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Rapaport Weekly Market Comment July 18, 2014

Mumbai IIJS show opens with mixed expectations for domestic diamond and jewelry demand. Some Indian manufacturers reducing prices for better-quality carat and larger sizes. Global diamond markets are quiet with cutters frustrated by high rough prices during sight week. De Beers 2Q production +7% to 8.5M Cts. Rio Tinto 2Q diamond production -7% to 3.8M cts. Belgium’s June polished exports flat at $1.4B, rough imports +20% to $1.3B. Christie’s 1H jewelry, watch and wine sales +11% to $456M. Sotheby's appoints Daryl Wickstrom as managing director of new global jewelry and watch division. 

RapNet Data: July 17
Diamonds   1,155,857
Value $7,386,745,252
Carats   1,284,542
Average Discount -27.03%

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De Beers Production +7%

De Beers production rose 7% year on year to 8.515 million carats in the second quarter, an increase that was largely due to higher output at the company's Venetia mine, where production more than tripled to 834,000 carats. Production at the Kimberley mine dropped 31% to 154,000 carats, while production at the Voorspoed mine rose 18% to 186,000 carats.

In total, output from De Beers Consolidated Mines in South Africa grew 84% to 1.174 million carats. Production at De Beers Debswana joint venture in Botswana, which includes the Orapa, Letlhakane, Damtshaa and Jwaneng mines, fell 2% to 6.266 million carats. The decrease was due to lower-grades mined at the Jwaneng mine. Production at Namdeb, which includes both terrestrial and marine mining in Namibia, rose 20% to 509,000 carats. De Beers Canada production from the Snap Lake and Victor mines rose 13% to 566,000 carats.

In other news, De Beers Consolidated Mines appointed Nompumelo (Mpumi) Zikalala to its board of directors. Zikalala joined De Beers in 1996 as a bursar and has filled a number of senior roles in the organization, in both the mining and diamond trading divisions.

Rio Tinto Production -7%

Rio Tinto’s diamond production fell 7% year on year to 3.832 million carats in the second quarter that ended on June 30. Diamond production from the company's Argyle mine in Australia fell 21% to 2.459 million carats due to mining operations moving from open pit to underground and from the processing of lower-grade tailings.

However, production from the Diavik mine in Canada surged 38% year on year to 1.29 million carats due to improvements in mining rates, with all three pipes in full production, as well as due to processing plant improvements that were implemented over the past six months. Rio Tinto owns a 60% stake in the Diavik mine with Dominion Diamond holding a 40% share. Diamond production from the Murowa mine in Zimbabwe increased 21% to 83,000 carats due to improved throughput and processing previously stockpiled rough diamond material. Rio Tinto owns a 78% stake in Murowa.

In other news, Rio Tinto's Bunder project, in partnership with the Maruti driving school, has implemented a driver training program as a part of a skills development plan in Madhya Pradesh. In Mumbai, Rio Tinto Diamonds celebrated the 25th anniversary of its office with the launch of seven new collections under their flagship diamond jewelry initiative, Nazraana.

U.S. Jewelry Store Sales +6%

U.S. jewelry store sales rose 6% year on year to $3.12 billion in May. As reported earlier on Rapaport News, jewelry and watch sales from all retail sources increased 5.6% to $7.192 billion in May, although that wider industry sales measure is subject to revisions. Jewelry store sales for the first five months of 2014 have risen 4.6% year on year to $12.951 billion, while total jewelry and watch sales have increased 3.4% to $29.95 billion, according to preliminary calculations.

Meanwhile, advanced sales estimates for department stores in June fell 0.9% to $13.233 billion. The sector experienced a sales decline of 1.1% in May to $13.894 billion. U.S. consumer spending on non-essential items continues to be mixed with middle- and lower-incomes holding wallets tight, while upper income households are showing signs of pulling back.

Hong Kong’s Jewelry Sales Drop

Hong Kong's retail sales of jewelry, watches, clocks and other valuable luxury gifts plunged 24.6% year on year to $1.03 billion (HKD 7.944 billion) in May, according to provisional figures from Hong Kong's Census and Statistics Department. However, sales of jewelry, watches and valuable gifts just at department stores actually improved 20.5% in May to $37 million. By volume, sales of goods for the jewelry and watches category slipped 22.7%. Hong Kong recorded total retail sales in May of $5 billion, a decrease of 4.1%.

Additionally, Hong Kong revised the estimate of retail sales for April lower, to a decline of 9.9%, while calendar year to data retail sales were down 0.2%.

Christie's Jewelry Auction Total Rises

Christie’s auction total jumped 12% year on year to $4.47 billion (GBP 2.69 billion) for the first six months of 2014. The sales increase by dollar value rose 22% as the British pound strengthened during the period. Christie’s strong results were primarily driven by higher values for artwork. Digital engagement and new buyers coming into the market have continued to drive growth for the company with new clients representing 24% of all buyers and 15% of the sales total during the first half. Christie’s sales from the jewelry, watch and wine category jumped 11% to $455.5 million.

Sotheby's, eBay Partner for Live Auctions

Sotheby’s will offer live auctions from New York online through eBay's technology, accessing 145 million active buyers, in a new partnership. The deal unites eBay's online shopping expertise with Sotheby's auction business and together the two are developing an innovative online platform that will make it easier for global bidders to acquire art, antiques and collectibles.

The first offerings will tap into a newly-designed auction experience that eBay will launch on its website, tailored for collectors of rare, unique and premium art and collectibles as well as for first-time buyers. Sotheby’s will become the preeminent anchor tenant in the new design. Both companies intend to focus on growing the market at price points where they expect their collectors to converge in the future – particularly in the segments such as jewelry, watches, prints, wine, photographs and 20th century design.

In a separate announcement, Sotheby's appointed Daryl Wickstrom to a newly created role as international managing director of worldwide jewelry and watch divisions. Wickstrom joined Sotheby’s in 1996 and was appointed executive vice president and deputy chairman of Asia in July 2008. During his tenure in that position, Wickstrom was instrumental in developing the growth strategy in Asia and particularly Sotheby’s expansion in China.

Sotheby’s jewelry and watch sale activities set new highs in 2013, with jewelry sales achieving $529 million and watch sales reaching $97 million.

Movado Appoints Quintero as President

Movado Group Inc. hired and appointed Ricardo Quintero as company president to direct the brands, marketing and international expansion efforts, reporting to Efraim Grinberg, the company's chairman and CEO. Quintero most recently served at The Estée Lauder Companies as Clinique’s senior vice president; global general manager of market development. Additionally, Movado promoted Rick Coté, who has been serving as president and chief operating officer since 2010, to vice chairman and chief operating officer.

Forevermark Expands in U.K.

De Beers will expand its Forevermark diamond brand in the U.K. and Ireland in the third and fourth quarter, marking the brand's first entry into the Western European market. Forevermark appointed Crossworks Manufacturing Ltd. of Canada as its only licensee partner and will work with a select number of retailers to bring Forevermark diamonds to the region.

De Beers launched Forevermark six years ago and currently has 1,300 high-end retail stores in 29 markets worldwide across Asia, North America, the Middle East, Australia and Turkey. Crossworks previously worked with Forevermark to launch the brand in Australia and Canada.

HRD Adjusts Cut Grade

HRD Antwerp adjusted the proportion parameters of its cut grade to encompass a revision of the proportion parameter. Whereas, previously a diamond was graded "very good" on proportion, it is now possible for certain diamonds to achieve "excellent," increasing the possibility to obtain an overall triple excellent grade. The new cut update means clients may recheck diamonds to possibly obtain a better grading.

New U.S. Trademarks Approved

This month, the U.S. Patent & Trademark Office (USPTO) awarded the trademark "Love Remembered, Love Today, Love Forever" to Columbia Insurance Company of Omaha, Nebraska, which handles trademarks on behalf of Berkshire Hathaway. The trademark references jewelry, diamonds, engagement rings and wedding bands.

Fred Meyer Jewelers Inc. of Oregon received trademark approval for "Locked in Love," which refers to jewelry and Gems One Corporation of New York received the trademark "Powered By Her Heartbeat" for diamonds. J.S.N. Jewellery Inc. of Canada was granted the U.S. trademark "Canadian Ice" to refer to diamonds and jewelry as well as colored gemstones and semi-precious stones.

The trademark "M. Christoff" was awarded to Michael Christoff Diamond & Jewelry Inc. of Los Angeles, California in reference to jewelry, diamonds, watches, and precious metals and precious stones. The USPTO issued the trademark "The Diamond Family" to Diamond & Jewelry Brokers Inc. of Missouri to refer to online and retail store services that feature diamond jewelry.

Myanmar's Jade Exports Surge

Myanmar earned $1.1 billion from jade exports in the 2014 fiscal year, which ended on March 30, according to the Ministry of National Planning and Economic Development. Jade exports for the previous year totaled $297.9 million. Top exports markets were China, Hong Kong and India, where jade is clearly in high demand. However, while these record earnings represent the legal jade trading, illegal trading is also flourishing despite increased security. The U.S. does not permit gemstone imports from Myanmar.

WDC Seeks New Executive

The World Diamond Council (WDC) initiated a search for an executive director to head the organization, under the president and the executive committee. It is the first time that the WDC will employ a salaried administrator. Responsibilities will include day-to-day management of the organization, providing strategic development, liaising with the governments and representing the WDC in the Kimberley Process and its various committees.

Dealers Face Loss From Tanzanite Scam

Nearly one dozen Gujarati diamond merchants who also deal in tanzanite gemstones fell victims to fraud by a Chinese diamond merchant and three Rajasthani merchants, according to the Times of India. The dealers lost approximately $10 million in the deal when the buyers failed to pay on consignment. The gemstones were later sold or smuggled out of Hong Kong into China and other countries for prices far below market value. Hong Kong authorities have vowed to investigate and Indian authorities claimed that arrests were likely soon.

Winsome Approves Delisting Shares

Winsome Diamonds & Jewellery informed that Bombay Stock Exchange (BSE) that its board of directors agreed to delist the company's equity shares from the National Stock Exchange of India Limited in accordance with regulation 6 of SEBI (Delisting of Equity Shares) Regulations, 2009. Delisting is anticipated shortly.

LVMH, eBay Drop Litigation to Cooperate

Luxury retailer LVMH and online auction portal eBay announced a cooperative effort to protect intellectual property rights and combat counterfeit goods in online commerce. Given this cooperative measure and additional commitments, the companies have settled ongoing litigation. In a joint statement, senior executives of LVMH and eBay stated that their joint efforts ultimately will ensure that consumers have a safer digital environment globally.

Lucara Tender Achieves $40M

Lucara Diamond Corp.'s second exceptional tender of large stones from its Karowe mine in Botswana achieved $40.1 million on July 16. Sixteen lots of 1,445 carats were offered and sold, with 13 lots achieving over $1 million each and four stones selling in excess of $4 million each. The top lots were a 109.40-carat diamond that sold for $6.2 million or an average $56,615 per carat and a 118.40-carat diamond that fetched $5.36 million or $45,225 per carat.

Gem Upgrades Letseng Reserves

Gem Diamonds reported that probable reserves at Letšeng increased by 64% to 2.26 million carats, while the average price estimates grew 19% to $2,045 per carat, reflecting improved recovery of large, high-value, type IIa diamonds. By tonnage, reserves at Letšeng rose by 67% to 131.9 million tonnes of ore. The company explained that the increase in reserves stemmed from extending the depth from the current pit bottom of 100 meters to new depths of approximately 350 meters below the current mine pits, on both the satellite and main pipe ore bodies.

Letšeng's indicated resources increased in carat terms by 127% to a total of 3.23 million carats.

Rockwell Returns a Profit

Rockwell Diamonds Inc. reported a profit of $345,000 in the first quarter that ended on May 31 compared with a loss of $1.2 million one year ago. Revenue rose 67% year on year to $15.1 million, with $9.7 million in direct diamond sales and an additional $5.4 million from its beneficiation partners. As reported earlier, production jumped 90% to 9,162 carats, with 4,800 carats derived from the company's royalty mining contractors. Inventory at the close of the first quarter totaled 5,237 carats carried forward, including 2,271 carats on royalty mining contracts.

Kennady Beings Drill Program

Kennady Diamonds Inc. began its summer drilling program at the Kennady North diamond project in Canada's Northwest Territories with plans to complete drilling a minimum of 5,000 meters, focusing on delineation drilling at the Kelvin and Faraday kimberlites. Additionally, Kennady Diamonds expects to complete exploration drilling at the MZ and Doyle kimberlites and at four new exploration targets. Analysis of the Kelvin 25 tonne mini-bulk sample that was recovered during the first and second quarter is completed, with results expected early in the fourth quarter.


  June $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,363 0% $7,567 6%
Polished imports $1,509 5% $7,400 6%
Net exports ($146)   $167 19%
Rough imports $1,301 20% $7,860 12%
Rough exports $1,325 5% $8,143 8%
Net imports ($24)   ($283)  
Net diamond account ($122)   $450 -36%

Diamond Industry Stock Report

Investors sense a problem with U.S. retailers: Consumers are not spending enough. Every industry share, save Birks (+9%), fell this week. Meanwhile, Hong Kong shares were mostly higher led by Chow Sang Sang (+3%) and Europe was basically flat but Damiani (+3%) pulled ahead. Indian shares mostly lower led by Classic Diamond (-17%) and Winsome (-19%) as it prepares to delist. Mining shares mainly higher, with double-digit increases for Rockwell, Gem Diamonds and Petra Diamonds. View the extended stock report.

  July 17 July 10 Chng.  
$1 = Euro 0.739 0.734 0.005  
$1 = Rupee 60.61 60.07 0.5  
$1 = Israel Shekel 3.43 3.43 0.00  
$1 = Rand 10.76 10.69 0.07  
$1 = Canadian Dollar 1.08 1.06 0.02  
Precious Metals        
Gold $1,318.50 $1,335.70 -$17.20  
Platinum $1,497.00 $1,510.00 -$13.00  
Stock Indexes       Chng.
BSE 25,561.16 25,372.75 188.41 0.7%
Dow Jones 16,976.88 16,915.77 61.11 0.4%
FTSE 6,738.32 6,672.37 65.95 1.0%
Hang Seng 23,520.87 23,238.99 281.88 1.2%
S&P 500 1,958.13 1,964.70 -6.57 -0.3%
Yahoo! Jewelry 984.27 992.65 -8.38 -0.8%

Polished and Rough Trading Activity

The local trade is focused on the IIJS show but very tight liquidity remains of great concern across the marketplace. Read the full report.


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