VOL. 17, #2, Summer, 1999

Colored Stone Magazine on Investing in Gemstones, The New Diamond Controversy, Book Review: Fire Into Ice, Auction Report, International Market Updates: Mogok Burma Report, GIA Emerald Study, AGL and Gematrat Emeralds, Collectors Corner, In The News

  Jun 24, 1999   admin



By Robert Genis

In the May/June, 1999 issue of "Colored Stone Magazine" (60 Chestnut Ave., #201, Devon, PA, 19333, 610-293-1112, $29.95/year), a trade publication, Mark Lurie wrote an excellent article regarding gemstones as an investment. National Gemstone was interviewed as a source, but specifically dealt with gemstones from a collector's viewpoint. The following is an excerpt which should be of interest to collectors:

Insider Picks
Most dealers and retailers spoken to for this article strongly discourage people from investing in gemstones purely for profit. At the same time, even customers who have no intention of selling are interested in seeing their stones appreciate in value. When asked, few in the trade will hesitate to offer their opinion on stones that are likely to rise -- or fall.

Among the "Big Three" of ruby, emerald, and sapphire, emerald has its supporters and skeptics. Some say that until the Gemological Institute of America issues its report on emerald treatments, the market will avoid the stone, whose value could be adversely affected depending on which treatments the trade deems unstable or harmful. On the other hand, right now prices are unusually low -- a condition which won't last much longer, says dealer Robert Linder. "I think top-quality emeralds are the exceptional buy in the colored stone market right now," he says. Ruby and sapphire also evoked some disagreement. While ruby prices are generally rising, no one knows when this upward movement will meet with a "correction". "I'm not buying ruby this year. I'm waiting till next year, when I think the price will be lower," says jeweler Judith Anderson, who is predicting yet another industry expose on harmful treatments. Sapphire is still affordable, due to good production, but most aren't predicting major hikes any time soon. In general, though, dealers say collectors should think twice before passing on an extra fine, unheated Mogok ruby or Kashmir sapphire -- stones which continue to escalate in value regardless of what happens to the overall ruby and sapphire market. "They're almost like blue chips," says Robert Genis of National Gemstone, adding that the collector's market he caters to is generally not interested in heated goods such as Mong Hsu or Thai rubies or Ceylon sapphires.

Outside the Big Three, most say that despite rising prices tanzanite is still a good buy, considering the levels it could reach if problems at the source continue. Other frequent recommendations include tsavorite, demantoid garnet, mandarin orange garnet, and color change stones such as alexandrite. Another favorite within the trade is Burmese red spinel. With a hardness of 8 on the Mohs scale, and a color comparable to ruby, red spinel was a popular choice to shoot up in value as the public becomes more aware of this increasingly rare gem. Since rarity is a major factor in determining how valuable a stone can become, Betsy Smith of House of Onyx recommends single deposit stones, particularly American gems such as benitoite, red beryl, and Oregon sunstone in its highly-sought-after reddish color. Rarity, however, is no guarantee that a stone's value will rise. Genis points out that if supplies remain too low, collectors could lose interest, causing prices to fall.

One stone which collectors and dealers will be eyeing for signs of market volatility is Paraiba tourmaline. At $15,000 per carat for top-quality material, Genis feels the stone may have reached its peak. "If you have two Paraibas, to me it makes sense to trade one and keep your position" he says. "Price is a function of how well a stone is known, how long it has been marketed, and what sort of a brand awareness it has," he continues, pointing to Kashmir sapphire as a stone far more likely to hold and surpass its current value than the less widely-known Paraiba tourmaline. "Besides, we know they're not going to find anymore Kashmir sapphires."


Lazare Kaplan Treats Diamonds
Diamond dealer Lazare Kaplan (LKI) announced a ten year exclusive worldwide marketing agreement with General Electric Corporation (GE). They will eventually begin marketing diamonds treated by a new secret process. It is believed the irreversible, permanent process can significantly enhance the color, brilliance, and brightness of certain types of rough and polished diamonds. There have been rumors for years that Russian growers were working on a similar process. LKI contends the treatment is undetectable and will remain undetectable. The new process has not been patented by GE to keep it secret. LKI plans to sell up to $200 million of these treated diamonds over the next three years. It is rumored LKI sent thousands of stones through the major labs and the labs did not detect the treatment. A subsidiary company in Antwerp, Pegasus Overseas Limited (POL), has been created by LKI to be the exclusive seller of the treated stones. LKI contends the sale of their treated diamonds will have a very limited impact on the marketplace due to the relatively insignificant amounts of diamonds to be sold. According to LKI, only about 1% of all diamonds respond to the treatment process. Reports indicate that LKI has been buying up large quantities of select types of brownish color diamonds in Antwerp, Belgium over the past year. It is believed LKI plans on treating the rough and polished diamonds, but the treatment will not be available to the trade.

LKI's original position was that since the treatment process is permanent and undetectable, it therefore should not require disclosure. In defense of LKI, they could have simply sold the diamonds without disclosing the fact the diamonds were treated. The GIA properly argued that despite the fact this treatment is not detectable today, it does not mean it will not be detectable tomorrow, and the treatment should be disclosed on their reports. Until this fiasco, firms worked, in advance, with the GIA to disclose treatments. I am dismayed by LKI's apparent desire to trick the GIA by not disclosing this treatment. Although LKI eventually capitulated to the GIA's position, it was only after a fire storm broke out in the trade press. I found LKI's original position extremely irresponsible. What would happen to the diamond market if consumers learned in the future their diamonds had been treated by this process and were not told? Could you imagine what the network news programs would do with this story?

GE and LKI have pledged to assist GIA in their independent research study of the GE color enhancement process. GIA is expected to do everything they can to discover a method of detecting the GE process as soon as possible, but may not have detection capabilities before the Pegasus stones are put on the market for sale. However, reports indicate LKI is simply sending the treated diamonds to the GIA, and not the stones before they were treated. Of course, the GIA needs the product "before and after" the treatment to conduct proper comparison research. Hopefully, the parties involved will work this out.

All Pegasus diamonds that have previously been submitted to GIA and acquired GIA grading reports without the disclosure comment will be returned to GIA for new grading reports. The present plan is for LKI to laser inscribe all color enhanced Pegasus Overseas Limited (POL) diamonds with the letters GE POL on the girdle. The laser inscription will ensure that the first buyers are given notice that the diamonds have been color enhanced.

LKI Process
A press statement from Pegasus says that the new treatment does not involve irradiation, laser drilling, surface coating or fracture filling. So how are they improving certain diamonds? The likely option is annealing, or heat and pressure. Annealing mimics the high pressure found in nature and changes the molecular structure but does not add anything artificial to the stone. This treatment is already being used to improve the color of synthetic colored diamonds in Russia. This method is now detectable with synthetic colored diamonds. The Russians manufacturers also say they can improve the color of off-white diamonds, and have plans to bring these stones to the market in the future. The plan is to market the stones at 10% to 15% below what an untreated diamond should sell for in the wholesale market.

The Bottom Line
The issue remains: If a treatment is undetectable, is it a treatment? LKI is arguing that since no one can tell that the stone has been treated, for all intents and purposes, it is not treated. I find this position ludicrous because, at some time in the near future, it will probably be detectable. These diamonds need to be differentiated from the general population of stones. Sellers must accept responsibility for disclosure whether or not the customer can presently detect it. Just because you cannot presently tell a stone is treated doesn't mean it isn't treated. Also, just because this treatment may only affect 1% of diamonds today, does that mean the process will not be refined and may affect a larger population in the future? Of course that scenario is possible.

Price Directions?
Consumers and dealers will pay a premium price for a stone if they know that the stone is definitely untreated. If this issue is not resolved, the prices for the treatable diamonds will fall. It is rational to assume a brownish diamond should sell for the price of a brownish diamond plus the treatment process, not for the price of an E color. Another interesting scenario could be that prices for low color, treatable stones may go up and prices for high color, treatable stones may go lower. This might occur if LKI and the Russians continue to buy large quantities of brownish diamonds in an attempt to find stones that are treatable. There may be a loss of confidence in the high color stones since we do not know if they are treatable or not. Another problem may occur if dishonest buyers of GE processed diamonds recut the stones, resubmit to GIA and obtain a disclosure-free GIA report. The bottom line is that despite the good intentions and actions of all parties involved, it might be possible for dishonest diamond people to sell GE processed diamonds as the real thing.

Until now, you could assume a diamond was untreated. From now on, the only way you can know that a diamond is untreated is if you have an affirmative statement insuring that the diamond is a natural, untreated stone or you are purchasing diamonds with old diamond grading reports. Perhaps De Beers or the new Canadian mine will market diamonds attesting to the stones' natural origin? Of course, all these worries should vanish if a major lab can detect the treatment. Cap Beesley of the AGL has stated he will be able to detect these treated diamonds imminently. According to Beesley, "It's a fundamental principle of the gemological process that tampering with natural materials results in an identifiable fingerprint that is detectable."

The bottom line is consumers and dealers deserve to know if their diamonds are natural. Please learn a lesson from the colored stone industry. Assist the labs with research and disclose everything. If you do not, you may gain a small temporary price advantage, but in the long run, it will hurt the industry. Never forget, uncertainty and insecurity regarding treatment is negative for any gemstone market.


FireIce.gif Fire Into Ice
Charles Fipke & The Great Diamond Hunt
by Vernon Frolick
Raincoast Books -Vancouver, Canada
354 Pages, 1999
$21.95 US

Truthfully, have you ever thought of a geologist as a romantic adventurer? Did you know a world class geologist must possess the investigative skills of Sherlock Holmes? This book is the real life saga of Canadian geologist Charles Fipke, a modern Indiana Jones-type adventurer.

"Fire Into Ice" details the trials and tribulations of Charles Fipke's nearly 20 year quest for diamonds. It is actually two books in one as Fipke is also part anthropologist and social scientist. The book weaves its way through numerous encounters with native peoples of the world from Papua New Guinea, South Africa, and South America. I found his account of the time he spent with the Forest Pygmies and San Bushman in Africa riveting. Fipke shared world views with these native people on numerous subjects, such as religion, shamans, women, sex, death, and even cannibalism. Some of the more intriguing scenes remind me of the old Michael Caine and Sean Connery movie "The Man Who Would Be King". It is fascinating to read of the real life interactions of the local peoples with the high technology of the West. Plus, the book details numerous examples of harrowing escapes from wild animals and contains picturesque descriptions of the flora and fauna in remote jungles, barren deserts, and Arctic locations.

The second part of the book is of most interest to gem aficionados and those in the jewelry business as it describes Fipke's fascination with gemstones. I was particularly interested in the parts where he bought or traded for colored gemstones. For example, Fipke's involvement in the Lightning Ridge Black Opal discovery in Australia and how he acquired a black opal for $15 in 1972 that was probably worth $3000 per carat at the time. He also spends time in Tanzania buying tanzanite and ruby. We all know how the book ends. It ends at Ekati, a mile-wide crater in the tundra 125 miles south of the Arctic Circle. What we do not know is how we got there, or why the Australian mining giant, Broken Hill Proprietary Co. (BHP), invested $700 million searching for diamonds in Canada. "Fire Into Ice" documents the machinations of funding an exploration company at the Vancouver Stock Exchange, an exchange known for its scams and frauds, and details countless joint venture mutations gone awry. It tells of problems created as Canada kept changing her tax laws, and the trials of exploration being shut down during Canada's brutal winters. "Fire Into Ice" gives us an insider's first hand account of the details of how the story unfolds. In spades.

Of course, diamonds are found in kimberlite pipes. Kimberlite pipes are rare and only 1% possess gem quality diamonds. Until the Canadian find, the gem production of diamonds was from about 10 commercially viable pipes with only 2 being the real producers. Fipke devised a theory while working in the field to dramatically improve the odds of finding gemstones, minerals, and precious metals. His theories provided a quantum leap in the location of geological products. He would extensively sample large areas of promising topography to look for indicators, or more specifically, diamond indicators. Using these indicators, together with the theories of a Russian diamond geologist and surveys from a Canadian geologist, Fipke became convinced Canada possessed diamonds. Without alerting DeBeers, an associate geologist was sent to South Africa to conduct secret research on diamonds. He collected rock samples from all the known diamond pipes and analyzed them via micro probe research at Cape Town University. He correlated the data with published figures of known gem qualities to create an accurate chemical profile.

What was DeBeers doing throughout this process? Discover the mistakes DeBeers made in locating diamonds in Canada. When DeBeers found hot mineral indicators, they believed the kimberlite pipes would be close. By studying glacier maps and finding a rock from over 500 kilometers away, Fipke concluded the diamonds were from a distant location. Fipke was correct and DeBeers became the victim of their South African geologists. Read how Fipke staked 1 million diamond rich acres and DeBeers staked over 10 million surrounding acres, all for nothing. In the end, DeBeers finally got involved with Canadian diamonds by reaching an agreement to purchase a large percentage of rough diamonds from BHP.

This publication is not a story about striking it rich in the diamond fields of Canada. It is rather an accurate representation of the thrill of the hunt. The value of the book is in gaining an understanding of the science of diamond geology and the Diamond Rush of Canada. This insider's view of the quest is an important historical account that should be read by anyone with an interest in diamonds. "Fire Into Ice" provides a great deal of new information on the subject of diamond prospecting, yet it is not too technical. It is not written like a textbook, but rather as an exciting novel. My only complaint is the lack of maps to illustrate the locations Fipke explores. However, the book does contain some black and white photographs. I highly recommend "Fire Into Ice" as a summer read.

You can purchase the book on-line here: Amazon.com


Christie's and Sotheby's - New York (April)
Spring sales at Christie's and Sotheby's were down compared to last year's results. Both auction houses were selling between $30 and $35 million a few years ago. Sotheby's New York Magnificent Jewelry sale totaled $12.8 million and sold 64% by dollar value and 75% by lot. Christie's sales dropped 54% from $34.1 million to $14.6 million. Christie's Magnificent Jewelry sale sold 80 % by dollar value and 75 % by lot.

Privates Take Over
Buying was dominated by American privates bidding on the phone. Action on the floor was sparse as trade members avoided these auctions. Seven of the top ten lots went to American privates, two of the top ten went to the American trade and the remaining lot was sold to the international trade.

The Diamond and Emerald Necklace
The diamond and emerald necklace sold by Christie's on behalf of the Chaim Sheba Medical Center in Israel garnered $277,500 from two New York diamond dealers. The necklace has 235 diamonds and 18 emeralds. The necklace was owned by a man who sold almost everything he owned in 1939 to buy the necklace to secure his family's future before the Nazis swept across Europe. The man cemented the treasure below a kitchen tile in his apartment before he and his wife were arrested by the Nazis. The couple ended up in a concentration camp; she died there. After the war, the husband found their hidden treasure intact in 1946. The man died last year. In keeping with his final wishes, the proceeds from the auction will go to an Israeli hospital's wing for the elderly.

Colored Diamonds
At Sotheby's, a fancy intense, VS2, heart shaped, blue diamond of 4.20 carats drew a top price of $800,000, or just under $200,000 per carat, from an American dealer. Sotheby's had hoped to get more than $3 million for a 14 carat, fancy intense, pink diamond. The bidding began at $1.5 million and stopped at $2 million. Several dealers mentioned the lovely color was unevenly distributed. A 14.05, light blue, oval sold for $28,363 per carat. Yellow diamonds were steady sellers, going for the high estimate or over. A 2.25, vivid, yellow, IF sold for $16,611 per carat. A 15.05 carat, fancy vivid, yellow diamond sold for $552,500, or $36,700 per carat. A 3.83 carat, fancy vivid, yellow orange diamond brought $211,500, or $65,500 per carat.

At Christie's, a .91, rectangular, dark violet gray, VS1 fetched about $28,000 per carat. Two purplish pink, marquise diamonds of .32 and .46 sold for about $16,000 per carat. Yellows were also hot at Christie's. An 8.72, vivid yellow, rectangular, VVS1 sold for $32,110 per carat. A 3.56, vivid yellow, rectangular, VVS2 sold for $25,280 per carat. A 1.88, round, intense yellow sold for $15,185 per carat.

Lack Of Million Dollar World Class Gems
World class colored gemstone prices have remained stable, but the emerald market is still bothered by disclosure problems. Despite this trend, an emerald ring of 7.52 carats brought $354,500 or $47,140 per carat at Christie's.

Buyers have no problems with rubies and sapphires because treatments are permanent and both houses now obtain "no heat treatment" reports from labs for their high ticket goods. The houses really have not offered million dollar Burmese rubies for quite some time due to the lack of supply. A 5.31, oval, Burma ruby sold for $30,130 per carat at Christie's.

Sotheby's and Christie's - Geneva (May)
Sotheby's sold 60% of lots, or nearly 75% of the expected dollar volume, for $19.2 million. Christie's sold 80% of the lots, or 87% of the expected dollar volume, for $18.9 million.

A Cartier diamond necklace, which drew a final sale price of $2.9 million to an anonymous private buyer, went for 20% above the high estimate. A ring by Harry Winston with a 49.62 carat, step cut diamond center stone went to an American dealer for $2.1 million. A Van Cleef & Arpels sapphire and diamond ring sold for $573,110, nearly 4x the reserve, to a European dealer. An American buyer paid $606,040 for a 22.04 Kashmir sapphire. A fancy, orange-pink diamond sold for $331,630 to a European dealer. A 7.76 carat, fancy vivid, yellow drew a price of $776,195, while a 5.74 carat, fancy, pink diamond fetched $665,645 from a private buyer from Hong Kong.


Mogok Burma Report
Mogok5.gifReports from Burma indicate it is more difficult to get to the mines at Mogok. A buyer went overboard on a recent trip and purchased numerous spinels from private Burmese citizens, not government sanctioned gem dealers. The guide (visitors are required to have government guides and most of them are Military Intelligence) got a little spooked (foreigners are not really supposed to buy rough or loose stones from private citizens), and informed the government. For a period of about a week, all foreign access to Mogok was shut off. The government now requires all visitors to sign a form acknowledging they will not buy stones from private Burmese citizens. If they are caught, they will be expelled. The foreigner who set off these events was refused permission to revisit Mogok. Another incident occurred when a Thai buyer visiting the jade mines in Hpakan attempted to exit the country with a large piece of Imperial jade and was caught. The response to this was twofold; all foreign access to Hpakan has been stopped and Thais are currently prohibited from visiting Mogok. This restriction should be lifted soon.

Mogok2.gifThe lack of gem quality material coming from the mines in Mogok remains the status quo. Mining activity is high, but gem discovery is low. Many miners are digging with minimal results. Numerous miners are not even bothering to open their mines each day, as they can't cover the variable costs of production. Many are trying to sublease their license sites, but there are few takers. In the areas such as Inn Gaung, where miners dig virtually the same dirt year in and year out, single shaft mines are now trying to go deeper than in the past. Mechanized winches are now being used, rather than old fashioned muscle power, because of the depth (100 - 120 feet vs. about 60 - 70 in the past). Crude pumps are being set up to pump air down to the miners below. Still, the results are nothing special.

The Asian economic collapse is masking the growing lack of supply. Demand in Asia all but disappeared during the crisis, and dealers in Asia sold material in the US and Europe where demand is still excellent. Former Asian tycoons have been unloading their personal gem collections in order to raise cash. All of this has helped to maintain a certain amount of price stability when, in actual fact, the supply of newly mined quality material seems to be on the decrease. Asia is beginning to recover economically and when their desire for jewels picks up again to historic norms this lack of supply will become more apparent and prices should rapidly escalate. Irrespective of future economic conditions, the outlook for untreated and certed material remains positive. After all, 95% of all rubies in Thailand are from the Mong Hsu deposit in Burma and 90% of these goods are heated and fracture-filled.

GIA Emerald Update
The GIA's research study of emeralds will be completed in 1999. The paper will analyze the different substances used to fill emeralds. The focus is to understand the durability, stability, removability and retractability of emerald fillers. The completion of this study should be helpful to collectors, dealers, miners, and retailers. The GIA is studying 230 samples with a variety of fillers. The two main categories are:

  1. Oils - mineral and cedarwood
  2. Resins - opticon and Gematrat.

The study will also discuss how to detect emerald treatments, such as through fluorescence, the flash effect, and near surface probes. Hopefully, when this report is finished it will not create more questions than it answers and the emerald market will return to its former healthy state.

The AGL and Gematrat Emeralds
The Gematrat process for treating emeralds was invented in 1997. What is unique about the treatment process is that it is easily identifiable and is claimed to be virtually permanent. Emeralds which have undergone the treatment process fluoresce blue under long wave ultraviolet or a black light. Emeralds graded by the American Gemological Laboratories (AGL) in New York which have undergone the Gematrat process will contain an actual photograph of the stone and a second photograph showing the stone under ultraviolet. Hopefully, this branding will help restore confidence in the emerald market which has fallen in the last two years.


Burma and Viet Nam Star Rubies
According to "The Guide", extra fine stars are a hot stone right now, with the best quality one and two caraters reaching $13,000 per carat. "The Guide" predicts they will be trading at $15,000 per carat next year. Extra fine is described as red with slight pink or purple overtones. Fine and commercial qualities range from $450-$2500 per carat and the dark purplish and brown material is under $100 per carat.

Viet Nam is producing some nice star rubies. If you always wanted a star ruby but could not afford the Burma goods, these stones may represent an excellent opportunity.

Demantoid Garnets
New production at the Bobravka River in the Ural Mountains in Russia has created new supply for the first time in years. For collectors or connoisseurs who have always craved one of these gems, now may be an opportunity to buy a stone. This is a gem similar to Burma ruby, a gem in which you need rutile and classic inclusions for a positive identification. With demantoid, the discovery of "horse tail" inclusions proves the stone is Russian.

Mandarin Orange Garnet
Mandarin garnets remain a hot vibrant orange stone. Supply from Namibia remains small.

This stone remains in demand because there is no treatment issue. The hottest colors are red, pink, orange, raspberry and color change. The African material has risen dramatically in price, but these goods still do not rival the Burma goods in quality or price.

Supplies of tsavorite are increasing, especially small sizes for manufacturing jewelry. Fine gems over two carats are rare.

Yellow Sapphire
Reports from "Gemkey" indicate European buyers are going to Sri Lanka to purchase yellow sapphire from four to six carats and are paying about $750 per carat. These prices are extremely high compared to normal prices and seem to indicate the lack of material and the strong international demand are pushing up prices for these goods.

Prices have dropped about 10% from the highs of the Tucson Gem Show. This is probably a normal pullback. Tanzanite remains the number four gemstone requested after ruby, sapphire, and emerald.


Here are three short articles about colored diamonds recently published in "Forbes". These articles reinforce our position that now may be the time to buy colored diamonds and the diamonds must be GIA graded. (ED)

Colored Diamonds, Nature's Most Gorgeous Collectible, Are Beginning to Catch More Light
Forbes April 5, 1999
by Robert Goff
"Colored diamonds get a bad rap. To the uninitiated, a pink diamond is the gem world's equivalent of a spray-painted striped carnation - a garish, vulgar abomination. This prejudice is not without reason. Third World nuclear facilities just love turning out fake colored diamonds by bombarding colorless diamonds with atoms that change their molecular structures. There's a reason why these Third World nuke plants consider this lily-gilding endeavor a valuable use of their molecular energy: It's because real colored diamonds produced by nature's cunning hand are so very rare and so very beautiful. And so very expensive. The rarest of all colored diamonds - the blood-red diamond - is to a ruby "what wood is to formica", in the words of Simon Teakle, head of Christie's jewelry department. When collectors come across one - which is not very often - they must pony up close to $1 million to buy it. (Oh, by the way, that's $1 million a carat.)

For the past 18 years, Alan Bronstein, 43, and collector Harry Rodman, 90, have scoured the earth to assemble a colored-diamond collection. Called the Aurora Collection, it consists of 260 gems in an astounding palette of colors like apricot, china red, honey, rose, ink blue, kelly green and jonquil. On Mar. 27 their collection, on loan for the past decade to New York City's American Museum of Natural History, became the centerpiece of "The Nature of Diamonds" exhibition at the San Diego Natural History Museum, where it will remain on view until Sept. 7. It's a good introduction to a fascinating corner of the gem world. This collection isn't about the size of its gems, which range from 0.13 to just 2.88 carats for a total weight of 231.78 carats. (The Hope Diamond alone is 45.5 carats.) The pleasure of the Aurora Collection comes in seeing the enormous variety of brilliant hues play off one another - an entire aurora borealis locked in each rock. Consider that for every 10,000 colorless diamonds, there is only one gem-quality ("fancy" in the lingo of professionals) colored diamond. Last year Australia's giant Argyle diamond mine, a relative mother lode of pink diamonds, yielded a mere 40 carats worth of the rarest pink gems from a total of 39.2 million carats of diamonds mined.

The scarcity of colored diamonds is due to the extreme infrequency of the fragile geologic conditions necessary to paint a hue on a colorless rock. Each diamond in the Aurora Collection has a different story to tell of how it got its color. Canary yellow diamonds, for example, occur when nitrogen atoms replace isolated carbon atoms. This is no everyday event: It only happens when the stone is exposed to temperatures of roughly 1,300 degrees Celsius during a prolonged volcanic ascent. That's positively banal, though, compared to what the green diamond goes through. These extremely rare diamonds look black before they are cut because they get their color from exposure to uranium-rich ore over millions of years. And what causes the pink ones remains a complete mystery.

The Color of Money
On Apr. 14 Christie's will sell 69 pink, yellow, blue, violet-gray and greenish diamonds in 34 lots ranging from $5,000 to $85,000. If you're interested in picking up one of these rare colored baubles, this could be a good time. As Asian and Middle Eastern economies have slumped, many traditional players in the market have retreated and prices have fallen by as much as 20% to 30%. That doesn't happen very often. In 1980 the highest price paid per carat for a colored diamond was around $100,000. Today the market tops out at $926,000 per carat for a red diamond and carats of the best pinks and blues often fetch in the six figures. When Christie's auctioned off 18 pink, purplish, yellow and blue diamonds seized by U.S. Customs officials from drug runner Stephen Jenks last year, the gems were estimated to be worth between $395,000 and $556,000. They fetched $1.9 million, an average of $127,000 per carat. That's a lot more than you would pay for even the best-quality uncolored stone. The retail price of a colorless 1-carat D-flawless diamond averages $12,000 to $20,000. A flawless 5-carat colorless stone averages $150,000 to $200,000. Buying colored diamonds is not for neophytes. The Gemological Institute of America certifies all authentic colored diamonds. Fakes abound; if you're considering buying a colored diamond without the certificate, you're likely to get burned. Then, too, you must learn about the colored-diamond palette. According to Christie's jewelry department head, Simon Teakle, the most desirable shade of blue diamond is a pure sky blue; grayish blues are worth far less. In pink diamonds, a cotton candy shade is always more sought after than brownish "salmon pink". In both cases, the very best stones will set you back $50,000 to $200,000 a carat. A year ago they would have fetched $75,000 to $300,000 a carat. Factors like a diamond's cut, clarity, size and provenance (who's owned it in the past) can affect price dramatically.

Hard Science
There are a lot of phony colored diamonds out there, so if you're planning on taking the plunge, it helps to know a little bit about the science of fakes first. Synthetic diamonds are routinely made for industrial use by companies like General Electric and Sumitomo Electric. The newest process for doing this, called chemical vapor deposition, applies low heat and low pressure to build up the lattices of carbon molecules. The resulting substance mimics the physical properties of a diamond. To make a fake colored diamond using this process is easy: Just add a pinch of nitrogen or boron and you end up with yellow or blue diamonds, respectively. It's virtually impossible to tell a fake blue diamond by eyeballing it. It usually takes lab tests, which can pick up the bits of iron or nickel used as catalysts in the fake-diamond processing. The most valuable fake diamonds, however, are also the hardest to detect. These are knockoffs of the fabled green diamonds, formed after exposure to natural radiation in the earth over tens of thousands of years. Third World nuclear labs can turn out an almost perfect facsimile by blasting a less-valuable genuine diamond with enough electrons or neutrons to turn it celery green. One of the few ways to tell a phony here is to measure just how far the electrons have penetrated the stone. If the color only extends a few microns into a green diamond, then its color is likely to be artificial. Finally, the color of both synthetic stones and diamonds blasted by radiation can be altered by subjecting them to heat of up to 900 degrees Celsius. However, a fake stone will absorb its color in subtly different ways than a real stone. The only way to tell is measure the two side by side in a lab. Not so easy. Caveat emptor."

Diamond Skulduggery
South Africa Sunday Times, May, 1999
by Michael Schmidt

This is a fascinating story about the underhanded dealings surrounding a large diamond. At the time of the article, one dollar equals about 6 Rand (ED).

One of the world's biggest diamonds slipped through the fingers of its legal owner into the underworld of the black market because a sorting machine rejected the gem as worthless rubble. The mechanical fluke saw the gemstone - a yellowish giant the shape of an egg and the size of a man's wristwatch - thrown out onto a heap of stone, where an alert worker picked it up and pocketed it.

Now the owner of the licensed diamond digging concession 2km outside Bloemhof, in North West, is spitting mad that the diamond, which was allegedly sold to two Johannesburg dealers for the dollar equivalent of R12-million, is in criminal hands. But the man, who does not want to be identified for fear his diggings will be flooded by illegal treasure-seekers, never saw the diamond and only realised he had lost the fortune of a lifetime when detectives from the Bloemhof Diamond and Gold Branch told him of the theft.

Now Interpol has been drafted in to help trace the diamond, believed to be in the Belgian city of Antwerp, in a race against time to prevent the unpolished stone being cut into untraceable smaller gems. Detectives said this week that if the diamond remained intact it would likely be destined for the vault of a big investor or a private collector. At 186 carats, the Bloemhof diamond compares favourably with some of the world's most famous gems. It is bigger than the 108-carat Koh-i-Noor in the British Queen Mother's crown and also outweighs the long-lost 137-carat Florentine diamond that was once part of the Austrian crown jewels. "It's a Cullinan-class gem that could only be used as part of a set of crown jewels," said Sergeant Johan Mulder, referring to the 3,106-carat Cullinan diamond, the world's biggest, which was found in South Africa in 1905.

"An informer alerted us that a man believed to be a worker at the dig had found the diamond about two months ago. It had apparently been too big to fall through the drum-sieve which allows small stones to drop into the washing pans, so it was thrown aside with the bigger rocks." The worker, who has disappeared, then allegedly sold the diamond for a paltry R30,000 to two brothers who run a chain of taverns. The pair allegedly had the gem valued by a jeweller who said it was worth R1.48-million. They then allegedly sold it to two Portuguese citizens - a Warrenton chicken farmer and restaurateur who also owns property in Mozambique, and a relative - for R1.7-million. The Portuguese pair teamed up with a liquor-store owner and allegedly sold the stone to two licensed diamond-buyers at Diamond House in Johannesburg for US$2-million.

Mulder said one of the brothers and an alleged accomplice had given information to the police, but the two Portuguese and the liquor-store owner had denied everything. All six have appeared in the Bloemhof Magistrate's Court, although charges have yet to be formulated. They were not asked to plead and are out on bail, with the Portuguese forced to hand in their passports. Mulder said police would arrest the Johannesburg dealers as soon as the evidence against them was solid. "Information received from a South African source is that the diamond is now in Antwerp, but we can't yet establish if that is true and we won't move until we have confirmation," Mulder said. "Our branch has been working around the clock on this. This sort of diamond is as rare as hen's teeth. The average stones found here vary between 0.1 carats to, very rarely, about 22 carats. This story has set the international market buzzing." He said local prospectors still clung to the prophecy of a long-dead writer and seer that a diamond the size of a sheep's head would one day be found in the area."

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.