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Apr 1, 2009 6:18 AM   By Rapaport
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RAPAPORT... Working Group Created for Diamond Marketing
More than 60 diamond industry representatives met in London to discuss developing a new organization for generic diamond marketing and advocacy. There, they formed a working group comprised of leading diamond producers, cutters, wholesalers, the International Diamond Manufacturers Association (IDMA), the World Federation of Diamond Bourses (WFDB) and the Gem & Jewellery Export Promotion Council (GJEPC).
During the same week, De Beers presented its latest “big idea” marketing concept to Diamond Trading Company (DTC) sightholders in London.

Robbins Bros. Files Chapter 11
Retailer Robbins Bros. Co. of California sought Chapter 11 bankruptcy protection and proposed a plan to sell some of its Texas stores and Illinois store assets to Canada’s Spence Diamonds for $3.3 million. Under this plan, Robbins Bros. Jewelry Inc., an affiliate of Weston Presidio, the investment firm that owns 49 percent of Robbins Bros., would acquire the company’s remaining assets.

Court documents state that Robbins Bros. Co. incurred a net loss of $6.4 million in 2008, with net sales totaling $103.7 million. The retailer reported that its debt includes $16.7 million against its $30 million revolving credit facility with Wells Fargo, an $18 million secured note with Paradox Capital and $6 million in secured notes with WPCEF II.

Two weeks after the filing, Paradox Syndication and Paradox Capital filed an objection against the sale, arguing that if it was allowed, the lenders would still hold an $18-million unsecured claim against the jeweler. The objection also stated that the sale to Weston Presidio violates the Bankruptcy Code and was designed to benefit equity holders, including Weston, at the expense of creditors. Both filings awaited a court ruling at press time.

Abraham Petitions to Void NY DDC Vote
David Abraham, vice president of the New York Diamond Dealers Club (DDC), filed a petition in New York Supreme Court to void changes to the club’s bylaws. The changes passed by three votes on December 4, 2008, but Abraham alleges that the 524 ballots cast included at least four votes from members who were not current with their dues, along with a number of votes from inactive members and one from a nonmember club employee, according to court documents.

The suit also claims that Jacob Banda failed to explain that the amended bylaws would allow him to seek a fifth term as president and an officer position after serving as president. Banda was first elected for a two-year term on June 22, 2000. He was elected to his fourth term on October 26, 2006.

The DDC recently announced that Banda was re-elected to his fifth consecutive term as president. The newly elected DDC officers included vice president Moshe Mosbacher, secretary Nissan Perla and treasurer Jacob Weinstock. The following individuals were elected to the board: Gary Dimenstein, Abraham Einhorn, Meilech Fastag, Dov Fruchter,
Eli Gottlieb, Joseph Khafi, David Klein, Philip Klein, Aaron Landau, Benjamin Moller, Robert Moskovitz, Zev (William) Oster, Moshe David Reisz, Solomon Rybak, Leon Well and Moshe Zwiebel.

Activity Up at DTC’s February Sight
Participants in the Diamond Trading Company’s (DTC) February sight reported a slight increase in activity, although the sight remained comparatively very small. Participants estimated the sight’s value at about $110 million.

Louise Prior, a DTC spokesperson, noted an improvement in sales compared with December 2008 and January 2009. All of the February sight participants surveyed by Rapaport News reported price revisions, but agreed that DTC’s prices were still higher than other rough sources in the market.

In an unprecedented move, DTC carried over rejected stock from the February sight and sold it to sightholders for a second week, offering boxes to sightholders that needed specific items or goods that weren’t in the company’s Intention to Offer (ITO). Prior said that DTC is gathering feedback to assess the initiative’s success. She added that the company has not decided to go to the secondary market, as hinted at in January, but is keeping all of its options open.

De Beers reported that its rough diamond prices rose by an average of 14 percent in 2008 on the back of the market boom of the first half of the year. DTC ended 2008 with flat sales of $5.9 billion. Sales from DTC Botswana (DTCB) and Namibia DTC (NDTC) were $367 million and $172 million, respectively, while DTC South Africa (DTCSA) achieved sales of $574 million, De Beers reported.

The Diamdel Group, which sells rough diamonds to nonsightholders on behalf of De Beers, saw its sales fall 17 percent to $444 million in 2008. Diamdel is conserving cash by limiting purchases, reducing operating costs and ensuring tighter inventory management.

The group sold 300 lots of rough diamonds through its e-auctions during the year. More than 80 different companies, based in Hong Kong, Tel Aviv, Antwerp and Mumbai, bought lots at these events.

Jewelry Crime Up
In its annual crime report, Jewelers Security Alliance (JSA) found that the number of reported crimes against the U.S. jewelry industry increased almost 17 percent as total dollar losses rose nearly 7 percent to $103.5 million in 2008. The most crimes occurred in California, followed by Florida and Texas. In New York, there were 87 crimes against the industry, while 75 were reported in New Jersey. Overall, grab-and-run incidents were up 51 percent, on-premises crime reports increased 18 percent and off-premises dollar losses rose 9 percent.

The greatest number of robberies occurred between 10 a.m. and 11 a.m., while the most active day of the week for crime was Thursday. Parking lots remained the top location for jewelry crime. The number of robberies involving violence increased from 29 percent in 2007 to 33 percent in 2008.
John Kennedy, JSA’s president, concluded that almost all major crimes against the jewelry industry — including armed robberies, safe burglaries and attacks on traveling salespersons — are committed by organized gangs that are not motivated by changes in the economy.

DTC Botswana Unveils Jewelry Collection
The Diamond Trading Company Botswana (DTCB) introduced its first collection of diamond jewelry, the DTC Southern Africa Shining Light Collection, which consists of five pieces from Botswana designers, eight pieces from South African designers and five pieces from Namibian designers. Nine of the 18 pieces are Forevermark branded. DTCB hosted design workshops in Gaborone and held a competition to create the jewelry designs.

IDI Launches Marketing Initiative
The Israeli Diamond Institute Group of Companies (IDI) unveiled the first stage of a strategic initiative designed to provide marketing support to Israeli diamond manufacturers and exporters.

Moti Ganz, IDI chairman, explained that additional stages of the program will be announced at Baselworld and JCK Las Vegas.

In Stage I of the effort:
• An Israeli diamond industry news service will write and distribute press releases about Israeli diamond companies as a free service;
• Israeli diamantaires will be offered a series of online seminars about internet marketing and ecommerce and IDI will also provide free consulting services for diamantaires who wish to create or improve their websites;
• IDI will assist diamantaires in taking advantage of the marketing opportunities offered by social networks on the internet;
• Israeli diamond pavilions at major trade shows will be expanded to include meeting space for nonexhibiting Israeli diamantaires; and
• IDI will continue to offer foreign buyers a free night at the Sheraton City Tower Hotel for every day they spend on the Israel Diamond Exchange (IDE) trading floor for a total of up to four nights. The service brought dozens of foreign buyers to Israel at the end of 2008, IDI reported.

Credit Reductions for Israel’s Diamond Industry
The Union Bank of Israel decreased credit to Israel’s diamond industry by 21 percent to $1.9 billion during the four months that ended January 31, 2009. The bank explained in its 2008 annual report that it reduced its industry exposure and tightened its lending criteria for diamantaires in response to the economic downturn.

For the year, the bank cut its lending to the industry by 20 percent, from $586 million at the beginning of 2008 to $471 million in December. The report stated that the economic crisis will continue to impact the industry throughout 2009.

The bank nevertheless posted a profit of $1.7 million (NIS 7 million) for 2008, compared with a loss of $1.2 million (NIS 5 million) in the previous year. Revenues from its diamond segment declined 7 percent to $15 million (NIS 63 million).

Collectors Universe Exits Diamond Grading
Collectors Universe discontinued its authentication and grading of diamonds and colored gemstones. However, the parent company of the Gem Certification and Assurance Lab (GCAL) and the American Gemological Laboratories (AGL) will license its Gemprint identification technology and related patents to the Palmieri Group. Donald A. Palmieri, who served as president of GCAL, will continue as president. The Palmieri Group will continue providing diamond-grading services under the GCAL name from GCAL’s current offices, pending finalization of a definitive purchase agreement.

RJC Allows Lab-Grown Producers to Join
The Responsible Jewellery Council (RJC) renamed its “mining” membership category “diamond and/or gold producers” to enable laboratory-grown diamond producers to participate in RJC’s third-party certification system. The council now defines a diamond as natural or laboratory-grown.
LLD Cuts Jobs in Namibia

Lev Leviev Diamonds’ (LLD) Namibia polishing factory is scaling back its operations and has cut 77 workers, leaving it with a staff of approximately 30 people, according to a report in the Namibia Economist, which cites Kombadayedu Kapwanga, LLD’s chief
executive officer (CEO).

LLD’s Namibia factory, established in 2002, was intended to produce 25,000 carats per month from its sister marine company, Samicor, and employ 550 people. However, Samicor’s diamonds proved too small and the 4,000 carats per month supplied by Namdeb, the joint venture between De Beers and Namibia, are not enough, according to the newspaper.

Plea Deals in Work-Visa Bribery Case
Michael John O’Keefe, a former Toronto-based U.S. diplomat, and Sunil Agrawal, chief executive officer (CEO) of STS Jewels, both pleaded guilty to charges that they were involved in a scheme to fast-track U.S. work visas in exchange for diamonds and gifts. The case was first reported by Rapaport News in August 2006 when prosecutors indicted Agrawal on charges of bribery and conspiracy and O’Keefe was accused of conspiracy and seeking to receive “things of value” for his “favorable performance as an official of the U.S. government.”

O’Keefe pleaded guilty to the lesser charge of accepting a gratuity, a felony that carries up to two years in prison and a $250,000 fine. He is required to return all of the items he received from STS Jewels in exchange for approving 21 visas for the firm and to pay a $5,000 fine to compensate for Agrawal funding his travel and providing two exotic dancers as travel companions. Agrawal pleaded guilty to the misdemeanor charge of illegal salary supplementation. He could face up to one year of prison time and a $100,000 fine.

Sierra Gold Expands Into Diamond Mining
Sierra Gold Corporation, which explores for and mines gold in Sierra Leone, announced in a statement that it had entered into two new joint-venture agreements for diamond mining in the Zimmi region of Sierra Leone. Doug Evans, chief executive officer (CEO) of Sierra Gold, noted that the area is well-known for colored diamonds, including canary yellow stones. Sierra Gold produced more than 76.8 ounces of gold in February.

De Beers Lays Off Snap Lake Workers
De Beers Canada restructured operations at its Snap Lake mine in Canada’s Northwest Territories, laying off 128 employees and reducing production levels. In addition, 90 contractors were told that their contracts would expire or that the scope of their work would be reduced.

Rio Tinto Finds Diamond Resource in India
Rio Tinto has discovered an “immensely rich” diamond resource in Madhya Pradesh, India at its Bunder diamond project, a development that could boost the company’s plans to invest “hundreds of million dollars” in the country, Nik Senapati, Rio Tinto India’s managing director, told the Press Trust of India (PTI). The Bunder diamond project was discovered by Rio Tinto in 2004.

RBC: Letseng Tender Prices Plunge
Gem Diamonds’ January rough tender of goods from its Letseng mine in Lesotho achieved an estimated average price of $1,000 per carat, according to Des Kilalea, an analyst at RBC Capital Markets, based on feedback from tender participants. While the December tender was postponed because of the weak market, the average price achieved at Letseng in the fourth quarter was $2,139 a carat. So, according to Kilalea’s estimates, prices for diamonds from the world’s richest mine fell by around 53 percent through December and January. A spokes-person for Gem Diamonds declined to confirm these figures. Kilalea lowered his 2008 full-year forecast for the company from a loss of 35 cents per share to a loss of 95 cents a share.

Henricks Liquidates
Florida’s Henricks Jewelers is liquidating its $8 million inventory, Buxbaum Jewelry Advisors, the firm’s liquidator, announced in a statement. The 60-day sale includes steep discounts on diamonds and gemstones, according to Buxbaum.

Henricks Jewelers was founded in 1982 by Henry Grimes and his son Rick and was purchased by Luxury Ventures LLC in 2003. Henricks filed Chapter 11 in November 2007 and emerged as a reorganized company the following March. The statement explained that the company became saddled by debt during a failed attempt to expand into local and national markets.

Angola Government To Buy Local Diamonds
Angola is planning to buy diamonds mined in the country at “acceptable market prices” to boost local mining companies reeling from the drop in global demand, according to Bloomberg. Makenda Ambroise, Angola’s energy and mining minister, stated, “The objective is to maintain companies’ liquidity so that they can pay salaries and services.” Ambroise went on to say that exploration companies that abandoned their prospects because of the recession wouldn’t be allowed to return when the economy improves, Bloomberg reported.

LJW Expands Into India
Leading Jewelers of the World (LJW), an association patterned after the business model of Leading Hotels of the World,® is making its foray into India. Open to only 100 elite jewelers, LJW offers its members a lineup of brand enhancement programs including advertising support, visual merchandising, store events, relationship management and public relations support, among other programs.

Illinois Abandons Luxury Tax
The Illinois state legislature’s Revenue and Finance Committee will not move forward with HB0451, a bill that would have imposed a 5 percent luxury tax on jewelry and timepieces priced at over $20,000 in the state, Jewelers of America (JA) announced in a release.

JA had targeted members and nonmembers in an antiluxury-tax letter and fundraising campaign, reaching out to its state affiliate, the Illinois Jewelers Association (IJA) and the nonaffiliated Chicago Jewelers Association (CJA), and provided jewelry businesses with sample letters and petitions.

The campaign was part of a two-pronged effort on the part of JA in fighting a similar luxury tax proposal, S00060, in New York’s state budget bill, which also calls for a 5 percent tax on jewelry and watches over $20,000. The release noted that JA continues to keep a close watch on the New York state legislature, and is joined in its efforts by the American Watch Association (AWA).

India’s Wedding Business Remains Strong
In India, there is no business like the wedding business, according to the International Herald Tribune. A wedding thrown by the family that owns ORRA, India’s largest diamond jewelry retail chain, reportedly had 12,000 attendees. More than 70,000 invitations with prints of a painting by the artist M.F. Hussain were distributed for the marriage of Juhi Babbar, the daughter of actor-turned-politician Raj Babbar.

Traditionally, North Indian weddings are full of pomp and show compared with those in South India, which is more discreet in spending and showing wealth. But because of new money from the information technology and software businesses, changes are occurring in southern cities like Hyderabad, Chennai and Bangalore, the newspaper reported.

Husband-and-wife team Pradeep and Neha Hirani recently launched Kimaya Studio bridal salons in Mumbai, New Delhi, Bangalore and Chennai that offer services like videoconferencing with a favorite designer anywhere in the world or practice sessions for the big day. Pradeep told the Tribune, “And even with the recession, the margins are so high that a dip in the economy wouldn’t impact the bridal market that much.” *

ALROSA Asked Gokhran to Buy All 2009 Output
ALROSA requested that the Gokhran, Russia’s state precious metals and gemstones repository, buy all of its diamond production in 2009, but the repository will end up buying less than that, a Gokhran source told Interfax. “ALROSA has asked us to buy all the diamonds it mines in 2009. But their request has been scaled down considerably, and even then it’s hard to tell how much we’ll buy,” the source said.

An ALROSA representative declined to comment, citing state secrets, Interfax noted. The Gokhran’s draft of its 2009 budget could boost spending on precious metal and gem procurement to $1.3 billion, almost triple its 2008 budget, according to Interfax.*

India Plans Training in Africa
Pranab Mukherjee, India’s external affairs minister, announced at the India-Africa Project Conclave that his government had approved the request of some African countries that India set up diamond cutting and polishing institutes to train African workers, Indo-Asian News Service (IANS) reported. India had previously offered its expertise in mining technologies to African diamond-producing countries like Angola, Botswana, Namibia, South Africa and the Democratic Republic of the Congo (DRC). India and Namibia are already discussing setting up a training facility to polish and cut diamonds — a step that could lead to direct imports of diamonds from Africa to India, cutting out middlemen along the way, according to IANS.
* Additional reporting by Dialog NewsEdge.

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Tags: Alrosa, Angola, Auctions, Baselworld, De Beers, De Beers Canada, Diamdel, DTC, Economy, Gem Diamonds, Gokhran, Government, Hong Kong, IDI, India, Interfax, Israel, Israel Diamond Exchange, JCK, Jewelers of America, Jewelry, Laboratories, Lesotho, Letseng, Leviev, Mining Companies, Namdeb, Namibia, Polishing, Production, RBC capital markets, Responsible Jewellery Council, Rio Tinto, RJC, Robberies, Russia, Sightholders, South Africa, Trade Shows, World Federation of Diamond Bourses (WFDB)
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