Precious color and beauty of stones

Items with precious stones occupy a special place in the jewelry trade. These minerals have a unique aura due to their aesthetic properties, rarity, high cost and mystical appeal. Whereas detailed information is available for rough and polished diamonds, including where they are mined and polished, as well as price lists and other financial information, this kind of information is often unavailable for colored stones such as emeralds, rubies, sapphires and alexandrites. It is difficult even to know how big the markets for these goods are. The volume of the world rough diamond market is -13 billion a year, the market for polished diamonds totals approximately billion, and the market for diamond jewelry totals billion. Varying estimates indicate that the size of the market for polished colored stones, including semiprecious stones, is about billion a year. Almost .5 billion of that comes from “the big three:” emerald, sapphire and ruby. Of these, sapphires are the most plentiful and are on average the cheapest. The volume of the market for polished sapphires is estimated at 0 million a year. Emeralds circulate in the market in significant amounts but are highly valued; therefore, they have the largest market—0 million a year. Rubies are considered to be the most costly of the three, but are scarcer. The market for rubies totals around 0 million a year.

Alexandrite is also highly valued. Judging by the available information, or to be more precise, by the absence of such information, there is no regular mining of alexandrites currently underway, so the stones available on the market now were mined some time in the past.
This article on emeralds is the first in a series of articles on the colored stone markets.

The world emerald market: basic trends

 Emerald, along with sapphire and ruby, is traditionally placed among the so-called “big three” of colored gemstones. Emeralds are a green variety of beryl. There are emerald deposits in many countries. In Africa, the deposits are in Zambia, Zimbabwe, South Africa, Madagascar, Tanzania and Mozambique. In Asia, these precious stones are found in Pakistan, Afghanistan and India. Non-gem-quality emeralds without commercial value are found in the United States, Canada and Australia. In Russia, the only deposit of emeralds is in the Urals. The emerald mining industry, like the diamond mining industry, is characterized by a high degree of concentration. The top three producing nations are Colombia, Brazil and Zambia. World production of emeralds is estimated at 43.1 million carats. Deposits of emeralds in different countries differ noticeably in color, quality and size.

 Between 80 and 90 percent of rough emeralds are low-quality stones. High-quality crystals make up no more than 5 percent of rough stones produced at mines.

Table 1.
Мировое производство изумрудов (в млн. каратов) – World manufacture of emeralds (carats, mln.)
Бразилия - Brazil
Замбия - Zambia
Колумбия - Colombia
Зимбабве - Zimbabwe
Мадагаскар – Madagascar

 Colombia leads in production of the highest quality emeralds. Until now, these emeralds have been recognized by jewelers as a standard. They are characterized by their saturated green color. The country mines rough emerald in a wide range of sizes, including stones weighing more than 10 carats. According to the Colombian government, about 90 percent of emeralds mined in the country are exported, and of those, about 80 percent are uncut. Colombia’s share of the world market for high-quality emeralds is in the 50 to 60 percent range.

There are three main emerald deposits in Colombia: Muzо, Coscuez and Chivor. In recent years, the exhaustion of these emerald deposits has been noticeable. Production from the Muzo deposit, which provides the highest quality rough, is in decline. In order to maintain the level of production and increasing efficiency, a transition from predominantly open pit to underground mining is now underway at Muzo. However, investment is insufficient for full modernization.

The La Pita mining district, which opened at the end of the 1990s, is comparatively new. At present, there are about 10 mines actively operating in this district. Prospecting has been underway recently in the Millionarios district.

 Officially, emerald production in Colombia was 9.3 million carats in 2004, up 47 percent from 1995. About 60 percent of the emeralds produced came from La Pita, 20 percent from Coscuez, and 10 percent each from Muzo and Chivor.

According to available estimates, in terms of physical volume Brazil holds the leading position in emerald production. Emeralds were first found in the country at the beginning of the 1960s. Emerald mining is done in three Brazilian states– Minas Gerais, Tocantins and Goiás. The largest quantities of emeralds are mined in two regions: Itabira and Nova Era. In recent decades, emerald production in Itabira focused on the Piteiras and Belmont deposits, which stand out for their high level of technological development and steady production. The work is done by large companies. The total volume of production from these deposits is estimated at 5.5 million carats a year. About 10 percent of the stones can be cut; high-quality emeralds produced at these mines total almost 55,000 carats a year. According to expert estimates, the operational life of these deposits is about 30 years. The development of the deposit at Nova Era is being carried out by small companies with a rather low level of equipment; the volume of production there is estimated at 12 million carats.

In 2005, development began on a new deposit of emeralds in this region. Volumes of trial mining at the Rocha mine totaled about 4.8 million carats a year. The quality of emeralds mined in Brazil improves from year to year, a fact that is explained by increasingly sophisticated ways of mining valuable materials, as well as by a shift toward mining more expensive stones with deeper underground mines. The total volume of emerald mining in Brazil was estimated at 22 million carats in 2005.

Practically all emeralds in Zambia are mined in the Ndola region. Seven big companies and a lot of small firms are engaged in mining there. The largest mining company with the biggest influence on the total volume of mining over the past decade is Kagem, which is under mixed state and private control. The private investor, which now possesses 75 percent of the authorized capital, is the Israeli-Indian consortium Hagura. According to official data, in 2004 10.5 million carats of diamonds were mined in Zambia, up 16.7 percent from 1995, when production totaled 9 million carats. The rough stones produced in Zambia are mainly small, up to 2 carats in weight. The overwhelming majority of the emeralds produced in Zambia are exported uncut. For the past decade, Israel and India have been the main centers where Zambian emeralds have been cut.

In Zimbabwe, there is a known deposit of emeralds called Sandawana, located in the southwest of the country. The rough found there is characterized by exceptionally high clarity and small average size. Mining in 2005, according to estimates, totaled about 1 million carats, down tenfold from 1995 levels.

In Afghanistan, there are more than 15 emerald deposits in the Panjshir Valley of the Hindu Kush Mountains. The quality of the stones is almost Colombian. However, large-scale production is not under way there now, owing to the complex political and economic situation.

In Pakistan, in the Swat Valley, there are three deposits of emeralds. In terms of quality, the stones are similar to Colombian emeralds. According to expert estimates, the country could produce more than 1 million carats of emeralds a year. However, the deposits are not being developed.

Deposits of emeralds in Russia are concentrated within the so-called Ural emerald belt. There are 26 known deposits and instances of emerald mineralization: Malyshevskoye (which accounts for about 90 percent of the country’s emerald reserves), Krupskaya, Sverdlovskoye, Pervomaiskoye, Cheremshanskoye and Shag. Practically all of these deposits were discovered between 1831 and 1839. According to Russian experts A.F. Laskovenkov and V.I. Zhernakov, the Ural emerald reserves have decreased only 30–35 percent in more than a century and a half of development. There is no publicly available official information on the mining of emeralds in Russia. There are only estimates by foreign sources and calculations based on comparisons with the known value of various emerald deposits around the world. On the basis of the available data, it can be assumed that mining of emeralds in the USSR and Russia post-1991 never exceeded 2 million carats a year, worth no more than million. Emeralds from Russian deposits are predominantly of low color and quality. A significant share of Russian rough emeralds are not suitable for faceting, but could be turned into cabochon-cut stones. During the Soviet period, Ural emeralds were considered no more than a byproduct of beryl produced for the defense industry.

Until 1993, the Malyshevsky Mine was run by the Ministry of Atomic Energy. Privatization led to the creation of a company called Izumrudniye kopi Urala (Emerald Mines of the Urals), which went bankrupt in just two years. In May 1997, a new company called Zelen-kamen JSC was set up. An Irish company called Cabal Development Ltd. was part owner. But this company also failed to renew work on the emerald deposit. In 2002, the company was judged bankrupt under an arbitration procedure. Competitive management was introduced and an inventory of property was carried out. In 2004, a new investor, the Canadian company Tsar Emerald Corporation (TEC) took over the company and the property of the mine. In 2004–05, TEC provided almost 95 million rubles of financing, followed by another 105.2 million rubles in the first nine months of 2006.

The centers of emerald processing

Cutting of emeralds is concentrated mainly in Israel and India. Small cutting capacities are also found in Germany, in the city of Idar-Oberstein. Insignificant quantities of rough are processed in emerald mining countries. A small Colombian cutting industry specializes in polishing large high-quality stones. Numerous attempts to organize a Zambian cutting industry have not succeeded. As privatization of the Zambian economy got under way starting in the early 1990s, emphasis was placed on the production and export of mainly unprocessed rough stones.

The Israeli cutting center specializes in processing of medium and high-quality rough. The Israeli firms traditionally use the best part of emeralds from the Zambian deposit at Ndola. India processes cheap low-quality roughs coming from practically all the producing countries. India is the only center processing the cheapest grades of rough emeralds—stones with an average price of less than per gram.

Demand and the dynamics of emerald pricing

The main consumer markets for emeralds are the United States and Japan. The former accounts for about 35 percent of the total world consumption of these gems. Import of emeralds into the United States in 2004 was down more than 40 percent in both value and weight terms compared to 1995.

Japan has developed into a large consumer market for emeralds in the past 10 years. While there are no data on the consumption of emeralds in Japan, it is possible to speak with confidence about a down trend in imports, because the total import of emeralds, sapphires and rubies in 2004 was down some 77.8 percent from 1996, dropping from 2 million to million.

In the absence of generally accepted standards by which to judge the specific features of stones from different deposits, significant amounts of colored gemstones are traded illicitly, which substantially distorts official price information. Prices in sales contracts are mainly agreed upon on a bilateral basis, and are not published.

For the past decade, a general decline in emerald prices has been observed. According to the reference work The Guide, which sums up price trends in the U.S. market, prices for emeralds during this period decreased substantially.
The following charts depict price trends for emeralds by size, weight and quality. The data are taken from various reference works on colored stones.

Table 2.
Динамика средних цен на ограненные изумруды размером до 0,50 карата по качественным категориям – Average prices for polished emeralds up to 0.5 carats, by quality category.
Категория – Category.
долл. за карат – dollars per carat.

Table 3.
Динамика средних цен на ограненные изумруды размером 0,50 – 0,99 карата по качественным категориям - Average prices for polished emeralds weighing 0.5 to 0.99 carats, by quality category.
Категория – Category.
долл. за карат - dollars per carat.

Table 4.
Динамика средних цен на ограненные изумруды размером 1,00 – 5,99 карата по качественным категориям - Average prices for polished emeralds weighing 1 to 5.99 carats, by quality category..
Категория – Category.
долл. за карат - dollars per carat.

The practice of treating emeralds to improve their optical properties by correcting their natural defects has had a negative influence on prices. With the spread of new treatment methods and materials in the mid-1990s, and given the lack of any agreed approach to the valuation of such stones, end consumers became uncertain about the quality of the goods offered them. This decline in consumer confidence, along with general economic problems, led to a sharp fall in prices in 1997–98. According to The Guide, prices began to recover only in 2003, and then mainly for high-quality expensive goods.

М.В.Omelin-Terentjev, Chief Market Research Expert, Almazjvelirexport FSUE
N.A. Popova, Chief Market Research Expert, Almazjvelirexport FSUE.