The value of African gems

Speakers: Richa Goyal Sikri, Dharmendra Tank, David Nassi, David Bennett, Tony Brooke

Long read

When it comes to diamonds, unless you are tracking a diamond from mine to market, it’s impossible to tell where it’s from. Thanks to geological events that occurred millions of years ago, the characteristics of the stones make them unique. Which is why we, in addition to colour, clarity and all the other aspects that add to the value of precious stones, also look at origin.

And as the flow of gemstones from historic sources like Burma, Kashmir, Ceylon and Colombia has been reducing over the past decades, a new source has become quite prominent as far as mined gemstones are concerned, and that is the African continent. One of the challenges is that, even though the vast majority of mined gemstones come from Africa, when we look at auctions or at public pricing that is available to consumers, we still see African gemstones with the price tag lower than those from historic origins.

The discussion is then about the various sides related to the origin-based values and origin-based value perceptions, to historic discoveries and the impact that they have had on the marketplace.

Emeralds

Today it is estimated that in terms of quantity, approximately 40 to 50% of mined emeralds are coming from Zambia and that all the Zambian emeralds formed 500 million years ago. They were discovered in the late 70s, and the first official auction by the Zambian government happened in 1982.

At that time emerald grading was not as it is today. Lower grades were not that much in demand and were not getting that much of value. Today, we are seeing that groups like Gemfields and Grizzly, with their new technology, are able to create their goods in a better way. Therefore, thanks to time and technology, they have been processing, chipping, washing the goods and grading in a much better way, and we are getting a better selection and a bigger variety across the board.

Rubies & Provenance

Africa today is the primary source for mined rubies. It is estimated that 80% of mined rubies come from Mozambique, primarily from the Gemfields mine. More actors are joining in, such as Fura Gems, who have started auctioning goods in the last year, together with a third contender, Gem Rock, who is going to enter the ruby auction market soon.

Africa, as a source, has been traditionally looked down on by the industry, particularly for rubies, as these have to be Burmese. Now that this supply is down, African rubies – Mozambique, Madagascar and Tanzanian rubies – are in the ascendancy. Therefore, it could be advisable to try to cut back on this desire for pure provenance. The focus should be the value of the stone itself, how beautiful that particular stone is, and that should be the basis of the pricing structure.

Gems & origin-based premiums

Auction houses play a vital role in shaping value perceptions because it’s probably the only place where a consumer can see pricing and sales data published. Price levels are also confirmed by the gemmological certificates, which specify the gem’s origin.

However, with coloured stones it is not so easy. The first issue is that origin is still sometimes subject to conjecture: a gem can sometimes offer to clients two certificates stating two different origins, and this generates mistrust.

Historically, in the early ‘70s, gemmological certificates were unknown in the auction world.

Precious gems prices would be set by looking at previous sales, which would create a precedent. It was not until mid to late ’90s that gemmological certificates at auction came in.

Rubies & Spinels

Spinel in industry circles was once known as “the dealer stone” because it was primarily appreciated by people who were in the industry, and this was despite the fact that spinel has a history as rich as that of a ruby. Some may even say that spinels have been responsible for the lore and the brand that ruby has today, because many historic stones that were mistaken for rubies were actually spinels (the most famous, the “Black Prince Ruby”, is a 170-carat spinel set in the Imperial State Crown of the United Kingdom, n.d.r.).

Since the discovery of spinels in 2007, there has been a consistent supply of top quality, very bright, vivid spinels. Now that consumers can see that there is value in this stone, that there is history, and there is supply, they can start to acquire it and the collection becomes more important. And with the dwindling supply and quality to that supply, prices have gone remarkably up – from $5,000 a carat to $50,000 a carat today. At the same time, size is decreasing, so while it was easy to find a 100-carat stone back in 2007/8, today to find a very clean 20-carat stone is quite difficult.

Emeralds & pricing

The largest emerald mine in the world is in Zambia today. Being a publicly listed company, Gemfields publish all their auction sales revenue data in detail on their website. By looking at data that has been published since they started the auction, in 13 years, the price for the high-quality rough emeralds coming from their mine has increased in 13 years, going from $5 per carat to $150 per carat.

For the African material, we have seen a potential growth over a period of time and a ratio of increase of 300% for the rough. On the cut goods, the ratio is even higher, especially when it comes to finer stones. This happens partly because some stones are coming to auction and now clients are more aware of them, they have started appreciating them. Potentially, there is no limit to the price level cut emeralds can reach.

Gems certificates: yay or nay?

Clients are gravitating towards origin labels when it comes to coloured stones. The reason might be that there is some customer confusion and those who may not necessarily have the in-depth knowledge related to cut, clarity, character, treatments, would hang on to something that they recognise. Words like Burma, Ceylon, Kashmir evoke something in their imagination. But by doing this, clients could risk buying certificates, more than stones.

This is particularly true with coloured stones, for which the colour becomes a much more subtle matter. The differences between two vivid blue diamonds, or orangy pinks, or vivid pinks, are subtleties that can generate massive differences in price.

Market demand

From a dealer’s perspective, considering the auction houses as a price indicator could be unfair because, historically, they were only offering Kashmir, Sri Lankan, Burmese stones. These stones were attractive, while African stones are not perceived at the same level as those from Kashmir, Sri Lanka or Burma, and they do not have price precedents.

One element that is probably going to reverse this will be the jewellery maisons using African gems for their jewels – such as Cartier, who is starting using Mozambique rubies.

The demand for rubies on the market is huge, and unfortunately the Burmese stones are becoming unavailable. So mining companies like Gembridge are now actively promoting Mozambique’s rubies on their platforms, and over the coming years, Mozambique rubies will finally be seen being used by the major jewellery houses and in 10, 15, 20 years from now, the secondary market will start to appreciate a 5-carat, loop-clean, Mozambique ruby whereas at the moment it does not.

The cross-pollination of gems

Gems cross-pollination happens when gems go from a lesser known, or new, deposit, to a better-established market. This phenomenon has been going on for centuries. In the 1700s diamonds were discovered in Brazil. And at that time, the primary source of diamonds was India. So the main market being Europe, all the European diamond merchants were sitting on stocks of Golconda diamonds and when this deposit was found in Brazil, they were nervous that this new discovery was going to bring down the value of the Indian Golconda diamonds that they were sitting on. So they started a campaign, saying that all these diamonds from Brazil were of an inferior quality, that they were not as good as the ones coming from India.

On the other hand, the Portuguese, who were colonial masters in Brazil, and also in Goa, which was the main trading hub for diamonds at that time, exported the diamonds from Brazil to Goa, and sold those Brazilian diamonds to those same European merchants as Golconda diamonds. This is something that we have seen happening with many discoveries from the African continent, for example with Nigerian and Mozambique tourmalines taken to Brazil and sold as Paraiba tourmalines, or Mozambique rubies cut in the Burmese style and sold in Burma as Burmese or (the most famous one in the industry) beautiful velvety blue sapphires from Madagascar sold with certificates as Ceylon and some maybe even as Kashmir sapphires.

The question of what type of gemstones tend to carry this region-based price premiums in the market is quite relevant because, first of all, it does not qualify for every type of category and value to carry that premium, and secondly because there are only certain types of labs that even have the equipment to certify origin. There are some spectacular stones that don’t sell, or that haven’t sold because they have a Gübelin certificate and an SSEF certificate both saying it is a no-heat sapphire, but one certificate says it is Kashmir and the other one that it is Madagascar and the stone remains unsold, which can appear quite absurd. This shows that it all comes down to the opinion of the gemmologist – which is not science, but it is the interpretation of an individual.

Buying gemstones: practical advice

The main advice then, when buying a gem, is to choose quality above anything else – and to choose a gem we love.

Most people, when they buy a gem, do it by using their eyes. Therefore, one ends up buying a stone he/she is perfectly happy with, because it looks exactly what he/she wanted it to look like. Even considering potential treatments. This aspect goes back to consumer/client education. There should be no problem for anybody to buy a lovely three-carat heat-treated Sri Lankan sapphire, or a treated three-carat Madagascan sapphire as long as they know what it is.

And if the seller explained to the clients that a three-carat Madagascan sapphire can be purchased for $2000 a carat and that it can be compared to a three-carat, non-heat treated stone, also from Madagascar, that is going to cost three times as much – if all this could be explained clearly, correctly, coherently across the market, then understanding would be there. Trade and consumer education on gem origin, colour treatments and the associated value will be of great benefit for the whole industry.