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Vol. 21, No. 4 Winter, 2003 |
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Vol. 21, No. 4 Winter, 2003 |
Collecting Orange Diamonds
by Robert Genis
Some people buy Warhols or Van Goghs. Others scour the world for rare
Ferraris or Maseratis. The Winstons collect colored diamonds. Orange colored
diamonds are viewed by collectors in a manner similar to those who quest for
famous paintings and exotic automobiles. Pure orange diamonds are extremely
rare, beautiful, desirable and highly marketable.
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The Pumpkin On Halloween Eve in 1997 Ronald Winston, president and CEO of Harry Winston Inc., purchased a 5.54 carat fancy vivid orange diamond for $238,718 per carat at Sotheby's. This stone is the largest and most famous fancy vivid orange diamond in the world. Winston wanted to call it "The Tangerine" but his staff felt it needed a better connection to Halloween, hence the name Pumpkin. According to Winston, "I am a connoisseur and collector of colored diamonds and I searched my entire life for a diamond with this distinctive bright orange color and saturation." Winston is unsure of the origin of the diamond but believes it is "Central or South Africa." (Photo thanks to Harry Winston.) |
The Pumpkin's Recent Travels
The Pumpkin was recently on display at the "Splendor of Diamonds" exhibit in
Washington, D.C. Other well known colored diamonds that were displayed until
September, 2003 included:
* The Steinmetz Pink, a 59.60 carat fancy vivid pink flawless stone. It has
never before been on public display.
* Heart of Eternity, a 27.64 carat fancy vivid blue diamond from South Africa.
* The Moussaieff Red, at 5.11 carats, is the world's largest known fancy red
diamond. It was discovered in Brazil in the 1990s by a farmer.
* The Allnatt, one of the world's largest yellow diamonds at 101.29 carats.
* The Ocean Dream, the world's largest fancy deep blue-green diamond, 5.51
carats.
Previously, the diamond was worn by actress Halle Berry at the 2002 Academy
Awards, where she accepted the Best Actress award for her role in the movie
"Monster's Ball."
Pumpkin For Sale
The Pumpkin is for sale but Winston laments, "I am constantly torn between
being a collector or being a jeweler...especially with the stones I love. I
guess I would reluctantly sell the stone, but I am not giving it away, and the
cost will be in the millions." As most in the colored diamond industry know,
this is not a stone that could easily be replaced.
Why Are Oranges Orange?
The main reason for color in diamonds is the presence of impurity atoms or
atomic structural defects. What causes the color in orange diamonds remains a
scientific mystery. Gem scientists used to believe the orange color was caused
by nitrogen. Winston believes the 5.54's color is caused by hydrogen. Jim
Shigley, GIA Director of Research, Carlsbad, states, "we tend to think of
diamonds as pretty easy to understand since they are simple carbon. However,
the scientific reasons for color in colored diamonds are not always known.
The reason orange diamonds are orange is probably because of hydrogen or
nitrogen. Further, these diamonds are Type I not Type II."
Rarity
How rare are orange diamonds? According to Winston, "people don't realize the
rarity of vivid orange diamonds. I would say oranges are rarer than greens
but not as rare as reds." In other words, oranges are the second rarest color
and even rarer than greens, pinks and blues. On the connoisseur demand side,
the only thing holding back the price of these stones is the fact that orange
is not a primary color. Collectors tend to covet reds, blues and greens
before they consider an orange.
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Gemsicuted by Julian Robov Xlibris.com 326 pages, 2001, $22.99 |
Julian Robov is a German-trained gemologist residing in Bangkok, who writes novels about the gem business. When I first got this book I was skeptical. I always thought there was a negative reason why a book was self-published vs. the traditional publishing route. The Bangkok Post has stated every gem dealer in Bangkok thinks he can write the Great Bangkok novel. I was afraid this was going to be just another horrible gem dealer book from a man who should be selling or grading stones, not writing.
The title is confusing. I assume it is a combination of gems and executed. The book has numerous editorial mistakes and mis-spellings. Sometimes Robov's writing seems strained, but it is probably because he is a German writing in English. The first 100 pages or so shows Robov knows a great deal about the inside of the gemstone business. Although the story takes a while to get going, eventually it becomes clear who the main characters are in the book. In essence, they are all conniving to get a 37 carat unheated Burma ruby into the possession of a wealthy collector. One of the twists in the book is that a synthetic 37 carat ruby is also traveling in the same gem circles. The cast of characters include the Russian mafia, sex driven wives, mistresses and international gem dealers from the largest to the smallest brokers. The book revolves around the lives and numerous deaths of the people as they attempt to obtain the coveted 37 carat ruby.
Some of the parts in the book seem unrealistic such as- most gem traders needed their stones graded at an unnamed gem lab in Switzerland to verify country of origin and treatments. Surely gem dealers who work in the business daily should know simply by looking. Another improbable scenario is when two gem dealers buy a lottery ticket and win the British Lottery, which in return helps them to buy a 1/2 share of the 37 carat unheated Burma ruby. But after all it is a novel!
Ruby aficionados will salivate when a dealer enters the largest ruby dealer's office in Bangkok and picks out a group of unheated Burma rubies over 20 carats as easy as going to the store for milk. The main character also dreams of being a pioneer and creating a three dimensional color grading system to communicate color to his international clients instead of them looking at the gemstones in his office lights.
The book really picks up speed in the second half. It becomes interesting and is packed with backstabbing and skullduggery. Alliances and interests shift like sand. The chase for the 37 carat ruby turns the lives of these characters upside down. It is hard to put down until you reach the violent and unexpected conclusion. In the end, I was pleasantly surprised what an excellent first book Julian Robov wrote.
This is a different type of gemstone book. Instead of raw and boring facts like most gem books, you get a fictional story about the industry along with some interesting gemological information. If you want to learn about ruby in a fun manner, buy this book.
You can purchase this book on-line at Amazon.
I do not think Ms. Curry understood me that the price of a full American Gemological Laboratories (AGL) colored stone grading report with country of origin and treatments for a Burma ruby or sapphire is about $330. She has me quoting the price of a one carat Gemological Institute of America (GIA) diamond as $330. Of course, one carat GIA diamonds are less expensive than $330.
Finally, many financial planers or stock brokers keep telling people not to
invest in gemstones because they are not liquid. This is true-but most people
consider real estate the best investment they have ever made and it also is
not liquid.(ED)
In the 1980s, the heirs to a ranching business in Texas discovered they owed
the IRS a million dollars. To pay the bill, they could sell the family
business or sell off the gem collection their dad had stashed away for years.
He had hundreds of gems. The family was fine with that option. They had always
thought Warren Hancock was a little nuts anyway for spending all that money on
colored diamonds.
They shipped off the lot to Sotheby's in New York, hoping that selling them might make a dent in the tax bill. Sotheby's picked out three and sent back the rest. On April 28, 1987, an agent allegedly representing the Sultan of Brunei bought the largest of the trio, a .95-carat red diamond, for $880,000, plus a 10 percent buyer's premium.
That set a world record of $926,000 per carat. With the sale of other two stones, Sotheby's was able to send the Hancocks a check that covered the taxes, along with some serious change left over. The Hancock Red remains a standard in the world of colored diamonds -- as revered as the Hope Diamond among gem collectors.
Hancock had bought all three diamonds from his local jeweler and paid retail prices for them, an investment of less than $20,000 combined.
Those are the kinds of stories that fuel the desire to invest in gems. But the people who live and work in this circle make it very clear: Buying gemstones should be something you do because you like them. It should never be a major part of an investment strategy.
"If you want a nice sapphire for your wife, you want to buy the best sapphire on earth," says Richard W. Wise, a graduate gemologist and author of Secrets of the Gem Trade: The Connoisseur's Guide to Precious Gemstones. "That's very nice and I'm sure your grandchildren will appreciate it. But if you buy it at Tiffany's and think you'll turn it over for a profit in 10 years, you're deluding yourself."
Financial advisor Fred Siegel of New Orleans tells people who call his radio show to inquire about investing in gemstones that they should stay away from them unless they already have enough money saved for retirement in a well-rounded portfolio.
"If you're taking care of that, fine, then it can be a nice investment," he says. "Gems have nice stories with them, and they're beautiful. Get a good gemstone and you have something of beauty. But it's not like a stock and some other things that you can tell the value quickly."
In fact, gemstones are about as far from stocks as you can get. Stocks, bonds and CDs are perfect markets, with known values at any given time and set prices; investors can buy and sell whenever the market is open for trading, Siegel says. Gems are an imperfect market, with a sale possible only when there is a willing buyer and all prices open to negotiation. Other imperfect markets include real estate, art and antiques.
"Does it mean you shouldn't invest in imperfect markets?" Siegel says. "Not at all. You either have to gain the expertise or get help from someone who is an expert that you really trust." The expertise includes an understanding of how stones are bought and sold.
"The average jeweler will sell a stone for two or three times what he paid for it wholesale," Siegel says. "He'll buy a stone from an individual for half of wholesale. It makes it hard to make money unless you really know what you're doing."
As an investment class, gemstones and diamonds are considered hard assets, as are gold and silver. Hard assets as a group have a place in any investment portfolio, but generally not more than 1 to 3 percent, says Tom Cloud, president of Georgia-based Turamali, Inc., who has been investing in gems and jewelry since the late 1970s.
It's definitely not an investment you make with an eye toward turning a quick profit, he says. Like many other experts in gemstones, he says investors should expect to hold the stones for 10 years or more to see a return on their investment.
When you're shopping for a stone, it's important to understand that many colored gemstones have been treated and enhanced. That's perfectly acceptable, says Antoinette Matlins, a noted Vermont-based gemologist and author of "Colored Gemstones."
"Emeralds have been oiled for thousands of years;
sapphires and rubies have been altered through heat at least since Roman
times," Matlins says. "Treatment processes allow you to have a product formed
by nature but improved for clarity or quality. Had we not begun routine
treatment, no one but kings and queens and the world's wealthiest would wear
them today."
Today, natural unenhanced rubies, sapphires and emeralds are among the rarest
of all gemstones, Matlins says. If a seller says a stone is natural or
unenhanced, make sure he has the certification to support that claim and make
the sale contingent on an independent, third-party analysis. Walk away from
any seller who won't submit the stone to a lab for a grading report.
In the United States, the most respected labs are the Gemological Institute of
America, the American Gemological Laboratories and American Gem Trade
Association Gem Testing Laboratory, she says. Many sellers will present their
reports with the stone, but it's not uncommon for a buyer to then send the
stone with that report off to another lab to make sure the stone in the report
is the one that's being offered for sale.
The cost for the report starts at $100, plus shipping costs of the stone. For a 1-carat diamond, expect to spend about $330, with the cost going up with the size of the stone, says Robert Genis, editor of The Gemstone Forecaster, a quarterly newsletter for gemstone collectors and investors.
"That independent, third-party grading is the key to investing or collecting stones," he says. "If you look at all the auction catalogs where goods are selling for $100,000 to $200,000, they pretty much all have GIA or AGL certification."
The report won't tell you how much the stone is worth; that's the job of an appraiser. It will tell you what kind of stone it is, how much it weighs, how it's been cut, its color, tone and brilliancy, the imperfections in the stone on a standard grading scale, any treatments that have been done on the stone and the country of origin.
For detailed information on what the report data means for colored gemstones, visit the American Gemological Laboratories site. For diamonds, check out the GIA's tutorial. You can also learn about gemstone standards at Diamond Guide (click on the Buying Tools checklist), or check out the tutorial on gemstone clarity, color, cut and carat at the Pricescope Web site.
Much of a stone's value will be based on subtle color differences, Matlins says, that can change with lighting conditions. Before you buy a stone, look at it both in daylight and lamplight. Indoor light is the best light for viewing rubies because that light is at the high end of the red light spectrum. Buy a jeweler's loupe, a 10X magnifying glass that will help you detect noticeable flaws and polishing marks.
If you don't have the background or don't want to take the time to learn, you need a knowledgeable expert that you trust to make the assessments for you, much as you would a stockbroker or mutual fund manager for equity investments.
The people who don't want to take the time to learn about gems are in the minority, Genis says. Most of today's buyers are collectors with a passion for stones and want to know everything they can about them.
"Some of my clients would never part with these
stones at any price," he says. "It's an addiction. They become obsessed. "
A 478-carat sapphire was sold by Christie's for $1.5
million. This is slightly above $3,000 per carat. It was bought by a
anonymous telephone bidder. The gem was first recorded in Sri Lanka in 1913
and its previous owners include Queen Marie of Romania, as well as an American
jeweler. The gem is said to be larger than a hen's egg and only two larger
gem quality sapphires have been recorded, both in museums. These results
show the auction market remains weak due to the international economy..
Notable Quotes
"In economically troubled times, diamonds are more than a girls's best
friend....they are an investors best friend. When investors don't know what
to do, they buy diamonds."
Francois Curiel, Christie's
Wall Street Journal, October 27, 2003
"Now economists see another cycle starting. With stocks and bonds up, folks
worried about the sustainability of these markets are likely looking at art
along with other luxury items like jewelry (up 8% this year) and private jets
(up 25%). Hard assets look more appealing."
Mark Zandi, Economy.com
Wall Street Journal, November 7, 2003
Collectors Corner
North Carolina Emeralds Sold
A matching pear of oval emeralds weighing 4.76 carats, mined in Hiddenite,
N.C., have been sold for $20,000 per carat to a private collector. It took
two years to mine the matching emeralds, which are being set into earrings.
The most famous stone from North Carolina is the 7.85 carat Carolina Prince.
It sold for just over $63,000 per carat or $500,000. The Prince is considered
to be one of the finest emeralds ever found in North America.
Gemesis Goes After Diamond Industry
Gemesis Corp. has launched an all-out attack on the diamond industry. The
diamond maker is partnering with nationwide retailers to market jewelry
featuring Gemesis-made fancy yellow diamonds. Jewelry featuring Gemesis stones
will be available in about eight different stores around the country by the
end of 2003. Gemesis has 23 diamond-making growth chambers, each weighing
about 4,000 pounds and costing about $50,000. Each chamber produces about
eight 3-carat rough stones per month. The Gemesis-made diamonds are virtually
indiscernible from naturally mined stones. The gemstones are not look-alikes;
they are actual diamonds, intrinsically and chemically. Gemesis is inscribing
every stone it produces bigger than 0.2 carat. Gemesis plans to produce
colorless and colored diamond colors as market demand grows for the product.
Victoria's Secret's Fantasy Bra
Every year Victoria Secret's creates an unbelievable bra for the Holidays.
We have never heard of any of them selling and wonder what happens to them?
This year, Heidi Klum wore the 2003 Very Sexy Fantasy Bra at the Victoria
Secret's fashion Show. The bra and panty set is valued at $11 million and
made from more than 6,000 gemstones, including a 70-carat pear-shaped diamond.
The bra has a total weight of 2,200 carats of white diamonds, yellow-orange
sapphires, rhodolite garnets and amethysts. The matching panty has over 3,200
diamonds and colored gemstones and weighs 200 carats. It took over 375 hours
of work to make the set.
Buddha Crystal Unveiled
The world's largest crystal Buddha was created by the Cable Beach Club Resort
and given to the people of Broome, Australia. It is believed to be the
largest crystal Buddha in the world. The statue was hand carved from smoky
quartz and weighs more than seven tons, is two meters high and took a team of
stone masons six months to create. The male Buddha sits on a lotus flower in
a copper clad temple behind the Club and is surrounded by crystal gemstones in
an ornamental garden.
Jagger In Burma
Rocker Mick Jagger, 56, spent a one-week vacation in Burma free of the fans
and paparazzi who usually chase him. Accompanied by a woman friend and a
bodyguard, Jagger arrived on a private plane in November. Jagger's women
friend looked between 25 to 30 years of age. Jagger spent a night in the
luxurious, 102-year-old Strand Hotel in Rangoon, which costs more than $900
per night. The anti-tourism campaign of Burma is strong in Jagger's native
England, but he is known for thumbing his nose at authority. We wonder if he
bought any gems or simply wanted to get away from it all?
Rapper's Bling Bling Stolen From Vegas
In October, recording artists Nelly and Michelle Branch were staying at the
Aladdin Hotel and Casino on the Las Vegas strip. They were attending the 2003
Radio Music Awards. Thieves made off with rapper Nelly's jewels and stole
Branch's computer, cell phone, iPod, cash and credit cards from their hotel
rooms. Nelly told police he lost more than $1 million in jewels. Branch
criticized the hotel and said detectives are following up several leads, and
said it was too soon to tell whether the burglaries were an "inside job."
Russia
In December an Israeli citizen arriving at Sheremetyevo Airport from Tel Aviv
was arrested trying to smuggle in a batch of jewelry and precious stones . The
suspect was arrested after customs officials discovered 2,560 diamonds, 19
emeralds, 13 rings and six pairs of earrings hidden in his packed
undergarments. Preliminary estimates place the value at over $150,000. The
diamonds might have been mined in Russia's North and sent to Israel for
cutting. The suspect was a recognized expert in precious-stone cutting.
Bank Sued Over Safe-Deposit Box
This story proves it is smarter to keep your goods in your own safe.
According to court documents filed in Utah, on January 10, 2002, two teenagers
stole Steven Hall's briefcase, containing the keys to the Halls' safe-deposit
box and paperwork that included the bank's location and account number. The
teenagers were allowed access to the safe-deposit box area at Brighton Bank,
despite bearing no resemblance to the Halls in appearance or age. A teenager
forged Hall's signature, used the stolen key to open the box and stole
$200,000 in cash and two large emeralds. Court records say Steven Hall
routinely cashed checks, then counted and bundled the money before walking to
the vault area with employees, whom he came to know on a first-name basis.
The family is suing the bank for negligence, breach of bailment and conversion
and asking for $600,000 in addition to attorney's fees and costs of the
suit.
However, in my opinion, one of the main reasons that the sapphire mining industry in Australia is in such dire straights today, is the fact that Thailand as a market for our stone is no longer the best place to sell Australian sapphire. This is due partly to the rise of new gemstone processing centres in other places like India and China, where large-scale value-adding is taking place, but is also due to the fact that Thailand is considered by many in the global gemstone business, to be a place where rip-off predominates over honest business practice. This is particularly evident in the beryllium diffusion of sapphire treatment scandal that has rocked the coloured gemstone business around the world this year. Many of the traders in the US and Japan, who bought these orange and yellow coloured altered sapphires for very high prices, have been left with large inventories that are virtually worthless. Thus, today, Thailand is well and truly "on-the-nose" with many gemstone traders in first world countries, because of the large-scale dumping of fake sapphires passed-off as natural stones, by unscrupulous Chinese/Thai traders. This has significantly contributed to a drop in the market for all types of sapphires marketed out of Thailand, leading to historically very poor gemstone market conditions in that country.
For the sapphire produced from the New England gemfields, this situation has been made much worse by the fact that hundreds of millions of dollars of fine Inverell blue sapphire has been acquired over the past 30 years, by visiting and resident Chinese/Thai gemstone buyers, at very low prices. These stones have been routinely taken back to Thailand, and then re-marketed to the US, Japan and Europe as top Thai, Cambodian or Ceylon sapphire. At the same time, Thai gem merchants have engaged in a concerted campaign around the world to promote the view that Australia only produces dark inky blue, very low grade sapphire. This campaign has been so successful, that everywhere in the gemstone world today, Australia is regarded as the home of cheap dark junk sapphire, even though the Inverell - Glen Innes area has produced literally tonnes of very fine Pailin and Ceylon quality equivalent blue gem sapphire.
The Chinese/Thai buyers that have come to Inverell for almost half a century have been able to acquire vast amounts of premium blue gem sapphire from struggling miner's by engaging in a variety of coercive business practices designed to cause deliberate economic hardship, as a means of lowering the value of locally produced sapphire. Any local sapphire miner reading this, will know precisely what I am talking about. Today, those same buyers are engaged in an even more concerted campaign to drive the value of New England rough sapphire to levels that are clearly uneconomic for virtually all local miners. Evidence for this can be seen in the recent demise of Great Northern Mining's sapphire operations, which grew out of the substantial exploration and mining business built by Mr. Tom Nunan.
The great tragedy for Inverell today, is that there is virtually no sapphire cutting and polishing gemstone valuing-adding industry, associated with the town. This is extraordinary, given that the New England gemfields have been host to some of the richest sapphire deposits mined on Earth, containing some of the world's premier blue gem sapphire. In particular, the sapphire deposits occurring along the upper reaches of Kings Plains Creek, have probably been the richest sapphire deposits yet mined in the world today, with sapphire grades exceeding 50,000 carats per cubic meter, in some areas.
What many overseas buyers of Australian gemstones conveniently forget, is that this country is a unique location to do business, and to source high quality gems. Compared to most other gemstone producing countries, Australia is safe and convenient to visit, allowing buyers to easily acquire a wide range of stone for their on-going, day-to-day, business needs (particularly important for manufacturing operations requiring a steady source of supply). Furthermore, there are no restrictions on the export of rough gemstones from Australia, unlike many other gem producing countries such as Sri Lanka, parts of SE Asia, and China. Thus, in these ways, Australia stands in stark contrast to virtually every other place on earth that produces gemstones. The rule-of-law is enforced in Australia, making this country by far the safest, most reliable, and easiest place in the World today to explore, mine and source a variety of gemstones.
What is very interesting about the current sapphire exploration and mining situation in Australia now, is that because the buyers who have traditionally come here, are largely seen to be of little or no value to the future of the sapphire industry in NSW and Qld (and perhaps they never were, given their unconscionable behavior for all these years), for those miner's that are left, there is a growing realization that their only sustainable future lies in establishing Australian-based gemstone cutting operations that produce high quality premier material for marketing to top-end jewelers in 1st World countries; while at the same time reclaiming this country's "true-blue" Aussie sapphire heritage.
To this end, local government and business in Inverell, need to work together to establish a new sapphire industry based around local value-adding and Australia-wide tourist-based marketing of top-grade New England sapphire and sapphire jeweler. Only in this way will miners be encouraged to contribute their knowledge, resources and expertise to build a new and more sustainable gemstone industry in the Town and district. This is the trend today, in many of the world's gemstone producing areas, and particularly where large-scale gemstone resources are located.
I know, that from a geological perspective, there are still substantial sapphire resources left to be developed in the New England gemfields, and in eastern Australia as a whole. These resources can form the foundation of a new Australian-based sapphire cutting and marketing industry in Inverell that, if properly promoted, could attract visitors and jewelry manufacturers to the town from all over the world.
I commend these views to your readers, as a basis for
helping to encourage the future establishment of a new, more advanced,
sapphire industry for Inverell
Last British Company To Leave Burma
The Sydney Morning Herald, November 8, 2003
By David Jones in London
The international pressure on Burma is mounting. The Burma Campaign UK will
now go after gems. (ED)
The world's second-biggest tobacco group, British American Tobacco, has bowed
to pressure from the British Government to pull out of Burma after
international criticism of the country's human-rights record. BAT said it had
agreed on the sale of its 60 per cent share in its Burma business to a
Singapore investment firm after the British Foreign Office asked the tobacco
group in July to quit the country, which is run by a military government. The
remaining 40 per cent of the Rothmans business in Burma is held by the junta
there. "The sale agreement follows the exceptional formal request by the
British Government in July for us to reconsider our investment in the joint
venture," said BAT's director of corporate and regulatory affairs, Michael
Prideaux. The London-based tobacco group insisted the sell-off had nothing to
do with the international campaign and was solely a response to the British
Government's request. Foreign companies investing in Burma have long
been a target of Western human-rights groups who say the firms are indirectly
supporting a regime guilty of human rights abuses. BAT entered Burma in 1999
when it took over the tobacco business of London-based Rothmans. After the
Government's pressure in July, BAT had said it was reviewing its presence. The
Government welcomed the move, saying it reinforced Prime Minister Tony Blair's
message in June that trade and investment with Burma is not appropriate so
long as the regime continues to suppress the basic rights of its people. BAT
is the last big British company to pull out of Burma. The Burma Campaign UK
welcomed the move and said it would shift its focus to campaign for a ban on
imports of Burmese gems and timber into Britain and the European Union, which
are an important source of income for the regime. "This is a huge victory,"
said John Jackson, director of the Burma Campaign UK. "They had to be dragged
out kicking and screaming but at least they are out. If a company like BAT can
be forced out of Burma, any company can be."
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