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Rapaport TradeWire April 24, 2015
Apr 23, 2015 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
April 24, 2015
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Polished trading quiet with many sellers refusing low offers. Manufacturers significantly reducing production as sales volume remains low and Indian market heads for vacation. Miners increasing rough production despite weak 1Q sales. ALROSA’s 1Q production +6% to 8.4M cts., De Beers +2% to 7.7M cts., Rio Tinto’s +14% to 4.2M cts. Graff Diamonds 2014 retail sales +30% to $922M, profit +41% to $180M. Sotheby’s NY sells $65.1M (79.9% by lot) with emerald, 100.20ct., D, IF diamond achieving $22.1M ($22,459/ct.). Luk Fook 4Q same-store sales -20%. Chow Tai Fook 4Q sales -9%, gem-set jewelry same-store sales -6%. Lazare Kaplan 3Q revenue -32% to $9.8M. ALROSA appoints Andrey Zharkov as president. HRD Antwerp appoints Peter Macken as CEO.
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RapNet Data: Apr. 23
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| Diamonds |
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1,441.246 |
| Value |
$8,558,742,700 |
| Carats |
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1,360,483 |
| Average Discount |
-23.52% |
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 recovery of a 341.90-carat, magnificent stone once again confirms the quality of diamonds contained within the Karowe resource. Timing of the sale of this exceptional stone is still to be decided.
William Lamb | Lucara Diamond Corp.
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INDUSTRY
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ALROSA Production +6%, Names President
ALROSA’s production rose 6% year on year to 8.4 million carats in the first quarter that ended on March 31. The increase was driven by expanded production at the company's Mir underground mine, the Botuobinskaya pipe and the Arkhangelskaya and Karpinskogo-1 pipes at the Lomonosov deposit.
ALROSA sold 9 million carats during the quarter, a drop of 29% year on year, including 7 million carats of gem-quality diamonds at an average price of $161 per carat and 2 million carats of industrial diamonds with an average price of only $8 per carat. The company expects that its first-quarter revenue from rough sales will reach $1.1 billion, compared with $1.5 billion reported in the first quarter of 2014.
In other news,
ALROSA's supervisory board elected Andrey Vyacheslavovich Zharkov to serve as company president, with a contract period of three years. Zharkov, 42, most recently served as deputy head of state repository Gokhran and he was the chairman of the board of Directors at Kristall Production Corporation. Previously, he was the chief commercial officer at Prioksky Non-Ferrous Metals Plant; a board member of Novosibirsk Refinery Plant; a project manager at RUSAL Global Management and at En+ Management; the CEO of TsentrStroyRekonstruktsiya, and chief engineer at Norilsk Nickel. Concurrently, from 1995 to 2011, he was the head of precious metals transactions at the Bank of Russia.
The board also recommended that shareholders vote in favor of issuing $212 million (RUB 10.8 billion) in dividends for 2014, an amount per share that is on par with the previous year. ALROSA will conduct its annual general meeting on June 25.
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De Beers Production +2%
De Beers Group diamond production improved 2% year on year to 7.7 million carats during the first quarter that ended on March 31. Despite the slight increase in the first three months of the year, Anglo American lowered De Beers full year production guidance to between 30 million and 32 million carats from an earlier projection of between 32 million and 34 million carats in light of weaker trading conditions.
De Beers production in South Africa during the period rose 14% year on year to 1.1 million carats, due primarily to higher grades at its Venetia diamond mine. Production fell 2% at Debswana to 5.6 million carats, Namdeb's production increased 7% to 462,000 carats and production in Canada rose 25% to 510,000.
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Rio Tinto's Production +14%
Rio Tinto's diamond production grew 14% year on year to 4.155 million carats in the first quarter that ended on March 31. Production at Argyle grew 31% to 3.217 million carats, but even more striking, Rio Tinto registered a 77% improvement in Argyle's production as compared with the previous quarter due to plant modifications to underground crushers.
Rio Tinto’s 60% share of the Diavik mine in Canada reported production decreased 20% to 899,000 carats.
Rio Tinto’s 78% share in the Murowa mine in Zimbabwe experienced a production decline of 42% to 40,000 carats as the company implemented a shutdown in order to reconfigure the processing plant. The company expects to produce 20 million carats in 2015.
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U.S. Jewelry CPI -4%
The U.S. consumer price index (CPI) for jewelry dropped 3.5% year on year to 165.6 points in March, which was basically unchanged from February. Comparatively, the CPI for watches was basically flat, or up 0.2% year on year, to 123.23 points in March, which resulted in a new index high for the month.
Meanwhile, prices for diamonds and precious metals experienced broad declines in March. The RapNet Diamond Index (RAPI), the global benchmark for polished prices, plunged 14.4% for 1.00-carat certified diamonds, while RAPI for 0.30-carat contracted 19.8%, RAPI for 0.50-carat fell 8% and RAPI for 3.00-carat diamonds declined 14.7%. Gold prices in March came under pressure as the dollar firmed against world currencies, leaving the metal about 8% lower than one year earlier. Platinum, on the other hand, remained under tremendous pressure, falling about 18% in March and silver plunged 17% compared with March 2014.
The CPI for all consumable product categories in March was basically unchanged from one year ago at 236.12 points.
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RETAIL & WHOLESALE
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Sotheby's Sells 100.20ct. Diamond
Sotheby’s New York auctioned The Ultimate Emerald Cut Diamond, a 100.20-carat D, IF type IIa estimated at $19 million to $25 million, for $22,090,000 or $220,459 per carat to an anonymous buyer on the phone.
The jewel has the distinction of being the first 100-carat plus diamond ever sold at a Sotheby’s New York auction as well as the highest per carat price of any colorless diamond sold at a New York auction. It is also the largest perfect emerald-cut diamond ever sold at any auction and it is one of only six diamonds over 100 carats to sell at auction in the past 25 years.
The sale tallied up $65,086,500 against a presale estimate of $59 million to $77 million, setting a new record for a total garnered at a Sotheby’s New York auction. The 368 lot sale was sold 79.9% by lot and 84.4% by value with 294 of the lots changing hands.
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Graff's Profit +41%
Graff Diamonds told the Daily Mail that revenue reached $1 billion in 2014, led by a 30% increase in retail sales at $922 million. Profit surged 41% to $180 million. The brand observed strong demand for its jewels in the Middle and Far East. The report noted that expansion plans continue to progress, after adding three locations in 2014, it opened one store in Hong Kong this year and plans to open in Oman, Qatar and Azerbaijan.
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Richemont Warns of Weaker Profit
Swiss luxury goods group Richemont anticipates that its profit will drop 36% year on year for the fiscal year that ended on March 31. The company, which will report on May 22, made an unscheduled announcement to alert investors ahead of time, explaining that the decline was a result of losses on financial instruments, including derivatives. The group operates luxury brands Cartier, Van Cleef & Arpels, Piaget, IWC and Montblanc. Last month, the group sold Net-A-Porter to YOOX in an all-stock deal.
Richemont indicated that sales in the fiscal year, excluding Net-A-Porter, rose by 4% on a reported basis and by only 1% on a constant-exchange-rate basis. Richemont’s operating profit for the year was anticipated to improve 10%, however.
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Lazare Kaplan's Revenue -32%
Lazare Kaplan International estimated that revenue fell 31.9% year on year to $9.8 million in the third quarter that ended on February 28. Diamond sales declined 33.8% to $9.2 million, while revenue from other activity rose about 20% to $600,000. The company informed the Securities & Exchange Commission that its financial report would be late, citing the continued inability to resolve material uncertainties pertaining to the recovery of certain assets and the potential obligations under lines of credit.
Lazare Kaplan reiterated its intention to file official quarterly and annual financial reports dating back to May 31, 2009, after concludes litigation with Antwerp Diamond Bank N.V. and KBC Bank N.V.
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Chow Tai Fook's Sales -9%
Chow Tai Fook Jewellery Group Ltd. reported that retail sales fell 9% year on year in the fourth quarter that ended on March 31, led by a 21% decline in Hong Kong, Macau and other markets, while the drop was only 3% in Mainland China. The retailer did not provide hard totals.
Same-store sales for the group fell 16%, with comparable-store sales falling 9% in Mainland China and 26% in all other markets. Gem-set jewelry sales as measured on a same-store basis fell 6% and gold product sales dropped 19%.
Chow Tai Fook opened 14 points of sale during the quarter, comprised of nine for jewelry, one of which was a standalone Hearts On Fire location, and five for watches. Chow Tai Fook operated 2,257 points of sale as of March 31.
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Luk Fook's Same-Store Sales -20%
Luk Fook Holdings reported that group same-store sales dropped 20% year on year in the fourth quarter that ended on March 31. The company's same-store sales in Mainland China fell 5%, while comparable-store sales in Hong Kong and Macau plummeted 22%. Gold product same-store sales fell 21%, while gem-set jewelry same-store sales dropped 20% with gem-set jewelry comparable-store sales in Mainland China increasing 11% but in Hong Kong and Macau they dropped 22%.
The group operated 1,383 points of sale as of March 31, including 1,241 licensed stores in Mainland China and one store in Korea, 142 self-operated stores consisting of 48 self-operated stores in Hong Kong, 10 stores in Macau, 79 shops in Mainland China and five overseas.
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Festival Sales Surge for SHUBH
Rajesh Exports Ltd.'s retail brand SHUBH Jewellers posted record sales during the Akshaya Tritiya festival, in response to introducing several new designs, according to a filing on the Bombay Stock Exchange (BSE). The company did not provide hard totals.
Rajesh Mehta, the chairman of Rajesh Exports, told investors that SHUBH has become the "largest gold jewelry retailer in South India" in part due to offering unique merchandise and, secondly, an aggressive expansion strategy.
During the most recent financial period, Rajesh Exports stated that it operates without debt and has grown sales to approximately $5.5 billion annually. SHUBH Jewellers operates 83 retail outlets across India.
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Gitanjali Streamlines Operations
Gitanjali Gems will consolidate its various jewelry retail subsidiaries as part of the group's effort to streamline operations, therefore reducing costs and improving cash flow.
In a note to the Bombay Stock Exchange, Gitanjali confirmed the merger of Asmi Jewellery India Ltd. and Spectrum Jewellery Ltd. with Nakshatra Brands Ltd. All three entities are step-down subsidiaries of the company. Gitanjali Jewellery Retail Ltd. and Gitanjali Lifestyle will be merged with GILI India Ltd., which is also step-down subsidiary.
The company explained that the consolidated business model will help unlock future value and enable synergies for sourcing, manufacturing, distribution, exporting and retailing in an efficient manner.
The group's consolidation is subject to court and statutory approval.
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Sandeep Diamond and IDD Strike a Deal
Sandeep Diamond Corp. merged its independent jewelry division with IDD to bring additional resources that will benefit current clients of both companies. Alok Mehta, the CEO of IDD NY, explained that Sandeep Diamond has a similar customer-centric culture, a strong bridal category and intellectual property that is unrivaled. "We look forward to welcoming their accomplished independent team of professionals and helping create even more value for our combined clients" Mehta said.
Sandeep Shah, the CEO of Sandeep Diamond, added that IDD’s consistency, service and delivering value in diamond basics are an industry benchmark, all of which will open new sources of collaboration in a changed consumer and retail landscape. "Nothing will change for our customers in terms of the people and how they are being serviced," Shah said.
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GENERAL
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RJC Adds Civil Society Executive
The Responsible Jewellery Council's (RJC) general meeting, held in India, appointed its first executive committee member from civil society -- Estelle Levin of Estelle Levin Ltd., who was also named to co-chair the standards committee.
RJC has made significant progress in India, especially over the past two years, and is fully committed to working with the trade and local institutions to fully integrate with this key market. To this end, the RJC appointed Kinjal Shah as its country head for India.
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Samsung, World Jewelry Hub to Cooperate
Samsung Electronics and the World Jewelry Hub signed a memorandum of understanding, pledging to cooperate strategically on providing added value to both organizations, as well as their to respective clients and stakeholders in Panama. The two expect to create a strategic alliance in order to develop and implement projects that provide mutual commercial benefits and encourage loyalty to both brands. In addition, the two organizations agreed to develop projects that will serve local communities and expand corporate social responsibility.
Eli Izhakoff, the chairman of the World Jewelry Hub, explained that the deal was a milestone for the hub and for Latin America.
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Pasch Joins Simon G., Zeghani
Simon G. Jewelry and Zeghani appointed Terry Pasch as director of sales. Pasch has more than 25 years of experience in all aspects of sales, management and training within the jewelry industry, the firms stated. He will be responsible for developing and executing on new market sales and business plans and supervise the U.S. sales teams to identify new opportunities.
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HRD Appoints Macken as CEO
HRD Antwerp appointed Peter Macken as its new CEO. On June 1, Macken will begin the role on a part-time basis, concurrently with his present position as the CEO of Irmaco SA, and assume the HRD post full-time at the end of August.
Macken, 53, holds an MBA from the University of Chicago and a degree in civil engineering from the University of Leuven. He is a member of the Belgian American Educational Foundation (BAEF).
HRD Antwerp also appointed Yichun Wang (Wayne Wang) as the managing director of operations in China and Ravi Chhabria as managing director of operations in India.
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MINING
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Lucara Produces 342ct. Diamond
Lucara Diamond Corp. recovered a 341.90-carat gem-quality diamond from its Karowe mine in Botswana, while processing fragmental kimberlite from the central and south lobe interface. The type IIa rough diamond shows exceptional color and clarity, according to the firm. Lucara intends to sell the diamond along with two other stones that are larger than 100 carats.
Plant optimization at Karowe and construction activities are essentially completed. Tracer testing of the new XRT diamond recovery machines has been completed and already a small volume of material was processed to check how it handles material, resulting in the recovery of a 7.80-carat diamond. Lucara anticipates that the new recovery and XRT sections will be integrated into the main treatment plant before the end of April.
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Gemfields Ruby Sale Achieves $16M
Gemfields plc concluded the sale of mostly lower-quality rough ruby and corundum from its Montepuez ruby deposit in Mozambique, achieving $16.1 million at an average price of $4.03 per carat. The sale was 99% sold by lot.
With three ruby auctions now concluded since June, Gemfields has collected $92.9 million in revenue from its ruby operations. The recent sale was held in Jaipur, India, where Gemfields offered lower-quality material to build an understanding of the downstream market in order to optimize its long-term ruby auction format, according to the company.
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Lucapa Produces 63ct. Stone
Lucapa Diamond Company Ltd. recovered an exceptional 63.05-carat, type IIa diamond from alluvial mining operations at its Lulo diamond concession in Angola. The large stone was produced from mining area 31 at Lulo, which is north of the company's diamond processing plant. The diamond is the third-largest to be recovered at Lulo, with the two largest weighing 131.40 carats and 95.45 carats, which were recovered during bulk sampling south of the processing plant.
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Rockwell's Production +3%
Rockwell Diamonds Inc. reported that production rose 2.6% year on year to 6,932 carats in the fourth quarter that ended on February 28. Revenue increased 7.8% to $13.1 million as the average price for goods sold jumped 22.2% to $1,544 per carat.
During the fiscal year that closed on February 28, Rockwell Diamonds sold $50.8 million worth of goods at an average price of $1,345 per carat, compared with revenue of $45.2 million and an average price of $1,484 per carat in the previous fiscal year.
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Stellar's Baoulé Tender Achieves $195K
Stellar Diamonds realized $195,000 or an average $266 per carat from the sale of 733 gem-quality diamonds recovered from trial mining at its Baoulé project in Guinea. The diamonds formed part of larger sale of 4,414 carats.
The sale included a 5.55-carat diamond that sold for $5,000 per carat and several diamonds which achieved over $1,000 per carat.
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ECONWATCH
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Diamond Industry Stock Report
U.S. stocks little changed, except for Birks (+7%) and Blue Nile (-4%). Far East all higher, except Chow Sang Sang (-3%). European shares lower, led by LVHM (-6%) and Indian shares all down except for Lypsa (+1%) and Rajesh Exports (+14%). Mining shares mainly higher, except big declines for Peregrine (-10%) and Stellar (-9%). View the detailed industry stock report.
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Apr. 24 |
Apr. 16 |
Chng. |
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| $1 = Euro |
0.923 |
0.928 |
-0.005 |
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| $1 = Rupee |
63.28 |
62.30 |
1.0 |
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| $1 = Israel Shekel |
3.93 |
3.93 |
0.00 |
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| $1 = Rand |
12.15 |
11.97 |
0.18 |
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| $1 = Canadian Dollar |
1.21 |
1.22 |
-0.01 |
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| Precious Metals |
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| Gold |
$1,194.40 |
$1,198.90 |
-$4.50 |
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| Platinum |
$1,135.00 |
$1,159.00 |
-$24.00 |
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| Stock Indexes |
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Chng. |
| BSE |
27,735.02 |
28,666.04 |
-931.02 |
-3.2% |
| Dow Jones |
18,058.69 |
18,105.77 |
-47.08 |
-0.3% |
| FTSE |
7,053.67 |
7,060.45 |
-6.78 |
-0.1% |
| Hang Seng |
27,827.70 |
27,739.71 |
87.99 |
0.3% |
| S&P 500 |
2,112.94 |
2,104.99 |
7.95 |
0.4% |
| Yahoo! Jewelry |
1,364.52 |
1,375.00 |
-10.48 |
-0.8% |
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INDIA MARKET REPORT
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Polished Trading Activity
There was a slight improvement in demand and trading activity this past week, primarily due to demand from Hong Kong. Some shortages are evident as many
manufacturing units will head to summer vacations earlier than usual. Liquidity
continues to be tight.
Read the polished diamond trading report.
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