Coloured gemstone mining
Right up to the 1930s coloured gemstones and diamonds each enjoyed roughly a 50% share of the global gem market. As covered in previous articles, De Beers succeeded in manipulating the market in the first half of the twentieth century to such a degree that diamonds market share grew from around 50% to over 90% by the millennium. However in the twenty first century coloured gems have mounted a comeback by growing at almost 20% per annum according to UN data and this may actually underestimate the true figure quite significantly due to poor reporting procedures in many countries. This fact has been clearly highlighted in recent years by the nongovernmental organisation the International Coloured Gemstone Association (ICA). Despite the much vaunted growth of mass producers, such as Gemfields, the ICA estimates that up to 75% of world wide gem production comes from small to medium sized operations and they are often reluctant to provide accurate data on their true production to avoid government taxes and duties wherever possible. Very often stones are mined, cut from the rough and sold to a chain of dealers without their specifications being logged on any official paperwork.
(De Beers ‘Aura’ collection: De Beers ensured diamonds grew their market share from 50-90%)
The UN estimate of the global value of coloured gem exports is $3.3 billion per year, versus the ICA’s estimate of over $10 billion, suggesting that around two thirds of the market operates in the shadows. Much work is being carried out to rectify this situation and the ICA are a leading proponent of this change. Increasingly those actively involved in the supply chain are coming under pressure to greatly increase transparency and accountability. The urgency with which this is now taking place can be attributed in no small measure to the rapid price increases in coloured stones over recent years. As the sums of money being generated by and invested into the industry continues to grow so does the desire for investors and shareholders to have a full grip on the figures and activities of the mine operators and dealer networks. It is interesting to note that although emeralds, rubies and sapphires are by far the most valuable coloured gemstones others, such as spinels, green garnets and aquamarine, have seen substantial price increases as well. Red tourmalines have actually increased in value by over 1,000% in the past 10 years or so.
(ICA – The nongovernmental organisation leading the charge of the coloured gemstone comeback)
Some coloured gemstones that were virtually unheard of just a few years ago have suddenly soared in value. One such example is that of sugilite, which is a violet gem largely found in the Kalahari region of South Africa’s Northern Cape, where it is produced as a bi-product of manganese mining operations. In the space of just 2 years its price per KG has gone up from $50-$100 to a staggering $5,000-$10,000 mostly due to a surge in demand from China, where it is used to produce jewellery as well as featuring in rituals as a herbal cure for certain diseases. In an environment of high demand and low supply the inevitable price hikes can have very far reaching consequences. Despite the potential of coloured gemstones South Africa does not currently have any active mines producing these stones specifically, although it is very involved in their trade and delivery. Most of Africa’s coloured gems are mined in Zimbabwe, Zambia, Malawi, Madagascar, Mozambique, Namibia and Tanzania.
(Sugilite: a little known coloured gem that has seen 1,000% price increases in the past 2 years)
Potential African coloured gem production
Many commentators have pointed to Madagascar as one of the largest potential sources of coloured gemstones and some have even suggested that with sufficient inward capital investment it could become the world’s leading centre of production for these stones. The East African island nation has very large underexploited reserves of the precious gems rubies, sapphires and emeralds as well as other high value stones including tourmaline, sphene, aquamarine and amethyst. The current mining operations here are concentrated in the country’s northern jungles and for the most part they consist of small scale independent mines, presenting the possibility of future economies of scale being developed by the entry of large international players. The central belt of the country also contains significant possibilities for operators who are ready and willing to invest time and resources in exploration operations. The mines in the southern area of the island are prolific producers of both blue and pink sapphires, a stone that has seen sharp price increases in recent times.
(Mining for coloured gems in Madagascar has grown considerably in recent years)
Gemfields are one of the fastest growing mine operators in East Africa and their Montepuez mine in Mozambique is currently in the exploration phase with the target of producing approximately 8 million carats of ruby and corundum per year by the time it is fully operational. This has required the installation of new and improved infrastructure, including an enlarged washing plant, along with worker accommodation and domestic facilities. Zimbabwe has also shown potential for the development of its deposits of aquamarines, tourmalines, alexandrite, garnet and emeralds. Given the hyperinflation and economic chaos this once prosperous African nation has endured for many years, this new economic activity will be extremely welcome! Namibia, Zambia and Mozambique also have confirmed reserves of tourmaline, garnet and tanzanite, which are gems that are increasingly in demand by global jewellers. Tanzania is emerging as a new source of significant coloured gem production, exporting over $50 million by value in 2013. Tanzania now has one of the most coherent economic and educational strategies of all the African nations when it comes to the development of gemstone mining within its territory and could find itself at the centre of the trade and investment in this field in the coming years.
(Gemfields Motepuez ruby mine is forecast to produce over 8 million carats per year)
In many ways the diamond industry has served as a guiding light for the coloured gems sector and has taught it many valuable lessons in terms of the value of the continuity of supply and effective marketing of the whole industry to buyers and investors alike. The UN World Bank has been at the forefront of encouraging gemstone producing nations to develop a clear ‘mine to market’ approach, in which the greater part of the processing and distribution of the stones is carried out locally. This approach has the added advantage of encouraging multiple downstream, indirect employment opportunities within local communities. This can include the establishment of jewellery manufacturing and its associated industries which can increase the industries’ value added by selling local polished gems to tourists. In 2015 the UN estimated that in Tanzania for every person employed in the gemstone business up to 16 fellow Tanzanians benefit financially as a result of the increased economic activity. It is clear that coloured gems can play a significant role in the advancement of many developing nations and it has long been shown that economic progress leads to reduced regional political and social instability, enhancing world peace, security and prosperity.