On the Origins of Gems

New York Times, March 16, 2014

TUCSON — Every February, gem and mineral dealers from around the world flock to this city in the Arizona desert for a confluence of buying shows that function as the trade’s version of a debutante ball. And every year, intense speculation centers on which gem will be crowned the proverbial belle.

The critical factor in determining a favored new gemstone is not color, as many people might suspect. Rather, it is quantity. In other words, is the gem available in volumes substantial enough to support a commercial trade?

“It all depends on what’s coming out of the ground,” said Divyanshu Navlakha, co-owner of Sutra, a jeweler based in Houston that specializes in high-end colored stone designs.

By these standards, an enchanting variety of white opal from the Wollo Province of Ethiopia was Tucson’s undisputed winner.

“I saw, literally, tables full of it,” said Robert Weldon, manager of photography and visual communications for the Gemological Institute of America. “It’s the talk of the town.”

Discovered in 2008, the Wollo goods made their first major appearance in Tucson in 2010, when only a handful of dealers had access to the material. Over the past four years, however, more merchants — charmed by the gems’ lively appearance, their affordability and, of course, their abundance — have gotten in on the action. The subsequent rush has driven wholesale prices up by at least a factor of three.

“When it first came out, it was new, fun, exciting and cheap — and rarely do you get all those things in the same sentence,” said Jerry Romanella, co-owner of Commercial Mineral, a Phoenix-based gem dealer that has sold Ethiopian opals in large quantities since 2010.

“It used to be $35 to $125 per carat,” Mr. Romanella said. “Now, a very nice pretty Ethiopian opal is $100 to $300 a carat, so it’s catching up with the Australian.”

And therein lies the rub. Australia is the classic source of gem-quality opal. Legendary deposits such as Coober Pedy and Lightning Ridge have long supplied the market with gems ranging from low-cost white opal beloved by the jewelry television channels to fiery black opals worth as much as $300,000 at wholesale for a single spectacular stone.

Given how invested many Australian dealers are in opals, it did not come as a surprise in Tucson that some of them began grumbling about the competition from East Africa. They questioned the Ethiopian opals’ stability: opals are vulnerable to crazing, meaning they can lose water from their structures and crack. When it was determined that the Wollo goods were in fact hydrophane — Greek for “water-loving,” which describes dry opals that have a propensity to absorb moisture and become temporarily translucent or transparent — the Australians poo-poohed the material’s porosity.

“Of course they’re threatened,” said Simon Watt, co-owner of Mayer & Watt, a gem dealer in Maysville, Ky. “They’ve controlled the market for 50 years, and now there’s a huge deposit in another market, and they can’t control it.”

The opal skirmish lays bare some of the jewelry industry’s thorniest issues, including the elusive formula that determines pricing, demand, and, ultimately, value in a trade that still operates on the basis of ancient codes of conduct and equally ancient prejudices.

“Today we have a lot more sources producing material,” said Stuart Robertson, research director for Gemworld International, publisher of the GemGuide, a compendium of pricing and market information. “The industry is still trying to figure out how to sell that illusion of rarity for material that isn’t quite as rare.”

The trade confronted the issue in 1998, when a mother lode of sapphires — in a rainbow of hues, including blue, pink, yellow, and purple — was discovered near the village of Ilakaka in southwestern Madagascar. “There was a lot of it and it was starting to change the price structure and availability of certain colors of sapphires,” Mr. Robertson said.

As the Madagascar goods began to enter the market, they carried a stigma of being less desirable than sapphires from established sources such as Myanmar and Sri Lanka, said Richard W. Hughes, vice president of Lotus Gemology in Bangkok and the author of “Ruby & Sapphire: A Collector’s Guide.” He attributed that bias to their lack of historical significance.

“Madagascar is the up-and-coming artist, so people don’t recognize it as much, even though some of the stones are truly world class,” he said.

The point underscores one of the fundamental tenets of the gemstone business. Unlike diamonds, colored stones do not conform to a universally accepted grading standard. To determine the value of a fine gem specimen, you need to know more than its 4Cs (color, clarity, cut and carat weight). You need to know its origin.

Until the Ilakaka find, the bulk of the world’s fine blue sapphire came from Myanmar, Sri Lanka and the most illustrious source of all, the Himalayan territory of Kashmir. “What is the magic about this little region north of India?” said Jonas Hjornered, sales manager of Ivy, a Beverly Hills, Calif.-based jeweler. “It’s based on the color the sapphires possess — a warm, cornflower blue.”

Kashmir sapphires can command as much as $25,000 per carat at wholesale, while look-alike stones from Madagascar may fetch only a third of that. But the market’s obsession with origin does not end there. Prices on emeralds, for example, can vary by thousands of dollars, depending on whether the gems are from Colombia, Zambia or the less desirable tracts of Brazil. Much of that disparity comes down to aesthetics; the best Colombian crystals are prized for their electric green coloring, a product of near perfect combinations of chromium and vanadium. Do not, however, overlook the role that the Moguls of India played in building a centuries-old reputation for emeralds from Colombia’s famous Muzo district.

“A lot of colored stone promotion came from the history books,” said Ian Harebottle, chief executive of Gemfields Resources, a London-based mining company that co-owns and operates the Kagem emerald mine in Zambia, as well as a large new ruby concession near the village of Montepuez in Mozambique.

Mr. Harebottle has plenty of reasons to reframe the debate over the true value of origin. After a millennium of ruby mining in the Mogok region of Myanmar, it is taken as gospel that Burmese stones — especially those deemed to be the color of “pigeon’s blood”— are “the standard by which everything else is compared,” Mr. Hughes said. Yet Myanmar’s ruby mines have long been stripped of their low-hanging fruit, and production has slowed to a trickle.

As a matter of necessity, the trade has shifted its focus to the Montepuez deposit, with Gemfields leading the charge. The company, one of the few in the gem world that is well financed enough to employ mechanized equipment and staff geologists — acquired 75 percent of a 131-square-mile license area near Montepuez in 2011 and has spent the past three years creating a grading system for the rough rubies found there.

“Colored stones are not an easy geology, but Gemfields is doing what De Beers did 50 years ago” with diamonds, Mr. Harebottle said. “We are creating the science.”

By all accounts, Gemfields has its work cut out. Take the notoriously difficult task of identifying origin: Even the industry’s best-regarded labs admit that gemological analysis can reveal only so much. “It clearly states on our reports that origin determinations are based on our opinion and are not a guarantee,” said Shane McClure, director of West Coast identification services at the GIA Laboratory. “The absolute origin of most stones that come through the lab is unknown.”

Even countries as far-flung as Brazil and Mozambique have figured prominently in disputes stemming from the gem world’s overlapping mineral environments. The most famous example concerns a blue-green variety of copper-bearing tourmaline discovered in 1989 in the São José de Batalha mine in the Brazilian state of Paraíba. The trade, led by buyers in Japan, went crazy for the gems, whose color was likened to the neon glow of window cleaner. “Paraíba produced this material nobody had ever seen before,” Mr. Watt said. “And then the mine closed and prices started skyrocketing.”

Rare and exquisite (to the tune of $30,000 per carat), the Brazilian gems enjoyed a singular reputation in the gem trade until the early 2000s, when material from a large deposit of copper-bearing tourmalines from Mozambique arrived on the market, stunning buyers because it boasted electric blue-green colors to rival those from Paraíba. It did not take long before dealers of the African material began labeling their copper-bearing tourmaline by the same name.

The ensuing nomenclature battle, which regarded whether an origin name could be used as a variety name, raged for years until a 2007 decision by the Laboratory Manual Harmonization Committee about “paraiba tourmaline”: “The variety name is derived from the Brazilian locality Paraíba, where this gemstone was first mined. However, today it may come from a number of localities.”

The market, of course, found its own resolution. “We’ve seen the Mozambique material break $20,000 a carat but it probably trades at two-thirds of the Brazilian,” Mr. Robertson said.

That, however, is cold comfort to buyers who passed up the opportunity to stock up on the original blue tourmaline when it was still an unknown quantity. “When I discovered Paraíba, I thought it was so crazy looking,” said Erica Courtney, a designer based in Los Angeles. “And at $600 a carat, it was super duper expensive. I didn’t even know if I could sell it.”

Ms. Courtney paused to reflect on her decision to forgo the gems from Paraíba 20 years ago. “That’s one of the mistakes of my life,” she said.