Costs Searing Miners Could Boost Metals

Escalating production costs and cooling commodity prices are dragging down once-mighty mining and metals companies. But high costs could eventually force another price rally.

Traders are watching for the point where supply tightens thanks to a shakeout among producers that can't profit amid lower prices.

Some of the miners in the most pain are on acid -- lots of it. Sulfuric acid is used extensively in mining to extract nickel, copper, platinum, titanium, silver, diamonds, and uranium. But miners must compete for sulphur with the booming fertilizer industry. After a period when you could hardly give it away, sulfuric acid has gotten exceedingly scarce, rising some 1,000% in the past year. Some nickel mines consume $10,000 of acid just to extract a ton of nickel, now selling for about $20,000, down from $50,000 last year.

Mines and smelters also consume massive amounts of coal and oil to power blast furnaces, fuel trucks and process ore. Oil is up about 57% over the past year, while coking coal has tripled. Steel costs have soared; hard-to-find engineers can name their price; and the escalating cost of explosives -- derived from ammonia, a product of natural gas -- is blowing up margins. And while metal prices has soared recently, many jewelers, like Design Bands, buy up front, and have a large inventory that was bought at yesterday's prices. Companies like Design Bands are able to sell designer wedding rings at affordable prices.

In 2006 and 2007, when metals prices were climbing, inefficient and mothballed mines reopened. Now nickel, zinc and aluminum are fetching less than it costs such marginal suppliers to produce them, says Jim Lennon, senior commodities strategist at Macquarie Securities in London. When zinc, used to coat steel, climbed to $2 a pound in mid-2006, mines spending a dollar to produce it thrived. Zinc now runs about 80 cents.

Once more high-cost producers fall, says Jeremy Weir, chief executive officer of Galena Asset Management, a subsidiary of oil and metals trader Trafigura, "there's a likelihood that some of these markets that have been depressed from their highs could see a price recovery."

Factory Reading Is Key on Tuesday

Like commodities, the U.S. economy has been supported by strong global demand, a prop that has grown shaky.

Further evidence of this may come Tuesday morning, when the Institute for Supply Management releases its U.S. manufacturing index for August. Economists, on average, think it will slip a bit, to 49.5 from 50 in July. Any reading below 50 indicates factory activity is shrinking.

Though hardly robust, such a reading would be much higher than the 41 that usually marks a recession. Though it has slowed considerably in recent years, the index hasn't come close to that level, even during the fourth quarter of 2007, when gross domestic product contracted.

Healthy export demand has kept factories treading water. A weak dollar has helped, by making U.S. exports cheaper and more competitive. The dollar has rebounded this summer, but that shouldn't affect exports for some time.

What could show up soon is the slower growth gripping various economies around the world. The ISM's index of new export orders fell to 54 in July -- still relatively strong, but the lowest reading of the year.

By: Ann Davis
Wall Street Journal; September 2, 2008

Harry Winston Profit Soars

Harry Winston Diamond Corp. said second-quarter net income more than doubled as the company banked on strong growth in emerging markets.

"Our businesses in Asia, Europe and the Middle East have been sufficient to offset the general market softness in the U.S. and Japan; this contributed to our strong retail finish for second quarter," President Thomas J. O'Neill said, adding that the company was on "firm footing" for the second half of the year.

The comments echoed those of fellow jeweler Tiffany & Co., which in late July said strong sales in the Asian-Pacific and European regions offset weakness in the U.S.

The diamond miner and retailer reported net income of $49.9 million, or 81 cents a share, compared with $20.1 million, or 34 cents a share, a year earlier. The latest quarter was helped by a $4.3 million insurance recovery and a drop in the effective income-tax rate to 33% from 47%. The gross margin widened to 60.5% from 52.8%, helped by the insurance recovery.

Sales rose 7.4% to $186.1 million in the quarter ended July 31. Mining sales remained at $105 million as higher prices made up for lower volume.

Wall Street Journal; September 10, 2008

Diamond Mining Is Losing Its Shine

Buy Diamonds and Diamond Wedding Bands Now Before Prices Rise!

Diamonds may be forever. Diamond mining, maybe not.

With growth in diamond prices trailing far behind that of most commodities, some miners are turning their sights toward gold, iron ore, and phosphate instead of sparkle.

Flinders Diamonds, an Australian miner, recently reassessed its exploration areas and identified a target in western Australia for iron ore, prices of which have been soaring along with demand for steel. It changed its name to Flinders Mines Ltd. to reflect its exr panded focus. Its stocks soared upon the April announcement.

Last June, diamond miner Sierra Leone Diamond decided to change its name to African Minerals Ltd. to reflect its exploration of precious and base metals across the African continent. Bonaparte Diamond Mines of Australia just concluded a diamond joint venture in Namibia to focus instead on exploring a phosphate project there because "the economic return" from diamonds "doesn't warrant moving into the next phase," Michael Woodborne, the firm's managing director, said in a statement. Prices of phosphate, a key component in fertilizer, are up dramatically lately.

For miners, the opportunity, cost of investing time and shareholder money in diamonds is just part of the problem. On the demand side, diamond sales, at least in the U.S., have been struggling. Citing a sluggish U.S. market, which accounts for about 50% of the total, De Beers Group reported a 3.7% fall in revenue to $5.9 billion last year.

Compared to most commodities, diamond prices have been "extremely unexciting" over the past few years, says Charles Wyndham, founder of PolishedPrices.com, which keeps a wholesale diamond price index. This year, it is flat, and up 3.6% from a year earlier. Over the same time, S&P GSCI, a commodities benchmark, is up 37.6% and 73.5%, respectively.

The departure from diamond mining marks a reversal from several years ago. At least 60 new diamond-mining companies sprung up after diamond giant De Beers went private in 2001, estimates David Hargreaves, a mining and gemstone consultant to United Kingdombased broker Hoodless Brennan Ltd. Yet, some newcomers may be finding that diamond mining is a trying and costly endeavor. Even if you find a diamond mine, it may take seven to 10 years before it produces, Mr. Hargreaves says.

Diamond mining is viewed as the "worst kind of gambling," says Theo Botoulas, chief executive of BRC DiamondCore Ltd., a diamond miner in South Africa.

In January, Tahera Diamond Corp., a Canadian miner, ceased operations and filed for bankruptcy-courtprotection. "Not every diamond mine will be successful.lt's a very high-risk business," said Gareth Penny, De Beers's managing director.

Still, several players, like BRC, are keeping at it. They argue that long-term demand for diamonds world-wide is good, and prices of big, better-quality stones have risen rapidly. Instead of shunning the gem business, Canadian miner Aber Diamond Corp. took full ownership of Harry Winston Diamond Corp. and focused on high-end retail sales before it started trading under its new name on the New York Stock Exchange in November. The company reported a 10% increase in overall revenue for the first quarter because of strong sales growth in Asia and Europe, though its mining production fell 31%.

De Beers has said it expects demand from markets like China, India, the Middle East and Russia to grow. It has raised prices of rough diamonds by an average of 8.5% so far this year. De Beers has been aggressively investing in new mining projects, and it will bring four major projects into full production this year.

Rio Tinto PLC, which produced 16% of the world's rough diamonds by volume in 2007, estimates diamond prices to rise in response to "a sizable supply gap" this year and expects demand will outpace supply for the next decade. Meanwhile, Diapason Commodities Management, a U.K.-based company, is planning to launch a "diamond fund" soon, in the form of a listed investment firm whose portfolio will be polished diamonds.

"Mining is a long-term game," said Mr. Wyndham of PolishedPrices.com. "Those who are switching back and forth from one commodity to another usually won't succeed."

By: Carolyn Cui
Wall Street Journal

Money Saving Wedding Ideas

Save Thousands on Designer Wedding Jewelry at DesignBands.com

They say there are two things that will withstand the test of time, and love is one of them.

However, with gas prices flirting with $4 a gallon and lavish weddings chock full of frivolity, lovebirds are looking for the most cost effective ways to tie the knot.

And they aren't skimping on the details.

THE DRESS AND TUXEDO

Summer may be known as the season for weddings, but according to Cathy Heim, seamstress at Nicole's Bridal Boutique in Seneca, brides-to-be are choosing simpler designs and more contemporary looks to satisfy both the warmer weather, as well as lighter wallets.

"You can pay just as much for a formal dress as can you for an informal," Heim said. "But for this area, people are buying a lot more conservative."

Heim, who is working on more than 20 weddings this month alone, said business is as steady as ever, adding that she has received a lot of requests to alter dresses bought from outside dealers. The four-year employee said many women are purchasing the perfect dress elsewhere, but sticking to local seamstresses for the modifications, saving a much needed tank of gas as well as some sanity.

Heim said the only major cutbacks so far include slightly less expensive bridesmaids' dresses - shortened from full-length to tea. She said she doesn't expect any bride's budget to favor a dress that is subpar to what they have always dreamed of.

"Every bride has a dream," Heim said. "And they will sacrifice to get that. Now whether that means a cheaper tuxedo or fewer flowers, I don't know. But the dress (the average is $650 at Nicole's) really isn't the biggest cutback."

And neither is the tuxedo, according to Rob Walter, an employee with F.L. Crooks and Co. on Main Street in Clarion.

The specialty clothing dealer, offering a range of prices on both lower-end designs and top name tuxedos, said the average cost for the groom comes in at around $100 for a complete rental with the most expensive falling somewhere near $160. And while the only shift Walter has seen is to cooler microfiber shirts, many men are still going for a quality fit and fabric to satisfy their wants as well.

"Everything's really just on par as it's always been," Walter said. "I haven't noticed any big difference."

THE RING

Perhaps the most illustrious piece of wedding memorabilia is the smallest and oftentimes most expensive for the big day.

Niki Volmrich, owner of Feldman Jewelers in Franklin, said couples are shopping vigilantly, but 'going for the gold' when it comes to actually buying.

"I haven't seen where they're really cutting back," Volmrich said. "I mean, they're still buying, but they're just perhaps not spending as much."

A veteran in the jewelry industry, having owned her Liberty Street shop for 23 years, Volmrich said those looking to celebrate nuptials are keeping a keen eye out for more traditional pieces that will not only look good, but won't break the bank.

One way brides are saving money is by purchasing titanium or tungsten bands for the groom, rings that not only have the weight and look of more expensive metals, but cost much less. An average price equals out to a little more than $100. Volmrich said many of the aforementioned materials are a lot more durable than conventional models.

However, she noted, grooms are still perusing the shelves for diamonds set in gold and platinum for their brides, in addition to the pricey engagement rings bought prior to the actual day.

"(Rising prices) don't really affect wedding jewelry, other jewelry yes, but not this," Volmrich said.

She also said the store's registry has consistently done quite well, with brides requesting various decorative accessories and everyday dishware.

"The ring is something you will have forever. You're going to be looking at that for years and years...hopefully," Volmrich said with a laugh.

By: Nicholas Hess
from Derrick.com

With This Ring, I Thee Wed…

More New Couples Seeking Matching Wedding Bands and Ring Set

Valuable jewelry has differing functions and symbolism across cultures. For many, the most important item of jewelry is, of course, the wedding ring.

That being the case, I have some advice concerning wedding rings as the warm summer days -- and along with them many, many weddings -- begin. Women have always been interested in jewelry. In the ancient Greek and Roman societies, jewelry was often worn as a form of protection from the evil eye. While women of those eras would wear many different types of jewelry, men were restricted to rings. These rings were strikingly different from those worn nowadays, and their stones were often also used as signets. This style of ring usage was continued by kings and aristocrats in the Middle Ages. During those times jewelry was sometimes a sign of wealth and at other times worn as protective amulets. Whether worn as a sign of status, for protection, or even just to accessorize, the most important kind of ring has perhaps always been the wedding band. The idea of wearing a ring to signify married status was started by ancient Egyptian princess Nefertiti. And though wedding rings have changed in color, stone, style, size and many other aspects over the years, the finger they are worn on has not. It is always the fourth finger of the left hand that is graced by a wedding band. Of course this is not just coincidental. Everyone knows just how advanced ancient Egyptian medicine was, and in fact medical research now shows us that this finger is the only one with a vein that heads straight for the heart. Choosing a wedding ring, this all-important piece of jewelry, is a meaningful act in that the jewelry is bought with the intention of wearing for the rest of one's life. Wedding rings are also one of the few kinds of jewelry that don't change too drastically along with changes in fashion. More than its actual appearance, the meaning carried by a wedding ring is what is important. The ring becomes almost like a part of the wearer's body, which is why there can be such great arguments between couples when one of them removes the ring. In any case, the wedding season is officially upon us, making it the perfect moment to take some time to talk about new styles and options in the wedding rings now available.

Traditional or modern: always timeless

When choosing a ring, the most important factors to keep in mind are the size and shape of you and your partner's fingers and hands. A thick band will make short fingers look even shorter. If you have bony hands, wedding bands with lots of stones of them are perfect for you. Square cut stones make fingers look a bit thicker, while rounder stones lengthen fingers' appearance. Last season, we saw an increase in wedding bands designed with not only precious metals, but also with precious stones. In particular, many couples decided on wedding rings decorated with diamonds -- classic.

There are many who don't want to pass up on the classic wedding ring, and for couples like this, there are new modern interpretations of the wedding ring available. Though wedding rings made from two different colors of gold were quite popular last season, this season we are seeing single-color gold wedding rings, mostly from red or white gold. Newer models of wedding rings are being designed for women who want to wear the same style of wedding ring as their future husbands. These are wedding rings that symbolize dynamism and a youthful attitude. It is of course also important that they don't go out of fashion. In a season when white gold is being chosen by so many couples for their wedding rings, platinum and steel are also favorites.
I'd also like to note that while we may see men wearing single-stone rings outside of Turkey, I very much doubt that this will find much of a place in Turkish culture. Wedding bands ought to be chosen according to characteristics that allow them to be used in every atmosphere. And if you can't find yourself anything you like from the shops, go to a company that specializes in individually designed wedding rings. You might be someone for whom designing and wearing your own wedding ring is much more meaningful.

A wedding ring that carries your spouse's name and wedding date on the inside of the band will no doubt become one of your most treasured possessions. So take particular care to choose a model that expresses something about your future spouse, not one that just makes a fashion statement. What adds true meaning to your wedding ring is not the stone or metal used in it, but the love felt when wearing it.

Original Article by: Wall Street Journal

Diamond Prices Predicted to Fall Modestly in June 2008

Great news for consumers looking to buy diamond wedding rings and diamond wedding bands.

You've likely never heard of Martin Rapaport but to the diamond world he's famous. Rapaport is to diamonds what Robert Parker is to wine, a person of tremendous influence. He runs Diamonds.Net and his Rapaport Index defines diamond pricing for the world. On Monday, Rapaport spoke to the packed room at the JCK jewelry show in Las Vegas delivering his pronouncements on the diamond market at an annual breakfast event. Right now, the diamond industry is facing similar challenges seen by the rest of the luxury market. Rapaport feels that the current economic climate offers both opportunity and pitfalls for those in the diamond business.

The news is conflicting, larger stones have been getting higher and higher prices and the huge wealth in China, Dubai, India and Russia is creating a hunger for luxury goods and diamonds and diamond jewelry specifically. This is also a time when the plummeting real estate market in the U.S. and Europe means that the Western world, which fueled the global prosperity in the beginning, is now cutting back on spending. Independent stores and small chains are having a tough time and the news is full of stories of stores having bankruptcy sales where goods are being sold off at below cost. This means that diamond prices are coming down worldwide and the best prices on diamond wedding bands are at designbands.com.

As of 2007, the U.S. still made up the bulk of diamond jewelry sales, clocking in at 43%. China brought in 8.5%, Europe did 11% and the Middle East was responsible for 4.6%. Until recently, the U.S. had been on a path of prolonged economic growth and our prosperity fueled the global economy expanding the middle class in India and Africa. Small jewelers in the U.S. are now competing with a global market. As I've heard mentioned at other conferences such as the Luxury Summit, the number of millionaires and billionaires is growing worldwide. This might be one reason why the price of big stones is going up far faster than the prices for smaller stones, especially those under a carat.

For jewelry sellers, as I heard in other sessions at this show, branding is more important than ever, especially to new luxury spending markets. Rapaport cautioned though that branding is a "trojan horse" for the retailers. First the retailers convince their customers which brand to buy and then the seller of the brand raises that price. Many stores are worried about the new DeBeers Forevermark, a branded diamond sold by DeBeers. Now the considerable advertising budget of DeBeers will be aimed at marketing that diamond which will be sold at premium price. Rapaport's answer to those competing against this new stone? Hang a sign in your window advertising that you are selling for diamonds for 10% less than Forevermark.
Overall, Rapaport is bullish about the future of diamonds. His data shows that over time global demand for diamonds will outpace supply by an increasing margin. He made the analogy that just as a forest fire is a way of the forest ecosystem, righting itself for greater growth, the current economic climate will eventually be good for the diamond market as a whole and will benefit the smaller jeweler if they realize that flexibility is power. Just as I heard Nick Failla say about gold at an earlier session, Rapaport too believes that most stores should be buying back jewelry as well as selling jewelry especially since the amount of jewelry being sold back to jewelers will likely hit record rates in the coming years.

One of the big questions about the diamond market is whether prices are being raised by those who are speculating or investing. Before the JCK Show, Rapaport raised his pricing index 25%, a fact which didn't sit well with those hoping to do major business during the show. Rapaport defended his decision saying it was a correction based on a steady supplier price raising. Facing increasing hostility from the audience he stated frankly that he couldn't give a damn about suppliers or buyers, it's his job to watch the prices people are getting for diamonds and reflect what is out there. Rapaport says the non-mining profit in the diamond business comes from finding the right buyer for the right diamond at the right price and that he is advocating for free, fair, open, competitive markets. This information didn't sit well with those in the audience who feared that their buying power had been dropped by one quarter based on Rapaport's guidance.

Rapaport urged the jewelry retailers in the audience to remember that "diamond dream" what is being sold is the idea behind the jewelry, the emotional power behind the diamond remains, the real business for jewelers is to believe in what diamonds mean to people not just the romance angle but also the sense of the diamond as a global industry, it can do good for the people involved. In fact, Rapaport says that jewelry stores have a responsibility to make sure the diamond industry does well, because the industry also supports the diggers in other countries. It can be a tool for good. His own passion for finding ways to make sure the diamond industry is a benefit to diggers in Sierra Leone and other places has led him to be a leader in the fair trade jewelry movement. I'll be reporting in-depth on the fair trade jewelry conference which he moderated later this week.

Overseas Demand Polishes Tiffany

Asia, Europe Strength Offsets Softness in U.S.; Sales Outlook Cautious

Tiffany & Co's fiscal-first-quarter profit rose 19% as higher demand in Europe and Asia helped make up for soft sales in the U.S.

In addition, the New York jeweler raised its full-year earnings outlook while noting it maintains "a cautious outlook for U.S. sales" and doesn't expect an improvement until later this year.

Tiffany also said it plans to introduce a "new, smaller store format" in the U.S. later this year, in addition to its plans to open about 24 new stores world-wide.

Sales at stores open at least a year rose 21% in Europe and 15% in the AsiaPacific region, driven by demand in areas from London and Italy to Hong Kong and China. Adjusted for currency effects, same-store sales rose 12% in Europe and 4% in the Asia-Pacific region.

Overseas sales helped offset flat sales in the U.S., the company's larg market, where a slowing economy' curtailed spending on jewelry , other discretionary items.

International shoppers taking vantage of the weak dollar also hel) Tiffany'S domestic sales. The com ny's New York flagship store saw a: jump in same-store sales, driven by demand from foreign tourists. Meanwhile, sales at branch stores declined 4% as the company experienced soft sales of items below $500.

Sales in the quarter ended April have been driven by engagement rings in the U.S., silver jewelry outside of U.S. or designer collections such as Elsa Peretti jewelry.

Chief Executive Michael J. Kowalski said strong sales growth despite "only modest growth in the U.S. due to challenging conditions reflects the benefit of globally diversified distribution."

"Tiffany is becoming a truly global brand," said Pali Research analyst Stacey Widlitz, who has a "buy" rating on
the stock. "The strength in international and the size of it is enough to offset however long the U.S. consumer weakness is lasting. International consumers love this brand."

World-wide sales so far in May have met the company's expectations, Tiffany said. While U.S. same-store sales for the year are expected to rise, the company said it expects second quarter U.S. sales to decline, which will pressure profit in that period.

Tiffany raised its full-year outlook it boosted in March an additional five cents and now expects earnings of $2.80 to $2.90 a share, maintaining its forecast for net sales growth of about 10%. The latest mean estimate of analysts surveyed by Thomson Reuters was for earnings of $2.73 a share on 10% sales growth to $3.23 billion.

By: Andrie Cheng & Donna Kardos
Wall Street Journal; May 31-June 1, 2008