Jewellers were holding on to the hope that Black Friday would mean record sales
By Leia Michele Toovey- Exclusive to Diamond Investing News
The day after Thanksgiving has long been known as “Black Friday“, a moniker that denotes the fact that it is on that day that retailers go from being in the red, to the black. Many stores open as early as 4 am, coaxing shoppers through their doors with ‘once a year’ sales. The Monday following thanksgiving weekend is another key shopping day. It is called Cyber Monday, the biggest online shopping day of the year.
Jewellery merchants were hoping that black Friday would come through, after a year of disappointing sales. Online retail monitor COM Score reported that jewelry was among the worst performers in the first five days of December, recording sales 22 per cent lower than in 2007. Across all categories, however, sales in the period from Cyber Monday (December 1) through December 5 rose 9 per cent to $3.74 billion compared with 2007. From the beginning of November to December 5, sales were basically flat at $14.92 billion. Although not as good as what retailers were looking for, the December numbers were welcome, after store sales in the U.S. fell 2.7 percent, a record drop, in November.
RBC Capital Markets delivered a somber message to the diamond market Thursday, saying pricing and demand are likely to soften before they improve. ”While lower production will start building a floor under prices, we see little prospect of any significant improvement until well into 2009 and expect more juniors to cut back or leave the sector,” RBC analyst Des Kilalea wrote. Kilalea noted that a deeper concern was the lack of liquidity in the sector and diamantaires’ inability to gain credit. Mr. Kilalea’s speak was given at a mining conference in London. Diamond companies presenting at the conference seconded Mr. Kilalea’s speech about the difficulties the market is experiencing. Diamond miners also brought to attention that current rough diamond prices are too low to cover their costs. To add to the gloom and doom, more diamond mining juniors announced this week that they are cutting back on output or suspending operations to cope with falling prices. De Beers and ALROSA started the trend in October by committing to cut production to match lower levels of demand in the market. Many others have since adjusted their production as a result of weaker rough prices and rising costs.
Company News
The mining conglomerate Anglo American will slash billions of pounds from its capital spending program for 2009 this week, as it becomes the latest industrial group to adjust its growth forecasts amid the deepening economic malaise. Anglo, the world’s fourth-biggest miner, is the leading producer of diamonds and has a significant presence in coal, copper and iron ore. Anglo will say in an as-of-yet-unscheduled statement that it has to delay work on a number of large mining projects around the world, a move that may affect thousands of jobs across its global operations. Anglo’s statement is expected to be made late this week or early next week.
Diamond mining junior KimCor has agreed to sell its existing diamond operations to Belmont Mining Limited for US $736,000 . Belmont will also assume the existing liabilities associated with KimCor’s operations. The company has five diamond-producing mining operations near Kimberley in South Africa and further exploration projects and industrial operations in the country and in Tanzania. “With zero demand at present for rough diamond production, KimCor has no access to cash flow required to sustain operations,” said Martyn Churchouse, company chief executive officer (CEO). He added that fundraising was “currently out of the question and even if possible, the company would be unable to provide potential investors with any indication of when the market for rough diamonds is likely to improve.” Under the agreement, KimCor retains an option to reacquire 30 percent of the sale shares for nominal consideration, should the company’s SMI4 tailings-pretreatment operation achieve a production target of 150,000 metric tons per month before June 1, 2009. he deal will transform KimCor from a trading entity to an investment company. It will then have 12 months to implement a new investment strategy or to complete a reverse takeover.
