Our grading capacity has continued to expand, with the laboratory now exceeding 550 employees, more than two-thirds of whom are diamond graders and staff gemologists. Service demands have increased to such an extent that our intake of items is up 18% over the same period last year. To further support this growing demand, physical expansion is planned for New York operations next year, and an even more significant expansion is planned in Carlsbad over the next 18 months. We have incorporated dozens of testing and screening steps into our diamond grading and gem identification processes, using very sophisticated instrumentation to ensure the proper detection of treatments and synthetics.

Research, as always, is at the core of everything we do, and without it we would not be able to provide the quality and integrity of service and support that the trade and public have long come to expect. While the world may be dependent on our diamond grading standards and services, one of the greatest "unspoken" benefits of any GIA report is the accurate identification of new gemstone synthetics, simulants, and treatments.

This has also been an extremely important year for GIA Research, with continued progress on our groundbreaking research into the analysis of diamond cut in round brilliants, our focus on the identification of high pressure/high temperature (HPHT) treatment in diamonds, our work on HPHT- and CVD-grown synthetic diamonds, and our efforts to characterize and identify new forms of diffusion treatment in corundum. To support these activities, we have added to our technical staff in research and identification services. The right human resources and state-of-the-art instrumentation are key to our ability to stay ahead of the technological challenges facing gemology. Our work with other scientific institutions and technical experts worldwide has also been critical to our success.

GIA as a whole is nearing 900 staff globally, with Education centers in nine countries on three continents. GIA Education has experienced uninterrupted growth in recent years. In 2003 alone, there were some 15,000 new enrollments. These enrollments are up in all key categories: Distance Education, On Campus programs, and Extension classes. We are also seeing a number of trends take shape: As sophisticated consumers increasingly demand knowledgeable personnel behind retail counters, tradespeople recognize the need for well-trained sales and technical support staff. In addition, more career-change, hobby-driven, and other interested "public" parties are enrolling in our courses. Frankly, I feel that as these more-educated consumers put greater pressure on the industry to have well-trained professionals in their employ, they ultimately raise the quality and integrity of the trade as a whole.

Our Gem Instruments division has made a lot of progress in 2003, too, as jewelers have seen a renewed need for professional equipment to assist in their sales and gem identification needs. We have focused on customer service, and we are leveraging our intellectual resources in Research, the Laboratory, and Education for insight and collaboration on new instrument development. Plans next year call for the establishment of a new research and development center, and we intend to make new product development a high priority. I am very excited about this Institute-wide commitment.

In 2003, we continued to host, sponsor, or co-sponsor major events. This summer's “Splendor of Diamonds” exhibit at the Smithsonian Institution was a huge success and exemplifies our commitment to extend ourselves in public outreach, developing excitement and enthusiasm for beautiful gem materials. The publication of Legacy of Leadership: A History of the Gemological Institute of America was another milestone. I hope many Insider readers will order a copy of the book and enjoy this remarkable work. Other events stand out: Two excellent Career Fairs, one in New York and the other in Carlsbad; a record crowd at our League of Honor Dinner in New York; and GemFests from Texas to Basel to Hong Kong.

Indeed, 2003 was a remarkable year on all GIA fronts, both internally and externally. And we look forward to building on these successes in 2004. In this final message of the year, I would like to take this opportunity to again thank you for your support and confidence in GIA, and to wish all of you a healthy and prosperous holiday season and a happy new year.

There has been considerable speculation about the process used to achieve the unusual color concentrations observed in this material. Although we have seen several known Be-diffused blue sapphires, to date no significant amounts of beryllium have been found in these particular stones. Another theory that has received considerable attention involves the partial dissolution of the original sapphire during this “new” heating process and subsequent regrowth (i.e., of synthetic sapphire) over the remaining original stone.

Tennakoon's heat treatment experiments used several samples he supplied as well as reference material that had been pre-analyzed by GIA (figure 2). The heat treatment procedure (which is proprietary to Tennakoon) had a dramatic effect on the color of most of the samples (figure 3), and initial observation suggested that the unusual color concentrations indicated above were produced in more than two-thirds of them (figure 4).

On the basis of detailed microscopic examination of the samples after treatment, Smith and Hall determined unequivocally that no synthetic sapphire growth had taken place. Furthermore, the researchers did not witness the use of any fluxing agents during the heating experiments, and no evidence of flux was present on or around the samples brought back to the United States for further analyses. At present, we cannot state conclusively the role that lattice diffusion plays in this peculiar color phenomenon or which elements may be involved. However, we are continuing our research into the exact mechanisms responsible for these unusual color concentrations, and will release our findings to the trade as they become available.

Holiday jewelry demand has remained strong through the first three weeks of the season, but nowhere near the lofty 8% increases predicted by some analysts.

Retail jewelers say business has been good, with most of the action concentrated in the higher and lower ends. The hottest items are those backed by pricey advertising campaigns: diamonds and watches. Eastern retailers say the two snowstorms have slowed business somewhat, but they believe they will make that up before Christmas: “The good thing about Christmas is that buyers can put off getting gifts, but they have to buy them sometime before Dec. 25,” said one.

Visits to retailers in Southern California and the Chicago area, as well as telephone interviews, found that more than ever, jewelers are tying their own advertising, and their shop windows, into national ad campaigns run by the Diamond Trading Company (DTC) and the major watch manufacturers. Nearly every window featured DTC-promoted right-hand rings, three-stone rings, and diamond solitaires, or watch lines.  In addition, there are fewer discount-oriented jewelry promotions this season, in contrast with the previous two years, which saw deep price-cut promotions emblazoned over many storefronts.

John Michaels of Michaels, Inc., a 12-store chain headquartered in Waterbury, Conn., reported that upscale customers seem to be buoyed by recent rises in the stock market. Even in the mid-level range, Michaels noted, the average price of each sale appears to be going up.

“Emotion seems to be selling this year,” he said. “Again, it’s the three-stone ring that captures this feeling.”

Retailers reported that, among consumers, beryllium diffusion–treated sapphires, conflict diamonds, and Burmese (now Myanmar) rubies appear to be a non-issue. For example, managers of the eight retail jewelry stores in suburban Chicago's huge Woodfield Mall reported no consumer inquiries on any of those topics. There has been little publicity in the consumer press over the beryllium-diffusion controversy, and the U.S. ban on trade with Myanmar. In addition, the conflict diamonds issue has receded from the headlines.

One concern among retailers is that the current high price of gold may create a cash-flow crunch when they have to replace inventory next year. Most retailers ordered their current gold jewelry inventory when gold was trading at $350 to $370 per ounce. In December, the metal topped $400 per ounce. If the price does not break, it will leave retailers in a position of paying 20% to 30% more for a product which, at lower price points, has extreme price sensitivity.

“This is something we will have to deal with next year,” said Michaels.

DIAMONDS: Clients of De Beers’s Diamond Trading Company believe a price increase will be coming at the next sight, Jan. 12–16, 2004. However, as many as 35 DTC sightholders, many of them longtime clients, received their final allocations in December. January’s sightholder list will be much shorter and, in an interview for the GIA Insider, DTC Marketing Director Gareth Penny explained why.

The DTC’s actions are necessary, according to Penny, because its market share has plummeted from 80% to 50% in the past decade. The last time the DTC reviewed its client list was when the company was taking in most of Russia’s diamond production and a third of Canada’s Ekati output, and buying a substantial number of goods – much of them larger, high-quality stones – from the outside market.  The DTC also had multi-billion-dollar stockpiles in its own vaults and in the ore piles at its mining sites.

The world has gone upside down since then, he said. The DTC stopped buying outside rough diamonds from sources such as Angola and the Congo over four years ago, and all other non-DTC-owned producers, except the Russians, now sell their diamonds on their own. Penny insists the DTC’s actions should not have surprised anyone who really got the message.

“We have been clear for three years that our market share would be declining after we ceased outside buying, so everyone knew there would be fewer clients in the end,” he said. “We could have reduced everyone 20% and left it at that, but every other industry has regular client reviews. Why should we be the exception?”

Indeed, Penny believes there have been too many “exceptions” in the diamond business for too long – exceptions that are not sound, efficient business practices. (Letting the DTC do all the advertising is one, he said.) So now the DTC will review clients every two years. Clients sometimes complain this will make it difficult to plan far into the future. But Penny sees it differently: The “old” system, where clients who made the sightholder list basically stayed on for life, bred inefficiency and stagnation. It is one of the reasons, he believes, for the ingrained “supply-driven” mentality that occasionally leads, as it is doing now, to situations where the cost of rough exceeds that of comparable polished goods.

Penny said reviewing clients every two years will make the process more competitive: New firms with more innovative manufacturing procedures and marketing programs can compete with older, well-established diamond companies.

Many in the trade ask why, if the DTC is looking at reduced market share and fewer clients, are its executives so keen on marketing programs to “hype” demand? One major reason, of course, is that the resulting price increases borne by rising demand and dwindling supplies will allow the DTC to increase sales as its market share falls. But Penny says it goes deeper than that.

“First, our market share is down, but world production is not. Those goods we used to sell are still getting into the market through Rio Tinto (Argyle), BHP (Ekati), Alrosa (Russia), Angola, and MIBA (Congo).”

So the DTC marketing efforts will help support competing producers. Penny acknowledges that, but insists that the supplier of choice program is as much about business efficiency as it is about marketing and branding initiatives.

“While everyone is talking about scarcity, there are still about $18 billion – three years worth of our sales – of (polished) goods sitting in the pipeline. This will take years to clear out, and it shows how inefficient the industry is. Huge inventories and ever-lengthening credit terms are not good business. The return on capital in this industry is not good at all.  Improving this situation benefits everyone in the long term.”

COLORED STONES: Demand for colored gems has been the strongest in several years, according to key dealers. The chief reason is that some of the major retailers who have shied away from color in recent years are restocking again.

“We’re back to 1999 levels, and that’s good,” said Eric Braunwart, of Columbia Gem House, Vancouver, Wash. “The biggest surprise this year is that the mid-level chains have come back strongly, especially in very fine quality garnet, citrine, and peridot.”

Dealers report that sales have slowed in December, after several strong months, because retailers want to watch their inventories.

Corundum remains popular, and dealers say that is because they have assumed the burden of testing their inventories for beryllium diffusion–treated material and the yet-unnamed treatment of Sri Lankan goods.

“We’ve checked our entire inventory for these treatments, so retailers we deal with can assume they are not receiving these goods from us,” said Richard Greenwood, of A.F. Greenwood Co., New York.

MACRO: Surprisingly, the University of Michigan Consumer Sentiment Index fell more than four points from that released in November, to 89.6. Most analysts, looking at the stock market gains and a stabilizing labor market, had predicted an increase. The decline came primarily in consumers’ perceptions of current economic conditions. Analysts were at a loss to explain the sudden recession in consumer sentiment, though some believe the capture of Saddam Hussein might enhance the “feel-good” factor of the season, which could translate into increased sales.

Russell Shor
Senior Industry Analyst

The most interesting characteristic of this material was its high refractive index (R.I.), which was very close to that of tanzanite. We recorded a single R.I. of 1.700, which is the high value for tanzanite (1.690–1.700). The glass imitations of tanzanite we have examined in the past have seldom resulted in R.I. readings that exceeded 1.66. The fact that the specimen was singly refractive (with weak anomalous double refraction) was the main distinguishing property separating it from tanzanite, and this also meant that it lacked tanzanite’s characteristic pleochroism. Additional features of the stone included a calculated S.G. of 4.11; weak blue fluorescence to long-wave UV radiation, and weak-to-moderate chalky yellow and blue fluorescence to short-wave UV; as well as weak bands seen at approximately 500 and 600 nm with a desk-model spectroscope. The stone was fairly free from inclusions, and magnification revealed only a few pinpoints.

Both Fourier-transform infrared spectroscopy and Raman spectroscopy provided spectra similar to those previously recorded for manufactured glass, which confirmed the identification.

The important point with an imitation such as this is one that we continue to mention on a regular basis: Always use all the available information in making an identification. A quick R.I. reading coupled with the violetish blue color could easily lead to the wrong conclusion. However, if tanzanite is suspected, the characteristically strong trichroism should be readily detectable if the material is genuine.

This report was prepared by Elizabeth Quinn of the GIA Gem Laboratory in Carlsbad. The photo is by Maha Tannous, also of the Carlsbad laboratory. For more updates from the GIA Gem Laboratory, see the Lab Notes section of the upcoming Winter 2003 issue of Gems & Gemology. To subscribe to G&G, click here. Or contact Circulation Coordinator Debbie Ortiz at dortiz@gia.edu, or call toll-free 800-421-7250, ext. 7142, or fax 760-603-4595. Outside the U.S. and Canada, you can also call 760-603-4000, ext. 7142.

In the previous issue of Insider, we discussed Imperial topaz mining near the town of Ouro Preto at the Capão mine, the third mine visited during the ICA Brazil tour. This issue will cover tourmaline and aquamarine mining at the Navigator and Gypsy mines.

The next part of the ICA journey involved a flight to Governador Valadares, a center for gemstone cutting and trading. From there we went by bus to the Mina da Navegadora (Navigator mine), near the town of Galiléia. Our ICA group members were the first foreigners to visit the mine. Rogério Zucoloto Luz of Mineração Galiléia Ltda. owns Navigator’s mining rights. The mine was a longtime commercial producer of mica and feldspar. In 2000, a large pocket was discovered that contained a variety of other minerals, including large crystals of quartz, albite, aquamarine, garnet, apatite, and tourmaline. Since then, four important tourmaline-producing pockets have been found. The mine has become famous for its blue-green tourmaline. Zucoloto has modified his methods for opening gem pockets to protect the facet-grade and cat’s-eye quality tourmaline and to improve recovery of undamaged crystals.

After an amazing churrasco (Brazilian barbecue) at Zucoloto’s home, we continued our journey by bus to Mina da Cigana (Gypsy mine). Zucoloto has also worked the Gypsy mine since 1995. On average, the Gypsy employs 10 full-time miners. The Gypsy mine is very different from the Navigator mine. Blasting removes material from the hard rock walls of the pit, and bulldozers and trucks take the gem-bearing material to be washed and sorted by hand. Feldspar, morganite, kunzite, and aquamarine are recovered. Aquamarine is the most economically important gemstone produced at the mine, although most of the material is cabochon, bead, or carving quality.

To learn more about the mining and sources of colored stones, consult the GIA Colored Stones course and Advanced Gemology  seminars.

All photos by Andrew Lucas