GLOBAL MINING OBSERVER “De Beers made desirable. The industry has reaped the benefitsCOLOURED of that over a very long period of time.” -2014-

MARKET OVERVIEW CHRISTIE’S Coloured Gemstones Interest Rates Drive Poaching ’s Prices Market Share Higher

“The issue with the coloured Coloured gemstone prices at the top gemstone market is that it’s so disorg- end of the market will find continued anised compared to diamonds,” says support from their hard asset status, Anish Aggarwal, co-founder of gemst- Christie’s director of jewellery David one consultancy, Gemdax. The view is Warren tells Global Mining Observer. echoed almost unanimously across the “As we all know, money in the bank industry. “It’s an incredibly fragmented is not earning anything and people market,” says JPMorgan analyst Alex- may have enough property to want to ander Mees. diversify into something else. Property Colombia has historically been one EASTER EGGS designed by painters Chrissy Angliker, Pat Steir and comes with maintenance and some of the world’s largest export- April Gornik for the Fabergé Big Egg Hunt, currently underway in people don’t necessarily want that.” ers, whilst 80 per cent of all are New York (see page 2). Warren describes jewellery and gem thought to come from Burma. Turf -stones as “a kind of currency. Precious wars in Colombia and trade embargoes gems have a pretty well recognised against Burma however mean that in FANCY DIAMONDS value around the world and prices are both cases, export figures evade public Price Gains Show in US dollars per carat, so it’s quite company accounts. ofitable but high risk marketing ruses easy to take a stone from one country Grading arbiter the GIA estimates Signs of Fatigue can continue to lift prices indefinitely. to another and know what its value is. that including , the market’s In October, a 7.6-carat vivid blue stone If you want to be able to move large

retail value is $10.3bn, with rubies acc- In December 2008, the Wittelsbach failed to sell at a Sotheby’s auction in sums of money around the world, it’s a GLOBAL MINING OBSERVER is a mining news bulletin. To receive future issues as they are released email: [email protected] ounting for 20 to 30 per cent, Blue, a 36-carat blue-grey diamond Hong Kong after bidding peaked at very simply way of doing it.” 15 per cent and 5 to 10 per once part of the Austrian jewels, $16m, below its reserve. Sharp price rises in the last 5 years cent. Other studies point to a market went under the hammer at Christie’s Winning more publicity, in Novem- he says have been driven in large part size of around $2bn at the mine level, auction house in London. ber in Geneva the Pink Star diamond, a by investment demand. “It’s people with emeralds accounting for 25 per Fetching $24m, it became the most 59-carat flawless stone, sold for a new wanting to put together nice portfolios cent, a third of them from Zambia. expensive gemstone ever bought at record of $83m to cutter Isaac Wolf, of jewels which they believe will be a According to Antwerp trade body auction. Better than the price was the but in February it was reported that good long term investment and buying the AWDC, the value of the global timing, following the collapse of the sale had fallen through, top quality stones that are difficult to diamond market rises from $15bn to US bank Lehman Bros and at the forcing Sotheby’s to assume the replace or find, which they presume, $72bn as it passes through the pipeline bottom of a financial crisis that asset for $72m after guarantee- and hope, will get rarer over the years.” from a mine to a consumer’s pocket had whacked every asset class, ing its sale. “We are quite “Prices for Burmese rubies and and applying the same fivefold markup from gold to stocks. comfortable with our valuation,” sapphires are extremely high. Buyers bridges the gap in estimates. Ever since, coloured diamond Sotheby’s said, “and see real want the very best in every category, Red carpet endorsements from the prices have ripped higher. In value in owning it at this price.” whether it is an emerald, a , a likes of Penelope Cruz, Kate Middleton 2010, the record was broken by a 25- According to diamond histor- , they want to buy the top pieces and Angelina Jolie appear to have carat pink diamond sold for $46m to ian Edward Epstein, clear diamonds and the market’s strong for them all.” piqued the public’s interest in coloured the same buyer, jeweller Laurence are as common as television sets in the Warren dropped out of university stones. Diamond body the IDMA has Graff. Having recut the Wittelsbach, he US, but coloured diamonds enjoy true after his business trading in antiques said that at current rates, the coloured is meanwhile reported to have sold it in scarcity value, market insiders stress. and collectibles bought him a car and gemstone sector will double its market 2011 for $80m. Only 0.001 per cent of all diamonds motorbike. He has visited emerald share in the next 20 years. The recutting was heavily criticised mined have so-called fancy colours, mines in Colombia and is passionate “It’s not necessarily a zero-sum ga- and likened to the overpainting of a even fewer count as vivid and only a about saltwater pearls. me,” Aggarwal says. “I don’t see it as a Rembrandt. “It is the end of culture,” tiny fraction of those are large stones. Gemstone buyers at Christie’s he head-to-head between gemstones and lamented Gabiz Tolkowsky, a diamond Argyll Pinks for example (pictured), says are difficult to pin to any one diamonds. Both can grow together.” cutter whose great uncle Marcel mined by Rio Tinto in Western Austr- jurisdiction. “Whether they’re from Both at least are enjoying equally invented the ‘round brilliant’ cut. alia, are due to enjoy rising prices as Russia, the Far East, Middle East, we bullish dynamics, with low interest Graff’s objective, it is thought, was the mine deepens, moves underground have buyers from everywhere looking rates and rising discretionary wealth in to upgrade the stone’s clarity from and edges towards depletion in 2020, for top quality emeralds. The very best India and China elevating prices. “The “very slightly included” to “internally market observes say. Zambian stones are very fine, but if you growth in the middle class worldwide flawless”, increasing its value and by The slackening of record prices may want a suitcase full of Colombian top increasingly allows people to buy non- dint, prices across the market. His suggest however that the market has quality stones, it’s a lot easier to get.” essential items,” says analyst Edward publicised forays onto the auction moderated itself, escaping a worse co- Wealthy buyers do not operate in Sterck at BMO in London. “My fiancé circuit are also a well recognised way of rrection. “You can’t find fancy yellows isolation, Warren says, with prices at would argue it’s essential, but realistic- boosting recognition of his jewellery at prices where I feel comfortable,” one the top-end steering the wider market. ally, you don’t need gemstones to business, founded in 1960. polished diamond dealer recently told “The top tier pulls everything else up, survive.” Some query whether such highly pr- pricing group, Rapaport. I’ve got no doubt about that.”

Gemfields True North Gems Richland Res. Mrkt Cap: £215m ($362m) Mrkt Cap: C$20m ($18m) Mrkt Cap: £3m ($5m) INDUSTRY NEWS: Walter Energy has idled its coal operations in Can- The heavyweight of the coloured Toronto-listed True North Gems Richland Resources, formerly Tanz- ada • Agnico Eagle and Yamana gemstone sector, Gemfields owns the owns the Aappaluttoq ruby deposit in aniteOne, owns a mining block on the Gold have announced a joint bid for Kagem emerald mine in Zambia, hold- Greenland, which is engaged in a world’s only tanzanite deposit, sitting Osisko Mining valued at C$3.9bn ing the world’s largest known emerald headlong dash to develop its mining in northern Tanzania. Theft, smuggling ($3.5bn) • Goldcorp has nominated resource. Sales of $66m in the last 6 industry, fostering tax revenue to gain and government intervention however eleven directors to Osisko Mining’s months suggest the company accounts independence from Denmark. have proved rampant, foiling its plans board after increasing a bid for the for 26 per cent of the global emerald “This heralds the beginning of our to build an integrated producer. company last week to C$3.6bn market, whilst its first auction of rubies transformation from an exploration In 2003, the government announ- ($3.3bn) • Asanko Gold has amend- from its Montepuez deposit in Mozam- company to a producer,” chief execut- ced a ban on exports to India and in ed its debt facility with gold-copper bique, due in June, will bump up its ive and gemologist Nicholas Haughton 2010, it took control of 50 per cent of lender Red Kite • Sirius Resources asset value by revising its ruby inven- said last month after the company was the company’s operations. On Monday, has resumed drilling at its Nova tory from cost of production. awarded a 30-year mining license. “It Richland’s board announced a stop to Bollinger discovery in Western Au- “They’re potentially sat on the best will enable us to showcase and deliver investment, subject to a “group wide stralia • HudBay has sought a court ruby fields in the world,” says FinnCap a new supply of rubies and pink strategic review.” The company’s min- order blocking Augusta Resource analyst, Martin Potts. Shares have sapphires to the worldwide gemstone ing block has suffered incursions by Corp’s shareholder rights plan • doubled in 12 months to 40p. industry.” illegal miners “for years”, it said. GLOBAL MINING OBSERVER

From Black-and-White to Colour: Marilyn Monroe with diamonds, Mila Kunis wearing emeralds Coloured Gemstones Learning from De Beers’ Rise & Fall

“De Beers made diamonds desirable. The industry has reaped the “She married you for richer or for paigns aimed at the fashion press, in- poorer,” ran a De Beers ad-line of the benefits of that over a very long period of time.” cluding emerald auctions for the World 1960s. “Let her know how it’s going.” Land Trust to open elephant corridors The line was one of many brutally in India, and the Bigg Egg Hunt curr- coercive taglines that diamond mono- Men were told it was “customary” to meanwhile dropped to $150m, or 2 per ently underway in New York, with 300 GLOBAL MINING OBSERVER is a mining news bulletin. To receive future issues as they are released email: [email protected] polist De Beers deployed in the 20th spend two months’ salary on their cent of sales, by 2011, when the Oppen- giant easter eggs decorated by artists century under the leadership of the fiancé’s engagement ring and when De heimer’s sold-out to Anglo American, and designers dotted across the city. Oppenheimer family, embedding a Beers expanded its marketing into its sister company since 1917. Campaigns in Vogue India and disposition for diamonds in popular Japan in the 1960s, the threshold was window displays at Saks Fifth Avenue consciousness under a longstanding upped to 4 months. Western-style adv- Brian Gilbertson in New York have further expanded the relationship with Philadelphia-based erts showed courting couples spinning group’s advertising outlay, which has advertising agency, NW Ayer. in imported motorcars and from ’67 to It did not take long for the market to jumped from $150,000 in 2009 to Diamond prices had suffered a sp- ’81, the percentage of Japanese brides produce a contender for De Beers’ title $9.8m last year, equal to 7 per cent of ectacular crash with markets in 1929. receiving diamond engagement rings role. In 2007, an investment vehicle first half annualised sales. “No sale possible. Best offers for small rose from 5 to 60 per cent. led by BHP Billiton’s founder Brian The prize is high margins: aided by quantities well below cost price. Mark- Japan became the second largest Gilbertson bought a majority share in a proprietary grading system, the et quite demoralized. Inform Sir Ernest diamond market after the US, doubling London-listed Gemfields, owner of the company’s emerald prices have risen Oppenheimer,” read a cable from De De Beers’ group sales to $56bn in the Kagem mine in Zambia, the world’s from $4 per carat at its first auction in Beers in London to its South Africa 10 years to ‘95. The group was mean- largest emerald deposit. 2009 to $59 per carat in February, vs. office during the ensuing downturn. while spending $300m on advertising Until NW Ayer’s campaign of the production costs of $0.85 per carat. NW Ayer set about inculcating the each year, or 5 per cent of sales. 1940s, the coloured gemstone market Sales growth at jeweller Fabergé, American consumer with the idea that and the diamond market had been bought as its advertising figurehead in diamonds were the only recognised sy- Champagne & Cognac equal in size. Coloured gemstone deal- a $142m all-paper deal, has meanwhile mbol of engagement and should never ers now say their market is one tenth accelerated from 26 per cent in the last be resold, holding production from pr- The 1990s saw a loosening of the the size of diamonds. “De Beers made quarter to 89 per cent in December ior years on the hand of the consumer group’s stranglehold over global diamonds desirable,” one diamond and 198 per cent in January. and off the retail market. supply. Russian production fell broker in Antwerp says. “The industry “During the past 3 years, these other The message was spread from Holl- increasingly outside the De Beers cartel has reaped the benefits of that over a gemstone categories have taken away ywood, where Ayer changed the title of following the collapse of the Soviet very long period of time.” yet another half a per cent from our one film from Diamonds are Dangero- Union in 1991. Diamonds were also Coloured gems conversely market share, of our display space, of us and inserted diamond buying scenes found in Canada, whilst have been so neglected that our sales in the jewellery retail shops,” into another, to sex education classes, Australia’s Argyle mine Gemfields has been able to Moti Ganz, former president of the Di- where girls were warned of seduce- began selling its pink, buy up deposits for the amond Manufacturers Association told and-abandon tactics used by troops yellow and brown stones cost of a gold drilling the World Diamond Congress in 2012. returning from the Second World War. independently in the US campaign. Kagem was “A Diamond is Forever,” young women as “cognac” and “cham- dormant and lossma- Displacing De Beers were repeatedly reminded, a tagline pagne.” king when Gilbertson written by Frances Gerety in 1947, a A bid to buy Argyle took control, whilst its Likening Gemfields to De Beers is “a young copywriter who never married. failed as De Beers’ mar- majority share in Mon- cliché”, one analyst in London says. Consumers were “conditioned by th- ketshare dropped from tepuez in Mozambique, “Ian Harebottle’s a marketing man, eir environment”, according to internal 85 to 65 per cent. To now considered the he’s not a miner.” Growth in coloured agency memos. “We spread the word of retain control of prices, world’s largest ruby gemstones could also trigger growth in diamonds worn by stars of screen and it held back supply and deposit, was acquired in diamonds, says David Hargreaves, a stage, by wives and daughters of bought up the market 2011 for $2.5m. fairtrade gemstone dealer who used to political leaders, by any woman who surplus. Shares fell as the Gilbertson aimed to lead own the Chimwadzulu ruby mine in can make the grocer’s wife and the value of its stockpile doubled a coloured gemstone revival, Malawi. “For every coloured stone you mechanic’s sweetheart say, ‘I wish I to $5bn, exceeding its market dominating but not controlling sell, generally speaking, you want some had what she has.’” capitalisation. production, grading output to win diamonds around it.” In tandem with NW Ayer, De Beers The company’s duty to share- larger buyers and acting as the sector’s The likening of Gemfields to De began to lead consumers by the nose. holders had been “lost in the great advertising champion. Beers may be a strategic end in itself, When diamonds were discovered in imperial quest for control,” De Beers establishing Gemfields as the go-to Siberia in 1958, forcing the Oppenhei- boss Gary Ralfe later conceded. Anti- Vogue India group for colour, whilst pointing to a mer’s into a private treaty with the trust litigation in the US and the death benchmark for what can be achieved in Soviet Union and threatening an excess of Harry Oppenheimer in 2000 Chief executive Ian Harebottle and the niche between mining and retail. of small stones, De Beers initiated a sounded the death knell for the De grading specialist Adrian Banks were “The market is open to somebody new campaign promoting diamonds as Beers cartel. lifted from tanzanite dealer, Tanzanite taking the lead and driving coloured objects of perfection, regardless of size. Having lost control of the wholesale One, whilst Dev Shetty, an accountant gemstones into the high end consumer The campaign was hugely successful market, it went on a store-opening and turnaround specialist from tooth- segment,” says JPMorgan analyst Alex- and women surveyed by Ayer began to binge, whilst aiming to become the paste tube monopolist Essel Propack, ander Mees. “It requires somebody to describe big diamonds as “flashy” and “Supplier of Choice”, rather than com- was appointed as finance director. really seize the opportunity and Gem- “overdone.” pulsion. Its advertising spend had The company began a series of cam- fields is in the box seat there.”

GLOBAL MINING OBSERVER www.globalminingobserver.com