VOL. 16, #2, Summer, 1998

Burma Star Ruby and Star Sapphire, Review of Coloured Diamonds Book, Auction Results, International Market Updates: Diamonds, Colombia, Burma, Tanzania, Thailand, Collectors Corner, In the News, Gem Tidbits

  Jun 24, 1998   admin




By Robert Genis

Star ruby and star sapphire are two of the most fascinating gemstones on the planet. When ruby or sapphire is discovered filled with rutile (silk), some may be cut cabochon (domed), and occasionally they produce a six-legged star. A gem that creates an eye or a star is called a phenomenon or phenomenal gemstone. Naturally, these gems are sought worldwide by connoisseurs.

Why Stars Star
As mentioned earlier, the essential element in producing a star ruby or sapphire is rutile. The more densely packed the rutile, the better the star. When light is reflected from the crystals it produces a "sheen". Asterism occurs when the light is concentrated into three rays that intersect at right angles to the direction of the needles, thus creating a six-legged star. As most know, these stones usually only star in sunlight or under strong indoor light. Of course, the synthetic stars star perfectly in all lights, which makes them simple to detect.

African and Thai corundum do not produce stars due to the lack of rutile in the material. Only Sri Lanka and Burma produce these wonderful stones. Naturally, the Burma material is the most coveted. Star ruby from Sri Lanka tends to be purplish brown. Star sapphire from Sri Lanka is light blue or grey.

pinkstar.gifStar Ruby Guidelines
The six legs of the star should be sharp (not wide and blurry) and centered. The main ray should run lengthwise. The star should be silvery or milky white. From a clarity standpoint, the stone should be semi-transparent. A star cannot be completely transparent because it is the rutile that causes the star. A star must be properly cut to create a six rayed star. The stone should not be too flat on the top or too heavy on the bottom. Many bottoms of stars look almost unfinished. This is because the gems are so rare that the cutters do everything to save weight and assume they will be mounted anyway.

In an ideal world, star ruby should be the color of a Marlboro cigarette box with pink or orange secondary colors. However, if large, three carat red stones are discovered in Mogok, Burma, they are usually faceted and sold for serious money, or cooked to remove the rutile. This puts undue pressure on procuring these gemstones. Most star rubies today are red/pink or pink/red. As a general rule, the pinks have the best stars. You can be a little forgiving of the reds if the star is not as good because reds with a perfect star are almost impossible to locate and can reach $50,000 per carat. In general, gem three carat pinks sell for about $3000+ per carat and reds begin at about $7500 per carat.

starsapp.gifStar Sapphire Guidelines
In the 1940s, Linde, a division of Union Carbide, began manufacturing synthetic star sapphires. The synthetic stars' legs were perfect, and consumers began demanding the same from the natural gems. This is really too much to ask from a natural gem. Here are some tips if you are interested in collecting natural star sapphires:

The quality of the star is vital. Grayish sapphires tend to have better stars than the top blues. Gray stones tend to be better cut than the blues. The blues tend to have sagging bellies, while the grays are flatter. This is because the blues are more translucent, and cutters must keep more of the original rough to retain a star. Therefore, to collect fine blues expect to pay for extra weight. If the star is perfect, expect to pay $5000 per carat - if you can find one. Prices of 5 carat stars are below $1000 per carat. For collectors on a budget, you can buy light blue or gray stars for 1/10 of these prices.

Famous Stars
The most famous star ruby is the 138 carat Rosser Reeves at the Smithsonian. A famous blue star sapphire is the 563 carat Star of India. A great movie that can sometimes be found on cable is "Murph the Surf" (1975), which tells the true story of two Florida beachcombers who stole the priceless Star of India from New York's American Museum of Natural History.

Grading Note
Many stars trade with country of origin only reports from the AGL. This is due to the subjective nature of grading and viewing a star. What is important is the fact the gem is not heated and from Burma.

Rarity and Price History
How rare are these gems? For every 100 faceted corundum (ruby and sapphire) mined, approximately three stars are discovered. One will have good color and a bad star. One will have a great star and bad color. Only one out of a hundred will have a good star and good color. Fine stars are rarer than rare. Until the 1960s, these stones always sold for more than the faceted ruby. For example, in the late 19th century, three carat star rubies went for $3000 per carat. Stones found today that could be cut into stars are routinely heated to dissolve the rutile and then faceted. Also, US buyers must compete with the Japanese and the Europeans who will pay any price for these gems. Production today in Mogok is yielding a small amount of goods. It makes sense to collect gemstones that are 100X rarer than faceted stones and sell for less on a per carat basis. We believe these stones should eventually trade for more than their faceted counterparts. This would reflect their true value based upon rarity.

If a fine star ruby or sapphire is properly lit, the needles reflect the light in such a manner that it appears the star is hovering over the gemstone. The star wanders as the light is moved, enhancing the mystery of these special stones. Every serious collector should own one of these gemstones. If your budget is tight, you can trade in the light blue sapphire stars or pink star rubies. If you are seeking the ultimate stars, search for fine reds and intense blues. These stones are becoming popular again and are in high demand.


colourdiabk.gifCollecting and Classifying Coloured Diamonds
By Stephen C. Hofer, 742 pages, $300
"I have come to the realization that coloured diamonds, or other gemstones, should first be considered as a unique and individual work of art, and second as a commodity to be analyzed, computerized, and categorized."
Stephen Hofer, 1998

This is a book about obsession. The obsession of Alan Bronstein and Harry Rodman to collect colored diamonds and the 7 year obsession of Stephen Hofer to produce this significant work.

Aurora Collection
This book begins with a study of the Aurora Collection. Alan Bronstein started the Aurora with 10-12 stones as masters. He was simply a collector who searched out colored diamonds. Rather than specialize in one color, he bought as many different colors as he could find. Eventually he collected nearly 60 gems. With the financial help of Harry Rodman, the collection was aggressively expanded. By 1988, it contained 128 colored diamonds and was put on display at the American Museum of Natural History in New York. Today, the collection numbers 260. The book has a photograph of every diamond in the collection with descriptive and technical data. Although the majority of the colored diamonds are small and most of the colors are yellow and brown or their derivatives, the fact they collected these stones is an amazing feat.

Why collect colored diamonds? According to Hofer, people collect colored diamonds because they are intrigued with a particular color, are fascinated with the history of a specific stone, fall in love with an old piece of jewelry that contains colored diamonds, or are in search of perfection, such as a flawless fancy intense gem.

What colored diamonds do individuals collect? Some specialize in only one color, such as yellows or blues, some collect obscure colors, such as browns and purple, some collect nature's colors such as yellow and orange, some collect somber colors, such as gray and olive, and some collect odd shapes. To be a serious collector you must:

  1. Buy stones to use as masters to compare new stones.
  2. Visit museums and auction houses.
  3. Deal with colored diamond dealers and retail jewelers who are versed in these goods.

Collecting colored diamonds is not easy. You must have patience and good luck to be successful.

White diamonds were always scarce and expensive in ancient times. The first colored diamonds came from Persia and the Far East. The value of colored diamonds have been driven by the success of world economies. For the last 15 years, colored diamonds have broken worldwide price levels, leveled off and then continued to reach new highs. Today, colored diamonds are the most valuable gemstone in the world. For those interested in pricing information, a table of the highest prices paid at auction for colored diamonds is included.

Color Perception
Perception is the art of seeing the color in colored diamonds. The three factors in grading colored diamonds are the light, the observer, and the colored diamond. What collectors and connoisseurs understand and gem dealers do not is that beauty is in the eye of the beholder. According to Hofer, too many dealers get hung-up on labels such as "Fancy Intense". His advice is to learn how to grade colored diamonds yourself.

How to Grade Colored Diamonds
Hofer recommends using the rapid color method to grade colored diamonds. Place the stone face down on a white grading tray and gently tilt it until your eyes become familiar with the true "body" color. Once you have imprinted the body color into your mind, flip the stone face-up (90 degrees) and try to become familiar with the pattern of colors in the face. Then grade and rate these areas into color-area-micro-patterns, or CAMP. Of course, rounds will show the most consistent color pattern.

Problems in Colored Diamond Classification
One major obstacle in devising any colored diamond grading system is the lack of available colored diamonds. Hofer's system grew out of photographing every colored diamond that went through his CDLS lab and the Aurora collection. Hofer believes a major problem of the new GIA colored diamond system is that it is based on Munsell opaque chips. He believes you cannot compare opaque color samples with transparent diamonds.

Universal Diamond Color Language
Hofer has devised a six level Universal Diamond Color Language. For example, a brown diamond might look like this:

  • Common name: topaz
  • Variety: brown
  • Modifier: pinkish orange
  • Lightness: light
  • Saturation: moderate
  • Numerical Color Notation: a*=5.1 b*=11.1 L*=70 C*=12.2

To use the system, you could call a brown diamond topaz. Or you could say it is brown (variety), pinkish orange (modifiers), light (lightness), moderate (saturation). Finally, you could use the numerical color notation.

The colored diamond industry has not accepted this new language because it is too complicated. Hofer has forgotten a basic principle of any grading system: KISS, or keep it simple stupid.

Even dealers who dislike the present system have been slow to embrace this new terminology. Collectors are more interested in the terminology because it allows them to buy with more accuracy. Hofer contends his lab failed because the established diamond market is too steeped in politics and tradition. He criticizes the diamond industry for preserving the mystique of diamonds for marketing reasons rather than learning about them scientifically.

Face Up Color
According to Hofer, color grades today are incomplete, educated guesses. Labs do not characterize all the different colors of a colored diamond in the face up position. Instead, the colors are subjectively determined to represent the characteristic color, or the colors are "averaged" compared to a set of opaque masters. This causes confusion among buyers and sellers. Terms such as "intense" are appealing and favor the seller but may create disappointment for the buyer.

Classifications: Varieties, Modifiers, Tones
Hofer has measured thousands of colored diamonds with a Colorimeter and plotted the data on two-dimensional charts and graphs. The result is 12 different colors: black, blue, brown, gray, green, olive, orange, pink, purple, red, white, and yellow. This book provides a color code system for classifying over 275 colors.

This section is invaluable, prime reference material. It is impossible for most of us to acquire a large number of colored diamond masters. These photos serve as masters and will give you a starting point when buying/selling colored diamonds. Although it is difficult to accurately compare a two-dimensional photograph with a three-dimensional diamond, it is better than using your color memory.

This book pushes the envelope of colored diamond grading science. This serious work needs to be read and discussed by diamond dealers, jewelers, gemologists, and collectors. Although a great deal of the book is extremely technical and will require re-reading, it is well worth the effort. Colored diamond books are almost as rare as colored diamonds. Collecting and Classifying Coloured Diamonds will also be a welcome addition to your gemological library.
To order call Ashland Press at 1-800-451-2558.


Christie's (February, `98 Sales)
Colored Diamonds
A 2.80, oval, light pink diamond, VS2 fetched $27,970 per carat. A 3.24, oval, vivid yellow diamond, SI1 sold for $23,000 per carat. Two carat size, circular, vivid yellow diamonds fetched $35,430 per carat. A cushion, 4.73, Burmese sapphire sold for $17,178 per carat and a cushion, 7.70, Burmese sapphire sold for $18,056 per carat. A 9.71, Colombian emerald sold for $9629 per carat.

Christie's Magnificent Jewels, April, `98
Christie's New York April auction sold $31.43 million or 71 percent of lots. A 9.12, vivid yellow diamond went for $178,235 per carat and 51.04, G, VVS1 diamond sold for $32,376 per carat. Sales of unspectacular fancy colored diamonds were very disappointing. A 5.16, emerald cut, Colombian emerald sold for $85,756 per carat and a 5.07, oval, Burma ruby fetched $30,868 per carat.

Eva Peron Brooch

peronbr.gifThis brooch of Argentina's flag was created by Van Cleef and Arpels in the 1940s. It was owned by Eva Peron, the wife of Argentinean leader Juan Peron, who ruled the country from 1946 to 1955. She wore the brooch at gala evenings, on official visits, and during public appearances. The brooch is platinum and has 7 baguette diamonds as a flagstaff, the top and the bottom of the flag are square cut sapphires, and the center is square cut pave diamonds. The sun is represented by yellow diamonds.

Argentinean star Susana Gimenez flew in from Buenas Aires to bid on the piece. She was described as blonde, tanned, and scantily dressed in black. The rumor was she was bidding against Madonna on the telephone. The exciting bidding war rocketed the price from its $80,000-$120,000 estimate to a final sale price of $992,000. The new owner of the piece turned out to be a private American collector of historical objects.

US Customs Colored Diamonds
As reported in GF 15, #4, the US Government confiscated 33 colored diamonds from Stephen Jenks, an infamous drug dealer who also collected fancy colored diamonds. In 1982 Jenks was being investigated on 17 charges of transporting 55,000 pounds of marijuana from Colombia between 1978 and 1982. He fled to Europe to avoid prosecution for 12 years. Jenks returned to the US in 1994 and began recontacting his old business partners. Due to a wiretap, he was arrested in Ft. Myers, FL in 1994. He was sentenced to three years in prison and all his property was confiscated in 1995. The colored diamonds sold for $1.9 million, or close to four times the pre-sale estimate.

Here are what the major stones sold for:

  • 3.04, Marquise, Fancy Blue, SI2
    Price Sold: $120,230 per carat
  • 2.21, Emerald, Fancy Intense Purplish Pink, I1
    Price Sold: $135,520 per carat
  • 1.97, Square, Fancy Intense Purplish Pink, I1
    Price Sold: $62,690 per carat
  • 1.83, Emerald, Fancy Purplish Pink, VS2
    Price Sold: $145,628 per carat
  • 1.15, Round, Fancy Purplish Pink, SI1
    Price Sold: $212,609 per carat
  • 1.12, Oval, Fancy Intense Yellow, SI2
    Price Sold: $18,482 per carat
  • 1.02, Oval, Fancy Purplish Pink, SI1
    Price Sold: $58,529 per carat

Why did these colored diamonds sell when others at the auction did not? Wisely, the US Customs put reserves way under the market. This inspired interest and bidding and resulted in high prices for the goods. Other colored diamond sellers priced their goods at the market and went unsold. The lesson seems to be consigners must shoulder some of the risk by putting their goods under the market to inspire bidding.

Colored Diamonds
A 2.84, step cut, blue grey diamond, VS1 sold for $35,593 per carat. Two matching 3 carat, pear shaped, blue diamonds, VS2-VVS2 sold for $67,475 per carat. A 3.12, vivid yellow diamond, IF, sold for $51,861 per carat. A cushion, 4.42, Burma sapphire fetched $8258 per carat and a 3.29, Burma ruby fetched $20,574 per carat.

The spring auction season in New York ended with a whimper at Sotheby's on April 9 with the sale totaling a mere $17,114,482. The sales room was half-full at best and many pieces remained unsold. Historical, signed pieces did well, with the famed Tiffany Moonlight Rose bracelet garnering $525,000. White diamonds sold if the quality and price were right. Yellow diamonds sold well with a 9.38 carat, fancy vivid yellow diamond from Van Cleef & Arpels stealing the spotlight when it sold for $855,000. Perhaps the most disappointing moment of the sale came when the fancy deep blue diamond, weighing 15.98 carats, failed to sell. The bidding stopped at $4.5 million, short of the $5 million estimate. Despite the GIA fancy deep blue grade, observers described the color as "depressing and over saturated" and the cutting of the stone as "windowed and black because of the bow-tie."


Blue Fluorescence
For years, diamond dealers have been arguing about blue fluorescence. The Gemstone Forecaster has always held blue fluorescence makes diamonds prettier and more valuable. Other dealers say it makes them less valuable. When our parents and grandparents were buying diamonds, the ultimate diamond was termed a blue white. This was a D/E/F color with strong blue fluorescence. Problems arose when jewelers began selling stones that were not D/E/F colors and without blue fluorescence as blue white. The FTC banned this term in 1938.

The GIA recently conducted a study on the effect of blue fluorescence and the appearance of diamonds. The conclusion? Blue fluorescence either helps or has no effect on a stone's appearance and most consumers do not notice anyway. Further, most veteran GIA graders thought strong fluorescence diamonds had a better appearance when viewed through the table, but saw no difference when viewed table-down. Most observers saw no relationship between fluorescence and transparency. The bottom line is you need to look at these fluorescent stones. Take them outside in the sun and look for a blue undertone. If you like them you can usually buy them less expensively than similar stones without fluorescence.

Diamond Market
The diamond market is presently moving sideways. Prices have not increased significantly because the US market is flooded with supplies of diamonds from foreign cutting centers. These international firms seek to unload the diamonds they used to sell in the Far East. Competition is fierce and US retailers now have a broad selection of goods and suppliers available to them at discounted prices. De Beers CSO rough cutbacks are steadily decreasing overall supplies from the cutting centers. The current surplus is expected to erode sharply for 3/4 and larger, better color goods by end of summer.

Emerald Congress
During the conference, Victor Carranza, Colombia's emerald czar, was arrested by the Colombian military. He was charged with organizing a right-wing death squad. Carranza, 63, owner of the Muzo and Cosquez emerald mines, was the main organizer of the event. More than 600 emerald miners and 200 gemologists attended. Due to the present recession in Colombian emeralds, the Colombian gem dealers agreed only to treat their emeralds with cedarwood oil or Gematrat. This agreement will expire after the GIA publishes its long awaited research report on emerald treatments.

Emerald Production Today
The vast majority of emeralds today are from the Muzo and Cosquez mines. Both of these mines are known for their green-yellow colors. Cosquez now accounts for 60-85% of today's production. Most of this production is cut into squarish emerald cuts.

Most of the production at Muzo is taking place in underground shafts. Miners use pickaxes and drills and load the black shale onto ore carts, then haul it to the surface for cleaning and sorting.

There are several open tunnels at Cosquez. The material where emerald is found is gray shale. The tunnels are filled with 1/2 foot of water and the ceiling is so low you have to crouch. Collapses are common.

Chivor is the other main mining district in Colombia. In 1996, a Canadian company, Chivor Emerald Corporation, Ltd. bought an 80% stake in the mine. The new company uses computers and modern mining methods to search for rough emerald. Its software plots mining moves with three-dimensional diagrams. They have only found about $250,000 worth of stones so far. These stones tend to be longer emerald cuts and green-blue in color. The one advantage to these stones is that they are cleaner than the goods from Muzo and Cosquez and sometimes do not require oiling.

Nearly Half of Colombians Want To Leave
According to recent poll by Reuters, nearly half of all Colombians would like to start a new life abroad because of rampant violence and the deteriorating job situation at home. The telephone survey showed 45 percent of those questioned would like to leave the country and more than 33 percent said the United States would be their first choice of destinations. Among those who said they would like to leave Colombia, 38 percent said they would do so for "economic and professional reasons". Colombia's National Statistics Department said urban unemployment had reached 14.5 percent, the worst level in 10 years. About 33 percent said they would leave the country to escape insecurity and violence. Colombia is one of the most violent countries in Latin America with more than 25,000 homicides and 1,800 kidnappings last year. It also has the oldest and largest guerrilla forces in the hemisphere and US officials and Western diplomats estimate the rebels now have de facto control of at least 40 percent of the country. Three-quarters of those polled said the overall situation in Colombia was getting worse, with only 7 percent saying it was improving.

Presidential Campaign
On May 31, the presidential election was held in Colombia. The ruling Liberal party's Horacio Serpa won 34.4%, compared to 34.3% for the Conservative's Andres Pastrana, a former mayor of the capital, Bogota, and son of a former president. The run-off will take place on June 21. At least 11 people were killed and four wounded in election-related violence. More than 220,000 soldiers and police were on alert to counter a sabotage campaign by left-wing guerrillas. Fighting between the guerrillas and government troops accounted for eight of the deaths. A bomb in the strategically important oil refinery town of Barrancaberneja killed three people and injured two soldiers. Police said they suspected the bomb was planted by National Liberation Army rebels. In other attacks, in 16 of the country's 32 provinces, rebels are reported to have kidnapped at least 14 election officials. They have also burned ballot papers. Large parts of southern Colombia are without electricity after two bombs brought down power lines. In the late 1980s and early 1990s, Pablo Escobar, the late kingpin of the notorious Medellin drug mob, launched a bloody series of bomb attacks in Bogota and the northwest city of Medellin as he successfully battled to force the government to ban the extradition of drug lords. But the Medellin cartel fragmented after police shot Escobar to death on a Medellin roof top in 1993 and there has been no repeat of urban bombings on that scale. Both the Revolutionary Armed Forces of Colombia, Latin America's oldest and largest rebel group, and the smaller National Liberation Army have urban guerrilla units and a network of urban militia fighters. But until now the rebels have concentrated their fight in the countryside. One of Colombia's bloodiest election campaigns was the 1990 presidential poll. Three candidates, including the front-runner, were assassinated.

Reports from Burma indicate unheated 1 to 2 carat Mogok rubies and 3+ carat sapphires in top qualities are becoming increasingly rare. Rubies above 1.5 carats, of any quality, are in short supply and the prices are rising. Larger stones are almost impossible to find, and when they hit the market they are quickly bought.

The Burmese government is trying to crack down on smuggling and now requires all loose stone purchases to be sealed, initialed by customs, and declared/shown at the airport upon departure. Dealers must also pay the 10% tax at the time the goods are sealed.

Thai buyers are purchasing large quantities of low quality ruby and sapphire rough, and heating it in Chantaburi.

In April, 14 tanzanite mines were closed after heavy rains and flash floods caused the mines to collapse, trapping miners hundreds of feet below the surface. As many as 100-200 miners were feared dead. By the end of May, rescuers had recovered only 65 bodies after six weeks of heavy rains and mud slides flooded mine shafts in northern Tanzania. Miners urged the government to stop searching and end an April 13 ban on mining at the site. The government said, however, that safety measures must be in place before they resume digging for tanzanite. The miners, who are licensed by the state and work for themselves, normally dig shafts by hand and use ropes to lower themselves to remove soil and gemstones. These mines are the only consistent supply of tanzanite. The mines are expected to reopen in July. Since production has been low for the last year, expect prices to climb about 20-30%.

The market for commercial quality Thai and Cambodian ruby and sapphire is weak. Some report goods are down 20-40%. Fine gems are just not being shown because the holders of the highest quality goods do not want to sell and lose money. They will simply put these gems in their vaults until the market improves.



reddia.gif Red Diamond
William Goldberg recently cut a 13.90 rough Brazilian red diamond crystal into a 5.11 gemstone. This is the largest red diamond ever graded by the GIA.



The Florida Times-Union
"In film, books and popular culture, precious jewels - diamonds, rubies, emeralds and sapphires - are the stuff dreams are made of. They are the playthings of the rich, an embodiment of untold wealth and the targets of bank vault heists and cat burglars.

Diamonds should be considered in the same light as a sculpture or painting...They're a collectible. There is no stock market for diamonds. Except in times of chaos, such as war, revolution and economic turbulence, gems ought to be viewed primarily as a luxury item. They answer a desire, a want...They show affection. They show appreciation. They show commitment. The entire idea of gems as an investment has to do with their portability...In nations where there is political or economic instability, the ability to pack a suitcase with one's wealth in diamonds has a great attraction. Then there are the really rare stones: colored diamonds such as pinks, blues, yellows and greens. Prices for these have gone up over the last decade...A deep blue diamond can fetch between $100,000 to $500,000 a carat at auction. Such a figure that is out of reach for the average consumer. Investing in such rare gems, like investing in Impressionist art, is just not an option for most people. Gems are a luxury item...They are to be enjoyed like a sports car or a fancy sailboat. A precious stone is an investment in happiness."

National Jeweler, April, 1998
"Although sapphire is always described as a crisp and cool hue, blue corundum stands alone as the hottest selling gemstone on today's market. Of the classic three gemstones, sapphire is the most popular among consumers due to its widespread availability and inexpensive price compared to that of ruby and emerald. The majority of available stones are less than 2 carats."
"The vibrant coloring and durability of ruby, for it shares the same physical properties of sapphire, have also made red corundum a popular choice. But unlike its blue brother, rubies are facing a few supply and treatment problems. Quality rubies in sizes larger than 2 carats are extremely scarce, according to multiple sources. As a result, already expensive ruby prices are being driven up further."
"Of the classic three gemstones, emeralds have been the weakest seller in recent months, according to sources. All the controversy surrounding the non-permanant enhancement methods and a recent television expose on synthetics have further undermined customer demand for emerald. Some jewelers have either cut back or completely stopped carrying emeralds, because of all the answered questions concerning treatment and durability. As a result, emerald prices and sales have faltered.

However, all this may turn for the better. Jewelers are likely to invest additional money into emeralds once they are confident that prices will remain stable. If people are confident they aren't going to lose money on an investment, they will start stocking up on stones."

Houston Chronicle, February 19, 1998
Emerald Miners Rework Gem's Image
"COSCUEZ, Colombia -- Hunched over, their faces streaked black with dirt, hundreds of emerald miners dig day and night with picks and sledgehammers in search of the sparkling green gemstones that -- after coffee and cocaine -- are Colombia's most famous export.

Nestled between the craggy mountain peaks of central Boyaca state, Cosquez is an emerald city. It is dominated by a series of shaft and open-pit mines that have helped to make Colombia the global leader in emerald production. This is the area where miners uncovered the 7,000-carat Emilia, one of the largest emeralds in the world. It is also the home of Victor Carranza, the "Juan Valdez" of Colombian emeralds, who uncovered his first gem at the age of 10 and is now one of the nation's richest men.

"These hills are full of emeralds. If you dig long enough, you will find them," said Itamar Avinami, an emerald dealer in Bogota, as he removed a gleaming specimen, worth about $10,000, from a piece of tissue paper. But like much of Colombia, the emerald industry has been wracked by violence and corrupted by drug traffickers. Although the nation still provides 60 percent of the world's emerald supply, such troubles have discouraged new investment and exploration. Analysts fear that several of the mines are just about tapped out. Developing new ones is an expensive, high-risk proposition.

"We are still exploiting the same mines that the Indians discovered during the time of the conquistadors," said Pablo Elias Delgadillo, a Colombian mining magnate. Emeralds are among the world's most precious gems and are much rarer than diamonds. In some cultures, they symbolize fertility, luck or eternal love. Experts have identified 64 shades of emerald green.

Spanish explorers searching for salt stumbled upon Colombia's emerald mines in the Andean highlands. The resulting war with local Indian tribes lasted 60 years. In the 1970s, state-run mines were bleeding money due to widespread smuggling and were turned over to private operators. But soon, left-wing guerrillas and drug traffickers, led by Gonzalo Rodriguez Gacha, known as El Mexicano, tried to move in. The mines were coveted for their wealth and strategic location adjacent to Antioquia state, the home of Gacha's one-time ally, the late drug lord Pablo Escobar. The business also became a favorite way to launder drug profits. Drug traffickers do this by creating a fake company that appears to be profiting from the gem business or by turning to confederates whose books report the drug dealers are earning cash on gem deals.

The miners, led by Carranza, formed private armies and fought back. An informal truce was declared in 1990, but by then, more than 3,500 people -- including Gacha -- were dead. At the height of the war, drug lords stuffed a labor leader into a burlap bag and dropped him from an airplane flying over the mining town of Muzo.

"When there is so much money involved and a long history of violence, it's very difficult to talk of a lasting peace," said Miguel Maza Marquez, who was director of Colombia's equivalent of the FBI during the so-called "green wars".

Now the industry wants to use this period of relative peace to bring in much-needed investment in new mines. Major spending is needed to develop this industry in Colombia. Billions of dollars in stones have been smuggled out of the country without taxes being paid. The jewelry business was never fully developed; 85 percent of legal exports are of rough stones, which are less profitable than crafted emerald rings and bracelets.

International prices have fallen. And except for a few Canadian mining concerns, foreigners have largely avoided Colombia. Of the 1.6 million acres that geologists have identified as having potential emerald veins, only 7,054 acres are being mined. Part of the problem is that it's impossible to confirm the presence of emeralds without a major excavation. Developing new mines "is very risky and requires a large investment," said Jose Antonio Duran, president of the industry group, Fedesmeraldas, in Bogota. Delgadillo said he recently sank $3 million into a 5,000-foot tunnel mine but has yet to find one emerald. "This is a business for crazy people because no one really knows" where the emeralds are located, said Nestor Ramirez, an emerald buyer in Cosquez.

The industry wants to create an organization with the power to control the market, like the De Beers syndicate, which controls prices in the diamond market by limiting the supply of uncut stones for sale. Fedesmeraldas will unveil a publicity campaign for emeralds similar to the highly successful print advertisements for diamonds. The long-term goal is to make emeralds the No. 3 legal export after oil and coffee.

Mining veterans say the industry has already started to rebound. "I have seen huge transformations," said Javier Guerrero, a sociologist who recalled his visits to the mines in the 1980s, when you never knew when someone might point a gun at you. "They are making a big effort to legalize the business, attract investment ... and become legitimate businessmen." Yet the shady image of the trade is hard to shake. It even inspired a sultry Colombian soap opera called Green Fire.

Exports peaked at $456 million in 1995, but money-laundering schemes may have accounted for more than half of that, Delgadillo said. Last year, exports dropped to about $130 million, and Duran estimates that 10 percent of production continues to be smuggled out of the country."


The FBI is investigating links between Chicago police and jewel thieves. Allegedly, the police used computer databases to tip the thieves to the home addresses and travel itineraries of couriers and jewelry salespeople. The case is the result of a 22 month wiretap. Justice sources say the thieves stole $16 million worth of goods across the country.

Los Angeles
About 50 South American gang members have been recently arrested. They have been targeting jewelry salespeople. According to the Los Angeles Times, these thieves have netted around $200 million in goods. The arrests were the result of a special task force using surveillance and sting operations. The LAPD has created a computer database of several hundred jewelry suspects. Expect these robbers to move to other areas now.

Valentine Carat Candy Taxes
In the last Gemstone Forecaster we discussed the Godiva promotion of giving away a Jacqueline Kennedy Onassis necklace. It was won by Susan Fisher of Long Island. The downside? The medical secretary had to pay $45,000 in taxes to retain the necklace. She decided to auction off the piece and set up a trust fund for her two children.

Christie's Sold
The international auction house was recently sold to French businessman and art collector Francois Pinault. The 233-year old institution will return to private ownership after 25 years as a public company. Pinault, a self-made billionaire with financial assets in companies ranging from luggage maker Samsonite to Chateau Latour wine, will reportedly offer $6.57 per share for Christie's, a price that would value the firm at $1.2 billion. Pinault became the largest shareholder of Christie's in May, 1998 when his holding company, Artemis, acquired 29.1 percent of the auctioneer from British businessman Joseph Lewis for $242.8 million.

The information provided in this newsletter has been derived from research and sources believed to be reliable. However, no guarantee is expressed or implied as to their validity. Opinions included herein are subject to change without notice. The gem market is speculative and unregulated. Certification does not eliminate all risks associated with the grading of gems. Recommendations are meant for those who are financially suited for the risks involved. Past performance is not a guarantee of future performance. Neither NGC nor The Gemstone Forecaster guarantee a profit or that losses may not be incurred as a result of following its recommendations. They may also hold positions in areas they recommend. Subscribers should not view this publication as investment advice, nor is it intended as an offer or solicitation with respect to the purchase or sale of any security.