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RAPAPORT NEWS SERVICE | August 25, 2016 |
Industry Retail General Mining EconWatch India
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Rapaport Weekly Market Comment August 25, 2016

Far East markets waking up with increase in activity as dealers prepare for Hong Kong show. Far East demand for larger 3 to 8 ct. stones getting more attention with D-F, IF-VVS goods becoming more interesting after price declines in recent months. U.S. market uncertain with some action in New York during DDC’s India Week. Signet 2Q sales -3% to $1.4B, profit +6% to $82M as private equity firm Leonard Green invests $625M. Tiffany 2Q sales -6% to $932M, profit +1% to $106M. Michael Hill FY revenue +10% to $421M, profit -29% to $15M. Dominion 2Q sales -24% to $160M. Swiss watch exports -14% to $1.7B in July. India July polished exports +1% to $1.7B, rough imports +27% to $1.4B.

RapNet Data: August 25
Diamonds 1,245,429
Value $7,946,242,415
Carats 1,332,049
Average Discount -30.40%

RAPI Chart
The RapNet Diamond Index (RAPI™) is the average asking price in hundred $/ct. of the 10 percent best priced diamonds, for each of the top 25 quality round diamonds (D-H, IF-VS2, GIA-graded, RapSpec-A3 and better) offered for sale on RapNet - Rapaport Diamond Trading Network.

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  This holiday season, all eyes are on the ears.

Mark Light, CEO of Signet Jewelers, envisages strong interest in earrings this year.

United States: Improved activity during India Week in New York Diamond Dealers Club (August 22 to 25). Overall polished market still cautious

Belgium: Market slowly opening up as dealers return from vacation. Trading expected to be stable until Hong Kong Jewellery and Gem Fair (September 13 to 19)

Israel: Trading quiet with the Israel Diamond Exchange closed until August 28

India: Polished trading improving ahead of Hong Kong show with dealers focused on VS-SI goods. Steady U.S. and Chinese demand with a number of foreign buyers in Mumbai looking for bargains

Hong Kong: Trading improving after long, slow summer. China and other Asian markets steady. Local Hong Kong demand slow

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Dubai Probing Rough Diamond Values

While the Kimberley Process chair is focused on advancing forums on rough valuation, questions linger about the UAE's own diamond trade....

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Rio Tinto Quits Indian Mining Project

Rio Tinto has terminated its Bunder diamond mining project in India to conserve cash and cut costs. The venture in the central Indian state of Madhya Pradesh was tipped as the first significant diamond mine in India, with operations expected to commence in 2019. The miner now intends to close all project infrastructure by the end of the year.

India’s Polished Exports Rise in July

India’s polished diamond exports climbed 1% to $1.65 billion in July, according to the Gem & Jewellery Export Promotion Council. Polished imports added 2% to $272.5 million, leaving net exports 0.6% higher at $1.38 billion. Rough imports grew 27% to $1.4 billion and rough exports jumped 85% to $110.3 million, meaning net rough imports rose 24% to $1.28 billion. India’s net diamond account, the difference between net polished exports and net rough imports, plummeted 70% to $100.1 million.

ALROSA to Auction 402ct. Rough Diamond

ALROSA will offer a 401.97-carat rough diamond and a 40.25-carat polished stone at separate sales this month in Vladivostok, a city near Russia’s border with China. The miner recently opened a base in Vladivostok to help its sales to the Asia-Pacific region. A total of 19 diamonds, with a combined weight of 1,098 carats, will be up for sale at the rough auction until September 3. A tender of 28 polished diamonds will be held at the same time.

Swiss Watch Exports Continue to Fall

Swiss watch exports slumped 14% to $1.71 billion (CHF 1.64 billion) in July. Shipments to Hong Kong dived 33% and orders from the U.S. declined 15%. The high-end categories slowed, with precious-metal watch shipments falling 27%, its fifth consecutive monthly decline. Exports of timepieces priced above $3,119 (CHF 3,000) slumped 16%.

Private Equity Firm Invests $625M in Signet

Signet Jewelers announced a $625 million investment from private equity firm Leonard Green & Partners (LGP). The deal is expected to close in the third fiscal quarter of 2017, with Jonathan Sokoloff, one of LGP’s managing partners, joining Signet’s board. Signet also reported sales fell 2.6% to $1.37 billion in the second fiscal quarter ending July 30, while profit increased 32% to $81.9 million. The jeweler adjusted its full-year guidance downward.

Tiffany Sales Slide in Challenging Environment

Tiffany & Co.’s sales fell 6% to $932 million in the second quarter that ended July 31, with steep declines recorded in the U.S., Asia Pacific and Europe. Management noted lower spending among foreign tourists in all markets and in particular pointed to weakness in Hong Kong. Comparable store sales dropped 8%. Net earnings rose 1% to $106 million as the company cut costs to offset the slump in sales.

Veteran Diamond Marketer Joins Macy’s

Macy’s hired Richard Lennox as its chief marketing officer, effective September 15. Lennox (pictured) ran the De Beers account for marketing firm J. Walter Thompson, leading a team that developed the iconic “A Diamond is Forever” campaign. He was also executive vice-president and chief marketing and ecommerce officer at Zale Corporation. The move comes after Macy’s announced plans to improve the quality of its jewelry offering amid declining group sales.

Michael Hill’s Sales Rise

Michael Hill’s revenue jumped 9.5% to $421.3 million (AUD 551.1 million) in the fiscal year ending June 30 with growth recorded across all regions. Sales in Australia, its largest market, increased 4% to $234.9 million. Revenue advanced 7% in New Zealand and 19% in Canada. U.S. sales leapt 24% with same-store revenue increasing 3.5%, which was below the jewelry retailer’s expectations and budget.

Dominion’s Sales and Production Decline

Dominion Diamond Corporation’s rough sales fell 24% to $160 million in the second fiscal quarter ending July 31 due to a shift in focus to lower-value goods at its Ekati mine in Canada. Sales of rough from Ekati slumped 40% to $83.3 million, while production fell 7% to 856,000 carats due to a shutdown following a fire. Revenue from Dominion’s 40%-owned Diavik mine in Canada increased 6.5% to $76.7 million.

Stellar, Octea to Merge Sierra Leone Mines

Stellar Diamonds and Octea Mining agreed to combine their Sierra Leone projects to create the second largest diamond-mining operation in West Africa. Stellar plans to amalgamate its Tongo kimberlite project with Octea’s adjacent Tonguma asset, which would enable annual production of up to 250,000 carats of “high-value” diamonds. Trading in Stellar’s shares on London’s AIM was suspended until an admission document outlining details of the deal is published.

Lucara Invests to Improve Small Diamond Recovery

Lucara Diamond Corp. will expand the use of X-ray technology (XRT) to target smaller size diamonds at the Karowe mine in Botswana, having used the equipment to recover exceptional stones such as the 1,109-carat Lesedi La Rona. Four new XRT units will focus on diamonds ranging from 4 millimeters to 8 millimeters. The project is expected to be completed in the fourth quarter of next year at an estimated cost of up to $30 million.

Tycoon Sees Opportunity in Consolidating Mines

South African billionaire Christo Wiese sees prospects for consolidating diamond mining operations in the region, Bloomberg reported. Wiese, the country’s richest man, formed a consortium that made a cash offer for Trans Hex earlier this month. “There are opportunities for consolidating diamond operations in southern Africa,’’ he said. “Obviously we will look at growing the business as much as we can.’’

Israel Bourse Petitions Minister Over Lending

The Israel Diamond Exchange (IDE) called on Finance Minister Moshe Kahlon to help overturn First International Bank of Israel’s (FIBI) decision to tighten its lending standards for the industry. FIBI rolled out more stringent collateral demands and now follows a policy “that does not exist in any other sector,” a petition says. IDE president Yoram Dvash has vowed to fight FIBI’s decision.

24 Karat Club to Leave Iconic Venue

The 24 Karat Club of the City of New York will cease holding its annual Grand Banquet at the city’s Waldorf-Astoria Hotel after more than 100 years due to a renovation project at the venue. The 115th banquet on January 14, 2017, will be the last one to take place in the grand ballroom, the 24 Karat Club said. A three-year refurbishment project at the luxury Manhattan hotel has forced the organization to seek an alternative.

India Diamond Week Brings 'Hundreds' to DDC

More than 60 exhibitors and “several hundred” buyers attended the fifth India Diamond Week at the Diamond Dealers Club (DDC) of New York this week. The event, organized by DDC and India’s Gem and Jewellery Export Promotion Council, marked an increase in New York trading as dealers return from the summer break. Sixteen Indian diamond manufacturers participated alongside U.S. suppliers, enabling them to build on relationships from previous events, said Reuven Kaufman, president of the DDC.

Diamond Industry Stock Report

Michael Hill (+11%) gained on strong sales results, while Blue Nile (+10%) and Charles & Colvard (+19%) both enjoyed strong weeks despite the Dow Jones index falling 0.5%. Share prices were recorded before the market opened Thursday and before reports of disappointing sales at Signet Jewelers and Tiffany & Co. Signet saw its shares fall in early trading Thursday, while Tiffany gained on improved profit. Global diamond mining stocks were mixed, led by True North Gems (+5.9%).

View the detailed industry stock report

  Aug 25 (12:24 GMT) Aug 18 (12:04 GMT) Chng.  
$1 = Euro 0.89 0.88 0.00  
$1 = Rupee 67.05 66.83 0.22  
$1 = Israel Shekel 3.76 3.78 -0.02  
$1 = Rand 14.13 13.35 0.78  
$1 = Canadian Dollar 1.29 1.28 0.01  
Precious Metals       Chng.
Gold $1,322.72 $1,350.45 -$27.73 -2.1%
Platinum $1,082.75 $1,123.40 -$40.65 -3.6%
Silver $18.56 $19.75 -$1.19 -6.0%
Stock Indexes       Chng.
BSE 27,835.91 28,123.44 -287.53 -1.0%
Dow Jones 18,481.48 18,573.94 -92.46 -0.5%
FTSE 6,817.45 6,858.17 -40.72 -0.6%
Hang Seng 22,826.87 23,023.16 -196.29 -0.9%
S&P 500 2,175.44 2,182.22 -6.78 -0.3%
Yahoo! Jewelry 661.54 665.81 -4.27 -0.6%

Polished Trading Activity

Polished trading improving ahead of Hong Kong show with dealers focused on VS-SI goods. Steady U.S. and Chinese demand with a number of foreign buyers in Mumbai looking for bargains. Steady demand for 1 ct. D-I, SI-I2 diamonds. Fancy shapes improving. Rough demand stable ahead of next week’s De Beers sight. Manufacturing expected to remain steady until November Diwali break.

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