The money that will be spent for rubies and emeralds may all end up in the pockets of a few monopolists. No exaggeration; it is a probable scenario sustained by facts.
Up until a few years ago, 85% of the raw materials needed for the gem industry came from small companies with small capital who were able to exploit floodplains or to follow rudimental galleries dug with explosives to find possible traces of precious minerals. This system still feeds the lapidaries even if supplies are unreliable in quantity and are variable in quality. Modern jewelers on the other hand need to plan their collections and they are reluctant to depend on the fickle underground market and on gem labs there. Today the supply chain for colored stones is changing radically through a process of financial consolidation and integration.
Why only now? There are a number of reasons. First of all, demand exploded with the frantic growth of new luxury consumer giants (not just in China and BRIC). Second, extracting rubies and emeralds generates more income than extracting diamonds since industrial costs are much more modest. Lastly, there has been ample availability on the part of countries like Zambia, Mozambique, and Tanzania who without the help of big international groups, would not be able to evaluate the multitude of deposits they have fast enough. These conditions have determined the rapid success of Gemfields, a new power in mining. The company has been quoted on the London Stock Exchange since 2008 and acquired 75% of emerald mines in Kagem, Zambia and later secured the rights to mine in promising areas rich in corundum in Pontepuez, Mozambique. Gemfields earned over 300 million dollars in 18 auctions; the first one reserved for rubies took place not long ago. There are even large companies in Bangkok who are interested in the red gem of Mozanbique, a source that has surpassed the Burmese one. Despite a robust colony of technicians in Montepuez and who buy raw rubies freely, the Thai prefer Gemfields’ auctions in that they are renowned for impeccable organization and gauging deposits. Observers estimate that they have put so much on the market that it must be worth billions of dollars, wealth that will become a strategic reserve able to influence supply and dictate pricing.
Ian Harebotlle, CEO of Gemfields does not hide his ambition for doing with gemstones what De Beers did with diamonds, and his strategy is clear. On one side each step is ethically oriented to increase support in healthcare and training for the local mining communities. On the other, costly controls in the various phases of production makes it essential to responsibly trace the road gems follow from the mine to the market. The consequential goodwill of public opinion that is attracted by ethical commitment is another plus because luxury brands (in 2013 Gemfields bought Fabergè and assigned as testimonial actress Mila Kunis) would rather use gems carrying the Gemfields label. In a search for the conditions imposing centralized and/or monopolistic management is commonplace among mining companies. The gem industry is no exception and the effects are already felt in the continuous rise in the price of rubies, consequence of the influential power and control over supply inversely proportional to the explosion of demand from China. It may be the case to recall the reduction of raw diamond market quota for DTC (De Beers) did not significantly reduce pricing. The minor players tend to follow the lead of the giants when they can maximize profits and keep a little piece of the pie.