As we finish the first four months of what many thought would be a difficult year, I want to take this opportunity to bring you, our valued Insider readership, a summary update on GIA’s efforts to date in 2002.

Given the challenges that the industry and the world faced late last year, most people were predicting a very soft business climate in 2002. Consequently, we felt that a conservative view was necessary to weather any potential storm that could result from such an environment. Fortunately for us, and I believe for many in the trade, the veil that covered the overall economy last year has lifted somewhat.  At GIA, we are pleased to have exceeded our projections in virtually every category. The Laboratory is extremely busy, with demand for diamond grading and identification services much greater than we had anticipated. As the challenge of treatments and synthetics continues, it is clear that tradespeople want greater assurance of the identity of their products and consumers continue to ask for third-party documentation of quality.

We are also doing very well in GIA Education again this year, especially on the heels of the introduction of our new Graduate Gemology (G.G.) program. In addition, the new Accredited Jewelry Professional (A.J.P.) diploma program for sales associates has been enormously successful, as have our new business courses in marketing, entrepreneurship, and retail management. Obviously, a strong education environment is good for the industry overall. It shows that jewelers are serious about their profession and that people are committed to standards of excellence in their career path.

We can report considerable success in our continuing efforts to keep pace with new synthetics and treatments in GIA Research. In particular, high pressure/high temperature (HPHT) processing in diamond has escalated beyond just those products we have received from General Electric and Lazare Kaplan International. However, we feel confident in our ability to identify the vast majority of diamonds treated in this manner. We have also been challenged on the colored gemstone front, with an apparently new form of sapphire treatment that can produce attractive yellow to pinkish orange to orange colors. In many of the stones GIA researchers have examined to date, the coloration is confined to a surface layer. Clearly, this must be disclosed. A related report in this issue of the Insider contains the latest information on this research.

Finally, jewelers seem to be more aggressive in acquiring GEM Instruments of late, and this could be yet another sign of the demand for, and confidence in, quality equipment to augment the professional needs of the industry. We are glad to see this continued investment in the tools that are the mainstay of the working jeweler.

In summary, we are pleased with our efforts and the progress made on many fronts thus far in 2002.  I wish you, too, continued success as the year unfolds.

Indicators still show that the U.S. economy is firmly rebounding despite listless stock prices, and the industry remains optimistic that the second half of 2002 will be strong.

Diamond Trade: The De Beers Diamond Trading Company is expected to allocate its largest sight of the year, as high as $600 million, this week, as brokers push for more goods on behalf of their clients.  One major reason sightholders have been requesting higher allocations is that rough is now quite profitable. Since January, the DTC has remained very flexible with prices, allowing a comfortable profit margin in all categories.

In other news, De Beers, barred from doing business directly in the U.S. since 1945 because of anti-trust regulations, will try to seek an accommodation to end that situation.

Gereth Penny, executive director of De Beers’ DTC, told this analyst that De Beers was waiting for the European Monopolies Commission to confer legal status to the Diamond Trading Company’s operations–including its Supplier of Choice program, its rough diamond marketing procedures, and its contract with Russia.

Penny hopes that once the European Union gives the DTC a green light, its terms will serve as a basis for a settlement with the U.S. Department of Justice. The EU already has approved De Beers’ joint retail venture with the French luxury group LVMH. Penny is optimistic that the EU ruling on the DTC operations will come shortly.

Colored Stones: Foreign buyers continue to travel to Bangkok, though traffic is still off significantly in Jaipur because demand for tanzanite remains down, and people are concerned about the problems in neighboring Pakistan.

The violence in India has had no apparent impact on the Thai market.

Paul Holewa, of Instore Magazine in Bangkok, reported that demand for the controversial treated orange sapphire remains flat, with little sign of recovery. Nevertheless, some Thais are investing in the Songea material and buying more ovens, so it seems that market conditions have not hurt interest on the part of those treating the sapphires.

He also reports that demand for unheated rubies has climbed, as the orange sapphire controversy has made buyers more aware of treatments.

Auctions: It’s been a good spring season thus far, with Christie’s, Phillips, and Sotheby’s reporting very successful sales. Sotheby’s conducted two major sales in New York April 23-25, from which they netted just over $17.5 million. The Jewels from the estate of Janice H Levin brought $8.15 million, while Magnificent Jewels brought $9.35 million.

The surprise lot of the Magnificent Jewels sale was a carved colored stone and diamond bracelet created by Cartier, Paris, circa 1930 that nearly tripled its presale estimate of $250,000-$350,000, bringing $933,500 from a private buyer.

Christie’s Magnificent Jewelry and Jadeite auction in Hong Kong, April 29-30, realized $20.6 million. The top lot, a 7.15 carat pear-shaped Fancy Vivid blue diamond, sold for just over $2.6 million. The next lot, a jadeite necklace of 26 beads that ranged from 14.36 to 15.64 mm, brought $1.65 million.

Country of origin usually isn’t an issue with diamonds, except in conflict areas and for the legendary Golconda area of India. Some dealers feel these diamonds are, in Christie’s words, “more transparent” than diamonds from other locales. The majority of the known Golconda diamonds are type IIa. On May 15, Christie’s is offering the 75.51 carat D-IF Golconda “Briolette of India,” which is estimated to bring $6-$7 million (or up to $93,000 per carat), as the signature piece of its Geneva sale.

Macro: The slumping stock market, the troublesome international situation, and mounting consumer debt caused consumer confidence to slip two points to 108.8 in April, according to the Conference Board, an economic research center. The index measures consumers’ assessment of current economic conditions. However, Lynn Franco, director of the Conference Board's Consumer Research Center, added that "Consumers' expectations remain virtually undaunted and signal continued expansion in the months ahead."

In better news, the U.S. gross domestic product increased at an annual rate of 5.8% in the first quarter of 2002, according to advance estimates released by the Bureau of Economic Analysis of the U.S. Department of Commerce.  In the fourth quarter, real GDP increased 1.7%. These increases were much higher than expected and represent the strongest showing since the final quarter of 1999.

Consumer spending, which accounts for two-thirds of overall economic growth, rose at a 3.5% annual pace in the first quarter, down from the strong 6.1% pace in the fourth quarter.

By Russell Shor
GIA Senior Industry Analyst

On April 25, 2002, we were contacted by a representative of Swarovski & Co., who said that their scientists have been trying to recreate the new sapphire treatment coming from Thailand. After their attempts to purchase details of the procedure in Thailand were unsuccessful, they decided to conduct their own experiments in an effort to understand the process. Swarovski scientists Arno Recheis and Thomas Rauch, under the leadership of Dr. Wolfgang Porcham, have reported some significant success that may provide a plausible explanation for the source of the beryllium detected in these stones.

Since GIA researchers first announced earlier this year that beryllium had been found to occur in conjunction with the orange surface-related color zones present in these sapphires, there have been questions about where the beryllium was coming from. Beryllium is a controlled substance in many countries because it is very poisonous in its pure form (although not when it is bonded with other atoms, as in chrysoberyl or these treated sapphires). We speculated in our last Insider report that the beryllium could come from the crucible, the local environment, a chemical flux, or even contaminants such as beryl or chrysoberyl mixed in with the sapphires during treatment.

The Swarovski scientists decided to experiment with adding chrysoberyl to the crucible along with the sapphires.  They explained that the decision to try this approach came from the fact that the lots of rough yellow sapphire they buy in Madagascar may contain anywhere from 10% to 40% yellow chrysoberyl.  Many of these chrysoberyls can be separated without difficulty because they have a distinct greenish component to their color.  However, some are almost the same color as the sapphire and, because all of the stones are waterworn pebbles [see figure 1], it is difficult to readily separate the two materials.  Therefore, it is possible that sapphire lots subjected to heat treatment could have contained some of these chrysoberyls.

Mr. Recheis reported that five experiments have been run to date, and in each case they were successful in producing the yellow to orange coloration characteristic of the new treatment method. Five stones were treated in each of the experiments. Blue, yellow-green, and dark red corundum from Songea was used, as well as pink sapphire from Madagascar. Mr. Recheis indicated that the blue material turned yellow but varied in tone from light to dark. He also said that the yellow-green turned yellow, the dark red turned orangy red, and the pink turned orange [see, for example, figure 2]. The Swarovski scientists intentionally treated these stones so that there would not be any surface-related color zones. Swarovski would not divulge the entire process, citing their respect for the trade secrets of the Thai gem industry and their desire not to make the process widely available.

Yianni Melas, the rough buyer for Swarovski, believes that the success of these experiments provides a possible scenario for the accidental discovery of this process during the heating of Madagascar sapphire rough.

Swarovski intends to disclose these treated stones in the same manner agreed on by four major laboratories in a unified disclosure policy issued earlier this year. They feel that proper disclosure will allow these stones to find their place in the market and be a viable and desirable product.

For a comprehensive review of the research to date on this new sapphire treatment, see the Gem News International section in the Spring issue of Gems & Gemology, available May 20. To order, e-mail dortiz@gia.edu, or call toll-free 800-421-7250 ext. 7142. Outside the U.S. and Canada, call 760-603-4000, ext. 7142. Order online at www.gia.edu/gandg. Please enter promotion code RTL02.

Editor’s Note: This report was prepared by Shane F. McClure, director of West Coast Identification Services, GIA Gem Trade Laboratory.

Have you ever wondered what makes a diamond sparkle? Find out in the latest issue of The Loupe: GIA World News, which features a cover story on GIA’s groundbreaking diamond cut research. We will explain the preliminary findings of years of GIA research into how proportions affect the appearance of a round brilliant cut diamond.

The Loupe also features a special section on the Institute’s coverage of the Tucson Gem & Mineral shows, including coverage of GIA’s seminars and events. It’s filled with tidbits on the shows, the GIA Industry Awards Presentation, the Alumni Association Dance Party and the first-ever silent and live auctions to benefit the Alumni Endowment Fund, among others.  A must-read if you missed the shows this year.

You’ll also find an article celebrating Richard T. Liddicoat’s 50 years as editor of Gems & Gemology and learn more about a new GIA Museum exhibit, “Gems in Art: Art in Gems,” which stretches the imagination on the uses of gemstones.

With more than 80,000 international subscribers, the Spring 2002 issue of The Loupe: GIA World News will hit mailboxes around the world in just a couple of weeks. A quarterly publication, it offers feature stories and news items that give you an in-depth look at the people and programs that make up GIA.

If you don’t regularly receive The Loupe: GIA World News, and would like to receive the free publication, contact Mark Saffell, database administrator, at (760) 603-4140 or by e-mail at msaffell@gia.edu.

If there were two words befitting the first graduates of GIA’s new business program, it would be pride and confidence. These eight students showed pride in themselves for having completed such a rigorous educational program and more confidence in their ability to succeed in the ever-competitive jewelry retail environment as a result of added business acumen.

On March 22, GIA also bestowed its own vote of confidence on these graduates by granting them diplomas for successfully completing the Institute’s Graduate Retail Management diploma program (GRM) – a program designed for those aspiring to positions in jewelry retail management, as well as for current managers wishing to improve their skills. Several of the graduates said they felt the three 60-hour courses – taught concurrently during a 10-week span – more than prepared them for the business side of the retail jewelry industry.

“When I came here, I didn’t know how to manage a retail jewelry store. Now I know exactly what to do and what not to do,” said Marc Arbadji, who plans to return to his homeland of Lebanon and open his own retail store.

“This should be a highly recommended class,” said Zoe Li from Taiwan. “Now I have the concept and the plan. I now know how to start a business.”

Brook Ellis, GIA’s Vice President of Education, pointed out the GRM program is unique among business programs in that it is designed with specific application to the jewelry industry.

“Some may wonder why GIA, famous for being the world’s number one teacher of gemology, would want to teach business,” said Ellis. “Yes, you have to be able to identify the various gemstones and know the many treatments stones can undergo, but you also have to be able to work out there and make a profit. That’s why we created this program.”

The next GRM program begins May 30. For additional information about the GRM program please call 1-800-421-7250, ext. 4001.

The Institute has just gone to print with Gems & Gemology’s special Spring 2002 Richard T. Liddicoat issue, to honor his 50 years as editor-in-chief.

In this collector’s issue you’ll find a tribute to Richard T. Liddicoat, “The Father of Modern Gemology,” as well as articles on liddicoatite tourmaline, portable instruments and field techniques, the historic 128-ct Star of the South diamond – and much more.

We are certain this historic Richard T. Liddicoat issue will sell out. But you can reserve your copy now when you order a one-year subscription to the award-winning quarterly journal Gems & Gemology for only $69.95 in the U.S. or $80 elsewhere. CALL TOLL-FREE now: 800-421-7250 ext. 7142. Outside the U.S. and Canada: 760-603-4000 ext. 7142. Or e-mail dortiz@gia.edu.

Check out the latest spring specials available from GIA GEM Instruments, which offers the finest equipment in the world of gemology, metallurgy and jewelry. Discover the incredible savings on microscopes, lights, loupes and tweezers that may help boost your bottom line this spring.

Convert your computer or monitor into a high tech sales presentation tool by purchasing the GIA GEM Instruments FlexCam®. This desktop video camera regularly sells for $625 and is on special for just $595. Mounted to your GemoLite® Microscope and your computer or video monitor, the FlexCam® projects a color image sure to dazzle any gem customer. Ideal for diamond sales presentations!  Mount it, plug it in, focus and the FlexCam® is already working for you. It's that easy. Camera eyepiece adaptor fits all GemoLite® Microscope models with 15x eyepieces.

Also available is the Presentation Loupe with Tweezers that allows you to position and secure a stone so customers can easily see the stone's qualities. Eliminates two-handed operation. This indispensable tool regularly sells for $195 and is currently on special for $159 a savings of $36. Patented adjustable combination loupe and locking tweezers holds stone securely, preventing loss or damage. Includes ultra-fine weave GEM Cloth.

Check out these and other outstanding specials available from GIA GEM Instruments by visiting GEM Instruments & Books Online Store. Order today, and own the superior equipment used by leading gem and jewelry professionals around the world. Special prices valid until June 30, 2002. Offers good while supplies last, as product is limited to stock on hand. Prices are F.O.B. Carlsbad Warehouse, CA and do not include shipping, insurance, import duties, local taxes and a $3.50 handling charge. Applicable CA, IL and NY sales tax will be added to all orders.

GIA’s Open House on Saturday, May 4, from 1-4 p.m. is the perfect opportunity for prospective students, parents, educators, and those who are simply curious about GIA to visit the campus and become better acquainted with the Institute.

The Open House will feature classroom demonstrations in gemology, jewelry manufacturing arts, design, and other topics, as well as self-guided tours of GIA’s 18-acre campus overlooking the Pacific Ocean and Carlsbad's beautiful flower fields. Visitors can meet GIA instructors, students, and staff members, and enjoy the many gemological and jewelry displays - most notably an in-depth museum exhibit about diamonds, as well as a new display, "Gems in Art: Art in Gems," demonstrating the versatility of gemstones in art.

GIA is located at 5345 Armada Drive (I-5 to Cannon Drive exit east, right on Legoland Drive). Parking is free. There will also be door prizes and refreshments. For additional information about the Education Open House, please call 760-603-4222 and leave your name and number.

GIA's Extension classes provide the practical experience needed to fulfill the requirements to become a world-renowned Graduate Gemologist and to help you continue your professional education. Extension classes are hosted in cities throughout North America, and Greensboro, N.C., New York City and Carlsbad, Calif. will be the sites for upcoming May classes.

Learn to grade diamonds from the creators of the Four Cs and the International Diamond Grading System™ in Greensboro May 6-10 with GIA's Diamond Grading Extension class. Spaces are filling quickly for the Advanced Diamond Grading Lab and the Detecting Synthetic Diamonds & Moissanite class, both being held Saturday, May 11, so sign up today. Also offered in Greensboro are these additional Extension classes: New Advanced Gemology, May 12 (Sunday); Gem Identification, May 13-17; Colored Stone Grading, May 20-22; and a one-day Pearl Grading class May 23.

If you're in New York City and want to take classes to earn your acclaimed G.G. diploma, these May Extension classes are also being offered there: Colored Stone Grading, May 4-18 (Saturdays) and also on May 20-22; Diamond Grading, May 6-10; Gem Identification, May 13-17; and an Advanced Diamond Grading Lab, May 24. To reserve a space for any New York Extension classes, please call 800-366-8519.

Time is running out, but there are still limited seats left in Gem Identification, which is an evening class, being offered in Carlsbad, Calif. May 6-21.

To enroll or for more information on these classes, or other GIA Extension classes held throughout North America, please call 800-421-7250, ext. 4001, e-mail eduinfo@gia.edu, or visit GIA's Web site, www.gia.edu and click on Education.