RAPAPORT... ALROSA agreed to supply $300 million worth of rough diamonds per year to Israel’s manufacturing sector, according to Israel’s Ministry of Industry, Trade and Labor. Benjamin Ben-Eliezer, the minister of this department, requested a direct supply of rough to Ramat Gan during a business delegation held in Russia. Representatives of the government-owned mining monopoly said it was prepared in principle to supply the requested amount, the ministry stated. No official agreement was signed, however.
Oppenheimer Uses Anglo Shares as Collateral
Nicky Oppenheimer, chairman of the De Beers Group, placed 27.3 million Anglo American shares to serve as security for a loan facility, according to a regulatory filing he submitted to the London Stock Exchange (LSE). The shares, 70 percent of which are held by E. Oppenheimer & Son International Limited, with the remainder owned by Gartland Limited, were valued at approximately $1 billion (GBP 739.8 million) when the agreement was transacted, based on the closing price in London on March 10.
Oppenheimer serves as a director at mining giant Anglo American and owns a 40 percent stake in De Beers through his family’s Central Holdings Group. Anglo has a 45 percent stake in De Beers, with the Botswana government owning the remaining 15 percent.
DTC Sight Estimated at $420 Million
The Diamond Trading Company’s (DTC) March sight had an estimated value of $420 million. The De Beers subsidiary kept its prices stable and its assortments consistent and sightholders were satisfied with the DTC boxes, reporting that De Beers is currently offering the best value on the market.
At its February sight, De Beers pledged to keep prices stable in the short term, barring “any further major changes in market conditions.” Sightholders said they expect this stability to last until at least June 2010, when the JCK Las Vegas show will be held.
Nonetheless, DTC sightholders reported high premiums for rough on the open market, stressing that the tender system was driving prices up. Reports indicated that BHP Billiton’s prices increased by an average of 2 percent to 3 percent at the company’s March tender.
Before the sight, De Beers presented sightholders with their intentions to offer (ITOs) for the 2010 to 2011 sight cycle, which begins in April. Sightholders indicated that the London ITOs increased by an average of 25 percent on a year-to-year basis, but still fell well below their 2008 to 2009 levels. The March sight was the smallest of the calendar year so far, as De Beers released large quantities of rough into the market in January and February.
U.S. Customs Says Taly Purchased Fraudulent Diamonds
U.S. Immigration and Customs Enforcement (ICE) advised New York City-based Taly Diamonds that a 143-carat rough stone it purchased in September 2009 was obtained fraudulently. Taly Diamonds stated that it bought the diamond from Belgo-Nevada Ltd., which obtained the stone from Higgs Diamond of South Africa.
After purchasing the rough diamond in September 2009, Taly cut and polished it into 68 carats, but on March 4, 2010, the U.S. government seized the diamond, pending the determination of its lawful owner.
Todd Hyman, a special agent with ICE, explained that diamond dealer Dennis Van Kerrebroeck agreed to purchase the diamond from Higgs. Kerrebroeck allegedly arranged for the stone to be released from Customs, while telling Higgs that it was still being held for Customs clearance.
Taly Diamonds intends to cooperate with the government’s investigation, but will vigorously pursue all legally available means to recover the diamond, according to the firm. It has retained Jerome J. Lawton and Lawrence S. Spiegel of the New York law firm Skadden, Arps, Slate, Meagher & Flom.
African Diamonds Claims De Beers Broke FSA Rules
Recent tension between De Beers and African Diamonds escalated when the exploration company claimed that De Beers failed to notify it about a transfer of shares.
“The board of African Diamonds has been informed by its registrars that one million shares in an account we believe to be controlled by De Beers have been sold or transferred without the company being notified. This, if true, breaches Financial Services Authority (FSA) rules,” African Diamonds stated in a London Stock Exchange (LSE) filing. The company says the account in question, which held 4,423,293 shares or 5.8 percent of the total shares, now holds 3,423,293 shares or 4.49 percent.
In response, Lynette Gould, De Beers spokesperson, confirmed that the necessary notifications were made and said that the company is seeking a full retraction of African Diamonds’ allegations.
Signet’s Fiscal Year Sales Fall Slightly
The world’s largest specialty retail jeweler reported that revenue dropped 1.6 percent to $3.3 billion for the fiscal year that ended on January 30, 2010. U.S. sales, which are derived from Kay Jewelers, Jared® the Galleria of Jewelry and other stores under various regional names, inched up 0.8 percent to $2.6 billion. U.K. sales, including H. Samuel, Ernest Jones and Leslie Davis, fell by 0.1 percent. Signet reported its sales figures based on constant exchange rates, which do not account for currency fluctuations.
Companywide, same-store sales fell 0.4 percent compared with fiscal 2009. Signet’s net profit was $164 million versus a loss of $394 million in fiscal 2009, which the jeweler attributed to impairment charges taken in the fourth quarter.
Signet completed a $100 million cost reduction program in fiscal 2010 in response to poor economic conditions on both sides of the Atlantic. This target was “slightly exceeded” and the additional savings were reinvested in U.S. advertising campaigns.
Net store space in the U.S. was reduced by 1 percent during fiscal 2010 as Signet closed 56 stores and opened 16. Capital expenditures were cut by more than half to $20 million. Working capital investment, inventory and receivables associated with new stores were $28 million, down from $67 million in fiscal 2009. Signet reported that its average unit-selling price in the U.S. declined 16.8 percent to $324.
During the year, the U.S. division further developed its Open Hearts by Jane Seymour™ brand, launched the Love’s Embrace collection and reported continued success with the Leo Diamond and merchandise from Le Vian. Signet reported that in calendar 2009, the U.S. division’s market share for specialty jewelry increased to 9.4 percent from 9 percent in calendar 2008, which it based on government data.
Looking ahead, Signet forecasted closing 50 stores in the U.S. during fiscal 2011 and opening eight new locations, for a net space loss of 2 percent from fiscal year 2010. The company said it would close 15 locations in the U.K.
In the fourth quarter, Signet’s sales rose 7 percent year over year to $1.2 billion, while its same-store sales increased by 5.2 percent. Net income was $117.2 million compared with a loss of $424 million one year ago.
IMF Tackles Africa’s Illicit Diamonds
The International Monetary Fund (IMF) launched a project to help 16 African countries fight money laundering and the use of their diamond and gold industries to fund terrorism. The organization, which has 186 member countries, stated that a number of reports in the past few years have raised concerns about links between the trade in precious minerals and corruption, drug trafficking, arms smuggling and terrorism financing.
The IMF said the first stage of the program will consist of two five-day workshops addressing institutional weaknesses. In the second phase, participants will set up antimoney laundering (AML) programs and combat financing terrorism (FT) strategies with support from IMF-backed experts. Africa’s diamond output and gold production are valued at $6 billion and $19 billion, respectively. The IMF stressed, however, that an unknown amount is tapped for criminal purposes.
Article from the Rapaport Magazine - April 2010. To subscribe click here.