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Armenia to Increase Rough Imports From Russia

By Rapaport
Armenian diamond-cutting companies would like to increase rough diamond imports from Russia to $100 million a year and sign contracts with as many companies as possible on ALROSA’s list of clients, following a meeting of the Armenian-Russian intergovernmental commission on economic cooperation in Yekaterinburg. The meeting was chaired by Prime Minister Tigran Sarkisian and Russian Transport Minister Igor Levitin, the Armenian and Russian co-chairmen of the commission.

Based on the protocol established at the meeting, ALROSA plans to offer Armenian diamond companies $20 million to $30 million worth of rough diamonds next year. In September 2010, Armenia’s economic minister and ALROSA reached an arrangement on long-term agreements for the supply of diamonds to Armenian companies. Local companies cut a total of 49,573 carats in 2009, down 51 percent from 2008.

—Additional reporting provided by Acquire Media.

 

ALROSA Approves Fiscal Targets

ALROSA’s board approved new fiscal-year targets in line with its earlier projections. The company expects to produce $2.32 billion worth of rough diamonds in 2010 and anticipates consolidated rough and polished diamond sales of $3.42 billion. The board also projected total rough sales of $3.29 billion and polished sales of $125 million for 2010.

ALROSA hopes to achieve a net profit of $193.3 million (RUB 5.93 billion) for the year. The board approved an investment budget of $987.8 million (RUB 30.3 billion) with capital expenses of $319.4 million (RUB 9.8 billion) and an exploration budget of $91.3 million (RUB 2.8 billion).

In related company news, J.P. Morgan valued ALROSA between $7.3 billion and $9 billion, excluding debt, the business daily Vedomosti reported, citing work J.P. Morgan carried out for ALROSA. The article also cited a wider range for ALROSA’s value: $5 billion to $10 billion.

ALROSA recently completed a Eurobond placement worth $1 billion with a consortium of banks, including J.P.Morgan, UBS and VTB Capital, acting as organizers for the flotation. The securities have been placed for ten years and the interest rate is set at 7.75 percent per year. ALROSA is poised to use the proceeds from the placement to refinance its current debt.

 

DTC Botswana Strike Ends

The two-week pay strike at the Diamond Trading Co. of Botswana (DTCB) ended, according to Bloomberg News, and workers resumed work as wage negotiations continued.

“The offer remains the same,” DTC spokesman Kago Mmopi said in an email to Bloomberg. “The union has decided to suspend the strike and continue with negotiations while workers resume their duties.”

Workers at the DTCB reportedly began what was termed an “indefinite strike” when negotiations broke down between De Beers and the workers union, according to Bloomberg. The DTCB offered a 6 percent wage increase, but the workers were seeking an 8 percent increase, along with improved allowances. Mmegi news quoted DTCB Workers Union chair Kabelo Kelepile as saying that the vote to strike had been approved by 94.7 percent of its employees.

 

Gokhran Auctions $28 Million of Rough

Russia’s State Depository for Precious Metals, Gokhran, auctioned $27.71 million worth of special-size diamonds, or those over 10.8 carats, the Finance Ministry told Prime-Tass. A total of 970 diamonds in 250 lots were placed at an open auction, where 227 lots comprised of approximately 10,950 carats were sold.

According to an official in the ministry, “The auction results surpassed all our expectations — we had such sales only before the crisis.”

The auction was attended by 33 diamond-cutting companies. The ministry official added that no other auctions would be held this calendar year.

—Additional reporting provided by Acquire Media.

  

De Beers Expands Forevermark

The trademark “Forevermark Jeweller” was issued to De Beers by the United States Patent and Trademark Office (USPTO). The U.S. trademark covers the goods and services provided by Forevermark Jeweller, including precious metals and their alloys, jewelry and imitation jewelry, precious and semiprecious stones, horological and chronometric instruments and related advertising and marketing. 


De Beers reported that Forevermark diamond sales reached $200 million in October. The brand established itself in China, Hong Kong and Japan this year and is now available from more than 300 stores across those regions, representing a 25 percent increase from January.

Forevermark recently announced growth into Singapore, the Caribbean and Mexico through exclusive partnerships with retailers Lee Hwa Jewellers and Diamonds International. In December, Forevermark will also add India to its core market list, launching with selected retail partners in Bangalore, to be followed by Mumbai, Delhi, Chennai, Hyderabad and Kolkata.

De Beers also opened its first diamond boutique in Southeast Asia at The Shoppes at Marina Bay Sands in Singapore, marking the most recent flagship for De Beers Diamond Jewellers.

 

Su-Raj Boosts FIIs

The Reserve Bank of India announced that Su-Raj Diamonds and Jewellery Limited agreed to increase the limit for the purchase of its equity shares and convertible debentures by Foreign Institutional Investors (FIIs) to 65 percent from 49 percent of total company capital.

Under the Portfolio Investment Scheme through primary market and stock exchanges, FIIs can now purchase equity shares and convertible debentures of Su-Raj Diamonds and Jewellery Limited if total purchases by all FIIs do not exceed the applicable overall ceiling limits of 65 percent of total paid-up equity capital or the total paid-up value of each series of convertible debentures and if equity share purchases by a single FII do not exceed 10 percent of the company’s paid-up equity capital.*

 

Gold Continues to Gain

Skittish investors continued to support gold during the third quarter, according to the World Gold Council’s (WGC) most recent Gold Investment Digest. Gold had increased 5 percent to $1,307 per ounce at the close of quarter, which the WDC noted was in line with the quarterly average gain recorded for the past five years. Juan Carlos Artigas, the WGC’s investment research manager, said that the third quarter was again marked by mixed economic news from global markets.

“While emerging economies continue to recover, central banks in developed markets appear ready to keep monetary policy accommodative as long as necessary to spur growth,” he explained. “In particular, statements by the U.S. Federal Reserve, coupled with a large trade deficit and record levels of debt outstanding, started to put pressure on the dollar and increase long-term inflation expectations.”

The council concluded that investors collectively purchased 28.3 tons of gold via Exchange-Traded Funds (ETFs) during the third quarter, bringing total holdings to a new high of 2,070.1 tons worth $87 billion. Central banks of Russia, Bangladesh and Thailand also increased their gold reserves. —Additional reporting provided by Acquire Media.*

 

Aire Protects Trademark

Watch and jewelry designer Chris Aire, the president of Solid 21 Inc., filed suit against 17 major watch brands and others for trademark infringement, unfair competition, false description and injunctive and declaratory relief in U.S. Federal Court. The suit, filed in Los Angeles, names many top-brand defendants, including Rolex, LVMH, Breitling, Richemont, Ulysse Nardin, Swatch, Chopard and about 200 others. Aire compared his fight to protect the integrity of his Red Gold™ brand to a classic case of “David versus Goliath.”

 

Signet Appoints New CEO

Signet Jewelers appointed Michael Barnes as its new chief executive officer (CEO) effective January 30, 2011. Barnes is scheduled to join Signet on December 1 as CEO designate and will then succeed Terry Burman, who will retire from the post.

Barnes most recently served as the president, chief operational officer (COO) and a director at Fossil Inc. 

 

Israel Seeks Rough From South Africa

In an effort to secure direct rough supplies from producing countries in South Africa, the Israel Diamond Exchange (IDE) hosted a delegation to discuss expanding its cooperation with South Africa and Angola. The IDE hosted South Africa’s ambassador to Israel, Ismail Coovadia, and the incoming Israeli ambassador to Angola, Irit Savion Widregorne.

“Our goal is to examine ways to increase direct trade between Israel and the countries that produce rough without the goods needing to pass through secondary markets,” Avi Paz, IDE’s president, said.

Paz stressed the benefits that a direct supply of rough would offer the Israeli industry, including the creation of new business opportunities. Direct rough trade between Israel and South Africa dropped dramatically to $235 million in 2009, following a peak level of $416 million in 2007. For the year to date, Israel’s trade with South Africa has reached $350 million in the first nine months of 2010 and is likely to continue climbing, according to the IDE. Rough imports from Angola to Israel for the first nine months of 2010 totaled $255 million, an amount that resembled the peak trading levels of 2007.

 

Nawakwa Sale Raises $9.5 Million

Namakwa Diamonds generated $9.5 million from the sale of 22,841 carats. Nearly 6,300 carats of production came from the company’s Storm Mountain Diamonds operations in Lesotho and 10,549 carats were from the Kasai Central Node in the Democratic Republic of the Congo (DRC), while nearly 6,000 carats were from alluvial operations in the North West Province of South Africa.

Diamonds of significance included a 7.53-carat, vivid orange stone that sold for $176,713 per carat and a 26.74-carat, D, IF, type IIa diamond that sold for $44,000 per carat. Both were said to have flawless potential.

The diamonds were recovered from operations on Namakwa’s southeast node, which recently came into full production. Orange diamonds are caused by the presence of nitrogen and carbon lattice and are exceptionally rare. One of the most famous is Harry Winston’s 5.54-carat Pumpkin Diamond, which was worn by Halle Berry at the 2002 Oscars.

 

Stellar Diamond Notes Strong Production at Mandala

Stellar Diamonds sold 18,549 carats from its Mandala mine in Guinea for $608,819 or $32.82 per carat during the third quarter that ended on September 30, 2010. The company held 8,194 carats in stock at the end of the quarter.

Stellar noted that quarterly production at the mine was significantly higher than during the second quarter, with Mandala yielding 18,291 carats at an average grade of 23.39 carats per hundred tons (cpht), mainly as a result of new machinery.

Diamond sales from Mandala for the first three quarters totaled $1.74 million, or an average price of $33.86 per carat, for 51,471 carats.

 

Obtala Holds Sierra Leone Sale

Obtala resources generated $744,270 from its first sale of rough diamonds mined at its Konoma alluvial project in Sierra Leone. The company sold a total 2,480 carats for an overall average price of $300 per carat. The parcel included a 23.26-carat stone that sold for $3,105 per carat and a 14.90-carat diamond that sold for $4,776 per carat.

In related company news, the board of Obtala Resources Limited disposed of its entire holding of 22,652,261 shares in Firestone Diamonds. The gross consideration from the sale was $7.8 million (GBP 4,937,955), which Obtala will use to continue its mineral extraction. Obtala held an 8.33 percent stake in Firestone Diamonds before the sale, making it the second-largest stakeholder after JP Morgan Asset Management, which holds a 9.77 percent share.

Firestone Diamonds plc recently completed a takeover of Kopane Diamond Developments, where Obtala held its original investment. Since acquiring its initial interest in Kopane for $2.8 million (GBP 1.75 million) in March 2009, Obtala has realized a profit of approximately $7.8 million from the sale of its interest in Kopane.



Delegates Ask KP to Address Human Rights

The Kimberley Process (KP) annual plenary began in Jerusalem amidst calls from nongovernmental organizations (NGOs) to expand its charter to better address the human rights abuses currently impacting the diamon trade.

“Human rights are central and people are dismayed that so far the KP has not been able to address this,” said Charmian Gooch, the co-founder and director of Global Witness. “It is time for the KP to ensure that the provision for internal controls do not facilitate human rights abuses in the same way that they currently do not facilitate conflict.”
 

Eli Izhakoff, the president of the World Diamond Council (WDC), which represents the diamond industry at the KP, stressed the need for industry support to incorporate a statement on compliance with international human rights law.

“We suggest that such a statement note that KP participants should ensure that all diamond sector activity is conducted in a manner consistent with international human rights law,” Izhakoff said. “Furthermore, it should state that when KP participants become aware of alleged violations of international human rights law in the diamond sector, they should bring these to the attention of the appropriate internal law enforcement authorities and to international human rights institutions.”

Izhakoff also emphasized the need for the KP to remain inclusive. “There are those who have said that the situation in the Marange region of Zimbabwe was indicative of the inability of the KP to operate within the geo-political environment that exists in 2010. To them, I would point out that by choosing to remain engaged in the KP, Zimbabwe never released noncertified goods onto the market. We thus were able to avoid a situation in which the integrity of the pipeline would have been threatened. Instead, Zimbabwe agreed to two carefully monitored shipments, both of which required a green light from the KP review team.”

Recommendations have previously been submitted to the plenary by a KP review team that visited Zimbabwe in August. Nonetheless, Human Rights Watch (HRW) reported that a large part of the fields remain under the control of the Zimbabwe Defense Forces, “who harass and intimidate the local community and engage in widespread diamond smuggling.” The NGO added that while violence had decreased in the fields, the army and police continued to commit abuses, which put Zimbabwe in violation of the minimum standards required for membership in the KP. HRW called upon the KP to prevent further exports of Marange diamonds until there is meaningful progress to end smuggling and abuses by the army.

 “Without these kind of reforms, international consumers risk purchasing blood diamonds,” the civil society group said.

While discussions were set to focus on Zimbabwe, KP chairman Boaz Hirsch highlighted the other initiatives on the table, as well, including the creation of a KP administrative support office, the approval of cooperation with the World Customs Office (WCO) and the establishment of a sub-working group for trade facilitation.

“We face a critical junction for the process,” Hirsch said. “The eyes of the world are upon us and we must prove that the process is still reliable and relevant and can prevent the trade of conflict diamonds and human rights violations.”

 

USKPA Supports Trade Initiatives

The United States Kimberley Process Authority’s (USKPA) announced that it was pleased to receive a letter from Robert F. Cekuta, Deputy Assistant Secretary for Energy, Sanctions and Commodities in the U.S. State Department, expressing appreciation for the USKPA’s support of “the implementation of the Clean Diamond Trade Act (CDTA) and the Kimberley Process (KP).”

USKPA launched its new website, www.uskpa.org, earlier this year. The site contains information on how to qualify to become a licensee authorized to use U.S. KP certificates to export rough diamonds, as well as how existing licensees can more efficiently use their KP certificates to ensure compliance with the appropriate U.S. legislation and regulations.

The USKPA is governed by a three-member board of directors consisting of Cecilia Gardner, the chief executive officer (CEO) and general counsel of the Jewelers Vigilance Committee (JVC), Mark Gershburg, the CEO of Gemological Science International and Dr. Martin Hochbaum, the managing director of the New York Diamond Dealers Club (DDC).

  

Traffic Picks Up at JA Special Delivery Show

Exhibitors agreed that the traffic significantly improved at this year’s JA Special Delivery Show compared to the previous year. The cash-and-carry event was held from October 24 to October 26 at the Jacob K. Javits Center in New York City, with the first day being the busiest. An even mix of new merchandise and old inventory was on display and retailers were buying, especially to stock up for the holidays.

 Some companies reported opening a number of new accounts. Tom Rigler of DNR Diamonds said that buyers were trying to find more vendors for Christmas. “This way, retailers can call and check prices with more than one dealer. You can bargain and find the vendor who will give you the right price,” he explained, adding that a lot of retailers are not flat-out purchasing stones, but instead are calling for a memo.

 Avinash Jain of Panag Diamonds said that the increased amount of traffic at this show was very encouraging. “So many people are buying for the holiday, it is such a positive sign,” he said, noting that buyers were looking for items with the best value, especially loose and certified stones.

 The biggest sellers included loose diamonds on opposite sides of the pricing spectrum — either very expensive or very cheap.

 “Customers from overseas are looking for big stones, people here are looking for one-carat sizes,” Rigler said. 

 Louis Ebazi from Louis Creations agreed. “Pieces that are $10,000 to $15,000 are all sold out,” he observed, adding that he carries two separate lines: diamond jewelry and silver. “New customers prefer the silver line. The jewelry that is selling is very basic and traditional because people are not afraid to invest in it. Lots of fashion jewelry designs fail.”

 Other vendors had more success with fashion pieces. Susan Michel of Susan Michel Jewelry said that sentiment charms were her most popular sellers. Representatives from Marcia Moran, which debuted at the show, said that titanium- and platinum-set drusies were their biggest sellers and semiprecious stones and rings were a close second.

 

LKI, Banks Settle

Lazare Kaplan International (LKI) entered into a settlement with ABN Amro Bank N.V. and The Royal Bank of Scotland PLC with respect to certain debt. The diamond firm has satisfied approximately $64 million of obligations and ABN Amro agreed to transfer 2,151,103 shares, or approximately 26 percent, of the outstanding common LVI stock it was holding.

As part of the settlement, both banks released the company from its obligations and all claims related to an earlier dispute. In return, LKI released ABN Amro and Royal Bank of Scotland from claims related to obligations and business dealings. As part of that deal, LKI paid $14 million to the banks.

 

Merit Diamond Settles Suit

Merit Diamond has successfully protected and enforced its copyrights to the Sirena Collection® designs. The company recently addressed a dispute with Potpourri Group Inc., a jewelry retailer and owner of Catalog Favorites, and Jewelry Concepts Inc., a jewelry manufacturer, regarding the alleged infringement of Merit’s “Three Stones” pendant.

In September, the parties entered into a settlement agreement wherein Potpourri Group and Jewelry Concepts will discontinue all manufacturing, sales and advertising of knock-offs of Merit’s “Three Stones” pendant. The two parties also paid Merit the profits generated by their sales of those pieces.

 

De Beers Settlement to Be Reheard

The Diamond Manufacturers & Importers Association of America (DMIA) filed an amicus brief on behalf of its membership in its settlement case with De Beers through its attorneys, Boni & Zack LLC, Kohn, Swift & Graf P.C., and Ben Kinzler, general counsel for the group. The case will be reheard beginning on February 23, 2011.

The court awarded DMIA the right to participate as an amicus representing the trade. Upon receipt of the DMIA filing, the Third Circuit Court vacated the original opinion by the three judges, which disapproved the settlement with De Beers. The case will be reheard before all 15 judges of the court.

 

 

Article from the Rapaport Magazine - November 2010. To subscribe click here.

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