Gemfields Tightens Control Over Coloured Gemstone Supply
Issue 68, December 2013
London-listed Gemfields, already the world’s largest emerald miner, is due to become the world’s biggest ruby miner in the coming months on commercial production from its Montepuez deposit in Mozambique.
Discovered in 2009, Montepuez sits in a private hunting reserve owned by retired general, Raimundo Pachinuapa. After failed efforts to partner with Thai miners, Pachinuapa sold 75 per cent of the deposit to Gemfields in 2011 for $2.5m. Bulk sampling has produced 4.6m carats to date, with monthly output of 2.5m carats expected by July.
Brokered by private dealers and buffeted by sanctions against many of the largest exporters, the coloured gemstone market is famously fragmented, with supply divided between juntas in Southeast Asia, militias in South America and unlicensed mining in Africa. Without formal structure, the sector has discouraged investment and mechanisation, shortening mine lives and rendering trade flows opaque at best.
Using a fleet of dumpers and dozers, Montepuez is projected to produce 20 per cent of all global supply. By sorting output into highly regularised grades, Gemfields expects its flood of rubies to drive up prices by allowing buyers to plot production runs whilst reducing a cutter’s waste, lifting the prices they are willing to pay.
Gemfields has implemented an identical strategy in the emerald market. Production at its Kagem emerald mine in Zambia has risen threefold under the company’s ownership from c.10m carats before 2008 to 30m carats in its last full year. Per carat prices for its high grade emeralds have meanwhile risen from $4.40 in 2009 to $54 last quarter, vs. production costs of $0.66.
“The emerald grading system has been very successful,” says its pioneer, Adrian Banks, a former tanzanite trader and grading specialist, Gemfields’ head of global sales. “We’re still seeing price increases auction-on-auction.”
Ahead of production at Montepuez, Banks is currently devising a similar system for rubies, the first of its kind, based on colour, inclusions and yield. The highest categories will be graded in Mozambique, with lower qualities sent to Jaipur before being heat-treated in Thailand. “The production is going to be huge,” says Banks. “It’s going to be the largest producing ruby mine in the world.”
Emerald and ruby miner
Gemfields could be preparing
a move into diamonds
"There's an allure to diamonds and people get a glint in their eye when they're running diamond mining companies"
BHP Billiton's founder gives widest ranging interview of his career, tips "Ivan" for industry leadership
Martin Rapaport's perilous route to becoming the diamond industry's most influential body