Sorting Table

Here are some interesting observations on the recently concluded sightholder selection process for the 2008-2011 period that was conducted by the De Beers Diamond Trading Company (DTC).

It has become apparent that several diamond companies might be fibbing when they say they have been given a sight. The bush telegraph in the marketplace has been consistently contradicting the assertions of some that they have received a sight.

Apart from the natural reaction of being just unable to come out and admit this publicly, this could also indicate that some of these companies might be contemplating appeals during the ratification process. The appeals will, I think, involve these companies drawing comparisons between themselves and those that have been selected.

Of course this is all speculation, but we could have a pretty rough start to the new year with perhaps a big fight that will involve not only De Beers and the disgruntled parties, but those that have made the grade as well…

I’m off on a break for a week. Back on the 31^st, in time to watch 2008 make an entrance. Here’s wishing you all a happy Christmas and a great new year.

The sagging consumer demand from the US has made the gem and jewellery export production industry from India look at all sorts of other markets around the world and concentrate a lot more on the domestic consuming market, which has been showing impressive growth. But the fact is, no other market is anywhere near being able to take up the slack left by the drop in US demand. And anything an Indian exporter can do to increase penetration in the US is still vitally important.

But what does one do when, in addition to a drop in demand, the US dollar has been sliding steadily downhill against almost every other currency in the world? The Indian export industry has been bemoaning the strong rupee and calling on the Reserve Bank of India (the country’s central bank) to do something to help.

But the highly respected economic writer Swaminathan Iyer says he hasn’t found any evidence at all that the strong rupee has hit the Indian export production industry. In fact, he finds that in relative terms, the Chinese yuan has appreciated more against the dollar than the rupee. For the Indian jewellery export industry, this is great news. Having been taken off the US government’s generalized system of preferences (GSP) list recently, Indian jewellery exports instantly became 5 ½ more expensive for the US consumer – much to the benefit of Chinese jewellery exports.

A yuan that is rising more strongly against the dollar than the rupee will erode much of that benefit. Overall though, I don’t know how much difference it will make. The categories of jewellery that have shown the greatest drop in demand in the US are those in with lower price-points. The kind that’s exported from India…

A few weeks ago, our guest blogger Ya’akov Almor, who serves as joint communications director for CIBJO, the World Jewellery Confederation, posted “Nokia’s Coffee Brown Sapphire“. Here is an update on how Nokia responded.

It’s taken some time, as one can expect in a large corporation, but the Nokia press liaison came back yesterday with the following answer:

“Thank you very much for your email and your expertise. Based on your suggestion, we have revised our communication materials to reflect the usage of man-made sapphire. We will still keep the reference to sapphire (Mono Crystalline Aluminum Oxide) for the Nokia 8800 Sapphire Arte but have removed the mention of gemstone.”

Well done Nokia was my first reaction. But hold on: while the use of ‘man-made’ is fine, what is it they mean by removing “the mention of “gemstone?” Does this mean they will now only call it a “sapphire” and not a sapphire gemstone? If that is the case it is obvious that Nokia may have missed the message.

Disclosure, after all, is about telling the consumer about the provenience and nature of the product or the products’ elements. In the case of the leather used in the phone, they did a ’sterling’ job.

Let’s hope that in the end, they do the same for the description of the sapphire: labeling it as a piece of synthetic or man-made corundum (they’ve proven they know it is Mono Crystalline Aluminum Oxide) or sapphire, whatever suits them better.

This is all academic anyway as a quick survey, albeit on line only, showed that the proclaimed changes could not be found. (more…)

When the world’s sixth largest mining company – one that has been making acquisitions up until now and was even mentioned in passing as a possible player in the Rio Tinto takeover story – suddenly puts itself up for sale, the first question is, why? Has it been secretly losing money? Or does it know something everyone else doesn’t?

It seems though, that the move might be a result of Xstrata boss Mick Davis and 35% shareholder Ivan Glasenberg seeing an end to the ongoing mining boom. To quote the FT.com report:

“The fact that Mr Davis and Mr Glasenberg – regarded as two of the sharpest minds in the industry – are open to offers could be interpreted as a sign that we have reached the top of the mining boom. Evidence of a looming recession in the US has caused economists to become more bearish on the outlook for China and India, whose demand for commodities has driven the boom.

“The theory that these fast-growing emerging markets have decoupled from the US economy, and that a recession in the US would therefore not hurt their growth, is now being questioned. Base metals prices have been very volatile as a result, and the performance of zinc and nickel have been poor.”

India and China being dragged down with the economic slowdown in the US is really bad news for the diamond industry. They are depending on those two markets to take up the slack left by a sagging US market.

BHP Billiton obviously doesn’t share this view as it continues its pursuit of Rio Tinto. But there are some steady voices saying the takeover isn’t worth it…

Here’s a fundamental question for the diamond industry. To what lengths will it go to source its product? Even though demand far outweighs supply and the gap between the two is set to grow, will the diamond industry, in its quest for new raw material, plunder one of the world’s largest and most varied ecosystems and trample on the rights and lives of indigenous people in the process? Greed and corruption seem to be doing just that in Brazil right now.

No matter how hard the industry tries, diamonds seem to be inextricably linked with death and the darkest, most repulsive side of human beings. All the hard work that the global industry did in getting together to work on stemming the flow of conflict diamonds could well be undone if stories like this hit the headlines over Christmas.

A representative of the United Nations and three others have been taken hostage by the Cinta Larga indigenous people. At the root of the hostage-taking is, of course diamond mining. Three years ago, 29 illegal miners were massacred on the reservation and the case against the killers is still in court, mired in confusion and controversy over who has jurisdiction over the indigenous people and their reservations. (more…)

Interesting development. Fortis Bank, one of the members of the consortium that bought ABN Amro, now seems reluctant to take the diamond finance division as its share of the spoils!

ABN Amro is the world’s largest single diamond-financing bank and Fortis’ reluctance, therefore, really makes one sit up. What could the matter be? ABN’s diamond finance head Loet Kniphorst has been rather negative about the industry that is the reason for his division’s existence. Addressing the World Federation of Diamond Bourses (WFDB) and International Diamond Manufacturers’ Association (IDMA) meeting in Israel, he seemed to make the case that lending to the diamond industry carried a more than ordinary risk.

Kniphorst noted that while the value of rough diamond production had increased 50% from $8.8- to $13.5 billion and the diamond content in jewellery had grown more than 30% over the years, retail sales had risen only 20% over a 7-year period. And while he thought money was being made in retail, he didn’t seem to think there was much money to be made in diamond manufacturing. Kniphorst has also been urging the development of instruments that would allow non-bank finance to flow into the industry.

Still, the diamond finance division of ABN Amro is making money. Despite all his worries and protestations, Kniphorst oversaw the massive expansion of lending to the industry in India. The bank is making money lending to the diamond industry.

So once again, what could the matter be?

S.A. Mining Industry Claims 201 Lives This Year

The number of mineworkers who died in South Africa during the first eleven months of 2007 has surpassed the figure for the whole of last year. Three more workers died over the past weekend in separate incidents at mines owned by Gold Fields, Xstrata and Anglo Platinum, pushing the mine death toll in the year to date to 201.

This reinforces the case of the National Union of Mineworkers (NUM) which plans to protest against “the genocide unfolding in the mining industry” by staging a walkout tomorrow (December 4). The one-day strike is expected to paralyse work across the entire South African mining industry.

Keep an eye on further developments as well as precious metal prices over the coming week as supply fears worsen.