VOL.13, #2, Summer, 1995

NGC's WWW Update, Burma Spinel, International Updates: Diamond, Colombia, Burma, Tanzania, India, World Mining Reports, Privacy Section

  Jun 24, 1995   admin


TABLE OF CONTENTS


NATIONAL GEMSTONE'S WEB PAGE UPDATE

We will be adding to our web page in the future with more extensive price lists, new links, and every new Gemstone Forecaster. When the technology arrives, we also plan to scan images of gems or gems of our clients for sale, so you can get a look at these gems on your computer. Have fun and let us know what you think!


BURMA SPINEL: ONE OF THE MOST INTERESTING AND MISUNDERSTOOD GEMS IN THE WORLD


by Robert Genis

Pliny the Elder (A.D. 23-79) in Natural History was highly skeptical of the curative power of gems. Nevertheless, he recorded the ancient beliefs. Ancients believed all red stones (garnet, ruby, and spinel) were good for curing bleeding and inflammation diseases. Later, it was believed spinel could detect if a person was supernatural. Gemological historians are uncertain as to how spinel was named. It may have come from "spark" in Greek, or "point" in Latin, or "thorn" in Italian. Spinel is associated with the planet Saturn.

What is interesting about spinel is the crown jewels of many monarchs gleam with spinel that were originally thought to be ruby. The most famous examples include The Black Prince Ruby, The Timur Ruby, the drop-shaped spinels in the Wittelsbacher Crown, the 105 carat red in the Louve in Paris, King Henry the Eighth's "ruby collar", the 414.30 spinel in the Imperial Russian crown (which was mounted for Princess Catherine), and the spinels in the Persian Crown Jewels in Teheran. All these stones were once believed to be ruby. In all likelihood, a great deal of regal jewelry thought to be ruby in the western medieval world is, in fact, spinel.

The Black Prince Ruby
This magnificent spinel, nearly two inches across, has belonged to English Royalty since 1367. It is one of the most treasured gems in the world. It is mounted above the 317.4 Cullinan Two, the second largest diamond in the world. It is irregularly shaped, pierced in one end, and the hole is filled with a ruby. It is estimated to weigh between 167-170 carats.

The history of this gem is in dispute. According to one story, The Black Prince, son of king Edward the Third, received the stone from Don Pedro, King of Castile. It was added to the Crown Jewels in 1377, for the coronation of Richard the Second. The second story is that in 1360, King Peter went to war with Granada to obtain this gem. King Peter was fighting against his brother, King Henry. King Peter requested the help of The Black Prince (Edward, Prince of Wales) to assist in the war. The Black Prince defeated King Henry in 1367, and Peter gave the gem to The Black Prince in gratitude for the victory. The spinel made its way as a crown jewel for the coronation of William and Mary of Orange, with the title, "The King's Great Ruby".

In 1415, King Henry the Fifth led his small British army against the French at Agincourt. For protection, he wore the famous Black Prince Ruby in his helmet. After winning the battle, he credited the stone for taking a blow meant for his head. Subsequently, it was set and reset in various crowns worn by the Tudors and Stuarts. In 1649, after the beheading of Charles the First, the great stone was sold for a mere 4 pounds and 11 shillings. The gem reappeared at the Restoration in the Crown Jewels of James the Second. Today, you can see the gem in the British crown jewels in the Tower of London.

The Timur Ruby
The Timur Ruby is the second largest spinel in the world, weighing 352.50 carats. Its name means, "Tribute to the World". It is not faceted, but retains its original baroque form, and is engraved. The Timur Ruby now resides in the private collection of Her Majesty Queen Elizabeth.

In 1739, the Shah of Persia invaded India to seize what was thought to be the largest ruby in the world. The East India Company took possession of the gem in 1849, and sent the gem to England. The stone sat unrecognized for 60 years with three other spinels. It was officially cataloged as, "Short necklace of four very large spinel rubies".

Finally, in the 1900s, someone translated the engraved inscription. The longest Persian inscription reads, "This is the ruby from the twenty five thousand jewels of the King of Kings the Sultan Qiran in the year 1740 from the collection of jewels of Hindustan reached this place Isfahan". The remaining five inscriptions are the names of emperors who had it in their possession, the first being Akbar Shah Jahangir in 1612. Further, the inscription says the stone fell into the hands of Timur, the Tartar conqueror, when he captured Delhi in 1398.

Gemology
Spinel occurs in a myriad of colors. It can be discovered in gem red, mauve, blue, hot pink, flame orange, brown, lilac, purple, violet, greenish, wine red, steel gray, slate, indigo, rose brown, and black. Occasionally, there occurs an alexandrite-like spinel, which changes from gray-blue to amethyst . Also, star spinels occur but they are exceedingly rare.

Spinel is a magnesium aluminate, its pigments are chrome and iron. Its hardness is 8, and it forms as a cubic crystal, like a diamond. Spinel occurs in octahedral crystals, and has a complete absence of cleavage. Due to the gems dispersion (0.021) gem spinels can possess vivid fire, and the intensity of these colors is partially due to the fact spinel is singly refractive. Characteristically, the inclusions in spinel are minute spinel crystals.

Spinel is usually formed as a contract metamorphic mineral in limestone. It is discovered as rolled pebbles in sand and gravel pits. It is formed because of its resistant physical and chemical properties. Spinel today is mined primarily in Burma and Sri Lanka, usually along side corundum (ruby and sapphire). A ten carat sized spinel is practically nonexistent.

As mentioned earlier, all red stones were assumed to be ruby. In 1783, minerologist Rome de Lisle was the first scientist to distinguish clearly the differences between true ruby and true spinel.

In 1915, synthetic spinel hit the world gemstone market. These stones are inexpensive to produce. This is the reason inexpensive "birthstone" or "class" rings contain synthetic spinel. Please note, the color and intensity of fine Burma spinel is in no way comparable to the lesser qualities of synthetic spinel, and the differences are easy detectable.

How to Collect Gem Spinel
Ruby, to the eye, looks very much like spinel, but not all spinel looks like ruby. Only the gem reds, hot pinks, and flame oranges deserve this honor. As a matter of fact, many collectors believe these spinels are actually MORE beautiful than ruby. Spinel is a gem coveted by inside connoisseurs and certain gem dealers themselves. Burma spinel is relatively inexpensive compared to some gems that are less attractive and more abundant. The only reason is the lack of market exposure. Most people are unaware of the existence of spinel, much less its intrinsic value. If you are a serious collector, you should own at least one of every color. If you consider yourself a speculator, spinel is an underpriced gem with serious upside potential. If you do not have the resources to invest $25,000 for a Burma ruby, this is an excellent alternative.

As mentioned previously, gem reds, hot pinks, and flame oranges are the most sought after colors by collectors. Any spinel over two carats is rare. The most desirable spinel is red/red or red/orange. When searching for pinks, search out electric or neon colors. Regarding oranges, look for an intense orange without a noticeable brown. Occasionally, NGC can locate a highly desirable amethyst or blue spinel. The colors should be vivid.

Avoid Sri Lanka stones; they are pastel in color or red-black. Avoid garnet-like spinel-red stones with dark tones and obvious brown secondaries. Typically, Sri Lankan stones are pale in color and very inexpensive.

SPINEL - RUBY COMPARISON CHART
  SPINEL RUBY
Hardness 8 9
Supply
Burma Ultra Rare Moguk-Ultra Rare
    Mong Hsu-Some Supply
Ceylon Plentiful None
Thailand None Available
Brilliance More Fire Less Fire
Rarity 200+ Times More Rare More Common
Price 25% The Price Of Ruby More Expensive

 

 

Conclusion
The problems in obtaining fine Burma spinel today are: 1) most of the miners who were working Mogok have now left and now working the new Mong Hsu mine. So far, no spinel or blue sapphire has been found at this new deposit. 2) There is a major collector who has been purchasing gem red and pink spinels for years. Other fine spinel sits in strong handed collector and dealer portfolios.

Despite the lack of material, NGC can locate these gems. If you have an interest, let us know. If inflation heats up, watch this stone. Based upon the desirability and rarity of this stone, the sky truly is the limit.


INTERNATIONAL MARKET UPDATES

DIAMOND
Russian sales of diamonds surged last year to $2 billion, or 30% more than in 1994. Some $750 million was sold outside the DeBeers cartel. Cartel officials say this rebellious stance poses a threat to the stability of the Cartel. Some analysts say these Russian sales casts a shadow over the market, when diamonds should be going up in value. DeBeers has been forced to stockpile another $256 million in diamonds. DeBeers total inventory is now $4.38 billion. While global diamond sales rose 4% to $45 billion, the diamond market has remained flat. DeBeers is currently negotiating with Almazy Rossii Sakha, an organization in charge of the Russian diamond output, to ensure that a large portion of the Russian output is sold through DeBeers. The current sales agreement between the Russians and DeBeers expires at the end of 1995. The cartel is willing to trade technological know-how on how to mine diamonds and are promising to invest money in Russian diamond mining in exchange for controlling the Russian output. However, the Russians are sitting on a $8 billion stockpile, controlled by the Russian treasury. So far, the talks have faltered.

The problem DeBeers faces is the Russians have learned how to circumvent DeBeers and make 30% more for their merchandise. The only way DeBeers can fight Russia is to go to war with Russia and flood the market with diamonds. DeBeers may be able to do this for six months. After six months, the DeBeers mines and stockpile will be severely depleted, and Russia will have all the diamonds. The Russians claim they can hold out for six months or more. Today, the Russians claim they have 25% of the world market and 50% of high-quality diamond market. If these two giants do not end up fighting each other, the outcome may be simply that there will be two major players in the diamond business. They both have the same goal; to reap as much profit from their diamonds as possible. If they get in a war, they both will lose.

However, NGC's position remains; if you want to buy a diamond for love or marriage, then go ahead and buy it. If you are a collector of large diamonds or D-Flawlesses, keep on buying at these historically low prices. If you view buying diamonds as fun or a forced savings plan, keep on purchasing these stones. However, if you view your portfolio as an investment-stick with colored diamonds. Colored diamonds are naturally rare, and international diamond power politics will not effect their prices. Never forget, at any one time, there are only 4000 carats of colored diamonds for sale vs. millions of carats of white diamonds.

Fancy Diamond Price Index
The multiplier is the D-Internally Flawless (D-IF) diamond price. Presently a one carat D-IF sells for $13,500 to $15,000. Therefore a carat size Fancy Pink may sell for between $121,500 and $135,000 per carat. Colored diamonds will sell for a premium or a discount to the multiplier. For sub carat diamonds, use the sub carat D-IF wholesale price, not the carat sized price. Please note, this index is an indication only, and some gems may trade substantially higher than these multipliers.

FANCY DIAMOND PRICE INDEX CHART
COLOR MULTIPLIER AVAILABILITY
Black .06 - .09 Available
Fancy Brown .10 - .50 Fairly Common
Fancy Light Yellow .09 - .25 Fairly Common
Fancy Yellow .18 - .50 Fairly Common
Fancy Intense Yellow .75 - 1.6 Limited
Fancy Light Orange .16 - .35 Limited
Fancy Orange .32 - .70 Limited
Fancy Intense Orange .65 - 1.4 Very Limited
Fancy Blue 4.5 - 7.5 Very Rare
Fancy Green 9.0 Not Available
Light Pink 1.5 - 2.5 Limited
Fancy Light Pink 3.0 - 5.0 Rare
Fancy Pink 9.0 Very Rare
Fancy Purple-Pink 4.5 - 9.0 Very Rare
Red 45 Not Available

 

COLOMBIA
Chain Saw Massacre
President Sampler agreed to investigate the killings in Trujillo, Colombia. This small town is 161 miles west of Bogota. At least 107 people were killed between 1988 and 1991. Sampler said justice need to be pursued, including prosecution, reparations and compensation to the victims, and public apologies and punishment of the perpetuators. The Colombian government admitted that police, judges, and soldiers allowed right-wing paramilitary groups to commit the murders and soldiers may have participated. The victims were men, women, and children who supported left-wing guerrilla groups. First word of the massacre came to Bogota in April, 1990, when Daniel Arcila traveled to the capital with stories of torture and chain saw killings. He was sent to a psychiatrist by authorities and declared a paranoid psychopath. A new government report slams the Colombian judicial system, and recommends the psychiatrist and the judge be investigated. According to Arcila, "Major Uruena took a 2-inch hose, and put it to a 55 year old lady, who began to shout: Don't you have children? For holy God's sake, what are you going to do to me? The major repeated the same torture with everyone. Then he told one of the paramilitaries to get a chain saw. Then he cut off their heads.....and later cut everyone into pieces." Last week, Sampler fired Uruena, who had been promoted to colonel.

Stock Market Boom
While Mexico and other Latin America countries are experiencing crashing currencies and dollar outflows, the Colombian stock market is booming and the government is trying to keep its dollars inflows to a manageable level. Unlike other South American countries, Colombia has never depended on fickle foreign money to finance its growth. Colombia has always reaped substantial dollar income from coffee and emeralds. More recently, dollars arrive in Colombia from international cocaine sales. Now Colombia is enjoying the fruits of one the biggest oil discoveries since the discovery of oil in Alaska's Prudhoe Bay. Colombia also has an lengthy record of economic growth since the 1950s. Unlike most Latin America countries, Colombia resisted the temptation to nationalize every business in sight during the 1960s and 1970s. Even during the 1980s debt crisis, Colombia never defaulted on any debt, and has averaged an annual growth rate of 4%. The Colombian stock market is up over 20% since the Mexican peso crisis.

However, everything is not perfect. Violence among drug dealers, gem dealers, and leftist guerrillas keeps many foreign investors away. Plus, Colombia's inflation rate seems stuck at 20%.

The Cali Cartel
The Cali Cartel sent $40 million to Mexico in 1994. This money could have been used "for investments or to guarantee a favorable position in the new government", says Peter Lupsha, researcher at the University of New Mexico in Albuquerque, in an interview with Proceso, Mexico's top news weekly magazine. This information was confirmed to him by Sandy Gonzalez, a Drug Enforcement Administration (DEA) agent stationed in Panama. Lupsha says one of the major foreign contributors to the PRI's presidential campaign was the Cali Cartel. In the spring and summer of 1994, Miguel Rodriguez Orejuela sent $40 million in two shipments (Proceso #965, 1 May 1995).

On May 8,1995, Gilberto and Miguel Rodriguez Orejuela, in a statement broadcast on TV-Hoy, offered to surrender to the Colombian government if the government leaves their families alone, guarantees them impartial trials, and refrains from negative publicity. Attorney General Alfonso Valdivieso said their surrender must be unconditional. The Cali Cartel controls 80% of the world's cocaine. In recent months the government has stepped up raids on safe houses and has confiscated communication gear used by the traffickers. The increased pressure has come after the US charges that Colombia was lax in fighting the cartel.


INTERNATIONAL MARKET UPDATES

BURMA
Civil Wars Threatens Gem Supply
A breakaway Karen guerrilla force which joined Burmese government troops in December has vowed to continue attacks on Karen refugees in Thailand to force them to return to Burma. A leader of the breakaway Democratic Karen Buddhist Army (DKBA), said the group wanted all of the 70,000 Karen refugees now in Thailand to go back to Burma before the rainy season begins in June. "We have attacked and razed the camps. If we didn't do so, then the refugees would not return home." said Tu Na, a DKBA leader, "We want all of them to come back. All of them have to return." The DKBA was formed last December by several hundred Buddhist Karen fighters who mutinied against the predominantly Christian leadership of the Karen National Union (KNU) which has been fighting for greater autonomy since 1949. The DKBA joined Burmese government forces and helped capture the KNU's headquarters at Manerplaw in late January. Tu Na said the DKBA was working with Burmese government forces who had promised to withdraw and leave them in charge of the border region once all the refugees were returned. Tu Na told the Bangkok Post, "We are working with the State Law and Order Restoration Council (SLORC)."

In early May, 1995, DKBA members crossed border rivers and raided several Karen refugee camps on the Thai side of the border, burning hundreds of buildings and killing at least one person. The raiders forced hundreds, including women and children, back across a border river into Burma, relief workers said. Thailand warned Burma of tough action against intruders from Burma saying it would not tolerate territorial violations that it said have been increasing over the past four months. Many of the more than 70,000 Karen refugees in the Thai camps are supporters of the KNU, driven from their homes by Burmese army offensives against the autonomy-seeking rebels. KNU sources say the raids are aimed at cutting the KNU off from its civilian support base by either forcing the refugees back to government-controlled parts of Burma or by pushing them off the border and deeper into Thailand.

Hundreds of Thai troops, border patrol policemen and defense volunteers, supported by helicopter gun ships and armored personnel carriers, have moved in to guard the 23 Karen refugee camps strung out along a 110 mile stretch on the Thai side of the frontier. Thailand is drawing up plans to move Karen refugees away from the Thai-Burmese frontier after a series of cross-border raids on their camps by a Karen rebel splinter faction.

The Burmese Government Attacks Khun Sa
On March 11, the Burmese government sent 35,000 soldiers to take on Khun Sa, the opium drug lord, and his 14,000 troops. In May, the government captured the Pachan mountains, west of Thailand, which has driven a wedge between Khun Sa's forces. The warlord still has sanctuaries in Thailand.

The Chinese Drug Connection
Since 1988, there has been a threefold increase in drug production in the Golden Triangle. Opium output is now forecast to be 3,500 tons per year. Prosecutions have been increased in Thailand, but new Chinese gangs are entering the fray. Not only has the quantity gone up, but prices have gone down , and purity has been improved by 1000% or more.

The reason for this is China. In the 1980s, China began courting Burma as an economic satellite. When the current Burmese regime killed hundreds of protesters after canceling a "free" election, China dropped its support for SLORC, and opened up its borders to the ethnic tribes that control the countryside. These insurgents traffic in heroin and gems. It is being reported that these new routes have eclipsed the infamous Burmese drug warlord, Khun Sa, and his Thailand drug routes. SLORC presently leaves these tribes to their drug trafficking, and probably rakes off a profit. It may be only a small time before the Burmese government takes on these traffickers, but they are presently busy fighting the Shans and Khun Sa. This new policy is not without its downside. Junkies are proliferating among Beijing's yuppies. China admits to having 300,000 registered addicts. Health officials put the real number at 2.5 million.

Conclusion
All of these problems may dramatically effect the supply of Burma goods. Gems are used to finance the rebel groups, so do not expect the supply to completely disappear. However, based upon the geopolitics of this area, placing a portion of your assets into unheated Burma ruby seems a prudent position at this time.

TANZANIA
Prices for gem tanzanite continue to rise. Prices have risen 25% since last year. The mines are getting deeper and more difficult to work, and maintaining legitimate gem operations is now more expensive due to rising inflation and taxes in Tanzania.

INDIA
One of the greatest collection of gems is now owned by the Indian government. The government paid $66 million for the gems, or half of the appraised value, after a decade long battle with the heirs.

The collection belonged to Mir Osman Ali Kahn, who died 40 years ago. Most of the gems were acquired in the 18th and 19th centuries. When his son died in 1970, the gems went into trust for sale and distribution to the 300 heirs. The trust tried to sell the gems to the government in 1972, but failed. When the trust tried to sell the collection through an international auction house, the Indian government blocked the sale by calling it a national treasure. Sotheby's valued the collection at $162 million, and Christie's at $135 million.

The cornerstone of the collection was the 184.75 Jacob Diamond valued at $12 million. The collection had 22 unmounted emeralds valued at $2.3 million. Other pieces include a necklace with 100 emeralds, a turban with 30 faceted and cabochon emeralds weighing 510 carats and 90 carats of diamonds, a turban made with rubies, and a buckle with 638 carats of diamonds. The government plans to exhibit the collection in New Delhi.


WORLD GEMSTONE MINING REPORT

AFRICA
Madagascar
Recently, a new find of blue sapphire was discovered in Southern Madagascar. The crystals are similar to Kashmir, although the material is cloudy and zoned. Heat treatment is effective. Most of the production is small, but a few stones over several carats have been seen. Emerald production has decreased considerably.

Ethiopia
Peridot has been discovered that is similar to Arizona peridot.

Somalia
Low-quality emerald has been found. The pieces weigh between 1/4 gram to 4 grams. The material is best for cabachons, and is medium to dark. The material is similar to and detectable like most African emeralds.

Kenya
A new tsavorite mine has been discovered. However, the output is small.

Tanzania
A new low grade emerald mine was recently discovered in Manghola. Production is expected in 1995. Colored sapphire are also being mined; green, magenta, and red. Most of the goods are over 2 grams.

Zambia
The Kamakanga emerald mine has reopened after seven years of being closed. It is producing all grades. Other emerald mines have dramatically reduced production.

Mozambique
Large quantities of high-quality aquamarines are being produced. The quality is so good it does not need to be heated.

South Africa
A new emerald deposit is reported in Northern Transvaal. The material is commercial quality.

Namibia
Presently, a bright orange spessartine garnet, named "mandarin", is being produced. This mine was discovered in 1993.

Sierra Leone
Large quantities of low-quality ruby is being produced in this country. It is red-brown and opaque, suitable for beads or low quality cabochons.

ASIA
Burma
Mong Hsu ruby is producing high-quality rubies. Mogok production of ruby, sapphire, and spinel has practically stopped. About 90% of the goods are being smuggled. Transport has slowed considerably due to the Civil War.

Vietnam
Production of ruby and sapphire has dramatically decreased. Many of the gem parcels are being salted with synthetics.

Laos
Low quality blue sapphire is being produced.

Thailand
Ruby and sapphire production is way down due to heavy mining in the area the last few decades.

Cambodia
Supplies are way down due to political turmoil.

Sri Lanka
Production has decreased due to bad weather and political turmoil.

China/India
Nothing significant to report in regards to high quality gems.

SOUTH AMERICA
Colombia
The last two years emerald production has come in waves. A few clean Chivor stones are reaching the market, the quality which has not been seen in decades.

Brazil
Production of emerald in the Nova Era region of Brazil has increased. Some high-quality emeralds are being found. Pink and bi-color tourmaline was discovered in Minas Gerais. A new alexandrite deposit was discovered in 1994, but so far the production has been disappointingly small. Brazil is producing aquamarine, morganite, and rubellite.

RUSSIA
Dark sapphires are being reported in Siberia. Production of demantoid garnet has resumed. Most of the stones are under 3mm. Plans are being made to reopen the famous emerald mine in the Urals.


PRIVACY SECTION

IRS in Cyberspace
The IRS has recently announced a new plan to go after tax cheats. According to IRS statistics, 17% of the tax base cheats the government out of $120 billion per year. Therefore, the IRS plans to vastly expand the secret computer database of information it keeps on all Americans. The original database was started in the 1970s, and is part of an $8 billion IRS computer and software upgrade due to be complete in 2008. The ultimate goal is for the IRS to have all the information to prepare most tax returns. Taxpayers will not be allowed to review or correct this new data.

In the past, the IRS had to search through county offices to acquire this information. Now the IRS is armed with computers and modems, and they are searching Department of Motor Vehicles, county tax assessor's offices, state and municipal taxes, child support records, building permits, and professional licensing information, credit reporting agencies' data, news stories, informant tips, and US Census records. Also, federal records of crop subsidy payments, boat and airplane ownership, currency transactions, wages, stock transfers, foreign corporations, and civil and criminal investigations will be collected. Their goal is to find people who are underreporting their business sales, overestimating their deductions, or are hiding assets.

This plan recently went into effect. In the past, the IRS had a computer matching program, which easily allowed it to discover underreported income from employers, banks, and brokerage firms. This computer matching goes a step further by targeting tax deductions, such as the property taxes people pay on cars and business deductions. The program is designed to discover problem areas in the IRS's 64 separate districts. This information will include currency and banking data, license information, and census data. For example, they will look at how many people claim to be self-employed, and match that against tax returns with self employment income. The second part of the program will be to find people who have dropped off of the tax rolls. The IRS will be searching through TRW, Trans Union, and Equifax credit-reporting files to find these people, and get their addresses. If you owe taxes, the IRS will search through the DMV and property records to see if you have a car or property that can be confiscated.

Privacy experts are appalled. David Banisar of the Electronic Privacy Information Center in Washington said, "They're creating dossiers on everyone in America." Evan Hendricks editor of Privacy Times, stated, "The IRS wants to wipe out the line between the private sector and government."


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. Potential investors and collectors should understand past performance is not a guarantee of future performance. This is not intended as an offer or solicitation with respect to the purchase or sale of any security, nor is it intended to be investment advice.