UpFront

RUSSIA-DE BEERS CONTRACT CEDES CONTROL TO KREMLIN

De Beers and Russia were expected to sign their long-awaited rough diamond marketing agreement Oct. 21. Russian sources say the deal will cede them greater control over diamond prices and supplies.

De Beers executives declined comment on the details of the pact at JCK press-time. But Russia’s top diamond official, Vyacheslav Shtyrov, says the new agreement gives Russia a hand in regulating sales in world diamond markets.

Shtyrov, president of Almazy Rossii-Sakha (ARS), the semi-government diamond mining and marketing agency, adds that the pact goes far beyond rough sales, allowing Russia to influence diamond pricing policy in consultation with De Beers and through outside sales .

The new agreement allows Russia to triple its volume of outside diamond sales and to create its own sales network, Shtyrov says. Trade relations with De Beers will be retained but “within limited amounts,” he adds. “We will sell only a certain quantity of diamonds [to De Beers], while we will sell the rest to foreign and domestic diamond manufacturers.”

Shtyrov says De Beers takes a negative stance on producing countries which try to start their own diamond manufacturing operations because it fears losing control of the market. Yet he says, “Restrictions on our country have been fully removed. We will first ensure a workload for the Russian cutting industry, and we will sell only the remains to De Beers. Moreover, De Beers will have to buy low-quality diamonds from us, for which market demand is limited.”

The Oct. 21 agreement, which will expire Dec. 31, 1998, covers diamonds ranging in size from 0.02-ct. to 10.8-ct. The draft agreement says ARS will supply De Beers annually with at least $550 million worth of diamonds from current production – but not more than 26% of De Beers’ Central Selling Organisation’s annual sales volume or around $1 billion. ARS last year produced $1.38 billion worth of diamonds. The two sides also will create a supervisory committee for joint regulation of the market, assortment and prices of rough diamonds. The agreement has been the subject of months of negotiations between ARS and De Beers.

An agreement between the firms – the world’s two largest diamond producers by value – is intended to replace a previous one which expired at the end of 1995. A new deal had been held up by Russian government efforts to retain a greater share of diamonds for sale outside the De Beers cartel.

ARS spokesman Georgy Minayev says the company had to defend its partnership with De Beers against some government officials. They wanted Russia to sidestep De Beers completely and work directly with the international diamond market.

In an earlier development, a De Beers delegation led by Gary Ralfe had met with Russian government officials in late September to discuss President Boris Yeltsin’s decree governing the future of the country’s diamond industry.

In that document, Yeltsin agreed to accept a Russian government proposal for further cooperation with De Beers, but apparently wanted some input into De Beers’ decisions. He said Russia would work with De Beers’ Central Selling Organisation on the following conditions:

  • The volume and range of rough diamonds sold on the world market is regulated jointly.

  • A common strategy for maintaining prices for cut diamonds and diamond jewelry is worked out.

  • Mutually acceptable pricing principles are agreed to, and joint control established over, the fixing of prices for natural rough diamonds.

Yeltsin’s decree gave ARS the right to sell natural rough diamonds produced in Russia to De Beers.

The decree also banned export of partly cut natural diamonds. Partly cut diamonds produced in joint venture polishing shops had been a major source of the leakage of rough which caused De Beers to break off formal ties with Russia in January.

ARGYLE PINKS SET NEW RECORD

The 55 diamonds in Argyle’s annual pink diamond tender sale broke the previous record of $4.5 million, says David Fardon, polished sales manager.

Fardon declines to reveal exact prices or the top bidders because of confidentiality agreements, but says the sale did draw a record number of prospective buyers in each of the five locales where the collection was shown. (The five were Sydney, Tokyo, Hong Kong, London and Geneva.)

The key diamond was a 1.78-ct. oval purplish red, which was the largest stone of that color ever graded by the Gemological Institute of America, according to Fardon. He notes the winning bid on that stone “made a significant contribution to the overall result of the sale.”

Four diamonds in the original parcel of 59, which totalled 58.64 cts., failed to sell. The remainder achieved an average of more than $100,000 per carat.

JSA NEARS FINANCIAL GOAL

The Jewelers’ Security Alliance reports it should reach the $600,000 goal of its three-year Capital Campaign by the time of its annual luncheon in

New York on Jan. 10, 1998. Campaign funds will be used to provide advanced technology, including communications systems and databases, for the JSA.

Major contributions include a $45,000 donation by Jewelers Mutual Insurance Company and gifts from David Cornstein of Finlay Fine Jewelry, George Flagg of Holmes Protection Inc. and Robert Lucente of Jewelers Insurance Services.

JSA, 6 E. 45th St., New York, NY 10017; (800) 537-0067 or (212) 687-0328; JSA@polygon.net.

KELSEY LAKE MOVES FORWARD

The Kelsey Lake Diamond Mine near Fort Collins, Colo., recently produced one of the largest diamonds ever found in the U.S. at 28.2 carats. Now

Colorado Diamonds, its marketing subsidiary, is showing off the resulting 16.86-ct. cushion-cut stone before it’s auctioned.

Some other developments.

  • Redaurum, parent company of the Kelsey Lake mine, announced it has settled a lawsuit filed by Union Pacific Resources, which had claimed a portion of the land being mined. Neither Redaurum nor Union Pacific disclosed details of the settlement. But Redaurum says that it will now be able to “continue to implement its plan of development and expansion which had been hindered by the litigation.” Redaurum also says the settlement will “have no current or ongoing financial impact on Redaurum or its subsidiary, Diamond Co. N.L., of Fort Collins.”

  • Expansion will include development of the Maxwell kimberlite, located about 2 km from the Kelsey Lake facility, according to Howard Coopersmith, president of Diamond Co., which discovered the mine. “The Maxwell pipe was discovered in 1979, but it was not quite economic as a stand-alone operation,” he explains. “As part of this mine, however, it is quite economic and will add years to the life of the mine.” Maxwell is a small kimberlite, but its output is high-quality: 60% to 70% gem with nearly 30% of the diamonds being larger than a carat. Boosting output would greatly reduce costs at the highly automated mine. “Right now, we are moving 12 tons of ore per man hour,” says Coopersmith, “and are working toward our goal of producing 25,000 carats yearly.” The operation weathered its first winter in good order, he says. “It gets down to 80° below in the winter, which makes operating machinery and excavation very very difficult. But everything worked well.”

  • The company has commissioned a line of finished jewelry containing diamonds from the Kelsey Lake mine. The jewelry will be available at the following Colorado retailers: Master Goldsmiths, Boulder; Megel & Graff, Colorado Springs; Jewelry Emporium, Fort Collins; Jack Armstrong Jewelers, Pueblo; and Weiss Jewelers, Greeley.

Most of the diamonds are polished by Schumacher Diamond in Bismark, N.D., and will come with certificates of origin.

MAYOR’S OPENS GALLERY-STYLE STORE

Mayor’s Jewelers, the upscale jewelry and giftware chain, has introduced an all-in-one specialty department store for luxury consumers at Town Center in Boca Raton, Fla., and plans to expand the concept.

The 6,000-square-foot prototype combines a European designer gallery and boutiques for international giftware, watches, bridal and estate jewelry. Among the merchandise will be crystal glass, china and silver from top European and American giftware houses, limited-edition collector timepieces, celebrity-owned jewelry and wide selections of top designer and name-brand jewelry and watches.

Mayor’s hopes to appeal to consumers who have a hard time shopping for specialized products “in a business where merchandise is a high-ticket investment with a longer-than-average shelf life,” according to a prepared statement.

The company plans to replace many of its 24 Florida and Atlanta-area stores with the prototype design in the next two years.

RELIABLE STORES SELLS JEWELRY DIVISION

Reliable Stores Corp., the holding company for several Mid-Atlantic jewelry chains, has liquidated its inventories and is planning to sell its 33 retail locations.

The company, based in Columbia, Md., and its subsidiary Barlow & Easton discontinued all jewelry retail operations in August and sold their inventories to Gordon Brothers Partners, a jewelry store liquidation company in Boston. Affected stores in Maryland and Virginia include S & N Katz, Castleberg’s, Morton’s Jewelers, Barclay, Henebry’s and Barnett’s, a jewelry superstore.

“We also run a furniture division, which is 80% of our business,” says Chief Executive Officer Richard Barnett. “Business is tough now, and it’s going to get tougher as we move into the year 2000. We decided management should focus on one retail business.”

Barnett says the locations will be sold in clusters according to geography.

Reliable Stores specialized in medium-priced jewelry merchandise, with 60% of its sales in diamond jewelry.

POLYGON LAUNCHES NETWORKS OVERSEAS

Polygon Network Inc., the Dillon, Colo., company that has linked many sectors of the U.S. jewelry industry, has taken steps to introduce overseas jewelers to the opportunities of the Internet.

The company launched a new trading network in early July through Polygon/South Africa, based in Pretoria. The network (sa.polygon.net) is modeled after the Polygon Trading Network for the U.S and includes information about retail jewelers, manufacturers, wholesalers, diamond cutting, mining, importers and exporters, education and trade fairs. Sites for the South African Diamond Bourse and the South African Diamond Board are also linked to the home page.

Polygon also plans to formally launch a Polygon/Australia trading network on Jan. 1. In the meantime, the Jewellers Association of Australia introduced its new site (jaa.polygon.net) on Aug. 31. All JAA retail jewelers will have Web sites designed and operated by Polygon.

Polygon users in the U.S. can access the new International Pavilion at www.polygon.net. Members of any of Polygon’s international networks will receive “guest access” to each other’s trading networks.

Polygon Network Inc., FirstBank Center, P.O. Box 4806, Dillon, CO 80435; (800) 221-4435 or (970) 468-1245; fax (970) 468-1247.

FASHION COMMUNITY PLANS FUND-RAISER

UJA-Federation, a philanthropic organization for the New York City Jewish community, will hold its annual Fashion Rescue charity event Nov. 23-30 at the New York Coliseum.

More than 800 companies in the fashion, home furnishings and fine jewelry industries will donate merchandise, which will be sold for up to 75% off the regular retail price. UJA-Federation hopes to raise $2 million, to fund 130 non-sectarian social service agencies in New York, Israel and around the world.

Contact Debbie Prince with UJA Federation Fashion Rescue at (212) 836-1692, fax (212) 836-1331.

WILFRID SCHEIN DIES

Wilfrid Anton Schein, president of Schwarzschild Jewelers in Richmond, Va., died on Oct. 8 following a brief illness. He was 51.

Schein became president of the four-store retail jewelry business in September 1994. Born and raised in Alexandria, Egypt, as the son of a civilian in the British Army, Schein had a passion for chemistry and biology as a teenager. However, a temporary job at Henry Birks & Sons Jewelers in Montreal, Canada, introduced him to the jewelry business.

During his 30-year career, Schein managed two chains owned by Henry Birks & Sons and expanded the number of locations from 16 to 65 across Canada. In 1990 he became president of Henry Birks Jewelers Inc. in Minneapolis, Minn.

Schein was a member of the American Gem Society and the Retail Jewelers Research Group, and was also heavily involved in the Richmond community.

He is survived by his wife Hasmig, son Alexandre and daughter Christine Ann.

“Wilfrid was always the one I could turn to for financial advice,” says Nick Greve of Carl Greve Jewelers in Portland, Ore., a fellow AGS member. “He was a great businessman who always gave great answers, even if it wasn’t what you wanted to hear. I was proud to call him my friend.”

JEWELERS TO WATCH FOR FUITIVES

The Federal Bureau of Investigation has warned retail jewelers to be on the lookout for two fugitives accused of armed robberies in jewelry stores across the country.

Karen Moore, alias Cay Cee Evans, and Mike Carroll, alias John Fitzgerald Bracken, are members of a Los Angeles-based gang that specializes in armed, “take-over” style robberies. Moore and Carroll are suspected in eight robberies in the past 16 months in Columbia, S.C., Naples, Jacksonville and Daytona Beach, Fla., Beaumont, Tex., Mountain Brook, Ala., Montgomery, Ohio, and Springfield, Mo.

Moore has been spotted casing the targeted stores the day before or on the day of the robbery. She often asks to see a large diamond to place in a ring or cross pendant, then flashes a large amount of cash while purchasing an inexpensive item and saying she will return the next day.

The robbery is carried out by two to four armed black males, of whom Carroll has been identified as one. All wear face coverings and surgical gloves. The robbers concentrate on loose diamonds and expensive watches.

An arrest warrant has been issued for both suspects. Jewelers who spot the suspects or who have information should contact local police, the nearest FBI office or the Jewelers’ Security Alliance at (800) 537-0067 or (212) 687-0328.

JA AFFILIATES SHARE IDEAS AT WORKSHOPS

More than 100 presidents, executive directors and leaders from Jewelers of America’s 42 affiliate organizations met at the JA Annual Association Workshop in late summer to share ideas and enhance member communication.

Theme of the four-day gathering in Los Angeles, Cal.,was “We Are One.” Meetings and workshops covered topics such as JA’s Venture Fund, Internet technology and effective publication design.

JA Executive Director Matthew Runci also discussed national goals, including mobilizing affiliate membership, education and certification, marketing assistance and promoting emerging technology.

ZALE OPENS CREDIT CARD BANK

Zale Corporation of Dallas, Tex., has opened Jewelers National Bank, a nationally-chartered credit card bank. The bank will offer revolving credit accounts to jewelry customers at Zales Jewelers, Gordon’s Jewelers and Bailey Banks & Biddle Jewelers. The bank will be headquartered in Tempe, Ariz.

Zale Corp. was one of the first retail jewelers to offer credit to its customers. Approximately 2.4 million people in the U.S. now carry one of Zale’s private label credit cards. Purchases with these cards make up about 50% of Zale’s total sales.

U.S. MINT SELLS FIRST PLATINUM COINS

Sales of the Platinum American Eagle bullion coin, the first platinum coin ever issued by the U.S. Mint, reached better-than-expected highs following the coin’s public launch on Sept. 23.

At press time, the U.S. Mint had sold about 30,000 ounces of platinum coins to authorized wholesalers. Wholesalers began buying the coins on Sept. 15 to prepare for the coins’ introduction to consumers the following week.

The platinum portfolio includes a 1-ounce $100 coin, a 1/2-ounce $50 coin, a 1/4-ounce $25 coin and a 1/10-ounce $10 coin. The coins are stamped with the Statue of Liberty on the front and a bald eagle on the back. Each coin is made in .9995 platinum and sold to investors at the platinum bullion rate.

The coin is being marketed as an investment option to add to Individual Retirement Accounts and the new Roth IRAs available in 1998. Financial experts suggest, however, that consumers will get a better return by owning the coins outside of IRAs.

The eight authorized distributors of the coins include MTB Banking Corp., Republic National Bank of New York, S.C.B./Mocatta Bullion, Prudential Securities and Smith-Barney, all located in New York City; A-Mark Precious Metals Inc. in Los Angeles, Cal.; Union Bank of Switzerland and Tanaka in Japan.

ISRAELI-JORDANIAN DIAMOND FIRM FORMS

Despite the current crisis in the Arab-Israeli peace process, progress at least is being made in the diamond business. A joint Israeli-Jordanian company has been launched in Jordan to market diamonds manufactured in Israel to Arab and other Moslem countries.

In mid-September, the owners of the new company circulated a letter among the heads of the Israeli diamond sector, notifying them of the company’s creation and its intention to act as a bridge between Israel and the Arab and Moslem worlds. The Israeli partner, Tal Semel, says the new company intends to bring in an additional partner, with an 18% share, to raise capital to purchase more stock.

In the meantime it has made a modest start. Its first shipment of goods to Jordan was recorded during the summer, and included goods valued at about $8,000.