Rapaport March 2016

8/19/2019 Rapaport March 2016

1/67


2/67

SO R.III I1., .

P M : t \ \ I I \ b ~ J •


3/67

~ ~ OUR W ~ S I H r OR

PRODUCT DU ILS

ND

PRICING


4/67

NEWS REVIEW

M I D Leads

Israel s Exports

nglo merican

Updates Strategy

De Beers

Revenue Falls

I

GD

Launches

1,111- arat

Diamond Named

JNS· Jewelry

News Se ce

From left: Michae l Steinmetz [eo Schachter Diamonds; Anna Marlin G/A; Dave Bonaparte }A;

David

Bouffard

Signet JeweJers; Erik jens ABN AMRO; John

Hall

SignetJewelers;

Cecilia

Gardner ve

SIGNET NNOUNCES NEW ST ND RDS

Signet Jewelers . the

largest

jewelry retailer in the

U. S., held a press conference

in February

2016

detailin

g

the launch o a new standard, the

Signet

Responsible

Sourcing Protocol

for

Diamonds D-SRSP). Signet's

new protocol

is

part of he company's efforts

to

promote

greater tramparency to better connect with taday's Millennial

comumen; concerned about ethical sourcing for diamonds.

Members

of

he diamond industry, civil society and

the government

who

contributed input included miners

De Beers and Rio Tinto, trade organizations Jewelers of

America OA),World Federation

of

Diamond Bourses (WFDB)

and United States Jewelry Council (VSJC), Signet's diamond

suppliers and more. Signet arrived at its current draft

of

he

protocol after a two to three year development period.

The

D-SRS

P was inspired by i

ts

previous success with inlplementing

a responsible sourcing protocol for gold and other

metak

•

The

D-SRSP covers

si

ngle stones and parcels from major

producers

De

Beers,ALROSA,

Rio

Tinto and

Dominio

n

Diamond

Corporation, mixed sources

as

well

as

diamonds

from

other

smaller miners .

• [n addition to being compliant with the Kimberley Process

(KP) and international sanctions,Signet requires suppliers

to

docu

ment

purchase records and provide evidence

of

a due diligence system, providing

as

much information

as

possible about their subcontractors.

• Suppliers are expected to provide a progress report on

compliance in 2016 and be subject to a third-party audit in

2017, whereupon they

will

be audited again every three years.

•

The D-SRS

P

is

also harmonized with other diamond

auditing standards such

as

the

De

Beers Best Practice

Pr

inciples

8

RapapOrT

March 2 16

and ALROSA's AL

Ll

AN CE Guidelines on Responsible

Business Practices,

to

avoid unnecessary audit duplication .

At the press conference, David

Bo

uffard, vice president

of

corporate

affa

i

rs

at Signet, said that Signet

is not

tryi

ng

to

segregate suppliers in the industry

of

good diamonds and bad

diamonds, as they were accused ofsimilarly for gold back in

201

O

Bouffard highlighted that Signet did

not

lose a single

supplier

when

they enacted their gold standards, and said that

the new diamond standard seeks to achieve the same results .

Participants posed questions about the

D-S

R SP's

feas

ibility

of

establishing a system of warranties internationally, especially

in major trading areas such

as

India and Antwerp. In response

Bouffard assured that Signet and its partners have identified

potential bottlenecks, and will be working closely with

suppliers in those

countr

i

es

to ensure compliance .

ErikJens, head

of

diamond and jewelry clients at bank

ABN

AMRO,also speaking at the conference, felt that

Signet's move would ultimately improve the bankability of he

di

amond

industry.

He

explained that

as

consumer confidence

in diamonds increase due

to

greater transparency, financiers

would see the risk in investing in the diamond industry

minimized, potentially inviting greater financing.

[n

other

Signet news, the jeweler announced its plans

to

delist from the L

ondon

Stock Exchange (LSE). Signet

said that

less than 1 percent of ts annual trading volume

occurs

on

the LSE,and the monetary expense, regulatory

burdens and time spent to maintain L

SE

trading supersedes

any benefits. Shares will continue to be traded on the LSE

until March 1

1,2016

and cancelation will take effect on

Ma

rch 14. Signet's shares will continue

to

be traded on the

New

York Stock Exchange (NYSE).


5/67

RAPAPORT

M RCH

2016

if you stop tllitlking o diamonds

as a commodity and start thinking

of

hem

as

uniqu

e

special

,

oHe-'-?J-a-killd illdillidllais,

then they are H

t

overpriced.

David Bennefl

Worldwide Chaimilltl

ifSolheby s

]l Wt lry

Division and Chairman

o

Swirzerland

Gmtva,

Swirzl'rLmd

24

1 Rapaport March 2016

COVER

36 THE MARKET

FOR SUPERGEMS

Martin R apaport goes

one-on-one

with Sotheby s David B

ennett to

discuss diamonds and the auction

mystique.

42

BEHIND THE SCENES

Each auction

is

a carefully crafted

sa

le. So what are the advantages

to

the

trade

when

selling at auction?

OP·E

34 RAPAPORT CALLS FOR

STANDARDIZATION OF

DIAMOND

GRADING

TERMINOLOGY

In an

open

letter

to

the

Federal Trade Commission

Mart

in

Rapaport comments

on

the

proposed

FTC

Jewelry Gu ides.

NEWS REVIEW

8 SIGNET ANNOUNCES

NEW

STANDARDS

28

M. .D. LEADS

ISRAEt :S EXPORTS

AWDC

Launches

New

Databa.se;

Zimbabwe

Seizes Di

amond

Mines;

Rapaport

Adds Grading Service.

30 ANGLO AMERICAN

UPDATES STRATEGY

De Beers R evenue Falls; BlueR

oc

k

to Bu

y

Diamond

Resources.

32 IGDA LAUNCHES

Di

amond

Slump

I-li

ts Botswana;

1

111-Carat Diamond Named;

SC

IO Gets

New CVD

Patent.

IN USTRY

18 ROUGH STRONG

POLISHED STILL

SHAKY

Rough demand

surged at

the

start

of2016 as polished inventories were

r

educed

in

the

second half

of

2015 .

However, polished

demand

remained sluggish.


6/67

RAPAPORT

M RCH

2 16

22

Rapaport

Oiaroond Report

0712-350; S5N:

0746-9829)

is published

monthly

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USA

Inc.

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R e p o ~ I n d e ~

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2 Rapaport March

2016

INTERNATIONAL COLORED GEMSTONE

48

U.S. RETAIL

12

GEMSTONE MECCA

Election year impact. Tucson

is

the

gathering place for

colored g e m ~ t o n e dealers and an

5

U.S

. WHOLESALE annual event that draws attendance

Market shim to more specialized g o o d ~ from all areas

of the

industry.

52 HONG KONG

Chinese NewYear period challenging.

54

ISRAEL

Economic,

po

litical i ~ m e s

impact market.

56 INOlA

Inventory streamlines.

58 RUSSIA

AL R

OSA 2015 production up,

sales down.

6 ANTWERP

Business mixed at Antwer p Fair.

RETAIL

1 6

FIRST LOVE

Emphasizing the personal touch

is

a priority

at

McCaski

ll

Company

in Destin, Florida.

1 8

RETAILRAP

This month Rapaport Magaz ine asks

retailers, What are you restocking

after the holidays?

11

RETAIL 8ULLETIN

112 RETAIL SCOPE

LEGACY

122 BETTER THAN EXPECTEO

Whi

le some dealers came

to

the

annual Miami antique show

with low expectations, they left

cautiously optimistic.

STYL

124 NOW TRENDING

The recent

NY

NOW gift show

revealed a shift in design trends.

126 DESIGNER LINES

128 JEWELRY CONNOISSEUR

ECONOMICS

74

PARCEL PRICES

77 RAPNET PRICE SHEET

8

TRADE SHEETS

92 ECONOMIC BULLETIN

94 IMPORT EXPORT

DEPARTMENTS

15 LETTER FROM EDITOR

9 ADVERTISER DIRECTORY

96 CALENDAR

98

TAKE NOTE


7/67

R P P RT

Volume 39 Number 3

iDITORI L

EDITOR IN CHIEF:

Amber Michel

le

EXECUTIVE EDITOR

: Phyllis Schiller

SENIOR

EDITOR: J

oyce

Kauf

SENIOR ANALYST: Krawitz

ASSOCIATE EDITOR:

Shuan

Sim

INTERNATIONAL

CORRESPONDENTS:

U 5 RETAIL

lara

Ewen

HONG KONG

: Mary

Kavanagh

INDIA:

Za

inab A

Mo

rbiwala

RUSSIA: Svet lana Shelest

BELGIUM:

Marc Goldstein

COLORED GEMSTONE: Sheryl Jones

SPECIAL

CORRESPONDENT: Ettagale Blauer

ISIGN

PHOTO EDITOR: luciena

Kardonsk.y

SENIOR DESIGNER:

Irena Sapi lak

ASSOCIATE

DESIGNER:

Ira

Cook

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MARKnlNG

VP

MARKETING: leen

Farrell

PHOTOGRAPHY

Don Kozusko

FOR ADVERTISING

INFORMATION

Eleen Far rel l

Tel: 646.572_8560: eil

een@d

iamonds_net

TO CONTACT EDITORIAL

Amber Mi

chel

l

e,

Editor in hief

Tel: 212 535.2283;

amber@d

iamol ldsl let

The above editorial, design and marketing services

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INDIA- SURAT

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DUBAI

Dubai Diamond

Exchal lge

Leve

l

2,

Office D06

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Tower,

lumeirah

Lake

Towers

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Rapaport Magazine,

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East

Warm Springs,

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Nevada 89119.

Copyright 2016

by Rapaport

USA. All

Rights Reserved.

Reproduction

is

strictly prohibired, Rapaport Diamond

Reporr-, Rapaport Magazine-, I n d ~ Index-The Internet

Diamond Exchange-, Jewelry Connoisseu ', RapNer-,

Rapaporr-, Diamonds.Ner-

and

JNS· are rrademarks

of

Martin Rapaport,

observ tions

he one thing that is certain in life is change. Sometimes

it happ

ens

gradually and other times it comes out ofnowhere.

H i

ght now the

U.S

.consumer

is

in a changing mind-set.Back

in

the 1980s, 19

90s

and at the turn

of

he Millennium,

it was

all about

conspicuous conswllption . .bigge r,betterand more diamonds.Bling was the

thing.Then the world changed seemingly overnight when the recession

of

2008 hit.Now the mind-set is about conscious consumption whi ch means

buying that which does no harm a product that is safe

for

the environment

and no one

was

exploited in th e pro

cess of

producing th e item.As a

res

ult

of

this conscious consumerism people are embracing experiences rather

than materialsm. Perhapsas a backlash to being glued to computers and cell

phon

es

emailing and texting

all

d

ay

consumers interests have turned

to

purchasing experiences vac

ati

ons dining out something that builds

re

lationshipsand creates conununity.These experiences are,ofcourse shared

on social media but it

is

the doing

of

an activity that

is

important. A


8/67

18 Rapaport March 2 16

Rough demand surged at the start of 2016 as polished

inventories w ere reduced in the second half of

2 15

However polished demand remained sluggish

he di amond marke t ha s

been characterized

by

scrong

rough trading and sluggish

po l

ish ed d em an d sin ce

th

e start of

20

16 .

Th

at has crea ted

som e uncer tainty among dia m o

nd

dealers as to which direction the ma

rk

et

is

headin g.

Th e rough market

was

exuberant in

January due

to

res tocking and

fa

ctory

an d transaction

-d

ri ven bu yin g, but

we typically have

th i

s ebb

and

fl ow

momentum in t he rough market, said

Marcel Pruwer, managing director of

I

nt

ernational Economic Strategy (lES),

a c

on

sulta

nt to th

e diamond indus

tr

y,

among others.

Th

e question is

if

it is

sustainable and how polished demand

will

be in

th

ree mo

nth

s when

th

e new

po

lished suppl y

co

m es

to mar

ket.

An es

timat

ed

$1

billio n

worth

of

rough e

nt

ered

th

e m

ar

ket

in Janu

ary,

m a

rkin

g a sig

nifi

ca

nt in

crease from

th e sec

ond half

of2 0 15 w hen d em and

slu

mp ed

. M a

nuf

ac tu rers

ex pla

ined

th

ey n

eed

ro ugh

to

fill sh o

rt

ages

in

th

e polish

ed

m a

rk

et

as

a res

ult

of

th

e

y AVI KRAW ITZ

30

per

ce nt to

50 p

erce

nt decline in

m a

nufact

uring las t year.Th

ey

add ed

th at ro u gh d em and is also p

ar tl

y

driven by a

nee

d to kee p their factories

c

hurn

i ng, as th ey cann o t

afford

to

lose any m ore w

or k

ers

than th

ey did

in 20 15.

Manufa

c

tu rers

po

li

shed

in

ve

ntory

was depleted fo llow

in

g a signifi cant

decline

in

ro ugh s

upp

ly in

th

e latter

ha

lf

of

20

15.

There

fore,

whil

e it takes

a

bout three

m o

nt

hs for rough

to

be

ma

nu

factured i

nt

o polished and for n

ew

produ ction to enter the ma

rk

et,polished

pri

ces c

ontinu

ed

to

be s

upp

o

rt

ed by

sho

rt

ages

in

Fe

br u

a

ry.

Polished prices stabilized , ca

lm

ing

th

e

uptr

en d w

it n essed

in

th

e past

th ree

month

s.The R ap

Ne

t Diam

ond

Ind

ex

(RAP

I

TM

) fo r 1

-ca

rat diam o

nd

edged

up

.3 per

cent

du r

ing

th

e peri

od

Fe

bru

ary 1 to 22. RAPI fo r .

3- carat

di

am o

nd

s

in

creased by .3 p er

ce

nt

,

while

RAP

I

fo

r .5-carat diam

ond'i

grew

.4 p ercent. RA P I for

3-c

arat di am o

nd

s

declin ed by

1.6

p

ercent

du

rin

g

th

e

p

er

iod (see c

hart

on o

pp

osite page,

to

p).


9/67

u.s.

SUPPORTING THE MARKET

Polished trading s

low

ed as bu yers in

Asia

Pa

cific took vacatio

ns

during the

Chinese NewYear f

es

tival. Dealers remain

cautious

abo

ut com-umerdemand

given

the

global

economic envirorunent,

particularly

with

re

ports ofdecliningjewelry

sales

over

th

e

Chinese New

Y

ear

season.

Chow T

ai

Fook,

the

larges t j

ew

elry

retailer in the region, noted that weak

consum er sentiment for luxury goods

du e to C hina's econ

omic

slowdown a

nd

recent stock market volatility weighed

negatively on

i

ts

sa

l

es durin

g the season

(see full report

on Chow

T

ai

F

oo

k s

resul ts on page 52).

Dealers therefore traveled to the

H ong Kong

In ternation

al J ewe ll

ery

Show, which began on March 1, wi

th

l

ow ex

pectations for the event. D ema

nd

inAsia P

aci

fic is slow asjewelry sales ha

ve

declined over the past year and retail

inventory leve

ls

remain high.

Rather, gl

obal

demand co n tinu es

to b e supp o rred by the U .S. eve n

as

trading

remains

below

levels recorded

in previous

ye

ar

s.

Polished

imports

to

rh e U.S . declined 10 percent year

on

year ro 5 .4 billion in th e fourrh quarter

of20

15

, w

hi l

e polish ed ex p o rr s fe ll

13 percent to

3.9

billion (see chart at

right , bottom).

Who

lesalers are selling

off

old

inventory and

tr

ading

is

driven

by

orde

rs for spec ifi c goods rarher

rhan in ve nt ory pur chases . Overall,

consum er spe

nding

is caut io us, wi rh

rerailers expressing

conce

rn about the

economy

in an

election

year an d

that

a possible negative wealth effect from

declinin g sto ck markets

will

impact

lu

xury

spe

ndin

g.

RapNet Diamond Index (RAPI'M)

2.5%

1.5%

0.5

-05%

-25%

1 2 3 4 5 6 7 8 9 10

11

12 13 14 15 16 17 18 19 20 21

FEBRUARY 2016

- .30el. .5 d . 3 d

The RapNet Diamond Index (RAPI ) is based on the average asking price in hundred /ct.

of

the 10 best·priced diamonds, for the top 25 quality round diamonds (D-H, IF-VS2, GIA-graded,

RapSpec-A3 and better), which are offered for sale on RapNet-Ra paport Diamond Trading Network.

u.s.

Polished

Diamond

Trade

7,000


10/67

eBeers Half-Year Revenue, arnings

•

.2

"

if>

>

5,000

4,000

3,000

2,000

$1,000

$-

1 1,000)

-

-

t-

-

-

-

-

Ie: -

V

l- I

: b.

lH 2H lH 2H l H 2H l H 2H lH 2H lH 2H lH 2H

2009 2010 2011

20

12

20

13 2014 2015

_ Other Sales _ Rough Sales - Underlying Earnings

Based on data published

by

Oe Beers and Anglo American.


BUILDING CONFIDENCE

Therefore,

businesses across

the

distribution

chain

are maintaining a

cautious

outlook

for 2016, despite

th

e

recent surge in rough demand .While

polished supply

is

expected

to

increase

significan tly in th e second quarter as

that new rough

is

prepared, De Beers

is

expected

to

limit its rough supply in an

effort to stabilize the market.

We're sellingwhat

our

customers want

and need rather than doing anything that

might

not

be in

ours

or

the

indu

stry's b

es

t

interests, Gareth Mostyn, De Beers head

of

strategy, told Bloomberg. The key for

us is to con

tinu

e to build on improving

confidence through 2016 .

Sightholders

noted there was good

de mand for

De Beers

supply ahead of

the February sight, which was

ongoing

at press time. They expla

in

ed that there

was

better

value in D e Beers

rough

than

other sources after th e company redu ced

pric

es

in

Janu ary.

ALROSA

r

eportedly

kept

pr ices un changed at its February

sa le,

wit

h its prices now unchanged

sin ce August. Prices were similarly firm

at tenders

and

on the secondary market.

While

rough

demand

remained robust

in Fe

brua

ry - and pr ices high - sales

are expected to fall below the

heights

reached in Januar

y, when

De Beers sold

$540 million worth

of

ough. Still, sales in

early 2016 marks a significant increase in

the

co mpany's performance in 2015,and

particularly during th

e

tough

second half.

RISING SUPPLY, STAGNANT DEMAND

De

B ee r s rou gh sa les slump ed

54

percent

year

on

year

to

1

.

36

billion


11/67

in the second half0£2015, which resulted

in a loss

of 102

million compared to

pr

ofit

of 454

mi

llion a

year

earlier

(see

chart on

page 20) . Full-year rou

gh

sales fell 37 percent to 4.1 billion, while

underlyi

ng

earnings slumped

72 percent

to

258 million .

Similar declines were evident in the rough

trading

centers, with Belgium's

rough

inlpOrts

down

32 percent

to

4.77 billion

in the second half of last year and rough

exports declining by the same margin to

5.1 billion (see chart at right) .

T he latest data published

about

India's

diamond trade in

January

confirmed

the upward trend in rough

trading and

continued caution in the polished market.

India's rough

imports

rose

16

percent

year on year to 990 million during the

month, while polished exports slumped

42 percent

to

1.04 billion,

according

to provisional data

published

by the

Gem and Jewellery Export Promotion

Council (GJEPC).

De

Beers

management

explained that

rough demand in 2016 will depend

on

consumer demand

for diamond

jewelry

and the

resultant

levels of

restocking by retailers and, consequently,

the

midstream.

At least in the

first

quarter, manufacturers

required some restocking as evident in the

recent surge in the rough market. However,

while

t

he current

polished price levels

reflect shortages in the market rather than

a rise

in

demand, there is an overriding

concern among diamond

dealers

about

how

the market will evolve

as

polish

ed

supply increases in

the

coming

months

while overall demand remains weak •

Belgium s

Biannual Rough Diamond Trade

9.000

8.000

7.000

.2

6.000

5.000

.000

if> 3.000

::>

2.000

1.000

.

( 1.000)

( 2,000)

'

2H 1H 2H lH

H l H 2H l H 2H

lH

H

lH

H

2009 2010 2011 2012 2013 2014 2015

_ Rough Imports _ Rough Exports - Net Rough Imports

Based on monthly data published

by

the Antwerp World Diamond Centre (AWDC).

Rapaport March 2 16

2


12/67


13/67

AWDC

LAUNCHES NEW DATABASE

The Antwerp

World

Diamond Centre

(AWDC) has

teamed up with Bureau Van Dijk. a firm specializing in

company data

gathering. to

launch

a

free database

to

help

diamond

traders

comply with Belgian antimoney

laundering legislation. The law requires banks and diamond

tr

aders

to

identify

their

clients, veri

fy

their i

de

nti ty and

conduct a risk analysis before transactions.

The

collaboration

with

Bur

eau

Va

n

Di

jk

will

allow traders

to

investigate

who the

Margaux Dan

er

client

is,

risks associated with

the client's profile and the nature

of the business relationship,

said

AWDC

spokeswoman

M argaux D onckier. Besides

company informati

on

of

some

250

million businesses

wor

l

dw

id

e, the da

t

ab ase

also includes sanctions lists,

politically exposed persons

(PEP), media reports and a list

of

Financial Action Task Force

(FATF) h i g h ~ r i s k countries .

M I D

LEADS ISRAEl S EXPORTS

M.I.D.

House

ofDiatnonds

Ltd.

was Israel's

top

exporter

in 2015.

according to

a list released by

the

Ministry ofEconomy and Industry's diamond controller.

Th

e company exported 191 million of gems during the year,

l

UlSeating

Leo Schachter

Diam

onds Ltd. ,- the top exporter in

2014 - from the leading spot.The top ten companies exported

Sl .13 billion worth

of

diamonds combined:

• M.I.D. House ofDiamonds Ltd.,S1 91 million.

• A.A. R achminov

a m o n d ~

(2000) Ltd.,S163 million.

•

Niru Di

amonds Israel Ltd. , 155 million.

• Leo Schachter

Di

amonds (1987) Ltd.,S150 million.

•

D.N

.

Di

amonds 2007 Ltd., S128 milli

on

.

•

Ofer

Mizrahi Diamonds Ltd.,S102 million .

•

Yo

shfe

Diam

onds International Ltd., 74 million.

• R osy Blue S

ales

Ltd., 60 million.

• Andre M

essi

ka Ltd., S54 mill ion .

• Moshe

Nam

dar Masingita Ltd., 49 million.

28

Rapaport arch 20

6

RAPAPORT

ADDS

GRADING SERVICE

The Rapaport Group* launched a new

diamond

grading report

for

investment-grade diamonds

titled the Rapaport Investment Diamond Report

(IDR).

T he report grades diamonds based on the

Gemo

logical Instinlte ofAmerica

G

rA ) standards and

includes additional information ab

ou

t tint,location and color

of inclusions.

I t

l ~ o features high resolution images.

The

IDR

is double tested and includes an additional

independent

GIA diamond grading report.The service will only grade round

diamonds

sO

carats and larger, D

to

H color, IF toVS2 clarity,

of

exce

llent

c

ut

, polish and

symm

etry - diamonds mus t m

eet

Rapaport gemologist

s'

opinion of nves

tm ent

grade quality

m o n that do n

ot meet the

standards

might not

be

issued

the IDR.

ZIMBABWE SEIZES

DIAMOND

MINES

The Zimbabwe

goverrunent has ordered eight

mining

companies

who did

not

renew

their licenses

to

cease

operations

and

vacate

their premises, reported

Reuters.

At least six

co

mp

an

i

es

-

Diamond

Mining

Company

(DM

C),Anjin Investments,Jinan Mining,

Ku

sena

Diamonds,

Marange R esources and Mbada Diamonds - have refused

to

leave.

The se

ized mines will

be

taken over by

the

n

ew

stat

e-owned

Zimbabwe Consolidated Di

amond Compa

ny

(ZC

D

C) as

these firms had

not

invested e

nou

gh

to

continue

production beyond alluvial produ

ct

i

on,

Mines and

Mining

Development MinisterWalter Chidhakwa said .

According to R e

ut

ers,

DM

C said it intends to sue

the

government for breach ofcontract over

the

attempt to eject

the

com

panies.

Ra nlZ

i Malik, a general manager at

DMC

,

sai

d

that its joint venrure contract with the Zimbabwe Mining

Development

Corpora

tion (Z

MD

C), the state mining arm,

stipulates that

ZMDC

was responsible

fo

r renewing licenses

a

nd

that the investment agreements were valid and indefinite.

Th

e ZMDC

is

in

joint ventu

re with eight firms to

mine

in

Marange. f f i c i a l ~ from Mbada Diamonds and Chinese-run

Anjin Inves

ml

ents said

th

ey were trying to persuade the

government to reconsider, reported R euters.

dd itional repor

tillg

pr

ovided

by uireM

ed ia

R

apaport Maga

z

ine

is

published

by

the

Rapaport

Gro

up


14/67

NGLO

MERIC N

UPDATES STRATEGY

Anglo American PLC

announced

plans

to streamline

its assets and improve cash

flow

to strengthen its

balan

ce sheets.

The

mining company n t e n d ~ to focus

on

De Beers - in which it holds an 85 percent interest

platinum group metals and copper. Ma rk Cutifani, CEO of

Anglo American, added

that

its workforce

will

eventually

be

ark

Culirani

reduced to fewer than 5,000 roles,

dow

n from 11,500 rol

es

in 2016,

wit

h cost savings estimated at

250 million.The

2016

targets in

the

new

strategy include:

• Positive free cash £low at

current

pnces

.

• 1.9 billion earnings before interest

and tax (EBIT) .

•

i s p o s a l ~

totaling 3 billion

to

4 billion.

• Net debt levels below S10 billion .

The

new strategy would effectively

streamline i

ts

core portfolio ofassets down

to

16 from 45.

Anglo American would seek to ensure there

is

no overreliance

from anyone product group or geography even as the

portfo

li

o becom

es

smaller. De Beers will continue its

mining operations across o t ~ w a n a Canada, Namibia and

South Africa. D e Beers is also expected to complete the

development

of

its 51 percent-owned

Gahcho

Kue venture in

Canada, with production

to

begin in

the

second

half

of2016 .

DE EERS REVENUE

F l lS

De Beers total revenue for 2015 fell

34

percent to

S4.7 billion. It is attributed to lower rough diamond sales

which

plummeted

36 percent to

54.1

billion, according

to a prelitninary earnings report. Earnings before interes t

and tax (EBI

T)

slu

mped

58 percen t to 571 million.De Beers

has reduced production by 12 percent to 29 .7 million

due

to

weaker rough

diamond

demand,

as

well as tr imm ed costs and

capital expendiru

re.The mining

company, which

emp

loys

2,236 people.has decided

to

reduce

i

ts workforce by 189 positiom,

of whi ch 68 need not be retrenched but redeployed

e L ~ e w h e r e

instead

or

by

natural attrition from retirements.

3

Rapaport arch

20 16

- Global consumer demand fell marginally in U.S. do

ll

ar

ter m

s,

accor

ding to

the report.

-While the US ., the largest market for polished diamonds

accounting for 45 percent of global market value. saw

growth in 2015, it was at a l

ower

rate.The growth was offiet

by soft economic sl

owdown

in C hina and a strong U S. dollar.

While

demand for

diamond jewelry

in

China

remained

stable. demand in India fell in local currency terms.

- The Forevermark diamond brand from D e Beers expanded

its reach by 14 percent and is now available in 1,760 outlets

across 35 markets. De Beers also rep

orted

that Forevermark

achieved

doub

le-digit sal

es

growth in 2015.

-

The

mining company expects the US . market to drive

growth

of

consumer demand in 2016 . Factors atTecting the

growth would include the strength

of

the currency and

the

economic p

erformance

in C hina .

- D e B eers

is

h

oping

that the continued r ise

of

he middle

class in the world's

emerging

r k e t ~ including India and

China, would positively impact the industry in the

long term

.

De Beers expects

to

produce 26 million

to

28 million carats

of

diamonds in 2016.

In

other

De Beers news, the miner's research company

Internation al Institute

of

Diamond Grading R esearch

(IID

GR)

will otTer to grade non-Forevermark diamonds

from its UK. lab for the first time starting March 1

,2016.

IIDGR has also launched a diamond grading service in

the Far East, Middle East, India and Europe.

The

service will

only grade natural, untreated diamonds, from

laboratories

in Belgium, India and the UK.

BlUEROCK TO BUY

DI MOND RESOURCES

U.K.-listed

BlueRock

Diamonds has approved

the

purchase ofDiamond Resources Pty Limited

from

Tawana

Resources.

Blu

eRock

will

ai


15/67

IGD LAUNCHES

Laboratory-grown diamond producers,

distributors

and

retailers around

the

world have

partnered to form

the International

Grown Diamond

Association (IGDA). Claiming to

be

the first ever association

representing the grown diamond industry, IGDA aims to promote

l a b o r a t o r y ~ c r e a t e d diamonds

as

an alternati

ve

and educate

about qualities and applications oflabot'arory-grown diamonds.

The

founding members include: Microwave n t e r p r i ~ e s (

MW E

),

IiaTechnologies,Washington

a m o n d ~

Corporation,

New

Diam

ond

Technology, Scio Diam

ond

Technology

Corporation, Go1condia Cultured

Di

amonds,

Pure Grown

Diam

ond

s.

Po

li

shed Diam

ond

Co mp

any,

Diamond Foundry, MiaDonna Company and

Chatham Created Gems Diamonds.Richard Garard,

CEO ofMWE, was

elected the secretary general of

the

new organization.

SCiO GETS NEW CVD PATENT

Laboratory-grown

diamond producer

Scio

Diamond Technology

Corporation announced

in

February that it

received

its 28th patent for its CVD

manufacturing

process.

Titled

Gemstone

Production from

ChemicalVapor D eposition (C

VD

) Diamond Plate:' the

patent

is

a continuation

of

a previous applicati

on

under the

same name.Th e patent l a i m ~ to maximize diamond yields

by geo metrica11y optinlizing

pref

orms, such as growing

cylindrical CVD d i a m o n d ~ from a round wafer

to

maxinlize

diamond yields for

round-cut o

Scio

Diamond

also claims to be the first firm to deliver C VD single-crystal

diamond plates, CVD diamond gems and one-inch square

single-crystal diamond wafers .

3 Rapaport arch 20

16

1.111-CARAT DI MOND N MED

Lucara

Diamond Corp. announced in February

that the l , l t l-carat diamond recovered from

the Karowe mine in Botswana has been named

Lesedi La

Rona.

The

name, which means Our Light

in the local Setswana language, was picked as the winning

en try in a nanling c

omp

etition held

in

January open only to

Bo

tswana citizem, includi

ng

the nliner's employees.

- Thembani M oiclhobogi from Mmadikola won the contest,

netting himselfa 2,243

pr

ize.

Hi

s entry

was one

ofmore

than

11 ,000 s

ubmitt

ed .

- Auditing firm Ernst &Young oversaw the nanling

competition to ensure fairness .

- The diamond was extracted

in

November 2015, and is the

second largest diamond ever recovered . is also th e largest

diamond nlined in

Bo

tswana.

DI MOND SLUMP HITS BOTSW N

Botswana s diamond e x p o r t ~ fell

to

i

ts

lowest in six year

s,

dropping 38 percent to 2.4 billion in 2015, according to data

published by the Bank

of

Botswana.

The

se

fi

gures do not include

d i a m o n d brought into the country by D e Beers for aggregation

and re-exports. Kenneth Matambo, minister

offinance

and

development planning,

sa

id in his 2016 budget speech that the

continued slowdown of growth in the global

economy

had

adversely impacted Botswana's

domes

ti

c econom

y,

reported

Mmegi Ol/lil/e He added that the Bank ofBotswana revised

its econonl ic forecast down

to

1 percent from 2.6 percent

because of the weakness

in

the diamond industry.The majority

ofBotswana s diamond exports come from D ebswana, ajoint

venture between the gove

rnm

ent and D e Beers. Debswana c

ut

i

ts

production 16 percent to 20.4 million car

ats

in

20

15.


16/67

OP ED

R P PORT

C LLS FOR

STANDARDIZATION

OF

DI MOND

GR DING

TERMINOLOGY

Rapaport Comment on the Proposed FTC Jewelry

Guides

Jewelry Guides 16 CFR Part

23

Project No. G711 001

To The Federal Trade Commission

Re Stalldardizatioll

of

Dimno d

Grading Terminology

The

Gemological Institute of America

GIA),

established in 1931 , created terminology to describe

the color and clarity of

diamonds. So as to differentiate

their language from a broad range of confusing terms

that were commonly used

in the trade, the GIA begins

their color grading scale using the letter 0 instead

of A, AA, AAA, etc. The GIA defines their diamond

grading terminology standards

by

grading millions

of

diamonds each

year

and applying the GIA terminology

to their diamond grading reports. The GIA Gem Trade

Laboratory (GTL) maintains and uses master samples

to define various gemological characteristics such as

color, clarity, fluorescence, etc. The use

of

GIAdiamond

grading terminology has become the de facto language

used to describe diamond qualities and gemological

characteristics.

Over the years numerous additional and competitive

diamond grading laboratories have emerged.

Almost

all use GIA terminology while applying GIA grading

standards. Unfortunately,

in

recent years, a number

of diamond grading laboratories have been issuing

diamond grading reports using GIAgrading terminology

to

significantly overstate

the color and

clarity

of

diamonds. Evidence of such deceptive practices has

been

presented

in a

court case

where two

3-carat

diamonds color graded as G by EGL International were

later graded by the

GIAas Nand

M

colors-a

disparity

of

six to seven colors representing a $113,000 value

difference according to the lawsuit. Please note, that

while we will be using diamond

color

differentials to

highlightovergrading, such overgrading also takes place

regarding diamond quality, cut and other gemological

characteristics.

The

attached article, Honest Grading,

4

Rapaport March 2 6

published in the

Rapaport Magazine

November 2014,

provides important additional information and is included

in this submission.

Unfortunately

,

the

gross misrepresentation of

diamond quality by unscrupulous diamond laboratories,

dealers and retailers has become rampant. Hundreds

of

thousands

of

consumers have been sold overgraded

diamonds, whose qualities have been misrepresented

through the fraudulent use of GIA grading terminology.

Such abuse

is

destroying

a level

playing

field and

constitutes unfair competition.

An honest eweler selling a legitimate honestly graded

G

color diamond must

charge a significantly higher

price than a dishonest jeweler offering the consumer

an

overgraded

G color. What is

the jeweler

to do?

Some are being forced to compete by overstating the

quality of he diamonds they sell and/or using fraudulent

grading reports that overstate quality. Furthermore, the

ability of consumers to competitively shop and compare

prices is

being

undermined. What

are

consumers

to

do when

faced with alternative grading reports or

representations, both of which claim a diamond is a G

color?

They

might naturally

go

for the less expensive

item ,

mistakenly

thinking that a fair comparison has

been made. Finally, the value

of

an overgraded diamond

will be significantly less upon resale. Consumers are

being led to believe that the quality

of

what they have

purchased is significantly greater than what it actually

is. Upon resale , consumers will find out the true grade

of

heir diamonds and the resultant significant difference

in value. This will not only hurt the consumers but

also significantly reduce co

nsumer confidence in all

diamonds, including honestly graded and fairly priced


17/67

diamonds from legitimate retailers. It should be clear that all of

the above point to unfair competition and consumer fraud.

Some

of

the entities overgrading diamonds try to justify their

actions by falsely claiming that since diamond grading requires

the subjective skill

of

a trained diamond grader there are no

diamond grading standards and they can therefore use GIA

terminology to misrepresent diamond qualities. While diamond

grading may in fact be subjective, such subjectivity is relevant

only within a reasonable tolerance range. Legitimate graders

might disagree

about

a one color or clarity difference but a

difference of five or six colors is outright misrepresentation and

fraud. No legitimate diamond grader would be off by more than

one color

or

clarity. Furthermore, retail jewelers are deemed to

be experts in their dealings with consumers; they should not be

allowed to misrepresent the quality of the diamonds they sell by

abusing GIA diamond grading terminology.

For all of the above reasons, this writer appeals to the Federal

Trade Commission (FTC) to make the following changes andl

or additions to the FTC Jewelry Guides.

l t s an unfair business practice to communicate the grade

of a diamond using

GIA

terminology while applying non-GIA

standards thatsystematically overgrade the quality of a diamond.

a Definition: An overgraded diamond is a diamond whose

quality is communicated by the seller using GIA terminology and

when graded by the GIA is found to be more than one color or

clarity below the grade represented by the seller.

2 Diamond sellers are responsible for the

quality

of the

diamonds they sell.

In

the event that a seller describes a diamond

using GIA terminology and the diamond is graded by the GIA

and found to be more than one color or clarity below the grade

communicated by the seller, the buyer may return the diamond

to the seller within a period of one year and obtain a full refund.

In the event that the Commission is concemed about the level

of

diamond grading subjectivity, it may wish to modify the above

rules by allowing for a two color or clarity differential.

Please note, in the event that the Commission is unable to

include the above rules, I request the following addition to the

rules.

u

The standard for diamond grading when using GIA

terminology shall be the results generated by the GIA Gem

Trade L a b o r a t o r y ~

In the event that the Commission holds any hearings regarding

changes to the rules , please notify me, as I would like to attend.

hank yoltfor your time and consideration.

Martin Rapaport

C

harimall

Rapa

port roup

RAPAPORT

CALL

TO

ACTION

Members ofthe diamond trade

are encouraged to communicate

directly

with

the

Federal Trade

Commission FTC)

regarding

misrepresentation of

diamond

quality. Please send an email or

letter supporting

our submission

to

the

FTC

and/or

request

that

the

FTC add these two rules

to their

guidelines.

1. Those using GIA

terminology

must use GIA grading standards.

2. Those selling diamonds using

GIA

terminology

must

provide

a refund

if within one

year the

diamond is graded by the GIA and

found to be more than one

color,

clarity or cut grade below the grade

the seller communicated.

• Write Jewelry Guides, 16 CFR

Part 23, Project No. G711001 on

your comment.

• File

comment online

at:

https://ftcpublic.commentworks.com/

ftdjewelryguidesreview

Or mail

your comment to:

Federal Trade Commission

Office of the Secretary

600 Pennsylvania Avenue

NW

Suite CC-5610 Annex 0)

Washington,

DC 20580

Rapaport March 2 16 5


18/67

OVER

Sotheby s

y M RTIN

R P

PORT WI

TH

M ER M ICH Ll

avid Bennett, worldwide chai rman of

Sotheby's

jewe

lry division and cha

irman

of

Switzerland,

made

jewelry

hi

story once

again when he sold th e

Blu

e Moon of Jo sephin e

diamond for $48.5 million in November

2015 - the

most

expe

n sive diamond or gemstone ever so ld at

auction.

Known

as the tOO-carat Man, Bennett has

sold seven tOO-carat diamonds during the span of his


four-decade

ca

reer at Sotheby's .H e has handled som e of

the world s most

important

historical jewels, including

the

collections of

he

Duchess of Windsor, Ava Gardner

and the

Beau

Saney

diamond,

which once

belonged

to H enry IV of France. Mter th e fall auct

ion

season

closed this pas t December, Bennett sat down wi th

Martin

Rapaport

at Sotheby's N

ew

York for this exclusive

in t

erview

about

diam ond and

the

auction market.


19/67

Martin Rapaport: How

s

the

jewelry

auction

business?

David Bennett: It

s

been

an

extraordinary year.The May

auction in Geneva was a record

sa

le of$160,914,902.

We had the Blue Moon

of

Jo sephine beating the Graff

Pink, very exciting, and we had the

tOO

-carat D

IF

in

New York.

The

jewelry market is extremely good at

auction. Toward the end of the year, there was a slight,

slight, softening in large white diamonds.

MR: s

it because

all

of

asllddwjantastic

stones

have

appeared?

DB: Most of he private se llers are

one-off

sellers.They

come, they sell what they have and that's it.

You

never

really see them

aga

in.The opportunity effect is very hard

to

predict. If we visit Munich for example, it might be

just at the right moment when a particular individual is

thinking

of

sellingjewelry she inherited from her mother.

We don't really know when and where sellers offantastic

items will appear.

MR: Are t tere a lot

i uppliers

in the

trade

who

are

produdllg

magnificent diamolldsforyou? Do tltey know ill

advance,

wltell

they buy

tlte rough,

that

auction is tlte way

they re

going to

sell

the diamond?

DB: We've had considerable success in selling dream

ticket co lored and white diamonds. We have built

relationships with some

of

the cutters.

When

we see a

big rough diamond coming onto the market, we follow

it. The Blue Moon seemed , right from the moment it

was

discovered, to be a stone that would attract a huge

amount ofattention. It is also, I think, the most beautifitl

blue diamond I've ever seen,We want to remind people

of

th

e magi

c,

history,

glamour

and

luxury

of these

wonderful treasures.

Th

e campaign we designed around

th

e Blue Moon

was

precisely that. We made two films

to

illustrate

th

wonder

of

his extraordinary stone that had been sleeping

miles beneath the earth 's surface for billions of years.

Suddenly, at this one mo m

ent, in a fraction

of

a second

in time, the diamond is brought up to the surface by pure

chance, with a volcano. I

t's

that mystery that we as an

industry need

to

remember, because that's what mak

es

people dream about owning diamonds. Somehow, we've

become very blase .The industry, particularly the client

facing part

of

he industry,

has

to remember these things

are objects ofdesire and ha

ve

to remain objects ofdesire.

Otherwise people, clearly,

w ll

stop desiring them.

MR

So Sotheby s adds vallie

to

diamonds by romal/cillg

tlte stolle?

DB: That's what I try to do. It's been important to me

to place every stone that I've offered over the years in a

context

of

rarity, beauty and historical importance and

to somehow bring the magic out

of

he stone.

MR

So who are the buyers of these very

rare

and special

diamonds?

DB: The

one

thing they have in conUllon is, of course,

that

th ey

have the funds

to

buy

these

items. Sometimes

people d

on't

know what

they

want

until they see it.

When I sold a 25-carat ruby in

20t5

for a huge price

- three times more than any

othe

r ruby

has

ever sold

or the biggest challenge was exciting people about it,

because nobody had ever seen a 25-carat pigeon blood

Burma ntby before.So they didn't know that they wanted

it . I talked to one particular individual and he was say ing

to me,

A

ruby, huh? He hadn't thought about buying

a ruby. I showed

the ruby to him and he said, Wow,

that is really fabulous, I've never seen anything like it.

I

sai

d, You've got a point, because in 40 years in this

business I've also never seen anything like it. He asked,

How much should I pay for it? I said, There isn't a

price for this stone. All I can do is try and tell you how

wonderful

it

is.

Th e best way to define something as being beautiful is

to

show it - by explaining to

him

how rare it

was

and

showing him it beauty and by detailing the history of

the stone.

Once

he understood all these things, he ended

up bidding.He didn't buy it,but he

was

a very important

part of the underbidding process.

There

isn't

anyone

particular buyer because in the end, ir's somebody who

e

nt

ers into

th

e magic

of

this world

of

extremely rare

natural treasures

who

buys the stone.

MR: How important are olltside

experts

wlto

call understand tlte

Imiqllelless, spedalness and

rarity of

agemstolle? Is

there

eliot/gil

gemological knowledge Ollt there to sllccesifillly dtfferwtiate and

value these

multimillion-dollar

pieces?

DB: If you're thinking of buying a gemston

e,

you need

an advisor who's seen a lot of stones. He can relate it

to specific points

of

reference that he

has

seen with his

own eyes. I think that's hugely important. The ruby is a

ve

ry good example.A pigeon blood ruby is not an exact

definition

of

color. I

t's

sort

of

an agreed upon

term

that

Rapaport March 2 16 7


20/67

eauSaney

38

Rapaport arch

20 16

the trade uses to describe a particular, very small spectrwn

of

he red end

of he

co lor scale So you really need to determine i his is a

good

pigeon blood.The

only way you can determine

if

something

is good

or exceptional

is

by mentally

comparing it w ith many other top-quality stones you've seen. A lab

orato

ry

certificate is

not

going to do that.

The same

is true

for colored diamonds . In my experience,

no

blue

diamond

is like another one.A blu e diamond can

only

refer to other blue diamonds. It's

not

like any

other

gemstone. Don't

think

a blue diamond is going to

look

like

a sapphire. It's an entirely different and special

co

lor and

ge m

.We have to stop

thinking

of

particular types

of

co lored diamonds, particularly blue, pink,

as

a

category of gemstones - they're individuals .

MR: Are

the

buyers i

lte

stones mostly trade?

DB:A stone that needs repairing or to be recut to improve its quality; very

often will go

to somebody

in

the

industry.

Certain

types

of

o ld colored

diamonds

are susceptible

to

being recut

to improve

the

colo

r or

appearance. But when a stone is finished like the Blue Moon,

it absolutely goes to a private.

MR: COl/ld YO l explain why

these historical prices

are

being

made at

a time when

the global

economy has beell

very weak?

DB:

E ven though there may be a general

econo

mi c

malaise, a

lot of people

are

making

a lot

of

money

and are very cash-ri

ch.

Fine gemstones have always

been something that people consider having in their

portfolio

of

investments

. If

they

are

going to

buy

something,

they

want

to

buy the rarest, the best.

In

my experience, in this market now,it's ten times easier,

no

matter

what

the price, to sell the rarest and

the

best

than it is to sell the second best or the third best, where

price sudd

enly

becomes an issue.

MR: Do

YOIl

think tltat the

economic

l/ncertaillty

is

flleling

demand? Political lltlrest in

the

Middle East, Hncertainty

about

the Chinese ecot/omy at/d the Chinese government cracking

down

on

comlpt

ion: s

that drivi g

demand?

DB: The i st 100-carat D IF diamond that I to ok for sale arr ived at what was

conce

ivably

the

worst

moment.

Saddam Hussein had

just

invaded Kuwait.

The underb

idd

er

of

hat

stone

was a

person

who was attracted to the diamond

because, as he said to

me, How

else can I

put

$12 million in my pocket? That's

portability. Great diamonds

and co lored

stones have been admired, valued,

esteemed and

collected by the

ri

chest

and

most powerful for

as

long as history

has been recorded .There's a

pr

etty

good

likelih

ood

that th is will continue .

MR: Do you feel that the kind i magnificent jewelry that

YO l

sell partiwlarly to very

wealthy people is a reaUsac and a reasonable form i iversificaaon o assets?

DB:

That's

not

for

me

to judge.

There

are people

who think

like that. People

th at I speak

to

say real estate,

jewels

and

gold

in some cases are all possible

interesting areas

of

investment.Whether jewelry is a

lon

g-term

investment,


21/67

I

don t

know, but it hasn't performed badly in the past

2,000 to 3,000 years

MR:

vVlIat

adds value, the history, owner or

maker

ofa piece?

VVlJat percentage

of

the vallie is attributable to these kinds

i hings?

DB: A good example would be the Duchess of Windsor

sale.

It s the

fi

st sale that

was

very heavily mediatized and

followed. Lot 15

was

a pair of the Duke's cufflinks tha

we estimatedjust on its intrinsic value. It

was

a Cartier set

estimated at $15,000 to $20,000 and it sold for 50 times

the estimate because it had been the King's cufflink set.

If you went out today to buy some cuffiinks fo merly

owned by the King ofEngland, you would have a great

deal

of

rouble finding them. Sometimes provenance, the

history

of

he item

or

the previous ownership, can make

a piece very desirable and valuable.

There was

the Beau Sancy. The diamond had been

cut in the late-sixteenth century and had been bought

in 1604 by

Henry

IV of France and given to his wife

Marie de Medicis to wear in her crown for the coronation

in Saint Denis cathedral in Paris.That stone was magical.

A lady rang me up before the sale and asked

to

see the

Beau Sancy. I opened the box, she took a look, gasped

and burst into tears. It

was

such an extraordinary emotion.

It's a

kind

of

visceral emotional response that I

think

separates a stone like that from all the rest. It

was

a stone

that had been owned by four royal houses, including

the British. It was an off-col

or

SI2 stone.The stone was

cut in this extraordinary way It

was

easy to imagine the

cutter, in Amsterdam, cutting it by hand.When Henry IV

bought it,it was the most valuable stone in the worldYou

can have diamonds where the value

is unrelated

to

the

history of he object.And you can have diamonds where

the value is all about the history.

MR: VVhat about regular jewelry? Mrs.jones passes away

and

her daughters

want

to sell it Vf; hat about

that

market?

DB : Well, that's very much a major part ofour market. I

mean, this year we've had a very good sell-through rate.

Eit

her we're doing something very, very well, which is

getting the price right,

or

the market is very healthy and

there's a lot

of

demand. Perhaps both.

MR : Are

there

jewelry collectors? How do

brands

play into

this? If a

piece

is

Van leif

Arpels

or

Tiffany Co.

or

Harry

WinstOIl,

how

much value

will that

add?

DB : Co llecting

is

about desire. There are people

who

collect, for exampl

e,

pieces by Belperron.

MR :

Brands also

play an important role. For example, if

YOIl

had an unbranded gmeric diamond ring alld a CrqIJ ring at

auctioll, most people would

go

for the Crqff

ring,

because it s a

standard

of

excellence .The

quesaon

is

how

much

more would

they pay?

DB : That's really a question

of

the competition . I think

the brands attract and focus much more attention on

the

item.The important thing at an auction is to get people s

interest started. Once you've got people started, there are

all sorts ofpsychological imperatives that may keep them

going. Having a signed ring is more likely

to

have more

people after

it.

MR:You

)ve made historical

prices for fmley

colors.

Even in

this

economic

environment)

everyone s

exdted aboHtfatuy

colors

but

the

same

level of exdtement is tlot

there

for

whites.

Why

do

YO thinkfalley colors have taken cijJwhile white

diamollds

are

languishing?

DB : It goes back to the fact that we need to give more

attention to marketing white diamonds. All the record

prices, almost without exception, have been for colored

diamonds.The ruby came close. It was $30 million, not

far away. Colored diamonds are very beautiful. A pink

diamond

is

an absolutely charming, entrancing stone.A

blue diamond is mysterious and wonderful.Whereas with

a white diamond, until you

put

it in front

of

somebody,

put it in somebody's hand, it

is

difficult to ima ine, as

most people are never going to have an opportunity to

hold a 30-carat-plus D fl wiess gem. I sold a couple

of

very large stones in 2015 for very high prices to a private

collector and it was simply a question of alking about it,

explaining it and putting it on their finge , and then it's

"wow." I think it's the wow that

is ultinutely the thing

that sells the diamond. T he wow is an experience.You

have to understand how big a 30-carat diamond

is,

or a

50-carat

or

a 100-carat.

MR:Are imey c r

diamonds

overpriced?

s there

a bubble

today?

DB : I don't think so. If you stop thinking of diamonds

as a

conunod

ity and start thinking

of

them as unique,

special, one-of-a-kind individuals, then

of

course they

are not overpriced.

MR: Is there an issue i Ollspiwous

cOllsumption,

so that the

more

expetlsive the

dial/Wilds are,

the more people want to buy

them?

DB : For certain groups

of

people, headline auctions and

publicity are very important. It nukes the diamond more

desirabl

e.

I think that's

all

part

of

t .

Rapaport March 2016 9


22/67

e

w nt

to

remind people

of the mag ie

history

gl mour nd

luxury of these

wonderful

treasures.

- David Bennett


MR: Do the auction O/ses appra ise jewelry? Hill

en

you appraise

i

t is

th

ere any

conflict i f nterest?

DB:

Because

I

ve

worked

so l

ong

in

th

e

auction

business, I have a very high

opinion of th e process. Selling at auction is a wonderful process. It beats

mos t

ot

h

er

ways of selling things, because fi st ofall it takes

the worry

out

of

t, you re

pr

esenting it

to

an

in t

ernational audience on a very sophisticated

and

open

platform.The other thing I like about the auction

bu

sin ess is that

the

se

ller and the auctioneer are on the

sa

me

si

d

e. Th

e simple dynamic is

the more we

se

ll it for, the

mor

e conuni

ss

ion we make. It s not like we re

trying to beat people down. In my

ex

perience, the least successful auction

examples are when people have insisted on very high reserves that we ve

counseled against. If I were se lling at auction, I d put a ve ry low reserve and

let

the

auction take effect .

MR:

What-s

tlte mostJantastic

piece

ifjetIJeiry you ve ever

seen?

DB: Th e Beau Sancy. It left me speechless.What history.You re th e Kin g

of

France and you se

nd

someo ne to negotiate the

pur

chase

of

the most

valuable diamond in the world.

Ca

n you imagine that?

Th

ere it was and

it

weighed 30-something carab. 100 percent Golconda. It

s

the only diam ond

so

ld

in recen t years that is 100 percent Golconda. It could

not

have com e

from

anywhere

else.

MR: f.Vh

at-s

going

to

happCII next year? Do yo u expect this tren d

toward

very

expensive diamollds sold at historical prices to continu

e?

DB: I think if the

market

or mines co

ntinu

e

to

prod

uce

very rare col

ored

diamonds, there s goi

ng

to be a continuing market for them. I really don t

see any lack ofdemand, bur ie s only for these very, very rare gems Very high

levels

of

excellence that we can attach to something is ext remely important

a

nd

I

think

th e market for excellence is goi

ng

to

continu

e. For the rest of

th

e

mark

et , it s really

mor

e a question of

what

happens

economi

cally in th e

wo rld. It s a question of

how

mu ch free m oney is available.You and I may

be sitting here in a year s time

with

an

economy th

at s go ne

into

a maj

or

recession, who knows? I think the American market is going to be very

important

next year. But th ere will be new emerging markets,

I m

certain

of

t. I think India has massive potenti

al.

If India can stop its punitive import

taxes, it could be th e biggest mark

et

in th e world . If the Indian economy is

l

oosene

d

up

and allowed

to

perfo

rm

, it

would be

fantastic.

Yo

u d

on t

have

to explain anything to Indians about co lored stones and diamonds; it s in

th eir blood.

MR: Do YO II think white

diamo

nds will come back?

DB:

I d

on

t

think

th ey ve go ne. I

think

maybe at

the moment, co

lo red

diamonds are th e fashion. All th e papers are always talking

abo

ut colored

diamonds wi th arti cles about h

ow

colored diamonds have

gone up

in price.

There has b

ee

n less publicity about white diamonds . I think the diamon d

industry must get behind promoting white diamonds.When it com es to th e

top e

nd

of

he

market,we

mu

st stop treating th ese diamonds as conunodities

and

instead treat each

inlportant diamond

as

th e individual it is •


23/67

THE EYOUNG

OLLE TION

~ a / o e

0 lt l ha jaa

SINCE 5

608 Fifth Avenue · New

York

NY

10020 · 212-54 -7202 • 800-525-3250

www thedeyoungcollection com


24/67

Ea

ch

auction is a carefully

cr

afted sale . So what are

the advantages to the

trade

when selling at auction?

ve ry jewelry auc

ti

on is a we

ll

-choreograph ed

per for ma nce, a perfec t balance o f se ll ers

and buyers with the au ctionee r being th e

conductor of the myriad players contr i

butin

g to

th e overall eve

nt

.

But

,like any pe

rf

o

rm

ance,

mu

ch of the

hard work tak

es

place behind the cur tains, out of sight

of the aud ience.T hat

is

where decisions are m ade about

which goods to take in for sale where to

pl

ace them in

the s

al

e and h

ow

to

se

t the es timat

es

all with an eye to

reaching a hoped- for do llar am ount.

At

th

e

sa

m e

tim

e, aucti ons have b

eco

m e

publi

c

spectacl

es

drawing the curi

ou

s and th e we

ll

-heeled, the

pri

va

te clients and the dealers, the celebrities and

th

e

socialites.This has helped auctioneers find fres h goods

fro m priva te consigno rs . In addition, the rrade often

bu

yers

at au c

ti

on provides a st

ea

dy supply of goods.

According

to

Gary

Sc

hul er

dir

ec tor of

th

e j ewe lry

departme

nt

at So th eby's, Most dealers will tell you

we are th e b

es

t retail ers in the world. We are turning

inve

ntor

y four times a

yea

r in New Y

or

k. R etail sto

res

rarely reach that l

evel

, which

is

crucial to presenting

fre

sh

goods to potential bu

ye

rs.

To accomplish this Sc hul er says Wh at we like to

see coming in are ve ry special goo

ds.

Th ose goods will

reach the grea test audience, on a global sc

al

e no matter

where the sale is held. Selected highlights of upcoming

auctio ns travel to key venu es, in clud ing Ge neva,

N ew

Yo

rk and Hong Kong, and catalogs are available

online reaching many

mor

e potential buye rs. Diamond

cut ter Isa

ac

Wolf says the global reach of th e auction

houses is an unsurpassed marketing t

oo

l for dealers who

pla

ce their

ra

re and special goo ds in the sales .

Auction hou

ses

are for select dealer goods.

Sc

hul

er

says We do h

ave

a good se nse of what we

ca

n se

ll


OVER

y

ETT G

LE BL UER

we know our audience and

wh

at th

ey

h

ave

an appetite

fo r. H e elaborat

es O

ur sal

es

are curated .

Th

ere is no

need to fill up a sal e with und

es

irable items. It affects

the look of the

ca tal

og and the mood of the sale. We are

merchandisers as much

as

specialists.We are not the ve nue

for everything.

Still, it is a very rare sale that is 100 percent so ld.That

honor goes to the unique

esta

tes: the Duchess of Windsor,

Elizabe

th

Tay lor or a socie ty

fi

gure

with

a ve ry high

recognition fac tor among the publi

c.

Mos t jewelry s

al es

are 75 perce

nt

to

80 perce

nt

sold by lot, sti

ll

a g

ood

ba tting ave

ra

ge for a one-day event.

GETTING TO AUCTION

While the trade is a consistent se

ll

er at auc

ti

on, gi

vi

ng

th

em their daily bread and

butt

er, it is th e es tat

es

and

pri

va

te goods from collectors that offer the most d

es

irable

goods that give th e auction s their fl air.

Goods come in from mom-and- pop stor

es

in sma

ll

town America,

as

we

ll as

the natio

nall

y known reno

wn

ed

nam

es.

R etailers' customers turn to them to se ll goods,

of t

en inher

ited

jewe

lr

y

th

ey do n 't wa

nt

. In some

instances, the reta

il

ers offer those goods to the auction

hou

ses. AI

Molin

a

chairman and chief executive officer

(CEO) of both Molina FineJewelers in Phoenix,Arizo na,

and Black,Starr Frost, with stor

es

in Newport Beach ,

California and Ph oenix,says that when his c

li

e

nt

s come

to him with goods to se

ll

,he

has

two options. l

fth

e c

li

e

nt

needs cash, I will buy it outright .But we may be allowed

to represent them in an auction. M olina th en acts as

the middleman, nego

ti

ating with the auction house and

then allowing the c

li

e

nt

to decide whether the estimate

suggested by the auction hou

se

is acce

pt

a

bl e.

Auction houses h

ave re

gular

re

lationships \

vi

th

re

ta

il

ers


25/67

w

ho

often bring th

em

fresh

goo

d

s,

sometimes items

that ha

ve

been in private hands for generations.Th is is a

win win

siruation for ll concerned . All three parties have

something to

gain

the auction house has a desirable

offering, the retailer creates a cash flow for his client and

the c

li

ent

e n e 6 t ~

from the expertise

of

both

entiti

es

.T

o

be successfitl

in

using the auctions

as

an outlet, Molina

says,

You have to be a stud ent of the auctions. From a

family

of

ewelers, he

was

8 years o

ld

when he attended

his first auction.

THE TRADE

The trade is a regular source

of

goods for auc tion

houses, with some dealers signed up with annual contracts

that state th

ey will

pro

vi

de a

minimum

dollar amo

unt

of

goods, according to Rahul Kadakia, international head

of

ewelry for C

hri

stie s. Conunission arrangements are

widely negotiated

do

wn from the standard 6 percent of

the hanuner pri ce and depend on the val ue of he goods

as

well

as

the volume and frequency

of

he consigrun ents.

Whether the consignment comes from a private client

or the trade, there are additional fees to cover r isk ofloss

a

nd ph

otography for the catalog.

Diamond cut ter

s,

too, sometimes turn to the auction

houses when they have extraordinary goods to sell. We

seek a balance ofgoods,

says

Kadakia. This

is

a very fluid

process .We

won't

take another lO-carat D flawl

ess if

we

have one

in

the sale, he says, We are looking for balance

among all the categories. According to Kadakia, it is

important to limit the appearance of hese stones on the

market so as not to decrease the sense ofabsolute rarity.

Kadakia continues,

Di

amo

nd

cutters

as

k

us which

shape and size they sho uld cut ,

which

product would

be a

sa

lable

diamond

and would make

more

mon

ey.


26/67

Rapaport March 2 16

They ask if they should make two stones, for

example, to make a pair.We try to think where

we should place each ge certain stones are

better in ce rtain parts of he wo rld.This helps

th

e buyer and seller.

Sometimes, if

th

e au ction houses see an

o

pp

o

rtunity

th

ey

reach

out

to

the

trade

.

Saul Go ld

berg

of William Goldberg, th e

NewYork Ciry-b ased diamond cutter and dealer

known for itsAshoka c

ut

,would never c

ut

a stone

to put it

into

th e auction but

th

e auction houses do

come to them for special goods.

T

hey are very clear

about what th ey like. 'Do you have a 5-carat pink?' they

w ll

as k. Their catalogs are

not put

together by accident,

says Goldberg.

The history of ecent sales also guid es the process ofdeciding what

goods to take in. Kadakia says,

We

know how many people were bidding

a

nd how much

cash was available from

under-bidders. This

suggests

that

th

e market is still hungry for certain rypes of goods, as seen n th e constantly

escalating prices of pink and blue diamonds.

When

C hristie's began 250 years ago, Kadakia points out, the sellers were

estates or royal families. D ealers didn't have access

to th e royal houses.

Th

at

has c hanged

over

th

e past 40 to 50 years as dealers began selling to o

th

er

dealers through the auction houses. In the heyday of Middle East buying in

th

e late 1980s/early 1990s, he says, A lot of he goods that Ahmed Fitaihi a

nd

Rob

ert M ou

a\-va

d - two

prominent

Middle East dealers

ca

ter ing to the royal

families of their own region - were buying goods from

other

dealers .

Whether

goods com e from dealers or pri vates, for a business known for its

secrecy, auction houses offer a

tr

emendo

us advantage over dealer

-to-

dealer

sales:

Th

e transactions are totally transparent.

Th

e hanuner pri ce plus

bu

yer's

commission is known to the penny and the se ttl

eme

nt date - 35 days from

date of sale - is also known.Th ere

is no

holding back payment,

no

chasing

after money owed, no r

et

urns. In an unsettled econo my such as exists today,

th is is very reassuring for a seller of high-

pri

ced good . For most consignors

th is advantage far ou tweighs

th

e

time

lag betwee n consi

gnme

nt and sale,

which can be anywhere from two to four months. Holding

goo

ds costs

mon

ey

including finance charges

on bank

loans and insurance fees, but putting goods

into

auctions means at least a 75 perce

nt

cha nce the item will sell.There is no

other venue that offers that assura

nc

e along with th e global marketing reach

and stellar customer service an auction house provides . •


27/67


28/67

lection

Year

mpact

BY

ARA EWEN

I

t's all

election year, and

some

scores

were

already feeling

the

ensuing

customer

caution,

with

slow s

al s

and light

traffic.Although custom pieces, especially

custom

r c m o u n t ~ were

doing

well,

new

purchases were

sluggish.

Additionally,

more

customers

were

paying in cash.

This

slight

pullback led some retailers to

question

whether

rhey were doing

all

they

could to

capture

new Millennial

customers. Stores

that

have

expa

n

ded

their

technological footprim have found

it easier

[

attract and interact with

younge r

customers.

However,

most

owners

indicated that after

the

election is

decided in November, one way or another,

they expected to sec sales stabilize.

DEBT AND SPENDING

Although some

stores felt rhe impact

of

elections even in

2015,

the

rca

bmnt

of the cycle

began

in

early

20 16 . An

election year

is

always

one of

concern

because o f

the uncertainty

of a leader,"

said Tonia Leitzel

Ulsh,

chief operating

officer

(COO) of Mountz

Jewelers, with

three stores in Pennsylvania. " T his affects

Documents

Rapaport March 2016