Fundamental changes are occurring in all levels of the diamond industry. That was the central theme running through the 2004 Rapaport International Diamond Conference, held Oct. 12 at the Waldorf Astoria Hotel in New York.

The conference featured speakers from the diamond mining, manufacturing, financing, and retailing sectors, all of whom described the transformations that have occurred in the way they do business.

Two diamond producers, Aber Diamond Corp. CEO Robert Gannicott, a junior partner in Canada’s newly opened Diavik mine, and Graham Nicholls, vice president of BHP Billiton Diamonds Inc., which has an ownership stake in Canada’s Ekati Diamond Mine, described their efforts to diversify into other sectors of the diamond industry.

Gannicott said that Aber bought a majority stake in Harry Winston Inc. because the company had a “robust cash flow.” Exploration for new diamond sources was risky, so Aber believed that acquiring a branded retailer like Winston was a much safer strategy because of the attractive margins at retail. At the time, he explained, diamond mining had profit margins averaging 65%, while branded retailers averaged 55%. By contrast, diamond trading carried profit margins of 5% to 7%, while jewelry manufacturing averaged 20%.

BHP Billiton has advanced through the middle sector of the diamond pipeline to promote its CanadaMark, guaranteeing that diamonds from its mine are natural and untreated, sourced from Canada only, tracked from mine to customer, and produced and cut by firms adhering to high ethical standards.

The idea behind CanadaMark, Nicholls said, is to create a “hallmark” that will support individual store brands. Knowing its origin “helps add essence to a diamond,” he said.

Peter Gross, global head of ABN AMRO Bank’s International Diamond and Jewelry Group, told the audience that industry debt is “too high,” topping $9.15 billion in September of this year. He said that there is an excess of $1.5 to $2 billion worth of inventory stocked in diamond manufacturing centers. In addition, polished prices have not followed increases in rough prices. The consequences of this rough price bubble and the rush by manufacturers to obtain goods “are yet to come.”

Gross pointed out that the industry is now going into the consolidation and vertical integration phase. This will consume increasing amounts of capital, particularly for advertising and marketing programs. However, firms must reassess some of these strategies “before it is too late.”

Dilip Mehta, CEO of Rosy Blue Group, Antwerp, addressed polished market issues. He agreed that the polished overhang is about $1.5 billion, but stressed that it represents lost selling opportunities more than inventory overhang.

Mehta estimated that diamond jewelry sales will grow about 7% worldwide this year. He added that prices for polished have risen slowly while increases for some categories of rough hit 45% this year, though the market has settled in recent months.

The industry consolidation has affected downstream diamond distribution, explained Matthew Fortgang, president of M. Fabrikant, New York. He said smaller players in the U.S. have had difficulty sourcing rough, causing many of them to ally themselves with overseas companies. Larger firms like Fabrikant have been establishing joint ventures in key areas of the world to make their distribution and operations more efficient. In addition, he stressed, retailers’ requirements for their suppliers, including financing and marketing help, are such that only large companies can meet those needs.

Elliott Tannenbaum, partner of Schachter & Namdar, a diamond manufacturing firm in New Yorkand Israel, noted problems he saw with the De Beers Supplier of Choice (SOC) program. He said, however, that the DTC still plays a very important role in the market – “consider the Three Stone Ring and other diamond advertising” – and therefore must adjust to the changing diamond market.

Discussing the Indian market, Pravinshankar Pandya, managing director of Revashankar Gems Ltd., explained that Indian manufacturers are going into larger sizes and pursuing new outlets, de-emphasizing their traditional dependence on the U.S. market.

Until a few years ago, the U.S. took 40% of India’s exports of diamonds and jewelry. This year, that figure is 28%, with China and other emerging markets capturing an increasing share.

Keynote speaker Maurice Tempelsman, chairman of the Board of Directors of Lazare Kaplan International, New York, said the diamond industry is “in uncharted waters” but that it can now take inventory of the many changes to chart its course.

Tempelsman pointed out three key areas of change. First, the historical reliance on rough supplies is being replaced by strategies to drive polished demand. He noted that the industry has made some strides in this area, though the squeezes on profits have made it difficult for diamond manufacturers to engage in effective downstream activities.

Tempelsman’s second point was that politics and government regulations will either enhance the trade or hinder it. He explained that producing nations want greater benefits in the form of employment from their diamond resources, while the European Union’s investigations into Supplier of Choice, the Kimberley Process, and the Patriot Act will provide other regulatory issues.

“If this government scrutiny is carried out objectively, it should not be a problem for our industry,” he said.

Last, Tempelsman talked about technological advances in treatments and synthetics. He said technology should be an ally and not an enemy, because it is here to stay. The key, he stressed, is disclosure.

A panel of four top retailers, representing 8% of all U.S. diamond jewelry sales, explained how changes have affected their operations.

Ed Bridge, president and joint CEO of Ben Bridge Jeweler, Seattle, noted that diamonds have been commoditized to some extent, but cited other industries – such as hotels – that have managed to differentiate their products sufficiently to add value and compete on issues other than price.

Terry Burman, CEO of Signet Group, London, the parent company of Kay Jewelers in the U.S., noted that increases in diamond and gold prices are causing concern over the value consumers see in these products. He also said that there is increased consumer awareness of social issues, such as gold mining’s impact on the environment and the sale of conflict diamonds.

Today, he said, “26% of consumers are aware of conflict diamonds, compared to 7% three years ago.”

Susan Jacques, president and CEO of Borsheim’s in Omaha, Neb., a large independent operation, noted that sales of $50,000 or more have increased 20% this year, while its store sales are up 11% overall.

Zale Corporation has moved to differentiate all of its store brands to better focus on its customer needs, said company president Mary Forté. Zale is mobilizing extensive research into consumers’ needs and lifestyles to target marketing programs for each of its divisions.

The challenge, Forté noted, is that “our suppliers are becoming our competitors.”

The retailers noted that they were reluctant to raise prices, though Burman pointed out that some prices have actually fallen in the past 10 years, and are up only slightly now.

“This year, there’s more consumer acceptance of higher prices, but which increase would be the straw that breaks the camel’s back is something we don’t know.”

Wrapping up the changes, Martin Rapaport, publisher of the Rapaport Diamond Report, listed a number of challenges, such as rough shortages, SOC, and vertical integration by Wal-Mart, Tiffany & Co., and others. While great opportunities exist, there are still challenges – such as Wal-Mart squeezing suppliers and retail competitors alike; and De Beers SOC, which reduces profits for other downstream diamond companies.

“We need to develop profits from sustainable growth and a free and fair competitive market,” Rapaport said.

Kenneth Gassman, director of research for the Rapaport group, predicted that holiday season sales will be up by 5% this year. This is important, he said, because jewelry is much more seasonal than most other major retail categories. On average, November accounts for 9% of yearly jewelry sales, while December represents 23.6%.

In other sessions, GIA President William Boyajian explained GIA’s new cut grading system for round brilliant diamonds. The new system, which will be introduced next year, will combine brightness, fire, and scintillation, along with proportion factors, into a single cut grade. There will be five grades.

“Most of the diamonds coming through the GIA lab will fall into the first three grades,” he said.

Boyajian added that the system will benefit the trade by encompassing a variety of international tastes and preferences while still requiring people to look at the diamond—“because there are a variety of different appearances among diamonds with the same cut grade.”

William J. Fox, director of the U.S. Financial Crimes Enforcement Network, told the industry that it is now covered under regulations overseeing financial institutions.

He said the industry, based on trust, already has a “know your customer” culture, but must ensure that criminals and terrorists do not creep in.

Fox warned that illicit trade in commodities by terrorists and criminals is one of the biggest challenges today, citing an example of a South American drug cartel that uses gold to launder funds.

“Diamonds also fit into this model. They can be carried undetected across borders. We know it’s already been done, but your industry has a history of cooperating with the government in such areas as the Kimberley Process to keep things clean.”

At the following day’s Couture Diamond Leadership Conference, held at the Plaza Hotel, keynote speaker Donald Trump offered his points for success:

Think big. Love what you do and never stop. Keep momentum. Go with your gut and against the tide. Get and pay the best people. Then watch them. Be lucky. Have a pre-nuptial agreement. Think like a winner.

Russell Shor
Senior Industry Analyst

Gems & Gemology has released its Fall 2004 edition. Highlighting this groundbreaking issue is the third installment of GIA’s research on diamond cut.

With the lead article, “A Foundation for Grading the Overall Cut Quality of Round Brilliant Cut Diamonds,” Thomas M. Moses and a host of GIA colleagues present the results of their latest research on the proportion factors that affect overall cut appearance and quality of the standard round brilliant. For this study, the authors conducted extensive visual observation testing on actual diamonds for brightness, fire, and overall cut appearance. On the basis of their findings, the team constructed the foundation for the GIA diamond cut grading system, which will provide a single overall grade for cut quality for standard round brilliants. This system will be incorporated into the Institute’s educational programs and diamond-grading services in 2005.

“The diamond cut article is the product of a truly monumental research effort,” said G&G Editor-in-Chief Alice S. Keller. “The first two articles in the series [from the Fall 1998 and Fall 2001 issues] used computer modeling to predict brilliance and fire based on various combinations of cut proportions. This new study involved more than 70,000 visual observations by trade professionals as well as consumers to refine the brilliance (now more appropriately referred to as 'brightness') and fire metrics and explore other aspects of the complex relationship between diamond cut and appearance.”

Accompanying the diamond cut article is a pull-out chart that shows examples from each of the five categories in the GIA diamond cut grading system. Another unique feature of the Fall issue appears on the cover itself: a lenticular image that projects a single round brilliant as it moves through five different viewing angles.

Also in this issue is an article by Jack Lowell and John I. Koivula, “Amethyst from Four Peaks, Arizona,” which looks at the geology, mining, and gemological properties of amethyst from the most important commercial source in the United States.

The Lab Notes column features the latest from the GIA Gem Laboratory, including rubies that had been clarity enhanced with a lead-based glass filler and a gemological examination of four blue diamonds from the historic Cullinan blue diamond necklace. Meanwhile, the Gem News International section covers the world of gemology, with reports on rhodonite from Brazil, spessartine and hessonite from Afghanistan, tourmaline from the Democratic Republic of the Congo, and more. Rounding out the Fall issue are the Book Reviews and Gemological Abstracts sections, plus the list of winners from this year’s Gems & Gemology Challenge quiz.

To order this issue or to subscribe to G&G, click here. Or contact Circulation Coordinator Debbie Ortiz , 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.

Tanzanite, the transparent purplish blue to blue variety of zoisite, is a relative newcomer to the gem trade. Discovered in 1962 in northern Tanzania, it is still found only in that country. Because it looks very much like fine sapphire, it was first marketed in 1968 as a less expensive alternative. But it soon gained a following as a fashion gem, worthy of its own respect in the gem world.

Production was low initially, but by the late 1980s and early 1990s tanzanite became available in a wide range of sizes and qualities. In the past few years it has become scarce again, and many tanzanite imitations began to appear on the market.

Treaters heat brownish zoisite to create tanzanite’s prized color, which rarely occurs without treatment. Treated stones lose their brownish tints and appear blue, purple-to-violet, and greenish yellow-to-colorless when viewed in different directions. This distinctive trichroism, along with a refractive index (RI) of 1.69–1.70, makes it easy to separate tanzanite from natural or synthetic sapphire of the same bodycolor. These factors also help distinguish tanzanite from its imitations.

Tanzanite has biaxial positive optic character, and may show broad absorption bands at 535 and 595 nanometers (nm). In rough form, the gem often contains a variety of natural inclusions. These include fluid inclusions along the planes of healed fractures, as well as crystals of graphite, calcite, rutile, quartz, and diopside. Faceted tanzanites are often quite clean because manufacturers remove most inclusions during the cutting process.

There are many tanzanite imitations, but synthetic forsterite is probably the most well known. It is grown in Russia through the pulling process. Although some dealers once described it as “synthetic tanzanite,” lab-grown forsterite actually has a crystal structure and chemical composition similar to peridot. Chemical analysis reveals traces of iron, vanadium, and cobalt, which is the single most important element influencing the material’s rich bluish purple color.

Like tanzanite, synthetic forsterite’s optic character is biaxial positive. However, its RI of 1.64–1.67 is significantly lower than tanzanite’s, while its birefringence, at 0.035, is about three times greater. Like tanzanite, it is strongly pleochroic, although only two colors can be detected with the dichroscope – blue and purplish pink. Magnification may reveal indistinct white inclusions and pinpoints.

Synthetic forsterite often fluoresces a weak, chalky orangy yellow when exposed to long-wave ultraviolet radiation and a weak greenish yellow to short-wave UV. Tanzanite is inert to UV radiation.

Coranite is a trade name for another tanzanite imitation. It is a purplish blue synthetic corundum with a typical RI of 1.762–1.770 and a birefringence of 0.008. Its optic character is uniaxial negative, which is quite different from tanzanite and synthetic forsterite. Coranite has weak pleochroism that shows purplish gray to light grayish blue, and it is inert to UV radiation.

Some manufacturers have grown a bluish purple synthetic yttrium aluminum garnet (YAG) that mimics tanzanite’s color. One version goes under the trade name Tanavyte. The material is singly refractive and over the limits of a standard refractometer, with an RI of 1.80 or higher. Because it is singly refractive there is no pleochroism, an important distinction. With the polariscope, it might show anomalous double refraction resulting from strain within the crystal.

Like synthetic forsterite, Tanavyte is a product of the pulling process. The resulting cylindrical rods or boules are distinctly darker purple at their cores than at their rims. Tanavyte glows a strong, chalky orange under short-wave UV radiation. Small bubbles arranged in circular patterns may be detected with magnification.

Even glass is sometimes sold as a tanzanite imitation. A material that is marketed as U.M. Tanzanic is a high-lead glass with an RI around 1.60. As with all glass, it is singly refractive. The material may show poorly polished surfaces and syrup-like flow structures under magnification. Weak absorption bands may be seen with a spectroscope at 490, 550, and 590 nm.

Tanzation is a synthetic spinel triplet with a cobalt glass layer that is fused to the colorless synthetic spinel crown and pavilion. The RI is around 1.728, and because it is singly refractive there is no birefringence or pleochroism.

GIA's Gem Identification course provides professional instruction in identifying characteristics of tanzanite and how to distinguish it from imitations. Click here to learn more about this course and GIA’s other gemological courses and diploma programs.

The global gemological community will converge in San Diego for three dynamic and important days Aug. 27–29, 2006, when GIA hosts the 4^th International Gemological Symposium at the Manchester Grand Hyatt under the theme, “Navigating the Challenges Ahead.”

Among the many highlights of this much-anticipated event will be significant keynote speakers, presentations, and panels focusing on pressing issues and cutting-edge technologies, as well as an opportunity for attendees to listen and be heard at daily “Think Tanks.” There will also be numerous networking opportunities and prestigious special events, including an opening-night “Diamond Gala” sponsored by the Steinmetz Group of Companies, Symposium’s premier sponsor, at GIA’s world headquarters in Carlsbad, Calif.

“This International Gemological Symposium will bring together the world’s best gemologists and researchers, along with top business leaders and innovators, to offer a glimpse into the future while addressing today’s critical issues in the global gem and jewelry industry,” said GIA President William E. Boyajian. “We are especially excited to host such an important event at a time when we will be celebrating GIA’s 75^th anniversary. It will be an honor to share that joy with so many from throughout the world.”

When last held in 1999, Symposium welcomed more than 1,400 participants from upwards of 50 countries. If the reactions of attendees at the 1999 event are any indicator, this will again be unique and memorable. Susan Jacques, CEO and President of Borsheim’s in Omaha, Neb., described the 1999 event as “An extremely interesting, informative, challenging few days.”

But even more is expected in 2006, according to Alice Keller, editor-in-chief of Gems & Gemology, and one of Symposium’s two co-chairs.

“Since the last Symposium, the gem and jewelry industry has seen sweeping changes at every level: how rough diamonds are distributed, how consumers buy gems and jewelry, and fallout from beryllium-diffused sapphires and commercially available gem-quality synthetic diamonds, to name just a few,” Keller said.

Kathryn Kimmel, GIA vice president of Marketing and Public Relations and also co-chair of the event, said Symposium offers beneficial opportunities for all who attend. “Over the course of three exciting days, Symposium attendees can absorb knowledge from gem and jewelry experts representing every aspect of the global trade: diamonds, colored stones, pearls, gemology, jewelry design, manufacturing, marketing, branding, and retail. Their valuable insights will be delivered in a variety of powerful formats, including presentations by speakers from the industry and distinguished business leaders from outside the trade, plus roundtable panels and provocative ‘Think Tanks.’”

Another unique feature of Symposium is the “Poster Session,” with dozens of new ideas presented in state-of-the art exhibits on topics related to gems and jewelry.

GIA will also host a pre-Symposium Gemological Research Conference Aug. 26–27 at the Hyatt. Topics for that event will include the geology of gem deposits, new gem occurrences, gem characterization techniques, diamond and corundum treatments, laboratory-grown materials, and general gemology. Attendees can also participate in a one-day field trip to the famous Pala pegmatite district in San Diego County. For more information on this research conference, click here.

Oct. 8, 2004

In GIA’s efforts to expand its public-service mission, the Institute has completed its first volunteer guest services training program. GIA is looking for G.G.’s and others with industry-related experience to conduct tours at the Carlsbad world headquarters and Robert Mouawad Campus.

The program is designed to encourage volunteers to “walk in the shoes” of GIA’s visitors, according to Guest Services Supervisor Yvette Wilson. After completing eight days of instruction, the new tour guides are prepared to explain the numerous gemological and jewelry exhibits and the Institute’s educational programs and laboratory services to visitors. They also assist in administering GIA’s Jr. Gemologist program, a hands-on workshop that supports the science curriculum of local schools.

Wilson said that being a tour guide for GIA can be a fulfilling experience. “They learn about one of the most dynamic organizations in the jewelry industry. Our docents also gain knowledge in gemology and the pleasure of showing off some of the most captivating exhibits in Southern California.”

“Conducting tours for GIA is particularly fun because of all the exhibits,” said Dr. Geoffrey Smith, a retired plastic surgeon and longtime ancient jewelry collector who is a member of the Institute's first docent program. “I like to see if members of the tours have a specific interest and then explain it more in detail. GIA is doing a really clever thing by bringing in people from the community and providing an interface to educate them.”

Smith was so impressed with the Institute that he loaned part of his collection of ancient jewelry and figurines from the pre-Columbian era to the museum for long-term display. He said it is rewarding to see guests become excited about his exhibit.

The 17 items, dating from as early as 200 AD to 1500 AD, were collected from archaeological excursions with his father starting when Smith was a child. Calling them “objects from the New World,” Smith said the precious metal and figurines originate from Colombia and Costa Rica, and were used by southern Mayan and various pre-Columbian tribes. “A lot of the gold is what Cortez and the Spaniards didn’t get,” he noted.

Many of Smith’s collections have been on view in various museums, including the Natural History Museum of San Diego. He says he plans to gift much of the jewelry to the Institute. “GIA is the most appropriate place for my collection,” he said.

New volunteer Dr. Barbara Salice said, “It’s been an incredible experience. I just couldn’t wait to come to GIA every week to learn more about gemology and the exhibits.”

The Institute encourages visitors to schedule tours to see the campus and its unique gemological and jewelry exhibits. Both adult and school tours can be scheduled for Monday through Friday from 9:00 a.m.–4:00 p.m. by e-mailing Yvette Wilson, or by calling 760-603-4116. Information about becoming a volunteer for GIA is also available by contacting Wilson.

Oct. 11, 2004