GIA President William E. Boyajian

One of the most important responsibilities of a business leader is assessing the health of his or her company. Recently, there has been a strong trend toward evaluating businesses on the basis of cash flow (cash generated from operations) rather than revenue growth (sales), or even earnings (net income). My concern in the gem and jewelry industry is that there are still some jewelers who base their success (or failure) on revenue increases (or decreases) from one year to the next. In other words, they seem to speak from a top-line perspective rather than from an earnings perspective – and certainly rarely from a cash flow perspective.

I fear that many jewelers believe they are doing better simply if their revenue is up year over year. But unless you are in a period of massive growth or re-investment in your business, what good is a revenue increase if net income is down? All publicly traded jewelry companies publish figures for revenue gains for comparable store outlets, along with earnings gains or losses year over year. It might also be wise to consider cash flow increases or decreases. These are seldom discussed in the jewelry industry, but it is becoming ever more apparent that cash flow is crucial to the health of any business.

I’m not a finance expert, but it seems to me that every jewelry businessperson should be aware of these fundamental principles. All business owners need to know how to grow their business, create more earnings, and maintain healthy cash flow for solvency and reinvestment in capital improvements, inventory, and the like. It is also my belief that a good businessperson is better able to serve the consumer than one who is struggling to survive.

This is one reason why we have established the GIA School of Business. We want to provide jewelers with the skills necessary to operate effective businesses and to better serve themselves, their families, the industry overall, and the consuming public. Jewelers cannot survive by revenue growth alone. The sooner business owners recognize this, the more effective they will be in assessing their own success and in evaluating the health of their operation.

If you want to learn more about how GIA can help your business improve cash flow, as well as make earnings grow, give us a call or send us an e-mail. The GIA School of Business may be exactly what you, a son or daughter, or a business partner needs to take your firm to the next level.

Valentine’s Day sales of diamond jewelry surpassed the expectations of most retailers, though most of the gains, which averaged 4%-5% over last year, came at the lower end. The bad news hit this week – consumer confidence took its largest single drop in 11 years, even greater than the weeks following Sept. 11, 2001.

The Conference Board of Consumer Research, a consumer research organization, reported on Feb. 22 that consumer confidence plunged 14.8 points to 64. By contrast, the index for March of last year hovered above 110. The number is a compilation of factors, including consumer views of current conditions, plans to buy major items within six months, and expectations for business and employment over the next six months. Most troublesome for the jewelry industry is that the largest decline came among the affluent households.

There was little mystery behind the dismal numbers: the potential war with Iraq and fears about its aftermath, fuel prices that top $2 a gallon, and soaring home heating oil costs in a very harsh winter.

A prolonged war with Iraq, or a major terrorist campaign in its aftermath, will severely disrupt the world economy, particularly the diamond and gemstone industry. De Beers’s forecasters and exhibitors at the various Tucson gem shows agree on that.

DIAMONDS: Despite the economic news, De Beers’s Diamond Trading Company (DTC) February sight proved to be larger than expected, $600-$650 million. The bulk of the allocations went to Indian manufacturers who serve the mass merchandisers that have been doing quite well this year.

According to brokers working with DTC clients, the DTC did keep a very tight rein on the upper end of the market, limiting allocations of large goods. While the DTC declines to provide specific information on sights, brokers say that large gems were in extremely short supply and De Beers declined all requests for additional goods.

The DTC is keeping its prices at or just below those of other major producers, including BHP-Billiton (the Ekati mine in Canada) and Rio Tinto (Australia’s Argyle mine, Canada’s Diavik). Both have increased their sales in recent months.

Authorities in Belgium have taken four people into custody over last week’s diamond theft from the strong room of a building in Antwerp’s diamond district. Thieves rifled 120 safes of diamonds, cash, and other valuables in what authorities termed an inside job. According to Belgian press reports, two Italian men, who had taken office space in the building several months earlier, began cashing securities allegedly taken in the theft. They were arrested, along with two women – one Italian and the other Dutch – when they began moving out of the offices they had rented.

Authorities and insurance companies are still totaling the claims that have arisen from the theft.

AUCTIONS: At the top end, Christie’s Feb. 19–20 Important Jewels auction, in St. Moritz, Switzerland, drew respectable prices, primarily from European and Middle Eastern buyers. A Middle Eastern private client paid $231,259 ($33,908 per carat) for a 6.82-ct. D-Internally Flawless pear-shaped diamond, while a Swiss private buyer paid $373,852 ($37,300 per carat) for a 10.02-ct. D-Internally Flawless cushion-shaped diamond.

A Middle Eastern dealer acquired a 12.11-ct. Kashmir sapphire for $255,704 ($21,115 per carat).

COLORED STONES: At an emergency meeting last week, the Chanthaburi Gem & Jewelry Association (CGA), which includes of some of the biggest players in gemstone heating, agreed to disclose the use of beryllium to enhance the color of some types of corundum. The action was welcomed by the gem trade.

The 60 association members present unanimously agreed that:  

• Chrysoberyl is being intentionally added to the crucible during the new heat treatment to enhance color in corundum.
• All association members are obligated to disclose and differentiate the new treatment when selling to customers.

The CGA agreed to add the code letter “A” to invoices of such treated material.

Russell Shor
Senior Industry Analyst

This 2.50 ct ruby contained a large glass-filled cavity. Photo by Maha Tannous.

Standard gemological tests confirmed that the 2.50 ct stone was indeed natural corundum. When we examined the ruby with 10× magnification, we recognized immediately – from the altered appearance of numerous inclusions – that the stone had been subjected to heat treatment. Not only did it show a series of fractures that had been healed, but it also contained opaque dark brown rounded particles that were remnants of crystals that had exploded during the heating process, with the pieces subsequently melted into rounded “balls.”

Deep in the pavilion, around the culet, we also saw a series of large gas bubbles that were confined to an area very close to the surface. Further examination with overhead illumination revealed very fine separations in three of the pavilion facets adjacent to the culet and a distinct difference in luster in those facets. This area of lower luster was large enough that we were able to obtain a single R.I. reading of 1.51, which indicates that it was not corundum but rather a type of glass. We advised our client that this ruby had undergone heat treatment and also had been surface repaired with a foreign material.

Over the last two decades, G&G has reported on a number of rubies with evidence of foreign “fillers” both on the surface and in surface-reaching fractures. On only a few occasions have we encountered filled cavities large enough to measure the R.I. We also determined that if this stone was recut to remove the cavity, it would likely lose significant weight and a “size” – that is, it would be less than 2 ct. While such fillings are less prevalent today than they were a decade ago, one still needs to be careful to inspect the surface of rubies for such a treatment. In this case, too, someone viewing the stone through the table could have interpreted the gas bubbles as indicating it was a melt synthetic.

For more updates from the GIA Gem Trade Laboratory, see the Gem Trade Lab Notes section of Gems & Gemology. To subscribe, visit Gems & Gemology. Or contact Subscriptions Manager Debbie Ortiz at dortiz@gia.edu, or call toll free 800-421-7250, ext. 7142. Outside the U.S. and Canada, call 760-603-4000, ext. 7142.

Editor’s Note: This report was prepared by Karin N. Hurwit and Thomas M. Moses of the GIA Gem Trade Laboratory in Carlsbad and New York, respectively.

Click here to read the article in its entirety.

In this chart, species and groups appear in capital letters, varieties appear in upper and lower case. Where not specified, listing includes all transparent varieties.

Type I stones are usually eye-clean with no inclusions visible to the unaided eye. The stones in this type are usually of such high clarity that even minor inclusions can detract from their desirability.

Type II stones typically show some eye-visible inclusions that do not detract from the gem’s overall beauty. Many stones with inclusions visible to the unaided eye are faceted for use in jewelry.

Type III stones are almost always included and show eye-visible inclusions, but even specimens with obvious or prominent inclusions are often faceted for use in jewelry.

In this chart of clarity types of common transparent colored gemstones, species appear in capital letters, and varieties appear in upper and lower case. Where not specified, the listing includes all transparent varieties.

The following criteria for each clarity type set the final clarity grade:

Type I clarity grades

• Eye-clean—appears clean to the unaided eye
• Slightly included—minute inclusions difficult to see with the unaided eye
• Moderately included—minor inclusions somewhat easy to see with the unaided eye
• Heavily included—prominent inclusions that have a negative effect on appearance or durability
• Severely included—prominent inclusions that have a severe effect on appearance, durability, or both

Type II clarity grades

• Eye-clean—appears clean to the unaided eye
• Slightly included—minor inclusions somewhat easy to see with the unaided eye
• Moderately included—noticeable inclusions apparent to the unaided eye
• Heavily included—prominent inclusions that have a negative effect on appearance or durability
• Severely included—prominent inclusions that have a severe effect on appearance, durability, or both

Type III clarity grades

• Eye-clean—appears clean to the unaided eye
• Slightly included—noticeable inclusions apparent to the unaided eye
• Moderately included—obvious inclusions very apparent to the unaided eye
• Heavily included—prominent inclusions that have a negative effect on appearance or durability
• Severely included— prominent inclusions that have a severe effect on appearance, durability, or both

Additional information regarding the grading of clarity can be found in the GIA Colored Stones course, Colored Stone Grading Lab Manual. For information on GIA courses and diploma programs, click here, e-mail eduinfo@gia.edu, or call 800-421-7250, ext. 4001.

GIA was well represented at the Tucson gem and mineral shows this year. The following are highlights of Alumni, Research and Treasured Gifts activities at the event:

Alumni Association
Nearly 500 Alumni members and friends attended the annual Dance Party and awards presentation held at the Marriott University Park Hotel, where the silent and live auctions raised nearly $20,000 for the Alumni Endowment Fund. The evening was highlighted by the announcement that Richard Drucker, G.G., Starla Turner, G.G., and Jon Phillips, G.G., would match the funds raised at the event, bringing the total amount raised to almost $40,000.

A signed copy of Elizabeth Taylor’s latest book, “My Love Affair with Jewelry,” drew the auction’s highest bid at $2,000, followed by a poster-sized cover of the Spring 2002 issue of Gems & Gemology, which fetched $1,400. The issue pays tribute to GIA’s late Chairman Richard T. Liddicoat. The oversized cover containing his portrait was signed by Liddicoat himself.

Following a buffet dinner at the nautical-themed event, attendees took to the dance floor after GIA President William E. Boyajian kicked the night off with the first dance, which was auctioned off for $350.

Research
Dr. James Shigley, director of Research at GIA, gave an informative presentation on the Institute’s latest findings regarding topics such as high pressure/high temperature (HPHT) processed diamonds, bulk-diffusion treated corundum, and the newest synthetic diamonds on the market.  

Dr. Shigley showed before-and-after images that demonstrate the dramatic changes that diamonds undergo during HPHT processing. In rare cases, the treatment has been known to produce pink and blue diamonds. Although GIA believes it can identify the vast majority of HPHT diamonds, detection in certain circumstances remains a challenge, Shigley said, but GIA continues to make progress in this area. GIA researchers have recorded data on tens of thousands of known untreated and treated diamonds as a means to develop and refine criteria for HPHT identification.

Dr. Shigley also explained two methods GIA researchers use to test the chemical properties of corundum to detect bulk or lattice diffusion treatment: laser ablation–inductively coupled plasma–mass spectrometry (LA–ICP–MS), and secondary ion mass spectrometry (SIMS).  In both cases, researchers were able to determine that beryllium, a light metallic element, was diffused into the corundum during the high-temperature heating. The chemical evidence was supported by visual observations of the material, which displayed internal color zoning directly related to the outside shape of the stones.

The presentation also included a brief analysis of some laboratory-created yellow diamond crystals being produced today. Although the material can be identified by gemologists, Shigley said its diagnostic gemological properties appear less distinct than other synthetic diamonds previously examined by GIA researchers.

Treasured Gifts
The Treasured Gifts booth was very popular with visitors, who eagerly sought free copies of the inaugural limited-edition poster that highlights GIA’s collection of gems and jewelry. On display at the booth were a variety of pieces from the GIA Museum Collection. Development Associate Pat Syvrud received in-kind gifts to GIA, including:

• A 70-ct. tourmaline, from an anonymous donor
• A 21.47-ct. aquamarine ring, with 2.24 cts. of pavé diamonds set in platinum with 18K gold overlay, donated by Keith G. Wurtz of Arlington Heights, Ill.
• Three samples of faceted peridot mined from Badger Creek, Colo., donated by Donna and John Rhoads
• An 11.06-ct. kunzite with tourmaline and rutile inclusions and a color change garnet, donated by Jeff Schneider
• A 6.74-ct. light-green diopside, donated by Columbia Gem House and Tri Gems Design
•  A suite of fancy colored sapphire, donated by Sara Gem