Sorting Table

The single most important issue in the global diamond industry today is the need to develop new mines. This is essential if an assured supply of raw material to all the processing centres is to be maintained in future. Right now, demand outstrips supply and the gap is set to grow over the next few years as all the new discoveries put together cannot make up for the shortfall generated by the peaking and decline of the world’s existing big mines.

Small wonder then, that the diamond world pays such inordinate interest to the doings of the junior exploration and mining companies. While the majors are looking, the juniors are the ones with the flexibility to look in the most impossible places and generally take chances the majors wouldn’t. Don’t forget, it was the junior miner Aber that found Canada’s Diavik mine. Eira Thomas, daughter of Aber’s founder Grenville Thomas, was reportedly the one who insisted that the survey team actually take core samples from the floor of the lake. The rest, as they say, is history. (more…)

Given the uncertainties in the global financial sector, the gloomy outlook for the US economy and the disruption in gold mining in South Africa, market gurus have begun saying that gold is ready for a ‘rocket shot’ past the $1,000 and ounce mark.

Indeed, the uncertainties are bothering Asian stock markets too. The Bombay Stock Exchange (BSE) sensitive index or Sensex dropped sickeningly this morning, only to wobble back to make up half the drop by late trading. Whichever way it goes, the erratic graph being plotted by the Sensex – as other indices all around the world – is all that is needed to guarantee gold its rocket shot. (more…)

S.A. Mine Production May Resume Later This Week

The power crisis that has thrown South Africa’s gold, diamond and platinum mining operations into disarray since last Friday, may ease off later this week, says Reuters. The state-run power utility Eskom earlier warned that the power shortage, which sent gold and platinum prices soaring to new highs, could continue for up to four weeks.

Eskom said that it couldn’t guarantee stable electric supplies, raising concerns that mineworkers may remain trapped underground. As a result, over the last four days, companies have stuck to activities that are not dependent on electricity, such as plant maintenance, etc.

Production is likely to resume after a meeting on Wednesday January 30 between Eskom, government officials and the mining companies. A ramp up in additional power later in the week should enable a phased return to normal mining operations, noted AngloGold Ashanti, one of the affected firms.

There are two essentials without which the global gem and jewellery industry will founder. The first is a free-flowing supply of money and the second is the market leadership and promotion that comes from the very high end consumer.

A large part of the world gem and jewellery industry’s problems today may be attributed to the drying up of the free flow of money with the sub-prime mortgage crisis and its overall impact on credit in the US. Just when we thought that all the bad news was in and we had pretty much bottomed out in this regard, here’s a piece of news that makes us all wonder what else is in store.

Citigroup, one of the worst hit in the sup-prime crisis (it wrote down $26 billion in all), now looks like it could get soaked for several billion more from the ongoing settlement of the Enron case. Enron’s creditors had accused 11 banks of aiding in the fraud that brought about the power-generation giant’s demise. Ten had settled out of court, stumping up $1.73 billion. Citigroup, the 11^th, had refused to settle. Now the creditors say in a lawsuit that Citi should pay up the outstanding $18 billion in settlement. This is six times more than the $2.8 billion Citi has set aside for settlements in the Enron, Worldcom and some initial public offering-related legal issues. (more…)

The Bombay Stock Exchange’s nosedive yesterday and today wiped out $6 billion in value. That staggering loss includes a huge amount of capital from the Indian diamond industry. We’re looking at a catastrophe too horrible to actually contemplate.

With margins thin to the point of almost being non-existent, a vast majority of the Indian diamond industry players, especially the smaller ones with no direct access to rough or polished markets, had diverted large sums of money to the stock- and real estate markets.

It was a sort of hedge to make up for the poor profitability in polishing diamonds and the lackluster demand from staple markets like the United States.

This diversion of money was blamed in part for the liquidity crunch in the Indian diamond market. But those funds were always there, ready to flow back into the diamond industry at the first sign of improved profitability. Now it’s gone forever.

Fasten your seat belt. It’s going to get really rough in the market now.

Jewellery is a product category that needs to maintain its special look and feel regardless of the economic situation in the marketplace. Take away that look and feel and you also take away its emotional appeal – the only thing it has going for it that other luxury product categories don’t have.

In tough economic times, therefore, the challenge for the jewellery industry to maintain that special look and feel and defer to the financial realities that govern discretionary consumer spending. It’s like trying to harmonise two completely opposing forces.

We’re going through tough economic times right now. The pundits are now categorical, the US is slipping into what they term the biggest recession in 16 years. Energy prices have gone through the roof, exacerbating an already tough situation. The situation in the world’s political hotspots is uncertain to the nth degree. Gold, the material of choice for jewellery fabrication for the vast majority of consumers round the world, has already breached $900 an ounce and is definitely going to rocket past the $1,000 mark according to the experts.

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Our guest blogger, Pooja Sahny, is a goldsmith and designer based in Belgium.

I learned something important about ideas and their communication. What you can see clearly in your mind’s eye is only the first step in being a designer or jewellery maker. You need to be able to communicate your vision clearly to your client before it can take solid shape. Being a 28-year-old goldsmith and having a pretty solid background in jewellery making and designing, I thought GIA London’s intensive two-week course in CAD/CAM would be a breeze. I was so wrong! Apart from knowing that CAD stood for computer aided design, I was quite clueless. I assumed CAM was short for camera, but in fact stands for computer aided manufacturing.

The course gave me a new perspective on what I see and what I communicate. I was always relatively old-fashioned in thinking the pencil can never be replaced by the computer. In some ways this is still true. I still believe most designers’ initial ideas stem from some rough sketch on paper that only he or she can understand. But when it comes to the practicality of communicating with your client, CAD/CAM opens up completely new possibilities. I actually did have some idea that it would open doors for me even before I started – I enlisted because I wanted a some way of communicating my ideas without having to watch the confused looks on my clients’ faces when I showed them my incomprehensible hand-made sketches! I can tell you confidently that I have found what I was looking for! I do think that CAD/CAM is the future. (more…)

The pundits are already talking about the scenario after the US dollar crashes. Not ‘if’ but ‘when’ – they’re that certain. And the word that this report uses is crashes – not ‘declines further’ or anything less gentle. The report says, all that will glitter then, will be gold. That, I guess, is pretty straightforward – dollar goes down & gold goes up. But the bit about the dollar crashing is really scary.

Let’s look at what could happen if the dollar crashes.

1. If you’ve invested in gold, you’ll make a bundle.
2. For some time at least, energy will be much more affordable. OPEC isn’t going to sit quiet, of course, and they’ll either hike prices hugely or switch to another currency like the Euro for trading.
3. Countries like India and China, which depend on exports to drive a substantial portion of their growth, will take a body blow.
4. The international diamond industry, which trades globally in dollars, will look like a complete shambles. (more…)

Happy New Year everyone! Hope lots of good things happen to you in 2008.

The Indian diamond industry doesn’t think the year has got off to a good start, however. Gem & Jewellery Export Promotion Council (GJEPC) chairman Sanjay Kothari held a press conference yesterday to express the industry’s concern over the new De Beers Diamond Trading Company (DTC) client list for the 2008-2011 contract period.

You can check the details here or pretty much anywhere else on business and industry-related sites. There’s also this brave observation that Diamonds India Ltd., the rough sourcing firm floated by 60 Indian diamantaires, will source goods from ‘elsewhere’.

What strikes me though, is the fact that De Beers, which now only controls between 35% and 40% of the world’s rough diamonds, down from a many-decade-long spell at 85%, can still shake the global industry.

The drop in the share of rough they controlled globally is what prompted them to move from their historic model of controlling supply to controlling distribution – the supplier of choice (SOC) system. And while everyone has written off SOC as a failed system, the new SOC-II, the system’s second edition with the bugs supposedly ironed out, has reminded everyone right off the launch pad that De Beers still packs a hefty punch.

India gets direct rough supplies from Rio Tinto, BHP Billiton and Alrosa (by bidding on their tenders), a great deal from the reselling market in Antwerp and a fair amount from resellers in Israel. Yet because De Beers has shed five clients net in India and three Indian-owned firms in Belgium, the Indian industry is reaching for the life-jackets.

More than ever, these developments reinforce the common wisdom that the money lies in either owning a mine or owning a customer (retail). If you’re anywhere in between in the diamond pipeline, you’re life will be one of unending pain.