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Rapaport TradeWire July 20, 2012
Jul 19, 2012 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
July 20, 2012
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Trading centers quieter than usual ahead of summer vacations in Belgium and Israel. Buyers avoiding large purchases while suppliers adjusting to lower prices. De Beers drops prices average of 3% but sightholders continue to reject non-profitable DTC goods. July DTC sight estimated at $420M before rejections. Harry Winston estimates rough prices -8% in 2Q. Rio Tinto 2Q diamond production +3% to 2.8M Cts. BHP Billiton FY4Q production -28% to 413K Cts. Chow Tai Fook 1Q revenue +16%, same-store sales +4% reflecting cautious Far East demand. Birks & Mayors 1Q sales -3% to $69M. India’s June polished diamond exports fall 35% to $1.5B, rough imports -26% to $1.2B.
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| RapNet Data: July 19 |
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| Diamonds |
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974,679 |
| Value |
$6,137,475,058 |
| Carats |
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1,039,013 |
| Average Discount |
-27.04% |
www.rapnet.com
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QUOTE OF THE WEEK
The biggest thing going on here is the euro crisis, where the main diamond-lending banks are capping their lending facilities. Effectively [diamantaires] are drawing down on their working inventory at the moment, and when they do need diamonds they are purchasing them more on a hand to mouth basis.
Edward Sterck | Bank of Montreal
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Careers@Rapaport
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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. View jobs now.
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INDUSTRY
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DTC July Site Estimate $420M
The Diamond Trading Company's (DTC) July sight estimate was $420 million, but that was before deferments or ex-plan. De Beers reduced prices approximately 3% across most categories of goods, but sightholders continued to complain that the goods offered no profitability. There was very little trading of DTC boxes as sightholders were not prepared to lose money given that they are selling at double digit discounts on the secondary market.
Sightholders have started to reject DTC allocations due as De Beers kept its prices steady while the market weakened. DTC subsequently notified sightholders in June that they could defer up to 50% of their July sight target to any other sight in the current intention to offer (ITO) period that ends in March 2013. In addition, DTC has offered sightholders the opportunity to take additional goods at the sight. De Beers is scheduled to report its financial results for the first half of 2012 on July 20. Rapaport estimates that DTC sales fell 19% to approximately $2.83 billion during the period.
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U.S. Jewelry Store Sales +4%
Jewelry store sales in the U.S. rose 4% year on year to $2.736 billion in May, according to U.S. government data. Additionally, preliminary figures for department stores in June showed that sales fell 5% to $14.338 billion. Preliminary jewelry sales data is not published for the most recent month. The National Retail Federation concluded that there is no doubt consumers are cooling their heels in discretionary spending.
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RETAIL & WHOLESALE
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Yvel Debuts New Line at Jovella
WATCH NOW Yvel's AB School of jewelry making in Jerusalem helps and empowers Ethiopian students to learn the trade and design jewelry. Now the company employs a first round of the school's graduates at its manufacturing center and Yvel hosted an exhibition of the student's work at Jovella 2012 in Tel Aviv.
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Michael Hill's FY Sales +5%
Michael Hill International reported that sales rose 5% year on year to $408.2 million during the year that ended June 30. Same-store sales were flat at $378.6 million. Sales in Australia rose 2% to $267.1 million, New Zealand sales grew 7% to $87.4 million, Canada sales jumped 14% to $44.2 million and U.S. revenue increased 13% to $9.6 million.
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Birks & Mayor's 1Q Sales -3%
Birks & Mayors reported that net sales fell 3% year on year to $68.8 million in the first quarter that ended June 30. Comparable-store sales increased 3%. The decline in sales came as the company operated 10 fewer stores than in the previous year. Birks & Mayors also wrote off $1.7 million due to currency conversions as the Canadian dollar depreciated against the U.S. dollar.
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Chow Tai Fook Offers Guidance on 1Q
Chow Tai Fook Jewellery Group reported unaudited operational data for its first quarter, which ended on June 30, and noted retail revenue growth was 16% year on year, however, same-store sales rose only 4%. The group did not provide figures. By region, comparable-store sales slipped 1% year on year for the group's Hong Kong and Macau operations where sales volume of high-end diamond jewelry was weak. Same-store sales growth on Mainland China rose 10%.
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Faberge Creates Karenina Collection
Faberge introduced Karenina, a special collection of jewels that were inspired by the heroine of Leo Tolstoy's masterpiece, Anna Karenina. The fine jewelry collection echoes the exuberance and romance of the era, while celebrating rose-cut diamonds and diamond clusters, opals, Akoya pearls and emeralds.
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De Beers Launches New Jewelry Line
De Beers Diamond Jewellers debuted its Imaginary Nature High Jewellery Collection by Hollie Bonneville. Eight one-of-a-kind pieces depict movement of flower petals and feathers, the natural rhythm of seasons inspired by the beauty of transformations within nature, which are realized in a story of metamorphosis. Each piece reveals a unique gesture inspired by the essence of nature. The collection is centered on diamonds of character, focused on pears and baguettes to create a language of movement and fluidity.
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Tiffany Introduces New Designs
Tiffany & Co. provided a preview of its Christmas 2012 gift line, featuring handcrafted jewelry, diamonds and colorful gemstones. This year, the Rubedo metal, a unique innovation debuting in Tiffany 1837 jewelry designs in honor of Tiffany's 175th anniversary, adds rose luminescence highlights to the Return to Tiffany heart tag on a sterling silver bracelet. Another item, a diamond contour ring, features a rare 3.04-carat, fancy intense Tiffany Yellow Diamond, mounted in a setting of white diamonds in platinum and 18-karat gold.
To celebrate Tiffany's famed designer Jean Schlumberger, the retailer handcrafted his famous Bird on a Rock brooch setting with an 86.60-carat green tourmaline, diamonds in platinum and 18-karat gold. Other items include earrings from Tiffany's Victoria collection, the new Tiffany Enchant collection and new Tiffany Keys to name a few.
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Signet Increases Share Buyback Funds
Signet Jewelers Ltd. authorized a $50 million increase, up to $350 million, in its existing program to repurchase common shares. Mike Barnes, Signet's chief executive, said that the increase reflected the board's commitment to building value for long-term shareholders. The repurchase program is funded through the company's existing cash balances.
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Gitanjali Opens B2B Center in Dubai
Gitanjali Group opened a business-to-business (B2B) trade showroom in Dubai's Almas Tower as the company aims to forge closer commercial ties with Middle East retailers. The 3,500-square-foot showroom follows the launch of Gitanjali's first store in Dubai earlier in July. The group's Italian brands being exhibited at the showroom include Stefan Hafner, Nouvelle Bague, Porrati, IoSi, Valente Milano, and Giantti. The floor also showcases Indian brands such as Gili, Nakshatra, Asmi, Adler & Roth.
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GENERAL
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Shear Delivers New Parcel to Tache
Shear Diamonds delivered 13,908.31 carats of diamonds from the Jericho mine to its marketing partner Tache Diamonds. The parcel was the second such delivery made since Shear started reprocessing stockpiles at Jericho in May. Tache advanced $550,000 to Shear for the shipment, while Shear has drawn an additional $550,000 from its revolving line of credit with Tache in relation to the production and delivery of the shipment. Tache will reconcile a final payment to Shear once prices per carat can be ascertained based upon the formula provided in their marketing agreement. A third parcel is scheduled for delivery in August.
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Trade Groups to Tackle Disclosure
India's various gems and jewelry industry associations formed a committee to tackle the issue of undisclosed lab-grown diamonds. The committee members are from the Gem & Jewellery Export Promotion Council (GJEPC), the All India Gems and Jewellery Trade Federation (GJF), the Bharat Diamond Bourse (BDB) and the Mumbai Diamond Merchants Association (MDMA). It will also receive input from the grading laboratories. The committee will take action inform the trade if and when goods are not correctly disclosed.
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ICA to Establish Center in China
The International Colored Gemstone Association (ICA) will establish a national manufacturing and training center for colored gemstones and jewelry in Hunan, China, per a joint agreement with the local government. The venture is part of a larger effort to promote colored gemstones, jewelry and minerals throughout China. ICA earlier this month moved its international headquarters to Hong Kong from New York and signed an arrangement with Gemfields International for a direct sourcing supply.
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Congress Registration Opens Online
Organizers of the 35th World Diamond Congress, to be held in Mumbai in October, launched the event's informational website at www.diamondcongress2012.com. The portal offers registration and background information on the congress as well as a schedule and agenda. The World Diamond Congress is the bi-annual general assembly of the World Federation of Diamond Bourses (WFDB) and the International Diamond Manufacturers Association (IDMA). The congress will take place October 14 to 17, and it is the first time it is being held in India.
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MINING
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Rio Tinto Production +3%
Rio Tinto reported that its diamond production rose 3% year on year to 2.808 million carats in the second quarter of 2012. Growth was driven by increased output at the Australia-based Argyle mine, which achieved higher grade ore as the company shifts toward underground mining at the operation. Production at Argyle increased 6% to 1.677 million carats, Diavik mine production was flat at 1.075 million carats, and production at the Murowa mine fell 30% to 56,000 carats.
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BHP Production -28%
BHP Billiton reported that its diamond production fell 28% year on year to 413,000 carats in the fourth fiscal quarter that ended on June 30. Production for the fiscal year declined 29% to 1.784 million carats. BHP has not yet completed its review of the diamond business.
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Rockwell's Loss Grows
Rockwell Diamonds reported that its first quarter revenue fell 17% year on year to $7.1 million for the three months that ended on May 31, while production costs rose 16% to $6.9 million. The junior miner recorded a loss of just more than $3 million, up from $1.2 million one year ago. The company produced 7,234 carats of rough diamonds and sold 6,234 carats at an average price of $944.
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Lucara Rough Sale Nets $7M
Lucara Diamond's second sale of diamonds from the Karowe mine fetched $6.5 million as the company sold 91% of the lots placed on offer. The auction sold 36,842 carats of diamonds for an average estimated price of $176 per carat, compared with $215 per carat achieved at the first sale, which was held in June. Bidding for high-color, high-quality diamonds was soft.
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Harry Winston Observes Price Declines
Harry Winston estimated that rough diamond prices have declined by 8% since April as demand has weakened. The company estimated that rough prices have dropped about 4% since the beginning of the year and that it expects to be holding higher than normal rough diamond inventory as of July 31, which is the end of its fiscal quarter.
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Kennady Diamonds Discovers New Kimberlite
Kennady Diamonds Inc., a subsidiary of Mountain Province Diamonds, made its first new kimberlite discovery at the company's Kennady North diamond project. The discovery was made at a geophysical target located at Faraday Lake on trend between the previously discovered Faraday and Kelvin kimberlites. An incline hole drilled from shore-intersected kimberlite first at a down-hole depth of approximately 47 meters and has continued to intersect kimberlite to the current depth of approximately 169 meters. Drilling has been stopped in order to survey the drill hole, following which it will recommence and continue until the hole exits kimberlite.
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Zim Lowers Revenue Target
Zimbabwe's Finance Minister Tendai Biti lowered the 2012 national budget to $3.4 billion due to an 53% diamond revenue shortfall through June. So far, Zimbabwe's treasury has received $146 million of an expected $600 million in diamond revenue, Biti claimed.
He also told Parliament that corruption within government, political uncertainty especially with regards to the holding of elections this year, policy inconsistencies in government and power shortages were deeply impacting economic growth. Biti revised GDP growth projections lower to 5.6% from 9.4%.
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STATS
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India
| | June $Mil | %Chng | YTD $Mil | %Chng | | Polished Exports | $1,450 | -35% | $9,363 | -40% | | Polished Imports | $271 | -85% | $3,141 | -75% | | Net Exports | $1,179 | 60% | $6,222 | 115% | | | | | | | | Rough Imports | $1,182 | -26% | $7,782 | 2% | | Rough Exports | $113 | -26% | $835 | 8% | | Net Imports | $1,069 | -26% | $6,947 | 2% | | | | | | | | Net Diamond Account | $110 | | $725 | 82% |
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ECONWATCH
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Diamond Industry Stock Report
Stocks gained traction after heavy losses the past two weeks. Tiffany jumped 12% after Goldman Sachs upgrade, Richemont (+11%) and Swatch (+8%) followed as analysts signaled lower commodity prices would improve fourth quarter jewelry margins. Diamond mining stocks were hammered though, Lucara (-12%), Stornoway (-8%), Mwana (-10%) and Namakwa (-13%) led the way. Read the extended industry stock report for this past week.
| | July 19 | July 12 | Chng. | | | $1 = Euro | 0.814 | 0.819 | -0.005 | | | $1 = Rupee | 55.17 | 55.84 | -0.7 | | | $1 = Israel Shekel | 4.00 | 3.97 | 0.03 | | | $1 = Rand | 8.17 | 8.23 | -0.06 | | | $1 = Canadian Dollar | 1.00 | 1.02 | -0.02 | | | | | | | | | Precious Metals | | | | | | Gold | $1,582.10 | $1,571.80 | $10.30 | | | Platinum | $1,414.00 | $1,407.00 | $7.00 | | | | | | | | | Stock Indexes | | | | Chng. | | BSE | 17,278.85 | 17,232.55 | 46.30 | 0.3% | | Dow Jones | 12,943.36 | 12,573.27 | 370.09 | 2.9% | | FTSE | 5,714.19 | 5,608.25 | 105.94 | 1.9% | | Hang Seng | 19,559.05 | 19,025.11 | 533.94 | 2.8% | | S&P 500 | 1,376.51 | 1,334.74 | 41.77 | 3.1% | | Yahoo! Jewelry | 941.15 | 903.27 | 37.88 | 4.2% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
Local polish market is cautious with activity mainly for SI and lower. Price differential is increasing as buyers play it safe. Few overseas buyers are seen locally, DTC sight was below expectations and the jewelry market is quiet.
Read the full report.
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