News: Hong Kong show opened strong but softened as Far East buyers refused to pay higher prices. Price standoff is restricting sales volume. Sellers report slightly higher prices but below their expectations. Good Demand for 1-3 cts., G-I, VVS-VS, X-VG+ goods with sellers pushing SI qualities to Far East markets. Trade is concerned about further rough price increases at next week’s sights. ALROSA Sept. sales about $200 mil. Rio Tinto predicts stronger demand and higher sales for 2H. Zale to restate 2007, 2008 financials after errors found. Retail Forward analysts predict flat sales growth for U.S. 4Q retail. Bloomberg reports Gordon Brothers buys Finlay assets for $116 mil. Rapaport offices closed Monday Sept. 28 for Yom Kippur.

SPECIAL MESSAGE FROM MARTIN RAPAPORT

Dear Friends,

Greetings and best wishes for the upcoming holiday season. I am writing to ask for your assistance regarding the distribution of the Rapaport Price List. Over the next few weeks and months we will be expanding the electronic distribution of the Price List. As we increase access we will also be implementing controls to ensure that only paid subscribers receive and have access to the Price List.

At this time I am personally appealing to our Rapaport subscribers not to redistribute the Rapaport Price List or give your password to any third parties. Your subscription and membership is personal. Please do not give copies of our list to third parties. I am also appealing to those who receive the Price List without a membership subscription to please join Rapaport directly by emailing join@rapaport.com or subscribing via our www.diamonds.net website.

The Rapaport Group is committed to significantly expanding our information and services to clients at reasonable cost. We will only share our knowledge and technology with honest and ethical clients who respect our intellectual property and the extensive investment we make in research and development. We will terminate our relationship with those that violate our terms of service, trading rules and compliance requirements. We will fully support and help increase the trade and profitability of clients that work with us in a fair and honest manner.

As the diamond trade adapts to the new realities of the marketplace, great opportunities await those who use advanced communication technology to reach and develop new customers. The Rapaport Group is on the cutting edge of new technologies and is committed to helping our clients use them to grow and prosper. I urge members of the diamond trade to join our efforts us and share the benefits.

Yours truly,
Martin Rapaport

ANNOUNCEMENTS:

RAPAPORT NY POLISHED DIAMOND TENDER
October 19–22, 2009

Wide assortment of round and fancy shape polished diamonds
Fine to commercial qualities, -6.5 sieve plate to 1+ carat.

By Appointment Only

Contact: Myles Schakler
Email:NYTender@diamonds.net
Phone: +1-212-354-9800

------------------------------------


QUOTE OF THE WEEK:

“This [zero growth rate as opposed to negative sales] is positive news as we move into the critical holiday season, but the economic environment will remain difficult. Sales declines will persist for specific retail channels—particularly apparel and home goods—but will end for aggregate measures of retail sales. The emerging recovery will be driven by growing confidence among households in response to, among other things, subsiding job cuts by businesses. Businesses, in turn, are taking their foot off the brakes in light of leaner inventories and expectations that pent-up demand and economic stimulus will soon require new business investment.”

Frank Badillo
Senior economist for Retail Forward


WORLD NEWS:

The September Hong Kong Jewellery & Gem Fair reported a record number of exhibitors spread out across a space 25 percent larger than that afforded by previous shows. Hong Kong buyers represented almost one-third of visitor traffic and another one-quarter arrived from mainland China. Notably, a decent number of visitors were present from the U.S., Taiwan and India. In contrast with other shows held earlier this year, exhibitors especially noticed that buyers from India were quick to close deals. There was, however, very little interdealer trading at the show. Demand was focused upon 1.00-3.00 ct., G-I, VVS-VS goods, while sellers were also finding increased success in SI clarities. H-I colors and lower are selling well in general. Participants noted some price increases, but they still failed to reach sellers’ expectations.
Read detailed coverage from the show.

The 44th Bangkok Gems & Jewelry Fair reported that traffic was on par with the 2008 level and this year’s show offered a fine diamond jewelry pavilion for the first time. Trading activity during the show centered on colored stones and silver jewelry. Diamond jewelry experienced weak activity. The show highlighted Thailand's aggressive branding initiative to become a major colored gemstone jewelry trading center. Thailand also reduced the value-added tax (VAT) on rough stone and precious metal imports in order to boost the local cutting, polishing and jewelry design trades.

ALROSA plans to sell between $190 million and $200 million worth of rough in September, much of which will be handled through long-term contracts. The company also plans to deliver a large supply of rough to the Gokhran. So far this year, Gokhran has purchased about $395 million in rough.

Rapaport Weekly Broadcast
Diamond jewelry and major brands were plentiful on the red carpet at the 61st annual Emmys. See some of the pieces up close. 


RETAIL & WHOLESALE:

Zale will restate its financial results for fiscal years 2007 and 2008 and expects to provide interim results for fiscal 2009 by October 29. Zale has twice delayed releasing its 2009 results pending review of the prior two years. The company's balance sheets for 2007 and 2008 misreported $41 million in prepaid advertising costs. Additional adjustments were required to aggregate approximately $9 million on a pre-tax basis from charges related to accounts receivable and depository bank account reconciliations. Another $4 million charge related to federal income taxes will be recorded in fiscal 2008.

Finlay Enterprises and its affiliates and subsidiaries completed an auction for its business and assets under provisions of the United States Bankruptcy Court in New York. The winning bid went to Gordon Brothers Retail Partners and the group will conduct "store closing" or similar sales of merchandise located at all of Finlay's locations, including distribution centers. The transaction must be approved by the court, and once approved could complete by February 28, 2010.

Weekly U.S. chain store sales were basically flat from one year ago for the week that ended September 19, 2009, according to the International Council of Shopping Centers (ICSC) and Goldman Sachs. Foot traffic slowed and customer traffic was sharply lower at department stores.

Lazare Kaplan could be delisted from the New York Stock Exchange (NYSE) if it fails to meet certain conditions required by the exchange. Lazare Kaplan delayed filing its annual report, but it has notified the exchange that it will submit a plan of action by September 30, 2009 detailing the measures necessary for it to achieve compliance by December 15. Failure to submit the plan or the rejection of the plan by the exchange would also subject Lazare Kaplan to delisting.

Stuller introduced a Red Box Diamond Giveaway through Facebook in conjunction with the release of its iPhone application to consumers in order to help drive bridal shoppers to local, independent Red Box Diamond retailers. Stuller hopes to generate excitement among consumers, which would result in increased business for the retailers.


MINING:

Rio Tinto told investors that sales and supplies of rough have risen recently and will continue to increase for the remainder of the year. Rio Tinto is a partner in the Diavik mine, where production has so far exceeded the company’s expectations for 2009. Diavik has undergone an expansive shift toward underground mining and Rio Tinto expects underground production to begin there in early 2010.

Peregrine Diamonds discovered large diamonds and a coarse diamond-size distribution from samples collected at the Chidliak project on Baffin Island in Nunavut, Canada. One sample from CH-6 yielded 2,730 diamonds that were larger than the 0.075 mm. sieve size, including 131 diamonds bigger than the 0.600 mm. sieve size. The largest diamond recovered from the sample was a 0.62-carat, white, transparent aggregate. Another sample from CH-5 revealed a diamondiferous pipe with a 423.7 kg. surface sample yielding 49 diamonds larger than the 0.075 mm. sieve size.

Lucara Diamond was granted a ten-year diamond mining lease by Lesotho for its Mothae project concurrent with a diamond mining agreement between Lucara and the government. Lucara will hold a 75-percent stake in the project, while the government will hold a 25-percent share. Lucara can now move forward with pre-production testing. A diamond valuation conducted in June resulted in a modeled diamond value of $549 per carat for Mothae.

TanzaniteOne reported an interim first half loss of $580,000, a sharp decline from its profits of $3.5 million for the first half of 2008. Revenue fell 77 percent to $4.9 million. The number of carats recovered fell 21 percent and the cash cost per carat rose to $3.99 from $3.38. The mining company noted that its second sight of the year was delayed and held in July, which further eroded its first-half revenue. This sale achieved $2.01 million and will be included in TanzaniteOne’s second-half results.


ECON WATCH:

	Sept. 24	Sept. 17	Chng.
$1 = Euro	0.683	0.678	0.005
$1 = Rupee	48.30	48.12	0.2
$1 = Israel Shekel	3.75	3.74	0.01
$1 = Rand	7.46	7.39	0.07
$1 = Canadian Dollar	1.08	1.06	0.02
Precious Metals
Gold	$993.70	$1,011.80	-$18.10
Platinum	$1,297.00	$1,335.00	-$38.00
Stock Indexes				Chng.
BSE	16,781.43	16,711.11	70.32	0.42%
Dow Jones Avg.	9,706.46	9,784.22	-77.76	-0.79%
FTSE	5,079.27	5,163.95	-84.68	-1.64%
Hang Seng	21,050.73	21,768.51	-717.78	-3.30%
S & P 500	1,050.75	1,065.50	-14.75	-1.38%
Yahoo! Jewelry Index	1,015.80	1,067.42	-51.62	-4.84%
USA
Birks & Mayors	$0.58	$0.59	-$0.01	-1.19%
Blue Nile	$60.01	$61.73	-$1.72	-2.79%
Charles & Colvard	$0.63	$0.70	-$0.07	-10.00%
DGSE Companies, Inc.	$1.42	$1.41	$0.01	0.71%
Fuqi International	$29.32	$30.57	-$1.25	-4.09%
JCPenney	$32.87	$33.67	-$0.80	-2.38%
Kohl's	$54.76	$54.87	-$0.11	-0.20%
Lazare Kaplan	$2.50	$2.50	$0.00	0.00%
LJ International	$2.18	$2.24	-$0.06	-2.68%
Macy's	$18.02	$17.68	$0.34	1.92%
Man Sang	$2.55	$2.12	$0.43	20.28%
Movado Group	$14.76	$13.77	$0.99	7.19%
Nordstrom	$30.61	$31.68	-$1.07	-3.38%
Saks	$6.94	$7.13	-$0.19	-2.66%
Signet	$25.35	$26.51	-$1.16	-4.38%
Sotheby's	$16.03	$16.75	-$0.72	-4.30%
Tiffany	$36.83	$38.84	-$2.01	-5.18%
Wal-Mart	$50.69	$49.90	$0.79	1.58%
Zale	$7.28	$7.35	-$0.07	-0.95%
EUROPE
Bulgari	€5.21	€5.56	-€0.35	-6.29%
Bijou Brigitte	€116.73	€126.69	-€9.96	-7.86%
LVMH	€67.79	€69.74	-€1.95	-2.80%
Pinault P-R SA	€84.31	€87.00	-€2.69	-3.09%
Richemont SA	CHF 29.18	CHF 29.82	-CHF 0.64	-2.15%
Swatch Group	CHF 233.60	CHF 239.00	-CHF 5.40	-2.26%
Theo Fennell (pence)	34.00	35.00	-1.00	-2.86%
INDIA (rupee)
Classic Diamond	25.90	25.60	0.30	1.17%
Gitanjali Gems	117.50	121.05	-3.55	-2.93%
Rajesh Exports	74.95	74.05	0.90	1.22%
Ren. Jewellery	48.15	51.90	-3.75	-7.23%
Su-Raj Diamonds	52.25	52.75	-0.50	-0.95%
Titan	1,249.85	1,275.30	-25.45	-2.00%
Zodiac JRD	22.05	21.55	0.50	2.32%
Suashish Diamonds	214.65	221.35	-6.70	-3.03%
NEW ZEALAND
Michael Hill	NZD 0.72	NZD 0.75	-NZD 0.03	-4.00%
MINING STOCKS
CANADA
Harry Winston	CAD 9.14	CAD 9.52	-CAD 0.38	-3.99%
Mountain Province	CAD 2.65	CAD 1.74	CAD 0.91	52.30%
Peregrine Diamonds	CAD 1.80	CAD 0.73	CAD 1.07	146.58%
Rockwell Diamonds	CAD 0.05	CAD 0.05	CAD 0.00	0.00%
Shore Gold	CAD 1.07	CAD 1.45	-CAD 0.38	-26.21%
Stornoway Diamond	CAD 0.15	CAD 0.16	-CAD 0.01	-6.25%
True North Gems	CAD 0.12	CAD 0.12	CAD 0.00	0.00%
UK (pence)
African Diamonds	29.75	29.00	0.8	2.59%
Anglo American	2,062.08	2,125.00	-62.9	-2.96%
BHP Billiton	1,686.62	1,766.00	-79.4	-4.49%
Firestone Diamonds	37.25	40.75	-3.5	-8.59%
Gem Diamonds	243.60	251.90	-8.3	-3.29%
Gemfields	6.75	6.90	-0.2	-2.17%
Mano River	8.63	7.75	0.9	11.35%
Mwana Africa	12.25	12.00	0.3	2.08%
Namakwa Diamonds	33.05	35.05	-2.0	-5.71%
Petra Diamonds	53.00	42.00	11.0	26.19%
Rio Tinto plc	2,686.09	2,740.00	-53.9	-1.97%

INDIA MARKET REPORT:

POLISHED: Many traders and their inventory are at the Hong Kong show with high hopes of securing transactions.
Round
-1 point:	Good demand: +$100 whites.
	Fair demand: $200-$300 OWTTLB/TTLC.
-2 point:	Good demand: $250-$400 whites.
	Fair demand: $100-$200 whites.
2-7 point:	Good demand: +$100 whites.
	Fair demand: $300-$400 OWTTLC.
8-18 point:	Good demand: +$500 whites.
	Fair demand: $150-$350 whites; $350-$450 TTLC.
20 points:	Fair demand: +$600 whites.
25 points:	Fair demand: +$700 & $200-$400 whites.
33 points:	Fair demand: +$900 & $250-$400 whites.
50 points:	Good demand:+$2000 whites.
	Fair demand: $300-$800 whites.
75 points:	Good demand: +$2000 & $700-$900 whites.
1 carat+:	Very good demand: +$1500 whites.
	Good demand: $500-$1000 whites.
Princess
-3 point:	Good demand: $300-350 whites.
	Fair demand: $200-$275 whites.
+3 point:	Good demand: $350-$400 whites.
	Fair demand: $200-$300 whites.
+9-18 point:	Good demand: +14 pts $550-$600 whites.
	Fair demand: $250-$350 whites.
20 point:	Fair demand: $700-$750 whites.
25 point:	Fair demand: $800-$850 whites.
50 point:	Good demand: $1600-$1,800 whites.
75 point:	Fair demand: $1,000-$1,200 whites.
1 carat+:	Good demand: +$1,500 whites.
Marquise
-6 point:	Good demand: $400-$500 whites.
	Fair demand: $250-$350 whites.
+7-18 point:	Good demand: $600-$700 & +14 pts $800-$850 whites.
	Fair demand: $250-$400 whites.
20 point:	Fair demand: $900-$1,000 whites.
25 point:	Fair demand: $1,100-$1,200 whites.
33 point:	Fair demand: $1,300-$1,500 whites.
50 point:	Fair demand: $1,600-$1,800 & $600-$700 whites.
75 point:	Fair demand: $1,100-$1,400 & $2,600-$2,800 whites.
1 carat+:	Good demand: $300-$600 & +$1,000 whites.
Tapers & Baguettes
	Good demand: $600-$800 +5mm whites. $250-$325
	2mm-2.5mm whites; $350-$400, 2.5mm-3mm whites;
	$400-$450 3mm-4mm, $500-$600 4mm –
	5mm & $175-$250 +2mm-3mm whites.
ROUGH: Activity improving for fancy shapes, I+, VS1+, overall though, activity in the local rough market is slow.
1-5 point:	Good demand: $80- $120 makeables; $100-$180 crystals.
	$35-$70 makeables.
	Fair demand: $7-$20 & $40-$80 OW TTLB & TTLC.
6-20 point:	Good demand: $150-200 crystals; $80-$170 makeables.
	Good demand: $60-$110 fancy shapes;
	Fair demand: $40-$50 clivage;
	$50-$90 OW TTLC & TTLB rounds.
21-50 point:	Good demand: $200-260 makeables; $100-$180 & $220-$280 crystals.
	Good demand: $80-$190 fancy shapes;
	Fair demand: $95-$200 rounds; $50- $90 clivage.
	Fair demand $20-$40 OW TTLC & TTLB.
0.51-1.00 carat:	Good demand: $150-$300 makeables;
	$120-$240 & $270-$440 crystals.
	Good demand: $70-$100 makeables;
	Good demand $90-$200 fancy shapes;
	Fair demand $60-$90 OW TTLC & TTLB; $40-$70 clivage;
1.01-2.00 carat:	Good demand: $200-$550 rounds;
	$250-$700 crystals; $90-$130 clivage; $180-$360 all fancy shapes.
	Fair demand $140-$180 OW TTLC & TTLB.
2.01-3.00 carat:	Good demand: $250-$1,000 makeables; $350-$1,300 crystals;
	$400-$800 fancy shapes.
	Fair demand: $250-$325 clivage; $100-$325 flats & TTLC & TTLB
	$350-$800 OW.
5.00 carat+:	Good demand: $1,000+ makeables, crystals & all fancy shapes till L color.
Mixed Lot:	Good demand: $2-$40.

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