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Rapaport TradeWire June 15, 2012

Jun 14, 2012 6:00 PM   By Rapaport
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Rapaport TradeWire
RAPAPORT NEWS SERVICE | June 15, 2012   www.rapaport.com | news@rapaport.com
 
 
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Rapaport Weekly Market Comment June 15, 2012

Diamond markets under increasing price pressure as Indian liquidity dries up and rough prices too high relative to polished. U.S. market stable but demand insufficient to support unsustainably high rough price levels. DTC May sight estimated at $540M with re-assortments that adjusted prices upward for SI quality and lower for better qualities. Christie’s NY sells $14.6M (89% by lot) with 22.46 ct., E, VS2 diamond selling for $1.9M ($84K/ct.). U.S. April polished imports -17% to $1.4B, polished exports -13% to $1.2B. Belgium’s May polished exports -15% to $1.2B, rough imports -21% to $1.1B. Israel’s May polished exports -8% to $1B. Botswana’s April diamond exports -42% to $174M.

RapNet Data: June 14
     
Diamonds   934,525
Value $6,097,893,256
Carats   993,031
Average Discount -26.81%

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  QUOTE OF THE WEEK
  Diamonds have been the flavor of the season, with top prices achieved in Geneva, Hong Kong and New York through spring 2012 as seasoned collectors and new economies went head to head for the best.

Rahul Kadakia | Christie's

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INDUSTRY  
 
Christie's NY Auction Nets $14.6M

WATCH NOW: Christie's New York sale of Important Jewels, which was held on June 12, realized a total of $14,596,525 and achieved 89% sold by lot. The sale of watches garnered $8,495,988. See top lots from both auctions in this video.  The top lot for diamonds was a 22.46-carat, E, VS2 diamond ring by David Webb that sold above estimate for $1,874,500. A 14.82-carat, E, VVS2 pear-shaped diamond  fetched $1,594,500, well above estimate. Another diamond, a 15.65-carat, F, VS1 sold for slightly above estimate at $1,538,500 and a second David Webb ring, a 39.83-carat, VS1 fancy vivid yellow diamond sold within estimate at $1,426,500.



 
Rough Prices to Remain Flat in 2012

Rough diamond prices are likely to remain at current levels in 2012 given near-term economic uncertainty due to euro-zone debt crisis and the uncertainty of global economic growth, BMO Capital Markets projected. BMO estimated that  rough diamond supplies fell 5% year on year to 127 million carats in 2011 due to production declines at De Beers and Rio Tinto’s Argyle mine, but it expects production is to rise again as development projects are brought on stream and De Beers catches up with its stripping programs.  The firm projects that the rough diamond market will be valued at around $29 billion by 2020, up 53% from $19 billion in 2011.  Meanwhile, the polished market is project to grow between 6% and 9% to reach more than $33 billion in total market value by 2020, driven by strong demand in emerging economies such as  China and India and consistently stable demand in the U.S.



 
India’s Gold ETF Assets Double in May

The assets held under India’s gold exchange-traded funds (ETFs) nearly doubled year on year to $1.85 billion as of May 31, according to the Association of Mutual Funds in India (AMFI). Total assets under gold ETFs were at $1.83 billion in April 2012. The number of gold ETFs in India has increased to 14 since the product was first launched in early 2007.



RETAIL & WHOLESALE  
 
U.S. Jewelry Store Sales -9%

Jewelry store sales fell 9.3% year on year in April to $1.996 billion, according to U.S. government calculations. Preliminary department store sales, which the government compiles quicker, were flat in the month of May at $14.576 billion. Both figures clearly reflected weaker consumer spending on jewelry and for general merchandise.  Nonetheless, the U.S. estimated that total retail and food services sales for May rose 5.3% year on year to $404.6 billion. Retail trade sales rose 5% from one year ago.



 
U.S. Jewelry Inflation -1% in May

The U.S. consumer price index (CPI) for jewelry fell 0.7% year on year in May to 173.3 points. While the index's change was slight, it was a significant shift being the first price decrease since August 2009. May's reading followed a 0.5% year on year increase in April.  The CPI is now at its lowest reading since March 2011, however,  May was the seventeenth consecutive month of a reading above 170 points, reflecting historically strong commodity prices since 2008.



 
Indian Watch Market to Grow to $3B by 2020

India’s watch market is expected to grow at 15% every year to around $2.70 billion by 2020 driven by young consumers, the emergence of a strong middle class and a larger number of high-net-worth individuals, according to the Associated Chambers of Commerce and Industry of India (ASSOCHAM). Due to increased international travel, Indian consumers have become more aware of various brands available globally and are willing to purchase in India. However, with more international brands entering the Indian market to cater to the growing demand of fashion and luxury watch consumers, it has also created some challenges for local manufacturers.  Still, local players still continue to dominate the Indian watch industry due to a solid manufacturing base and a wide range of price points.



 
LJ International Reports 1Q Loss

LJ International Inc. reported a net loss $2.87 million in the first quarter that ended March 31, compared with a profit of $3.3 million one year ago as expenses weighed on its performance. Selling, general and administrative expenses increased 65% to $24.2 million mainly due to an increase in investments in new store openings, marketing and branding campaigns, and professional fees for upgrades in internal control over financial reporting. Operating revenue increased 27%  to $52.2 million and comparable store sales grew 17%  year on year. Wholesale revenue fell 1% to $15.5 million.   The company added six new ENZO stores expanding its retail network to 208 stores at the end of March 2012.   LJ's store count further grew to 218 at the end of May 2012.



 
Kristall's Polished Diamond Tender Nets $2M

Kristall held its second exclusive polished diamond tender in Moscow from May 14 to 29 and reported that bidders were offered 55 stones, representing more than 190 carats. As a result of the tender, Kristall reported that 41 lots were sold, with 145.62 carats, for approximately $2.2 million. Kristall has schedule its next polished auction for September 2012.



 
Forevermark and Talos Select Damas

Forevermark appointed retailer Damas as its exclusive authorized jeweler in the United Arab Emirates (U.A.E.). Forevermark collections will soon be available at six Damas stores within the country.  Damas has confirmed that it plans to increase the number of outlets that retail Forevermark diamonds to 13 by the end of this year.  Luxury watch brand Talos also selected Damas  to be its exclusive retailer across the Arab States in the Gulf (GCC). A number of different Talos watch collections, including its well known Volute collection, are now available at selected Damas outlets.  All Talos watches are sold with diamond certificates, and the back of each watch is engraved with details about the diamonds used in each particular watch.



 
Amrapali Launches Ethical Emerald Collection

Amrapali  launched an ethical emerald collection, Panna, which is a direct translation of the Hindi word for emerald. The collection features ethically-mined stones from Gemfields' Zambia licenses. Panna designs were inspired by collections the Maharajas once commissioned to the grand Maisons of Europe and feature  cuffs,  necklaces and chandelier earrings. The line will be available at the company own boutique as well as Harrods.



MINING  
 
Trans Hex's FY Profit Jumps to $25M

Trans Hex reported a 15% year on year increase in revenue to $89 million for the year that ended on March 31.  The cost of selling rough diamonds fell nearly 3% to $67 million.  Trans Hex reported profit of $25 million compared with a loss of $5.3 million. During the year,  production in South Africa's increased to 84,409 carats from 69,508 carats in the 2011 with an average price per carat sold at $1,200, up from  $1,162 per carat in 2011. In Angola, production at Somiluana, in which Trans Hex holds a 33% stake, increased to 45,869 carats compared with 27,662 carats. Angolan operations achieved an average price of $446 per carat. Trans Hex expects production for the 2013 financial year to reach 80,000 carats out of South Africa, and 42,000 carats from Angola.



 
Lucara's Online Karowe Auction Nets $6M

Lucara Diamond Corp.'s first sale of Karowe diamonds through its new online auction system fetched $5.64 million. The company reported that 26,196 carats sold for an average price of $215 per carat and that sale was  86% sold by lot. A top lot included  a 25.90-carat diamond,  which achieved $130,070, or $5,022 per carat.



 
Shear Lowers Expectations for Jericho Sale

Shear Diamonds delivered 11,318 carats from its Jericho mine to its diamond marketing partner, Taché Company, to sell on the open market.  Taché made an initial payment of $500,000 for the first parcel but recent  declines in world rough diamond prices have resulted in a reduced expected price for the parcel. The company also noted that the recent drop in world diamond market prices will not generate sufficient cash flow to support operations.  Shear must obtain financing in the very near term to fund continuing operations and to increase production by going to 24-hour by seven day a week processing.



 
Stornoway Reports Resource Estimate for Qilalugaq

Stornoway Diamond Corporation reported its first mineral resource estimate for the Q1-4 kimberlite pipe located at its Qilalugaq diamond project in Nunavut, Canada. Qilalugaq includes the Qilalugaq kimberlite pipes and the Naujaat system of kimberlite dykes and has been the focus of ongoing exploration and assessment work by Stornoway since it was optioned and subsequently acquired from BHP Billiton. A total inferred mineral resource for the Q1-4 kimberlite pipe was 26.1 million carats of diamonds from 48.8 million tonnes of ore. Additional resource upside has been identified in the form of a target for further exploration for the Q1-4 kimberlite pipe of between 7.9 million to 9.3 million carats.



STATS  
 
Israel

  May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,040 -8% $3,320 -6%
Polished imports NA   NA  
Net exports        
         
Rough imports NA   NA  
Rough exports $293 -31% $1,240 -33%
Net imports        
         
Net diamond account $499 -6% $1,100 -2%


 
Belgium

  May $Mil. %Chng. YTD $Mil. %Chng.
Polished exports $1,181 -15% $5,695 -2%
Polished imports $1,207 -15% $5,671 5%
Net exports $154 -19% $24 -94%
         
Rough imports $1,111 -21% $5,620 0%
Rough exports $1,151 -22% $5,955 -3%
Net imports ($40)   ($335) 30%
         
Net diamond account $194 -24% $359 -60%


 
U.S.A.

  Apr. $Mil. %Chng. YTD $Mil. %Chng.
Polished imports $1,431 -17% $6,245 -9%
Polished exports $1,148 -13% $5,443 -4%
Net imports $283 -29% $803 -35%
         
Rough imports $27 -25% $147 -30%
Rough exports $15 -61% $125 -13%
Net imports $12 NA $22 -66%
         
Net diamond account $298 -24% $825 -36%


 
Botswana

  Apr. $Mil. %Chng. YTD $Mil. %Chng.
Diamond exports $174 -42% $1,000 -30%


ECONWATCH  
 
Diamond Industry Stock Report

Broad-based selloff for U.S. retail stocks and mining companies. Biggest drops were Lucara (-21%), Stornoway (-15%) and Petra (-11%). Read the extended industry stock report for this past week.
  June 14 June 7 Chng.  
$1 = Euro 0.794 0.794 0.000  
$1 = Rupee 55.82 54.90 0.9  
$1 = Israel Shekel 3.86 3.87 -0.01  
$1 = Rand 8.37 8.35 0.02  
$1 = Canadian Dollar 1.02 1.03 -0.01  
         
Precious Metals        
Gold $1,625.20 $1,590.20 $35.00  
Platinum $1,492.00 $1,439.00 $53.00  
         
Stock Indexes       Chng.
BSE 16,677.88 16,649.05 28.83 0.2%
Dow Jones 12,651.91 12,461.03 190.88 1.5%
FTSE 5,467.05 5,447.79 19.26 0.4%
Hang Seng 18,808.40 18,678.29 130.11 0.7%
S&P 500 1,329.10 1,314.99 14.11 1.1%
Yahoo! Jewelry 898.72 907.56 -8.84 -1.0%



INDIA MARKET REPORT  
 
Polished and Rough Trading Activity

Polished trading is very quiet and the dollar reached new highs against the rupee; furthermore, liquidity is very tight but there is ample supply of goods in the rough market.    Read the full report.




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