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RAPAPORT NEWS SERVICE | Sept. 12, 2014   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment Sept. 12, 2014


All eyes on next week’s Hong Kong Show with mixed expectations for Far East demand as diamond markets remain uncertain. Indian suppliers reducing prices to raise liquidity levels. Buyer’s market prevails. The RapNet Diamond Index (RAPI™) for 1ct. lab-graded diamonds -1.4% in Aug. Rough trading slows as Surat manufacturers focus on cutting operations ahead of Oct. Diwali season. Gem Diamonds opens Ghaghoo underground mine in Botswana. Belgium’s Aug. polished exports -12% to $484M, rough imports +30% to $1.1B. Rapaport to stop listing all EGL grading reports on RapNet Diamond Trading Network, effective Oct. 1.



RapNet Data: Sept. 11
Diamonds   1,243,786
Value $7,652,575,847
Carats   1,347,779
Average Discount -27.02%

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RAPI Chart

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RAPAPORT ANNOUNCEMENTS
September
8-18
Mon-Thu
Rapaport
Rapaport  Melee Auction

New York & Hong Kong

www.rapaportauctions.com


September
15-19
Mon-Fri
Rapaport
Rapaport at HK Jewellery & Gem Fair

Exhibitors may upload show diamonds here for display on RapNet's show listing page.

Visit Rapaport at Booth 7N33
AsiaWorld Expo

Sep-Oct
23-1
Tue-Wed
Rapaport
Rapaport Single Stone Auction

New York & Israel
 
View Details.



  QUOTE OF THE WEEK
  There is so much ‘noise’ and uncertainty in the U.S. economic system that small business owners are finding it difficult to be optimistic. More U.S. small business owners think conditions will be worse in six months than think they will be better. Few see the current period as a good time to expand. The outlook for improvement in real sales volume faded this month.

Bill Dunkelberg | NFIB

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INDUSTRY  
 
Polished Prices Decline

The RapNet Diamond Index (RAPI™) for 1-carat laboratory-graded diamonds fell 1.4% during August. RAPI for 0.30-carat diamonds declined 1.5%, while RAPI for 0.50-carat diamonds decreased 1% and RAPI for 3-carat diamonds fell 1.2%. Trading slowed and liquidity tightened in the manufacturing centers and buyers avoided making large inventory purchases in advance of the Hong Kong Jewellery and Gem Fair, yet suppliers are maintaining low expectations for the show.

There was steady U.S. demand for commercial-quality, SI-I2 clarity diamonds. Demand for Gemological Institute of America (GIA) dossiers slowed from previous months but remained fairly robust. Rough trading slowed and prices softened on the secondary market, following the relatively big De Beers sight. Manufacturers currently have significant quantities of rough inventory, which has further pressured their liquidity. Rough buying is expected to slow further in September.



 
RapNet Drops EGL Reports

Diamond grading reports from all European Gemological Laboratories (EGL) will no longer be listed on the RapNet Diamond Trading Network, effective October 1. RapNet is concerned about the misrepresentation of diamond quality by laboratories that use Gemological Institute of America (GIA) grading terminology, while applying alternative grading standards that overstate the quality of diamonds.

While some EGL grading reports are more consistent with GIA grading standards than others, there is, in our opinion, confusion and inconsistency among the various EGL grading reports. RapNet recognizes that GIA and other diamond laboratory grading is based on human evaluation and is therefore subjective. We recognize that a difference of one color and one clarity between diamond grading reports from the same or different laboratories is within a reasonable tolerance range.

We reject the idea that there is no diamond grading standard and caution RapNet members not to use GIA grading terminology to describe diamonds that are below a reasonable tolerance range of the GIA standard. RapNet members using GIA terminology are required to honestly communicate diamond quality based on the GIA standard.



 
Gem Opens Ghaghoo

Gem Diamonds opened the Ghaghoo diamond mine in Botswana, the first underground diamond mine in the country and the company's second major producing diamond mine -- the first of which is Letšeng in Lesotho. Gem Diamonds explained that a phased development plan at Ghaghoo defines the project as a "new generation" of diamond mining, with a core focus on ensuring that the highest benchmarks of excellence across health and safety and social and environmental impact are achieved. Ghaghoo's launch was not without controversy, however, given its location on the ancestral land of the Bushmen.

Gem Diamonds acquired the mine in May 2007 through its local subsidiary, Gem Diamonds Botswana, and it holds a 25 year mining license on the project. The Ghaghoo mine is situated in the southeast portion of the famed Central Kalahari Game Reserve. Development remains on target to deliver first phase objectives and begin commercial production before the end of the year. It is anticipated that Ghaghoo will ultimately tap 20.53 million carats with an in-situ value of $4.9 billion.



 
Petra Recovers 232-Carat Diamond

Petra Diamonds recovered a 232.08-carat, D, type II, white diamond at the Cullinan mine in South Africa. The stone was described as exceptional size and clarity. In February, Petra sold a 29.60-carat, blue diamond from the mine for $25.6 million or $862,780 per carat. In June, the company recovered a 122.50-carat, blue diamond, which is currently for sale in South Africa. The company intends to offer the recently discovered diamond for sale in the second quarter of its fiscal year and will notify the market once a date is finalized.



RETAIL & WHOLESALE  
 
LVMH, Google Sign Pact

LVMH and Google signed a cooperation agreement, committing to enhance their resources in an effort to tackle the advertising and sale of counterfeit goods online. The deal ends a decade-long legal dispute between Louis Vuitton and Google over who was responsible for chasing counterfeiters online. Pierre Godé, the vice president at LVMH, said the LVMH-Google agreement paves the way for greater cooperation toward a safer and more engaging digital environment.



 
Winsome Says 'No' Synthetics

Winsome Diamonds & Jewellery Ltd. told shareholders that a rogue media report was grossly mistaken to have defined the company as the world's largest producer of synthetic diamonds and the firm reiterated a long-held stance that it has "nothing to do with synthetic or man-made diamonds." In addition, Winsome stated that it did not operate a base in Singapore, Malaysia or the U.S., and disparaging press reports are negatively impacting an already "crisis ridden" image. The note was filed on the Bombay Stock Exchange and condemned the banks, too, for misleading the public by not producing an audit report from Kroll Advisory Solutions. Winsome also denied it had a run in with U.S. authorities over synthetic diamonds, adding that it has no investments in a U.S. company.



 
FTC Clarifies 'Made in the USA'

The U.S. Federal Trade Commission (FTC) told jewelry industry groups that unless a company can substantiate that all components, including a natural resource, in a product they sell did not originate from the U.S., that brand should not advertise product as "Made in the USA." The Jewelers Vigilance Committee, Jewelers of America, MJSA, AGTA and the Richline Group reached out to the FTC in June seeking an opinion on whether metals that were recycled in the U.S. qualified for branding a product made from those elements as Made in the USA.

The groups argued that it often can be impossible to identify origins of metals but that once the resource has been recycled, it begins a new life cycle, which can be tracked and traced. The FTC included in its response that its staff is available to help craft qualified claims that avoid deception, while highlighting the work done to recycle precious metal in this country. The trade associations and Richline are considering further steps, in accordance with the FTC’s response.
 


 
U.S. Regulations Swamp Smaller Firms

The National Federation of Independent Business (NFIB) determined that U.S. manufacturers face prohibitively high regulatory expenses that undermine any economic incentives intended to support small business growth. The average business with less than 50 employees pays $12,000 per person per year to comply with federal regulations, while manufacturers with fewer than 50 staff pay $35,000 per headcount. A jewelry making firm with 10 employees, therefore, would fork out $350,000 just in regulatory fees before $1 of profit can be made, the group surmised.

NFIB's small business index that measures owner optimism rose 0.4 points to 96.1 (1986=100) in August. The overwhelming majority of small business owners are not adding employees, suggesting a weak market in the fourth quarter. The net percent of all owners reported higher nominal sales in the past 3 months compared with the prior 3 months; however, expected real sales volume posted a 4 point decline, falling to a net 6% of owners expecting gains.

Rising labor costs are keeping pressure on earnings, along with poor sales performances. Owners cited high taxes as their primary concern, followed by regulations and a weak sales outlook. Only 4% of owners reported that all their credit needs were not met, equal to a record low reading. A net negative 2% of all owners reported growth in inventory, reflecting that more firms are reducing stock rather than building; but sales trends continued to deteriorate somewhat and expected real sales did not improve.



 
Is Your Shop Flex Ready?

Convenience dominates preferences both on and offline, according to the latest U.S. consumer shopping study conducted by comScore and UPS. In addition, shoppers demand comprehensive information about the jewelry product before weighing a purchase. The study revealed that it is essential to detail full product information, high-quality images and offer a variety of ways to ship and track the product after a purchase.

The study revealed that the first step in making a purchase for 27% of U.S. shoppers is to begin on Amazon, where products abound as do reviews and product summaries. This does not necessarily translate into an Amazon purchase, however. The second most popular way to research product was through search engines, whereas 18% of shoppers begin their research in a store and another 18% begin at a retailer's website. UPS and comScore found that, ultimately, 40% of consumers cross channel paths when shopping, 39% search and buy exclusively online and 21% search online and buy in a store.

Overall 63% of U.S. consumers just use a single device in the process, while 37% engage multiple devices and of that group: 57% purchase via laptop/desktop, 24% buy through a tablet and 19% purchase on smartphones. Eighty-one percent want free shipping from retailers and the study revealed that 93% of consumers will take some action to qualify for the option, while 58% actually add items to their shopping cart to qualify. In addition, comScore found that 48% of consumers have made additional purchases simply because a special or coupon was included with the packed item they received from the retailer.



 
Jewelers Debut Collections in Paris

Graff Diamonds joined several high-end jewelry exhibitors at the La Biennale des Antiquaires in Paris to showcase unique and rare masterpiece creations, including a dramatic necklace with richly colored clusters of sapphire beads entwined with pave diamond leaves and stems. A pair of earrings accompanies the necklace and feature a single emerald-cut sapphire surrounded by three pave diamond leaves and sapphire beads.

The 27th Biennale des Antiquaires began September 11 and ends on September 21 at the Grand Palais. Fine jewelry brands schedule to exhibit this year include Alexandre Reza, Véronique Bamps, Boucheron, Bulgari, Chanel, Cartier, Chaumet, David Morris, Dior, Martin Du Daffoy, Piaget, Siegelson, Van Cleef & Arpels and Wallace Chan.



 
Damas Opens in Ladies Club

Damas opened its latest boutique at Dubai's exclusive Zabeel Ladies Club, showcasing contemporary styles in high fashion jewelry, diamonds and precious gemstones. The new Damas boutique features elegant and plush interiors and offers its namesake jewels as well as Mikimoto, Roberto Coin, Fope, Marco Becigo and Utopia. The Zabeel Ladies Club contended that a Damas store on the premises is a unique value addition for members and guests.
 


 
Tissot Opens in New York

Swiss watchmaker Tissot hosted a grand opening celebration for its first U.S. boutique at 666 Fifth Avenue in Manhattan. Brand ambassador and NBA star Tony Parker was on hand to greet fans and perform the traditional ribbon cutting. More than 550 guests visited the boutique to see the newly introduced Tissot T-Touch Expert Solar Tony Parker 2014 Limited Edition Watch. The new boutique features a clock display highlighting Tissot’s T-Touch watch design and features digital exploration areas where customers can learn more about Tissot’s Touch Collection models and their tactile functionalities.



MINING  
 
Angola's Diamonds Sales Jump

Angola's diamond sales rose 18% year on year to $661 million during the first six months of the year, according to MacauHub. The government realized approximately $47 million in revenue from the sales total.

Diamond production, meanwhile, rose 4% to 4.26 million carats, according to the report.


 
Trans Hex Rough Prices +21%

Trans Hex's tender sales held during May, July and September, consisted of 22,033 carats from its South African mines and realized $24.7 million, or an average of $1,497 per carat. The company noted that average prices grew by 21% compared to the average prices achieved during the financial year that ended on March 31. Twenty-two single stones achieved over $10,000 per carat, including a 3.20-carat, pink diamond that was recovered at the Baken mine and sold for $54,750 per carat. A 132-carat diamond, also from Baken, realized $1.28 million.



 
De Beers Denies Miners' Claims

De Beers strongly condemned a DFA press report that allegedly quoted South African men who claimed they were renting parcels of land and selling rough stones to the mining giant for as little as $46 per carat. Police reportedly raided the area where some 1,500 were camping and mining on De Beers land, but many of the men subsequently set up camp at an adjacent site and continued to mine by hand.

DFA claimed the miners provided the names of two De Beers officials who they said kept records of all the diamonds they uncovered. Tom Tweedy, the head of communications at De Beers, called the episode preposterous and said that legal mining companies in Kimberley were being seriously undermined by such claims by illegal operators.

"De Beers states for the record that no diamonds emanating from any operation not managed by the company are purchased by it and states that it is untrue that the company rents sites to illegal diggers 'at ZAR 100 a fortnight' as claimed. The article (published in the DFA) is without fact in the references made to De Beers," Tweedy said.



 
Pangolin Sample Program Underway

Pangolin Diamonds Corp. recovered two additional diamonds on its Malatswae project in east-central Botswana. The stones were identified during a close-spaced follow-up sampling program and a number of samples also reported ilmenite; a common kimberlite indicator mineral. The samples were processed through the Pangolin DMS plant in Francistown.

A concentrate was then independently examined in Gaborone by a specialist mineral consultant who subsequently submitted the stones to MCC Geoscience Inc. in Canada who confirmed the two diamonds. The diamonds will now be viewed using a scanning electron microscope (SEM) in order to characterize the surface textures and features.



 
True North Signs Finance Deal

True North Gems signed an agreement with Leonhard Nilsen & Sonner and LNS Greenland under which the combined LNS entities will provide over $11 million in financing to transition quickly into the construction phase of the Aappaluttoq ruby project. The financing allows the company to restructure its share of capital expenses, reduce immediate requirements and minimizing dilution to current shareholders. With this funding, the company will be able to deliver on its vision of becoming one of the world's leading colored gemstone production and exploration companies.



 
Stellar Commissions Baoule Plant

Stellar Diamonds reported that it commissioned the diamond processing plant at its Baoulé kimberlite project in Guinea ahead of trial mining. The company intends to process 100,000 tonnes of ore to measure diamond grade and test for value as part of trial mining at the site, which is expected to begin in October. Commissioning is underway to establish the optimal operating parameters for the plant, after which the first kimberlite ore will be processed. Diamonds recovered during trial mining will be sold to generate cash flow.



STATS  
 
Belgium

  Aug. $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $484 -12% $9,433 5%
Polished imports $833 -7% $9,260 5%
Net exports $349 0% $173 12%
         
Rough imports $1,094 30% $10,179 15%
Rough exports $675 36% $10,614 10%
Net imports $419 21% ($435)  
         
Net diamond account ($768) 11% $608 36%


ECONWATCH  
 
Diamond Industry Stock Report

U.S. shares were all lower except for Blue Nile (+4%), while Chow Tai Fook (+2%) led gains in Hong Kong. European shares were all lower except for Damiani (+2%). Indian shares were mixed as C. Mahendra (-22%) continued a long slide and Goenka Diamond (+21%) led gains. Mining shares were also mixed, ALROSA (-7%) and Anglo (-6%) led declines and Petra (+9%) pulled ahead after two analyst upgrades. View the extended stock report.

  Sept. 11 Sept. 4 Chng.  
$1 = Euro 0.774 0.770 0.004  
$1 = Rupee 60.91 60.38 0.5  
$1 = Israel Shekel 3.63 3.60 0.03  
$1 = Rand 10.98 10.72 0.26  
$1 = Canadian Dollar 1.10 1.09 0.01  
         
Precious Metals        
Gold $1,241.30 $1,261.30 -$20.00  
Platinum $1,366.00 $1,401.00 -$35.00  
         
Stock Indexes       Chng.
BSE 26,995.87 27,085.93 -90.06 -0.3%
Dow Jones 17,049.00 17,069.58 -20.58 -0.1%
FTSE 6,799.62 6,877.97 -78.35 -1.1%
Hang Seng 24,662.64 25,297.92 -635.28 -2.5%
S&P 500 1,997.45 1,997.65 -0.20 0.0%
Yahoo! Jewelry 1,171.12 1,164.84 6.28 0.5%



INDIA MARKET REPORT  
 
Polished and Rough Trading Activity

Main activity ahead of the Hong Kong show is in VS-SI from 0.20-1.00 carat in I and lower colors. · Overall, prices remain soft by 3%-4% across the board except for -2 goods, which are in strong demand. · Read the full report.





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