612, and a cut-cornered square-cut light pink, VVS1 diamond necklace of 76.51 carats, by Leviev, which established a new world auction record price for a light pink diamond, selling for $10,000,825, or $130,712 per carat. The "Ocean Dream," a 5.50-carat, SI1 triangular-cut fancy vivid blue-green sold for $8,633,798, a new auction record price for a blue-green diamond.
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Sotheby's Jewels Sale Tops $141M
Sotheby's spring sale of magnificent jewels and noble jewels in Geneva achieved $141,492,079 and was 88.7% sold by lot. The top lot was "The Graff Vivid Yellow," a 100.09-carat, VS2, cushion-shaped, fancy vivid yellow diamond ring that sold for $16,347,847, a new world auction record for a yellow diamond. The second top lot was a 70.33-carat, D, flawless, type IIa, cushion brilliant-cut diamond that sold for $14,201,354.
A new world auction record price per carat was achieved by the sale of a 25.32-carat, D, IF round brilliant-cut diamond graded by GIA as type IIa with excellent polish, cut and symmetry, which sold for $6,246,702, or $246,710 per carat. Two other price-per carat records were set with a 12.07-carat, internally flawless, fancy pink marquise-cut diamond ring at $601,228 per carat and a 10.11-carat, VS2, fancy light pink, round brilliant-cut diamond that sold for $393,071 per carat.
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Richemont's Profit +3%
Richemont reported that sales rose 5% year on year to $14.6 billion (EUR 10.649 billion) for the fiscal year that ended on March 31. Profit rose 3% to $2.8 billion and included $292 million of currency hedging gains. Jewelry sales at the company's maisons, including Cartier and Van Cleef & Arpels, increased 4% year on year to $6.1 billion as the segment benefited from additional store openings with strong demand for jewelry and moderate demand for watch collections at Cartier tempered by lower wholesale orders. Specialty watchmaker sales rose 9% to $4 billion with improved sales at Baume & Mercier.
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Pandora's Profit +61%
Pandora's revenue rose 29.5% year on year to $478 million (DKK 2.59 billion) in the first quarter that ended on March 31. Profit jumped 60.7% to $129.9 million. Gross margin as a percentage of sales improved to 69.1% compared with 65.6% one year earlier. The number of unit sales during the quarter rose 26.6%, while the average sales price per unit increased slightly to $24.17.
In local currency, sales increased 9.2% in the U.S. but surged 42.1% for the other regions of Pandora's Americas division. Sales jumped 16.1% in Australia; however, the increase was in excess of 200% for the other markets across the group's Asia-Pacific region. In Europe, Pandora's sales in local currency rose 52.3% in the U.K. and 12% in Germany, while other markets in Europe jumped 55.2%.
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U.S. Jewelry Store Sales +2%
U.S. jewelry store sales rose 2.2% year on year to $2.376 billion in March. The increase was in line with overall U.S. jewelry and watch sales growth during the month, which improved 2.3% to $5.633 billion, according to preliminary estimates reported by Rapaport News on May 1. However, price pressure on jewelry continued to ease in March, as the consumer price index dropped 2.6%. Jewelry store sales have risen 4.7% year on year to $7.335 billion for the first three months of 2014.
Meanwhile, advanced estimates for retail sales at U.S. department stores in April revealed an increase of 3.4% year on year to $13.01 billion. Retail and food services sales in April rose 4% to $434.6 billion. Retail trade sales improved 4.2% and nonstore retail sales jumped 6.5%.
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U.S. Online Sales +12%
U.S. online retail sales as measured through desktops rose 12% year on year to $56.1 billion in the first quarter that ended on March 31, according to comScore Inc. Sales that were conducted through a mobile device rose 23% to $7.3 billion. Top performing categories during the period were apparel and accessories, consumer packaged goods, sport and fitness, digital content and subscriptions, and home and garden, all of which experienced at least a 13 percent increase compared with the first quarter of 2013. Desktop ecommerce accounted for 11.7% of consumers’ discretionary spending, which comScore stated was the highest share on record.
The jewelry and watch category, which recorded "strong sales growth," ranked No.12 in dollar value by comScore's measure of total sales, just behind sports and fitness items and ahead of flowers and gifts.
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Cash America's Profit +4%
Cash America International Inc. reported that revenue increased 5.3% year on year to $493.1 million in the first quarter that ended on March 31. Expenses rose 8.4% to $210.9 million. Profit improved 4.1% to $45.7 million or $1.55 per diluted share. Overall, there were lower losses from online consumer loans, strong ecommerce revenue and weaker net proceeds from the sale of commercial jewelry. The value of jewelry held for one year or less jumped 26.7% year on year to $108.1 million, while the value of jewelry held for more than one year increased 61.4% to $5.2 million. Total merchandise held for disposition increased 32.2% to $194.2 million.
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DGSE Reports a Loss
DGSE Companies Inc. reported that revenue plunged 32% year on year to $19.9 million in the first quarter that ended on March 31 due to significant decreases in both bullion and scrap sales as a result of weak gold prices. However, gross profit margin rose to 22.3% compared with 18.1% in large part due to an increase in high-margin jewelry sales, coupled with improved margins on bullion and scrap sales. DGSE recorded a loss of $523,000 or 4 cents per share compared with a profit of $300,000 or 2 cents per share one year earlier.
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U.S. Jewelry CPI -4%
The U.S. consumer price index (CPI) for jewelry declined 3.7% year on year to 169.63 points in April, which was the lowest in 39 months and ended the longest stretch on record of readings in excess of 170 points. The CPI for watches, meanwhile, was basically flat in April, down by 0.3% to 121.12 points. The average price of gold in April was down about 11% year on year, while platinum was down nearly 4%. The RapNet Diamond Index (RAPI), the global benchmark for polished prices, fell 3% year on year for 1-carat diamonds, while RAPI for 3-carat diamonds dropped 2.3%. However, RAPI for 0.30-carat diamonds jumped 10.8% and the index increased 4.2% for 0.50-carat stones.
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Tiancheng Plans June Sale
Tiancheng International will hold its spring sale of jewelry and jadeite on June 8 in Hong Kong, featuring a "no reserve" section of 70 lots included in 360 lots of Chinese and Western jewels that are expected to achieve more than $40 million (HKD 300 million). The jadeite section encompasses top old-mine jadeite, designer jadeite and a series of jadeite cabochons.
Some of the highlights include a five-strand natural saltwater pearl and diamond necklace; a 39.24-carat natural, untreated Pamir spinel and diamond ring and a natural jadeite leaf, ruby and yellow diamond and diamond pendant, with a pair of matching pendent earrings.
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TIG Seeks to Prevent Zale's Acquisition
TIG Advisors LLC, which owns approximately 9.5% of Zale's shares, seeks to block the jeweler's merger with Signet, citing a "grossly unfair" price per share offering at $21 along with several problematic issues in how Signet valued Zale and proposed the deal. TIG argued that Zale was trading at an EV/EBITDA multiple of 9.1 times 2016 analyst estimates, implying a $31 share price, or worst case $25 before the merger was announced.
Zale and its financial advisor, Merrill Lynch, Pierce, Fenner & Smith Inc. relied on stale financial forecasts prepared before July 31, 2013 in evaluating fairness to stockholders. Additionally, TIG believes Golden Gate’s representative on Zale's negotiation committee created an inherent conflict of interest and that BofA Merrill Lynch was conflicted and not in the best position to provide a fairness opinion on the proposed merger given its prior involvement with Signet. Zale never explored interest in a sale and no parties sought competitive bids. TIG intends to pursue an appraisal claim against Signet to compel additional consideration for its interest.
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GENERAL
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U.S. Confirms Fake KP Certificates
The U.S. government warned that several scams are involving Kimberley Process (KP) Certificates. Traders were invited to Sierra Leone to view rough diamonds that were later evaluated as fake and were provided with a fake KP certificate numbered Sierra Leone (SL) 004199, issued in either April or May 2014. Variations of certificate SL 004199 have been presented to prospective diamond purchasers in the past three weeks. Diamond traders and business community members are also urged to be on alert for that fake certificate. Report fake certificates to the U.S. Customs and Border Protection at kpmailbox(at)dhs.gov and to the Department of State at uskimberleyprocess(at)state.gov.
In the past year, fake KP certificates have also been arriving in the U.S. from Guinea, Ghana and Sierra Leone through an online advance-fee scheme that defrauds people of thousands of dollars.
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WDC Elects Asscher as President
The board of directors for the World Diamond Council (WDC) elected Edward Asscher, a fifth generation diamantaire who heads the Royal Asscher Diamond Company of the Netherlands, as its new president. Additionally, the WDC elected
Andrew Bone, the head of government and industry relations for De Beers Group, as vice president and Ronnie VanderLinden, the representative of the U.S. coalition and the president of the Diamond Manufacturers and Importers Association of America (DMIA), as treasurer.
Asscher will serve as president for a single two-year term, following which he will be succeeded by the sitting vice president.
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Sarine's Profit +13%
Sarine Technologies Ltd. reported that revenue grew 21% year on year to $24.4 million during the first quarter that ended on March 31. Profit rose 13% to $9.1 million. Sarine noted that revenue rose across most geographic segments and stemmed mainly from increased sales of its Galaxy family of products, as well as increased sales of the company's traditional products.
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MINING
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Letseng Sales Rise
Gem Diamonds Limited reported that revenue from the Letšeng mine in Lesotho rose 75% year on year to $81.9 million from the first three diamond tenders of the year. Sales by volume rose 4% to 30,060 carats, while the average price jumped 70% to $2,723 per carat.
Altogether, 81% of the mine’s revenue during the quarter was generated from the sale of 171 rough diamonds that were greater than 10.8 carats. Production at Letšeng rose 39% to 26,055 carats during the first quarter.
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Brazil Minerals Earns $500K
Brazil Minerals Inc. generated $500,000 from the sale of diamonds, common stock and two-year options to four investors. The diamonds, which the company stated were graded by the Gemological Institute of America (GIA), can be delivered through December 31, 2015. Brazil Minerals began selling a portion of its production as polished diamonds this year in an effort to tap higher margins from the market and the company has received more than $1.5 million from this strategy so far this year.
Brazil Minerals mines rough diamonds and gold, and owns interests in titanium, vanadium and iron projects in Brazil.
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Stellar's Tongo Grade Increases
Stellar Diamonds reported that ongoing bulk sampling at its Tongo kimberlite dyke 1 project in Sierra Leone has yielded a 12% higher diamond grade than previously reported.
To date, 730 carats were recovered at a grade of 134 carats per hundred tonnes (cpht). The company expects that the grades will further increase after re-processing the sample material.
The JORC resource currently stands at 1.1 million carats at a grade of 120 cpht for just one of four kimberlite dykes within the license area.
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Gemfields Partners With Select Jewelry
Gemfields will partner with jewelry manufacturer Select Jewelry Inc. for distribution of specialty jewelry pieces at big box retailers in North America and Canada. Select Jewelry will design and produce jewelry collections with emeralds and rubies that are sourced from Gemfields. The mining company chose the manufacturer for its reputation and track record of creating and delivering high-quality, modern jewelry.
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ECONWATCH
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Diamond Industry Stock Report
U.S. and Hong Kong shares mixed, with Charles & Covlard (+26%) rising on analyst reports that it was bargain; Signet (-3%), Tiffany (-3%) and Chow Sang Sang (-2%) led declines. Europe mainly higher except for Damiani (-10%). Indian shares mixed with Titan (+14%) and Classic (-15%) defining the spread. Mining shares lower except for ALROSA (+10%), Firestone (+3%) and Rio Tinto (+5%). View the extended stock report.
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May 15 |
May 8 |
Chng. |
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| $1 = Euro |
0.729 |
0.722 |
0.007 |
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| $1 = Rupee |
59.43 |
59.94 |
-0.5 |
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| $1 = Israel Shekel |
3.46 |
3.45 |
0.01 |
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| $1 = Rand |
10.41 |
10.34 |
0.07 |
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| $1 = Canadian Dollar |
1.09 |
1.08 |
0.01 |
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| Precious Metals |
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| Gold |
$1,296.40 |
$1,289.80 |
$6.60 |
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| Platinum |
$1,462.00 |
$1,432.00 |
$30.00 |
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| Stock Indexes |
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Chng. |
| BSE |
23,905.60 |
22,344.04 |
1,561.56 |
7.0% |
| Dow Jones |
16,446.81 |
16,550.97 |
-104.16 |
-0.6% |
| FTSE |
6,840.89 |
6,839.25 |
1.64 |
0.0% |
| Hang Seng |
22,730.86 |
21,837.12 |
893.74 |
4.1% |
| S&P 500 |
1,870.85 |
1,875.63 |
-4.78 |
-0.3% |
| Yahoo! Jewelry |
1,076.44 |
1,065.21 |
11.23 |
1.1% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Polished demand remains weak but rough prices stable following De Beers sight. Liquidity is very tight. Read the full report.
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