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Rapaport TradeWire April 18, 2014
Apr 17, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Apr. 18, 2014
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Polished trading quiet due to holidays. Cutting center demand slows with weaker market conditions and high rough prices. ALROSA 2013 production +7% to 37M cts., revenue +12% to $4.7B, profit -5% to $885M. Rio Tinto 1Q production +13% to 3.7M cts. Luk Fook 4Q same-store sales -10%. Christie's NY jewels sale achieves $61M (82% sold by lot) with 22.60ct. & 22.31ct. D, IF pair of circular-cut diamonds selling for $191K per/ct. and a 6.10ct., VVS1 fancy intense-pink rectangular-cut diamond selling for $5.8M or $945K per/ct. U.S. jewelry store sales +4% to $3B in Feb. U.S. jewelry price inflation -3% in March. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED ON APRIL 18 DUE TO THE JEWISH HOLIDAY OF PASSOVER.
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| RapNet Data: Apr. 17 |
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| Diamonds |
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1,023,914 |
| Value |
$6,525,356,932 |
| Carats |
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1,130,065 |
| Average Discount |
-26.64% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
By the time you try to follow [a laundered] KP certificate, it has gone through so many layers and has been exchanged numerous times; you'd never be able to get to the country of origin. And the origin would, ultimately, show that licensed diamond dealer who was hired to get that certificate -- he or she would be on the certificate -- not the actual owner of the diamonds.
Eric Ives | FBI's Intl. Organized Crime Task Forces
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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, Mumbai, Dubai and Shanghai. View jobs now.
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INDUSTRY
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ALROSA's Profit -5%
ALROSA's profit fell 5% year on year to $885.3 million (RUB 31.8 billion) in 2013 as foreign-exchange losses mounted due to a weakening ruble. Revenue from diamond sales grew 11% to $4.01 billion and total group revenue, including non-diamond business unit sales, rose 12% to $4.69 billion. The quantity of gem-quality diamonds sold during the year rose 15% to 38 million carats. Group production rose 7% to 36.9 million carats. ALROSA's cost of sales increased 19% to $2.27 billion, while group debt increase 13% to $3.85 billion. ALROSA noted that the average price of its gem-quality diamonds fell 9% to $176 per carat during the year. Prices peaked at $192 per carat in the fourth quarter rising from $185 per carat in the third quarter.
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U.S. Jewelry Store Sales +4%
U.S. jewelry store sales rose 3.7% year on year to $2.914 billion in February, which included Valentine's Day. The rate of sales growth was identical to that of one year ago. Meanwhile, the consumer price index (CPI) for jewelry fell 2.6% during February. The CPI fell 2.5% in March. Jewelry store sales for the first two months of 2014 have risen 5.3% to $5.041 billion.
As previously reported by Rapaport News, preliminary jewelry sales across all retail segments in February improved 6% year on year to $5.842 billion, while watch sales jumped 8.9% to $783 million. In broader retail news, advanced estimates for U.S. department store sales in March fell 5.7% year on year to $13.47 billion, marking a steeper decline than February when sales fell 4.7% to $11.843 billion.
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RETAIL & WHOLESALE
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Luk Fook's Same-Store Sales -10%
Hong Kong-based jeweler Luk Fook Holdings reported that group same-store sales growth at its retail business dropped 10% year on year in the fourth quarter that ended on March 31. Without providing hard totals, the company reported same-store sales growth in Mainland China rose by 1%, while comparable-store sales declined 12% in Hong Kong and Macau. The group's gold product same-store sales growth fell 15% during the quarter and gem-set jewelry sales declined 2%.
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Christie's Jewels Sale Garners $61M
Christie's New York sale of magnificent jewels achieved $60,561,125 and was 82% sold by lot. The top lot garnered $8,565,000 for a pair of circular-cut, D, internally flawless diamonds of 22.60 carats and 22.31 carats. Other top lots included a 40.43-carat, D, potentially flawless, oval-cut diamond that sold for $7,669,000; a 6.10-carat, VVS1, fancy intense pink, rectangular-cut diamond ring by Harry Winston which sold for $5,765,000 and a 20.10-carat, D, VVS1, rectangular-cut diamond by Harry Winston that sold for $2,461,000.
In May, Christie's Geneva will auction "The Blue," a 13.22-carat diamond with a presale estimate of $21 million to $25 million. The diamond is internally and externally bereft of any imperfections and it has been in the owner's possession for a long time. The Blue will be auctioned during the same sale as "The Ocean Dream," a 5.50-carat, fancy vivid blue-green diamond, with a presale estimate of $7.5 million to $10 million and "The Rajah" diamond, which has a presale estimate of $3 million to $5 million.
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Michael Hill's Comps +5%
Michael Hill International reported that preliminary revenue increased 10.5% year on year to $350 million (AUD 372.1 million) for the nine months that ended on March 31. Comparable-store sales rose 5.4%. In local currencies, revenue in Australia increased 5.4%, while same-store sales rose 1.4% and in Canada, revenue surged 30.6%, while same-store sales jumped 9.4%. In New Zealand, sales fell 2.6% and same-store sales contracted by 2.6%, while in the U.S, revenue fell 7%; however, comparable-store sales increased 2.8%.
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OFAC Adds Sino Zim, Sam Pa
The U.S. Treasury's Office of Foreign Assets Control (OFAC), which lists specially designated nationals and blocked persons, all of whom U.S. citizens and businesses must avoid, added Sino Zim Development Ltd. and Sam Pa on April 17, both of which are alleged to have ties with the diamond trade. OFAC sanctions already forbid U.S. citizens and business alike from conducting trade with, among many non-diamond entities, Marange Resources, Mbada Diamonds, Oryx Diamonds, the Zimbabwe Mining Development Corporation (ZMDC) and the Minerals Marketing Corporation of Zimbabwe (MMCZ), along with dozens of politicians, including President Robert Mugabe and most of his family.
Sino Zim Development also operates as Sino Zim Holdings and Sino Zimbabwe Cotton Holdings on the third floor of Livingstone House, 48 Samora Machel Avenue, Harare, Zimbabwe with a P.O. Box 7520 and a local telephone number of 04.710.043. Pa's aliases include Sam King, Samo Hui, Xu Jinghua, Tsui Kyung-Wha, Ghiu Ka Leung and Antonio Famtosonghiu Sampo Menezes. Pa was born on February 28, 1958, his nationality is from China, citizenship is from Angola and he has an alternate citizenship from the U.K. under the passport number C234897(0).
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Tracking Crime, Supply Chain Threats
Crime against the U.S. diamond and jewelry industry has been greatly reduced in the past decade as a result of increased vigilance and a cooperative working relationship between Jewelers Security Alliance (JSA), the FBI and the Gemological Institute of America (GIA); however, threats do remain to both the safety of industry personnel and to the integrity of the supply chain.
Eric Ives, the unit chief for the FBI's international organized crime task forces, told Rapaport News that the free-flow of information between industry groups enables immediate tracking of crime patterns and suspicious activity. "JSA is the bridge between law enforcement and the jewelry industry," he said, and it fulfills training requests to local authorities as well as the FBI to keep on top of and identify crime patterns and suspicious activity to prevent crime.
Emerging industry threats that the FBI, JSA and the GIA are monitoring include numerous imports of fake colored gemstones and counterfeit jewelry, although there are no real clear trends yet to establish a pattern or source of origin. A second issue Ives noted, global authorities are observing Kimberley Process (KP) certificate laundering, whereas rough diamonds are removed from their original location, destined for another country and it is there they are presented for the first KP certificate.
But then these diamonds are transferred to yet another country for a second KP certificate so that the parcel's country of origin will be shown as mixed. Ives noted, too, that a corrupt KP licensed diamond dealer may obtain a certificate that reflects a substantially lower value for the goods, for example listing the diamonds' value at $10,000 when in fact the value may be $100,000, which then lowers the export tax due. In both cases, by the time the certificate goes through other corrupt cycles in the supply chain, the parcel of diamonds eventually reflects closer to market value but no clear indication of origin by time they reach Antwerp or New York, Ives stated.
He reminded the trade to be diligent, vigilant and to survey the environment for abnormal activity and to call police if anything appears to be suspicious. "Many jewelry crimes have been thwarted because they have read the JSA's crime alerts and call police before a crime happens to them," he said.
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London Bourse Presents Membership to Shine
The London Diamond Bourse granted Varda Shine an honorary membership in recognition of her long standing service to the diamond industry. The recognition marks one of very few times the bourse granted this privilege. Shine stepped down from her role as CEO of the De Beers Group's Diamond Trading Company (DTC) at the beginning of 2014, after joining the company in 1984.
Victoria McKay, the chief operating officer of the London Diamond Bourse, said, “The London Diamond Bourse is delighted to present honorary membership to Varda Shine. Varda is a valued member of the diamond community. She brings to everything she does experience, astuteness, an incisive and clear mind, a respect for colleagues and, above all, a belief in innovation within the diamond industry. We are delighted to count her amongst our members.”
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Saul Gottlieb Passes Away
Saul Gottlieb the founder of Gottlieb & Sons passed away at the age of 88. Originally from Ladomirova, Czechoslovakia, Gottlieb survived the Holocaust, was liberated in March of 1945 and after learning the craft of jewelry making in Antwerp, resettled in Cleveland, Ohio, with only $90 and limited knowledge of the English. He eventually built one of the largest and most well respected international diamond and jewelry manufacturing companies in the U.S. Gottlieb is survived by his wife, three sons and their wives, eight grandchildren and two great grandchildren.
Friends may contribute to the Gottlieb Family Holocaust Memorial Fund c/o B'nai Jeshurn, 27501 Fairmount Blvd. Pepper Pike, Ohio, 44124 or The Survivors Initiative c/o The Jewish Community Federation of Cleveland.
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Court Upholds Most of Conflict Minerals Law
Companies covered by the Dodd-Frank Act continue to prepare Securities & Exchange Commission (SEC) filings on the origin of conflict minerals, according to the Jeweler's Vigilance Committee (JVC). The conflict minerals are tin, tantalum, tungsten and gold. In addition, companies covered by the law must exercise due diligence regarding their supply chains if the conflict minerals they use may have originated in the Democratic Republic of the Congo (DRC) or an adjoining country. Companies will only be able to comply with the requirements if they have the cooperation of their direct and indirect suppliers. Therefore, businesses in the supply chains of covered companies will continue to be called upon to provide information about mineral origin and to implement responsible supply chain processes.
The U.S. Court of Appeals for the District of Columbia Circuit issued an opinion that requiring certain companies to publicly report their products have “not been found to be ‘DRC Conflict-Free’” violates the First Amendment by unconstitutionally compelling speech. The ruling does not change the requirement that a disclosure must be made to the SEC if a company determines that its products contain minerals tainted by conflict. The disclosure, however, may be in language that the company chooses. The case has been returned to the District Court for further proceedings.
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MINING
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Rio Tinto's Production +13%
Rio Tinto's diamond production grew 13% year on year to 3.650 million carats in the first quarter that ended on March 31. The increase was mainly the result of greater production at the company's Argyle diamond mine in Australia.
Production at Argyle rose 24% to 2.461 million carats due to higher-grade ore from the underground mine and processing of highly concentrated tailings.
Rio Tinto’s 60% share of production from the Diavik mine in Canada decreased 4% to 1.119 million carats. Rio Tinto’s 78% share in production at the Murowa mine in Zimbabwe decline 12% to 69,000 carats during the period as a result of lower grades, slightly lower ore processed and the impact of wet weather on mining operations, which were partially offset by processing previously stockpiled material.
The company expects to produce 16 million carats in 2014.
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Diavik Production -4%
Dominion Diamond Corporation reported that its share of production at Canada's Diavik mine dropped 4% to 746,000 carats in the first quarter that ended on March 31. The company, which owns a 40% stake in the mine, attributed the lower amount of carats produced to mining and processing a larger amount of lower-grade ore from the A-154 North pipe during the period.
On a 100% basis, Diavik produced 1.9 million carats from 600,000 tonnes of ore during the quarter compared with 1.9 million carats produced from 500,000 tonnes one year ago.
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Trans Hex Tender Achieves $10M
Trans Hex reported that the March tender of its South African diamond production garnered $10 million (ZAR 106.5 million) or an average $1,684 per carat from the sale of 5,886 carats of diamonds. Nine diamonds sold for over $10,000 per carat, including a 22.50-carat diamond from the Baken mine, which sold for over $49,000 per carat.
Trans Hex's South African operations produced 52,081 carats for the year that ended on March 31, with 30,232 carats being produced just between October 2013 and March. The group will report its financial results in June.
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ECONWATCH
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Diamond Industry Stock Report
Mixed trading across the retail and wholesale sector with JCPenney (-12%) under pressure to perform better in the U.S., while Classic Diamond (+13%) and Goenka Diamond (+21%) show strong gains in India. Diamond mining shares all lower except for Firestone (+3%) and Stellar (+15%). View the extended stock report.
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Apr. 17 |
Apr. 10 |
Chng. |
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| $1 = Euro |
0.723 |
0.720 |
0.003 |
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| $1 = Rupee |
60.31 |
60.09 |
0.2 |
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| $1 = Israel Shekel |
3.48 |
3.46 |
0.02 |
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| $1 = Rand |
10.49 |
10.47 |
0.02 |
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| $1 = Canadian Dollar |
1.10 |
1.09 |
0.01 |
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| Precious Metals |
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| Gold |
$1,295.10 |
$1,318.10 |
-$23.00 |
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| Platinum |
$1,411.00 |
$1,449.00 |
-$38.00 |
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| Stock Indexes |
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Chng. |
| BSE |
22,628.84 |
22,715.33 |
-86.49 |
-0.4% |
| Dow Jones |
16,408.54 |
16,170.22 |
238.32 |
1.5% |
| FTSE |
6,625.25 |
6,641.97 |
-16.72 |
-0.3% |
| Hang Seng |
22,760.24 |
23,186.96 |
-426.72 |
-1.8% |
| S&P 500 |
1,864.85 |
1,833.08 |
31.77 |
1.7% |
| Yahoo! Jewelry |
1,027.83 |
1,034.56 |
-6.73 |
-0.7% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Weaker demand continues, very few overseas buyers are in the market presently and liquidity remains very tight. Read the full report.
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