Market NewsNewsDecember Highlights

December Highlights

Aber Diamond Corporation becomes the first diamond producer to open a rough sales office in India, marking Aber’s ambitious expansion plans as a diamond marketing company and majority-owner of Harry Winston.

The Toronto-listed company attributes record results for the three months ended October 31, to strong rough diamond prices and large sales volumes. Net profit at the company which owns 40% of Canada’s Diavik mine, jumps by $25.2 million to $33.7 million, compared to the same period last year. Sales during the three months ended October 31 are $49.2 million higher at $153.3 million.

ABN AMRO bank is fined $80 million by US regulators for violations of US anti-money laundering laws and sanctions against Libya and Iran. ABN AMRO says it recognises that serious mistakes were made and accepts the sanctions. The bank adds it has implemented a large number of measures in the area of compliance worldwide.

Alrosa, the Russian state diamond company, agrees to start selling rough direct to Israel through a sales office in Ramat Gan. Alrosa and Kristall, the state-owned diamond manufacturer, also plan to develop a collection with Russian diamonds under the Tiffany brand and are looking for similar co-operation with Cartier.

In a move marking Botswana’s increasing independence over its diamonds, the Botswana government issues three new diamond licences. The decision to hand out the licences undermines a list of potentials presented by De Beers following an exhaustive process that saw seven candidates with no sight or allocation in southern Africa - a requirement imposed by De Beers on its sightholders last year which bars them from having more than one sight in a producer country. A Botswana government official says the three new licence holders should be supplied from DTC as soon as the factories are up and running.

The world’s largest diamond producer by value warns diamond production will level off in the next few years. This year its mines are expected to produce around 33 million carats.

A spokesman for President Festus Mogae says De Beers chairman Nicky Oppenheimer has urged Botswana to reconsider its policies of relocating San Bushmen from the vast Central Kalahari Game Reserve. But despite a potentially damaging campaign by the UK pressure group Survival International, the government has no plans to change its stance on the Bushmen.

China announces a major revision to the previously published GDP figures, making it overtake Italy as the world’s sixth largest economy in 2004. It also means it is likely to overtake France in 2005 to become the fifth largest behind the US, Japan, Germany and the UK, and depending on the relative performances in the fourth quarter may possibly reach the size of the UK which is fourth. The size of GDP for 2004 was revised upward by 16.8% to 15.99 trillion Yuan, from 13.69 trillion Yuan, around $1.93 trillion. The government will use the figures to re-estimate GDP figures back to 1993.

De Beers
Analysts estimate record sales for 2005 at De Beers between $6.4 - $6.6 billion, or even higher, but some warn about some tough challenges the company faces on the regulatory front next year. "De Beers' challenges on the regulatory front are enormous," says Des Kilalea at Nedcor Securities in Johannesburg. "They have to adapt their business model to the demands of Southern African regulatory and legal changes as well as the challenge of expanding production to meet demand. And while the LVMH joint venture may have opened its third store, the restrictions under which it must operate in terms of supply make it more difficult," Kilalea says.

European Commission
The European Commission (EC) competition authorities propose the termination of the trade contract between De Beers and Alrosa starting from the beginning of 2009, according to sources familiar with the negotiations. The decision follows a fresh round of talks after it emerged the Commission had suggested a reduction to nil by the end of December 2007. It is understood that the maximum amount of annual sales for the three remaining three years is still under negotiation. The amount is likely to be between $500 and $600 million per annum for the 2006-2008 period. Alrosa's chief executive Alexander Nichiporuk tells reporters the total ban on diamond trading between Alrosa and De Beers, is far from decided.

The Board of Governors of the Gemological Institute of America (GIA) elects Helene Fortunoff as its chairman. Mrs. Fortunoff heads the jewellery business of Fortunoff, the US retailer, and served on the institute’s Board of Governors since November 1999.

The news of a scandal at the GIA takes a wider scope after several large publications, including the New York Times, CNN and the Times publish articles about the investigation at GIA. The New York Times cites GIA’s chairman Ralph Destino as saying members of the diamond industry have "grossly exaggerated" the size of the problems at the laboratory.
Shortly after, GIA announces the civil lawsuit filed by Max Pincione and Cimabue Ltd. has been resolved. The GIA also says it has set up a program to re-examine any diamond that it graded free of charge if an owner has any concerns.

ICICI Bank, India’s second largest commercial bank, says it has receives a licence to start operating a diamond office in Antwerp. The office, located in the heart of Antwerp’s diamond district, will officially open by the end of January.

Ivory Coast
The United Nations Security Council votes unanimously for a ban on diamond exports from the Ivory Coast to stop rebels from using diamonds to finance arms. The resolution states that "all states shall take the necessary measures to prevent the import of all rough diamonds from Ivory Coast to their territory". Regional governments should report within 90 days on steps taken to stop imports of Ivory Coast diamonds, it says. According to Global Witness, around 300,000 carats are mined in Ivory Coast each year.

Polygon, the business-to-business online market place for the jewellery industry,
and the Dubai Metals and Commodities Centre (DMCC), form a $12 million joint venture corporation for the expansion of Polygon throughout Africa, Asia, and the Middle East.

Rio Tinto
Rio Tinto decides in favour of developing the underground project at its Argyle diamond mine in Australia, underlining the mining group’s commitment to diamonds. Rio also increases its stake in Ashton mining by 4.4%, giving it a 53% stake in the Canadian junior mining company.

Signet Group announces plans to expand its rough diamond sourcing and manufacturing capacity. The retail jeweller, with over 1,780 stores in the US and UK, says it does not rule out applying for a sight at De Beers or any of the other major producers. The company, which targets the middle segment of the diamond jewellery market, appoints Hennig, the DTC broker, as a consultant. Other retailers that have moved ‘upstream’ to secure rough diamond supplies are Tiffany and Harry Winston.

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