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Rapaport TradeWire March 30, 2012

Mar 29, 2012 6:00 PM   By Rapaport
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RAPAPORT NEWS SERVICE | March 30, 2012   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment March 30, 2012

Polished markets quiet but prices strong. Small DTC March sight estimated at $520M with prices +2% as sightholder contracts end. Indian rough demand improves but manufacturing still restrained. Rio Tinto explores sale of diamond business as 2011 production -15% to 11.73M cts. Russia’s 2011 diamond production +0.8% to 35.14M cts. but exports +37% to $3.8B. De Beers estimates global diamond jewelry sales +10% in 2011 with China +22%. Chow Sang Sang 2011 revenues +47% to $2.2B, profits +45% to $143M. Indian jewelers continue strike as govt. set to impose excise duty and raise import tax on gold.

RapNet Data: Mar. 29
     
Diamonds   871,460
Value $5,837,228,170
Carats   921,302
Average Discount -26.31%

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  QUOTE OF THE WEEK
  We regularly review our businesses to ensure they remain aligned with Rio Tinto's strategy of operating large, long-life, expandable assets. We have a valuable, high-quality diamond business, but given its scale we are reviewing whether we can create more value through a different ownership structure.

Harry Kenyon-Slaney | Rio Tinto Diamonds

Careers@Rapaport  
 
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. To get on the fast track, email your resume to careers@rapaport.com.


INDUSTRY  
 
DTC March Sight

De Beers raised prices an average of 2% to 3% at the Diamond Trading Company (DTC) sight this week as the mining company has curbed its rough supply in the first quarter of 2012. The March sight had an estimated value of $520 million and sight participants noted that rough demand has improved, particularly from Indian cutters, but they added that DTC boxes are considered expensive at the moment.

Rough premiums on the dealer market increased in the past two weeks as market sentiment improved following the Basel and Hong Kong shows. DTC boxes and ALROSA goods have been selling at an average 5% premium. Sightholders observed that the price increases mainly affected the Indian goods. DTC sales during the first quarter likely fell 13% year on year to $1.77 billion, according to Rapaport estimates.



 
KP Warns the Trade on Cameroon

The Kimberley Process is aware of a number of fake certificates coming out of Cameroon. Any document purporting to be a Kimberley Process certificate from the country should not be used and no rough diamonds may be imported from Cameroon into the territory of any Kimberley Process participant. Cameroon is not a member state, however, it is making progress toward compliance. The Kimberley Process will provide further notice when Cameroon has achieved participant status and is eligible to issue certificates and trade rough diamonds. Information regarding fake certificates should be sent to kpcs.chair@state.gov.



 
Protests Open Door for Tax Rethink

India's Finance Minister, Pranab Mukherjee, is re-considering his budget proposal to tax unbranded jewelry following major protests by local jewelers across the country. He is also examining the issue of making PAN card declaration mandatory for buying jewelry of more than $3,938 (INR 200,000) in cash.

There is no plan to bring the jewelers with a turnover of up to $984,640 (INR 50 million) within the tax limit and he held firm on the proposed customs duty for gold as the government seeks to reduce imports due to current account deficit. Indian bullion traders and jewelry retailers, unhappy with the finance minister’s plans have been on strike since March 17 to oppose the proposed measures. Trading groups across the diamond industry in Mumbai will remain closed on Friday in support of the protest.




RETAIL & WHOLESALE  
 
Diamond Jewelry Sales +10%

Global diamond jewelry sales increased by 10% in 2011 spurred by continued growth in China, according to De Beers research. The rate of growth was on par with the increase in 2010. De Beers concluded that sales were boosted by increased diamond prices, which apparently led consumers to seek lower-quality or smaller diamonds. China posted the strongest sales growth, rising by 22% during the year, and overtook India and Japan to become the second largest diamond market behind the U.S.

De Beers estimated that China has 11% of the global market share now, whereas the U.S. accounts for about 38%. U.S. consumers focused on buying 0.50-carat to 0.99-carat, H+, SI last year, whereas in China and Japan, the popular items were 0.18-carat to 0.49-carat, H+ with VS clarity in China and SI clarity in Japan. The strongest items in India were 0.02-carat to 0.07-carat, H+, VS-SI goods. Bridal dominated the market, particularly in the U.S. where bridal and engagement rings had a “clear lead” over diamond jewelry. Earrings were important in India and necklaces were big sellers in Japan, while both bridal and non-bridal solitaire products dominated sales in China.



 
Chow Sang Sang Profit +45%

Chow Sang Sang's revenue rose 47% year on year to $2.21 billion and profit increased 45% to $143.2 million for 2011. The company's jewelry retail sales rose 53% as sales in Hong Kong and Macau surged, while wholesale revenue jumped 31%. Inflation-curbing measures in China did not deter mainlanders from spending, whether they were at home or in Hong Kong. Chow Sang Sang maintained a positive outlook for 2012 despite economic uncertainties and high gold prices. The value of the company's inventory rose 27% to $800.3 million.




 
Kingold Profit +44%

Kingold Jewelry's fiscal year sales rose 51% year on year to $789 million, while cost of sales increased 52% to $747 million, for the period that ended on December 31. Net income attributable to shareholders jumped 44% to $26.2 million. Despite the strong performance, Kingold Jewelry noted a weaker fourth-quarter.



 
Movado Turns a Profit in 2011

Movado Group reported fiscal-year sales rose 22.5% year on year to $468.1 million for the period that ended on January 31. Cost of sales rose 6% to $211.8 million, which helped the retailer out of the red and to report net income of $32 million compared with a loss of $47.2 million one year ago. Movado's inventory as of January 31 fell 10% to $163.7 million.



 
U.S. Ring Budgets Drop Slightly

The average budget for an engagement ring in 2011 dropped 5% year on year to $5,130, according to the latest ''Real Weddings Survey'' produced by XO Group for TheKnot.com and the WeddingChannel.com. While the average in real dollars was less, the amount bought even less, for the U.S. consumer price index for jewelry in 2011 rose 9.5%. Nonetheless, the survey, which captured detailed budget plans of 18,000 couples who were active with the sponsoring websites, revealed that the average wedding budget (excluding the honeymoon) was flat year to year at $27,021.



 
SRS Mulls Selling Stake

SRS Ltd. revised the utilization of its initial public offering (IPO) proceeds and is considering selling a stake in SRS Jewells Ltd. The board will meet on March 31 to consider the plan. SRS shareholders approved a special resolution to revise the utilization of IPO proceeds in February. SRS has business interest in jewelry manufacturing, retail and entertainment.



 
Cartier Appoints New Chief

Stanislas de Quercize has been appointed the chief executive of Cartier and will replace Bernard Fornas at the end of this calendar year. De Quercize has been the chief executive of Van Cleef & Arpels since 2005 and will continue in that capacity until he assumes the new position. He has also had an extensive career within the group since 1989, working at Montblanc, Alfred Dunhill and Cartier where he held the post of president in the United States.



 
De Beers Retail Launches New App

De Beers Diamond Jewellers will launch a new bridal app for the iPad and iPhone in April, which will be available in five different languages, aim to help consumers discover engagement and wedding jewelry. The app will feature videos that give consumers expert advice on how to choose the best ring, information on the design and craftsmanship of De Beers jewelry, and the ability to locate the nearest De Beers Diamond Jewellers store to arrange an appointment.



 
Aaron Farber to Host Jewelry Artists of Quebec

The Aaron Faber Gallery in Manhattan will host the “Innovation and Craftsmanship in Metal: Jewelry Artists of Québec” exhibition from May 3 to May 26, featuring 14 of Québec’s jewelry artists along with their work. The exhibition was created in partnership with the Québec government office in New York and SODEC, the Québec government body that promotes synergy between business and culture.





 
U.S. Consumer Confidence Rises

U.S. consumer confidence rose 11% year on year to 70.2 points in March, according to The Conference Board. While the reading was still far below the important benchmark of 100 points, it was slightly lower than The Conference Board Consumer Confidence Index® of 71.6 points in February. The Present Situation Index increased to 51 points from 36.9 points one year ago and the Expectations Index rose by two points to 83 in March.



MINING  
 
Mining Progresses in Canada, Africa

 WATCH NOW: Diamond miners and explorers from Canada and Africa updated shareholders on their progress. Lucara Diamond and Botswana Diamonds reported financial results and updated shareholders on key pipeline projects. Stellar Diamonds reported strong maiden resource estimates from its Tongo project. View the campaign materials from "Our Diamonds, Our Pride" a marketing effort developed by Debswana and the Botswana Export Development & Investment Authority.



 
Rio Tinto Considers Exit From Diamonds

Rio Tinto is considering exiting the diamond business, but it is very much business as usual in the states and countries where the company operates. The diamond market outlook is positive and discoveries are limited, but the company decided it was time to review its assets and explore ways to improve the value for shareholders.


 
Shore Gold's Loss Grows

Shore Gold recorded a net loss of $219.9 million or 98 cents per share for the fiscal year that ended on December 31. The company reported a loss of $26 million the previous year. Shore Gold registered impairment charges of certain previously capitalized exploration and evaluation assets of $208.4 million in 2011. The company sold some investments for $1.3 million during the year. Shore Gold held working capital of $15.9 million as of December 31, but it is actively pursuing financial options to go forward with its Star-Orion South diamond project.



 
Gemfields Sale Nets $26M

Gemfields conducted an auction of predominantly medium to high-quality rough emeralds in Singapore this past week and revenues came to $26.2 million, representing a price per carat of $38.25. The auction was 87% sold by lot and 94% sold by value. The next auction will be held in Jaipur in June.



 
Namdeb Funds New Mine

Namdeb expects to develop a new diamond mine at Sendelingsdrift, on the Orange River, and approved construction funding of approximately $36 million, according to fin24 news. Production is expected to yield 45,000 carats per year beginning in late 2013 with the life span of mine projected to be seven years.



 
India Seeks More ALROSA Rough

India is seeking more rough supply from Russia and pushed for and early close to ALROSA's supply contracts so that more Indian firms can apply for the next round of long-term contracts. The move would enable India's state-run trading company MMTC Ltd. and the Hindustan Diamond Company Private Limited (HDCPL) to apply for rough from ALROSA. The request was also made of Russia to formalize a way for Indians to buy from Gokhran.



 
De Beers Transitions Towns

De Beers and the Nama Khoi Local Municipality in South Africa announced the integration plan of Kleinzee, following a similar proclamation made for the town of Koingnaas in August. Both towns were established and managed by De Beers to cater to the company’s employees working at Namaqualand mines. Koingnaas is in the process of being integrated as part of the Kamiesberg municipality and Kleinzee will join the Nama Khoi Local Municipality. In anticipation of the transitions, De Beers has invested about $12 million (ZAR 90 million) in the refurbishment of municipal infrastructure to ensure that the towns are in a good shape when handed over to the respective municipalities.



ECONWATCH  
 
Diamond Industry Stock Report

Diamond-industry related shares were largely mixed this week. Movado Group pulled ahead 11% after reporting strong results, Sotheby's was up 6%, European shares were lower and Indian stocks experienced volatile readings with Classic Diamonds (-11%) and Gitanjali (-12%) in negative territory while Goenka (+13%), Rajesh (+10%) and Vaibhav Gems (+17%) pulled ahead.
Read the extended industry stock report for this past week
  Mar. 29 Mar. 22 Chng.  
$1 = Euro 0.750 0.758 -0.008  
$1 = Rupee 52.40 51.22 1.2  
$1 = Israel Shekel 3.73 3.75 -0.02  
$1 = Rand 7.72 7.71 0.01  
$1 = Canadian Dollar 1.00 1.00 0.00  
         
Precious Metals        
Gold $1,661.50 $1,643.60 $17.90  
Platinum $1,627.00 $1,617.00 $10.00  
         
Stock Indexes       Chng.
BSE 17,058.61 17,196.47 -137.86 -0.8%
Dow Jones 13,145.82 13,046.14 99.68 0.8%
FTSE 5,742.03 5,845.65 -103.62 -1.8%
Hang Seng 20,609.39 20,901.56 -292.17 -1.4%
S&P 500 1,403.28 1,392.78 10.50 0.8%
Yahoo! Jewelry 962.39 975.89 -13.50 -1.4%



INDIA MARKET REPORT  
 
Polished and rough trading activity

Local polished trading is steady with some shortages for SI goods; rough trading weakens with little to no compromise on buying/selling prices.  Read the full report.



 




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