In late November 2016, Hong Kong Jewellery was invited by Gemfields to visit its ruby mine in Montepuez, northern Mozambique in Africa. Media from India, Japan, the UK, mainland China and Hong Kong were on the invitation list. No doubt Gemfields is eager to show the world what they have done. During the visit, Ian Harebottle, CEO of Gemfields shed light on the company’s ambitions in the coloured gemstones and the China market.
Visit to MRM
Gemfields’ Montepuez ruby mine is operated by Montepuez Ruby Mining (MRM), a company jointly-owned by Gemfields (75 percent) and Mwiriti Limitada, a private Mozambican company (25 percent).
The tour at MRM began with a short introduction of the geography and procedure of ruby mining in Montepuez. Discovered in 2009, it is the most significant recently- discovered ruby deposit in the world. Formed 500 million years ago, these rubies present colours resembling the dark red of old Thai rubies and the more pinkish hues of Burmese rubies. In February 2012, MRM obtained a 25-year-long mining and exploration license for an area of 336 square kilometres from the Mozambique government. Although data collected in July 2015 indicated 475 million carats of mineral in the area, Gemfields believes that the actual number is at least double.
Before actual mining, core sampling is carried out by extracting cylindrical rock deposits from the mines. The presence of ruby formation on the sample provides a reference for the depth into earth where ruby can be found. While the cost of sample extraction is about US$500 per meter, so far the company has extracted 20 kilometers of core samples at a total cost of approximately US$10 million.
The ruby deposit in MRM consists of primary and secondary deposits. Primary rubies are formed when fluid derived from the parental magma interacted with the host rocks under a silica unsaturated environment. Secondary deposits are formed when the rubies are liberated from the host rocks, transported by water and finally settled in the river bed. Open-pit mining and bulk sampling are carried out in MRM with the capacity of 100 tonnes per hour. Before the rubies and corundum are sold in Gemfields’ auctions, the property belongs to the government so no one is allowed to take anything away from the mine, which explains why we, together with all the workers, are subject to thorough body searches before and after we enter each area.
After gravels and pieces of gemstones are collected by machines in bulk, they are transferred to the wash plants where materials with the specific gravity of corundum (3.97 -4.08) are extracted. Then in the sorting house corundum and rubies are handpicked and classified into different grades. Harebottle revealed that a new sorting house with more advanced machines and higher processing capacity will go into service later in 2017 to replace the existing one. The next day we left MRM to visit Gemfields’ corporate social responsibility projects in the local communities.
Benefiting local communities and environment
As the second highest tax payer in Mozambique, MRM has an extensive CSR program that engages the local community and the environment. For instance, after the deposit in one area is exhausted, it will be backfilled and trees will be replanted to restore the land. “What we do here is much better than artisanal mining, which will completely destroy the environment,” explained Harebottle. Regarding community engagement, they have built a chicken farm to empower local women to support themselves and a primary school that could accommodate 1,100 students. Furthermore, they are building a new school and accommodation facilities to save teachers’ long commuting time.
A game changer
Capitalising on its large scale of operation and access to the biggest ruby deposit, Gemfields’ approach to the gemstone industry makes it a game changer.
Held twice a year, Gemfields’ ruby and corundum rough auctions are only open to 55 select customers from around the world.
Their ruby and corundum roughs are divided into 500 grades and Gemfields could provide 1,000 to 5,000 pieces of ruby roughs of the same size, shape and colour. Such systematic and abundant supply was not possible before. When jewellers can purchase such a volume of standardised ruby rough, it allows them to produce a specific design in large quantities.
To secure new supply of coloured gemstones, Gemfields is the only company, according to Harebottle, to invest in exploring greenfield sites in Asia, Africa, Sri Lanka, Ethiopia and Myanmar to look for new sources of gemstones. In order to provide long-term supply for clients, they always reserve one year of stock so that their customers do not have to worry about future supply.
In Harebottle’s words, they are a ‘price maker’ rather than a ‘price taker’. In the past, the unstable and fragmented global supply chain of coloured gemstones leads to fluctuations in price and supply, resulting in a lack of confidence in building the industry of coloured gemstones in the downstream. Consequently gemstone sellers could only sell at a price that the market offers. When Gemfields entered the industry, by creating a stable supply of gemstone rough, they can attract more buyers to push demand that ultimately drives prices.
“Rarity is not the only factor that determines the price of gemstones. Knowledge, awareness, history and positioning are also part of it. Ruby is much rarer than diamonds. My advice is buy now because it will definitely go up in price,” added Harebottle.
In Harebottle’s view, terms like ‘pigeon blood’ have created confusion and hinder consumer confidence. “It’s time to move on. We need to come up with something cleverer. The diamond industry has created a very good nomenclature, with their colour grading starting with D. If it begins with A, everyone would want nothing but A,” he explained.
To help customers better understand their products, they are recreating a cut and polished grading system by collaborating with leading laboratories including Gubelin, Swiss Gemmological Institute (SSEF), National Gemstone Testing Centre (NGTC) and Gemological Institute of America (GIA).
Regarding the development of the industry, he said: “I think at some point there will be a gemstone producers association (like Diamonds Producer Association) when people realise we are all in the same sector but not competitors. Then it will be very exciting and we will assume an active role in it.”
China a priority
Asked of what Gemfields’ current priority is, Harebottle said: “We have a multi-facet approach but one of our top priorities is more exposure in the Chinese market. The potential of China is incredible.”
He observed that China has an inherent, historic love of colour that is embedded in the tradition and culture. “There had been an element of colour in China but it had been predominantly a little bit of ruby and mainly jade. The Chinese market for jade alone equals the global market for emeralds, rubies and sapphires. And remember jade is a coloured stone. The negative of that is that jade prices have gone through the roof. Prices are unaffordable. That’s when we see an opportunity. Just because you can’t afford a green jade doesn’t mean you can’t afford a green emerald or a green tourmaline. It is a huge opportunity from the cultural and market point of view,” he said.
Another factor is the issue of import duty, thanks to which the coloured gemstone market in China is mostly “blank”, as described by Harebottle. One result is that many gemstones are traded without declaration, which is not beneficial to the government either. He hopes to introduce coloured gemstones into China and believes a lower tax would be better for everyone. “From our experience of interacting with China, we believe that nothing is insurmountable,” he added confidently.
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