Hello All
Peter, you might like this last item...
Unrelated and interesting tid bits:
Diamond Industry Developments
The market performance of De Beers Consolidated Mines (DBRSY :
US$16.25) in the last several trading sessions has been quite
remarkable. (Since August's seven year low at US$11 7/16, the stock
has risen about 42%, despite continuing soft diamond market
conditions.) The new three-year pact to annually market a minimum of
US$550M of Russia's Alrosa Amanzy Rossii-Sakha (ARS) rough stones,
through the Central Selling Organization (CSO), was formally announced
earlier this week, but had been reasonably outlined in a Dow Jones
interview in mid-September and should not really be viewed as
startling news.
A London Financial Times article this week noted that Alrosa sales
would be limited to a maximum of 26% of CSO sales which totalled
US$4.6B in 1997, but with the slump in the far eastern markets sight
sales were just $1.7B in H1/98, and most analysts project total sales
of rough in for this year in the $3.4-3.7B range. The overall market
remains weak although certain segments, such as the lower value
Indian goods", have recovered considerably price-wise in the past year
with the oversupply condition largely resolved.
On the other end of the market spectrum, we note the following comment
from Hymex Diamond Corp. in an Oct. 21/98 corporate update on its
alluvial diamond operations in Guinea: "A feasibility study conducted
in 1992 on the Diani property indicated an average per carat value of
US$100. Current market conditions place this value closer to
US$60/carat. Similar feasibility studies conducted on the Milo
property in 1993 indicated an average value of US$250/carat, with
estimated current market value closer to US$160/carat. In recent
months, there has been a significant downturn in the global economy,
and commodity prices have not been unaffected..." This
notwithstanding, at the Ekati Mine opening on Oct. 14/98, BHP Diamonds
Inc. President Jim Rothwell was quoted as saying, "As we enter the
diamond market, we are aware that it is soft due to cyclical factors
affecting the global economy. However, we are confident in our
ability to market our full production, even in the current
circumstances, and we are very positive about the diamond market
outlook beyond the short term..." The "Panda" stones now being mined
carry a value of $130/carat. As is well known, BHP and Dia Met have
had a series of discussions with De Beers regarding marketing less
than 50% of Ekati's production, but we understand that no recent
formal discussions have taken place, and current plans remain to
market the mine's production through the new marketing operation
established in Antwerp.
We would highly recommend reference to Roger Chaplin's Nov. 4/98
comments on De Beers in the T. Hoare and Co. Morning Fax; he
concludes, "We may see some further weakness in De Beers towards the
end of the year and in early 1999 as the lower CSO sales are reported
and the lower earnings for 1998. However, De Beers is a survivor and
we would recommend that investors HOLD De Beers for now and look to
ACCUMULATE on any further weakness." We concur with his views. The
strength in De Beers should be reflected in the profiled Canadian
diamond stocks and particularly Dia Met Minerals "B" (DMM.B : TSE :
22.80) and Aber Resources (ABZ : TSE : $8.90) which remain as the top
BUYS in the Canadian diamond sector.
Next Tuesday, De Beers is hosting "The 1998 Diamonds-International
Awards Collection" featuring outstanding diamond jewelry from around
the world. Any gleanings will be passed along.
David James (204) 988 -9602
************
WEEKLY MARKET COMMENTS
News: U.S. retail activity increasing but NY market rather slow.
Foreign cutting centers very quiet. 5/4 through 7/4 are very hot, but
4/4 are weak. 3/4 doing well, two caraters soft. Demand for I-J colors
improving as buyers are attracted to more affordable prices. Rough
prices are under price pressure in spite of very small CSO sight.
Banks are cracking down on credit to diamond manufacturers following
Lorenzi affair. It looks like rough prices will come down as cutters
refuse to buy rough that is overpriced in relation to polished prices.
Large rough remains very scarce, but smaller rough under a carat
appears to be in oversupply.
.... The Argyle diamond mine in Western Australia produced 12.5
million carats in the quarter ended September 30, according to 40
percent owner, Ashton Mining Ltd. The output represents a 40 percent
increase over the corresponding period of 1997. Output for the first
nine months of 1998 stands at 31.8 million carats, up 18 percent from
26.9 million carats last year. In a statement, Ashton said U.S. demand
was a big factor in the mine's sales figures, which have not yet been
released.
.... Laurent Kabila, president of the Democratic Republic of Congo,
has suspended the operations of Service d'Achat des Substances
Minerales Precieuses (SASMIP), the country's new diamond and gold
buying agency. The SASMIP was established by government decree on
September 15, to handle the state's direct purchases of gold and
diamonds, but the agency had yet to begin purchasing operations.
According to state radio, the measure to suspend the SASMIP is part of
a plan to re-establish the availability of currency from the central
bank and restore confidence in the economy. Some officials had said
that uncertainty over the SASMIP plan led to downward pressure on the
national currency and upward pressure on inflation. One of the
purposes of the agency was to curb fraud by private buyers, perhaps
with the long-term goal of replacing them. Many traders believed the
government would not have the capital to replace the private
contingency altogether. Diamonds are Congo's main source of incoming
currency. The country exported nearly three million carats in
September ($36 million) against 2.2 million in August ($41 million).
Private buyers typically account for nearly 80 percent of these goods.
.... The Canadian Department of Indian Affairs and Northern
Development (DIAND) has appointed Diamonds International Canada
(DICAN) Ltd., as the first government diamond valuator. Based in
Yellowknife, near the recently opened Ekati diamond mine, DICAN is 51
percent owned by Aboriginal Diamonds Group Ltd., and 49 percent owned
by London-based WWW International Diamond Consultants Ltd. DICAN will
be responsible for valuing the rough diamonds for government royalty
purposes. Each diamond producing country has similar government
valuators who value goods prior to their sale or export.
.... Sirius Diamonds has agreed to buy and cut diamonds from BHP's
Ekati mine located in the Lac de Gras area of the Northwest
Territories. Sirius will manufacture more than 10,000 carats a year at
its factory in Yellowknife, making it the largest diamond producer in
North America. The company will specialize in stones above one-quarter
carat and of excellent make. The company has a laser equipped
production floor with a highly automated line that will produce
diamonds cut to Canadian Ideal, Hearts and Arrows and American Gem
Society (AGS) excellent. All diamonds cut at the Yellowknife facility
will be laser engraved with a northern logo discerning place of
origin. All stones will be accompanied by a certificate defining
proportions.
....Emaar Properties, a company partly owned by the government of the
United Arab Emirates (UAE), will build a gold and diamond processing
park in Dubai, according to a report from Reuters Newswire. The park,
which will be located on the outskirts of UAE's commercial center,
will cost an estimated $27 million. Construction of the infrastructure
and manufacturing units is expected to begin in January 1999 and take
about one year. According to Mohamed Alabbar, chairman of Emaar, the
park is a response to the increasing world demand for manufactured
gold and diamonds. The planned park is unique in that all facilities
will be under one roof. In addition, Alabbar continued, the low cost
of skilled labor in Dubai, simple import and export regulations and
strategic geographical location close to the world's main shipping
routes will attract manufacturers from around the world.
.... Australia's Broken Hill Proprietary Co. (BHP), is close to naming
a new chief executive. According to The Wall Street Journal, the
frontrunner is Paul M. Anderson, an American. Anderson is currently
president and chief operating officer of Duke Energy Corp. BHP, which
has worldwide assets of nearly $23 billion, has been without a CEO
since the resignation of John Prescott in April. The appointment of
Anderson would continue a trend in Australia of hiring Americans to
run its largest companies.
.... Sri Lanka's Blue Diamonds Jewellery Worldwide Ltd., a subsidiary
of the giant Ceylinco Group of Companies, has requested that the
Colombo Stock Exchange suspend its shares from trading due to a growth
stunt brought on by the financial crisis in Asia. In a statement to
the stock exchange, the company said that the international financial
crisis "has seriously affected the company's financial position." The
company's primary markets have been in Malaysia and Indonesia.
.... Class ring specialist Jostens Inc., reported a net loss of $7.2
million during the third quarter, compared to a loss of $6.2 million
in the same period last year. Sales for the quarter increased 16.4
percent to $127 million, and a strong manufacturing performance
contributed to a slight improvement in gross margin. Robert C.
Buhrmaster, chairman, president and CEO of the company, said the
results were a little better than expected given the company's
investments into its infrastructure. Through the first nine months of
1998, Jostens reported net income of $41 million on a 6.7 percent
sales increase to $594.2 million. The company anticipates a five
percent increase in overall sales for 1998.
.... C3, Inc., the developer of lab-created moissanite gemstones,
reported a 600 percent increase in sales volume for the third quarter,
ended September 30, 1998. The company, which shipped more than 6,500
carats of moissanite gemstones during the quarter, expects the number
to increase to 10,000 during the fourth quarter. C3 reported revenues
of approximately $1.3 million for the quarter ($1.2 million in
gemstones and $100,000 in test instruments). The company reported a
net loss for the quarter of approximately $1.6 million due to the
continuing development of equipment and marketing. The average
selling price for moissanite during the quarter was $178 per carat.
Regards |
