New York - A year ago, Heraldo Casas found a 32-carat
emerald on the outskirts of a mine near Bogota that he sold for $170 000 to a
It was enough money for the poor miner to buy his family a
house in the Colombian capital. And Casas says his lucky find got him hooked on
working for virtually nothing, scouring the countryside for more of the green,
In Colombia, the world's largest producer of raw emeralds,
the story told by Casas is no anomaly. Many of the country's poor work without
a salary for several local emerald mining concerns, hoping to pocket a few
stones along the way and make their own small fortunes.
It's no easy way to earn a living. But for these poor
Colombians, there's hope that better days may be on the horizon.
Some investment experts see growing demand for the stones in
places such as Asia and the Middle East, where for religious and astrological
reasons emeralds often have more appeal than diamonds or other precious gems.
Colombia, which has the largest emerald deposits in the
world, is particularly well positioned to benefit from this increased demand.
Several countries in Africa also have large emerald deposits.
"I would look at emeralds as a way of playing the huge
demand for luxury goods from China and the Middle East," said Caspar
Trenthard, investment director for UK smaller companies at Standard Life
Standard Life is a shareholder in Gemfields, a small company
trying to position itself as the leader in emerald mining. Gemfields wants to
move the business beyond its local-miner image and onto a bigger stage.
"Colour-stone mining around the world is done on a very
small scale, almost mom and pop," said Ian Harebottle, chief executive of
Gemfields, referring to a model that has hampered Colombia from better
exploiting the abundance of its natural resource.
Not easy being green
Harebottle said his company, which is publicly traded on the
London Stock Exchange's Alternative Investment Market, is trying to change that
model. But one problem Gemfields faces is the lack of a uniform "grading
system" for emeralds like there is for diamonds.
Clarity, brightness and colour are established
characteristics of diamonds. But the standards for emeralds are still in flux
and not universally agreed upon, something that can affect pricing and
Gemfields' goal is to do what privately-owned De Beers did
for diamonds by creating a stable market for emeralds and enhancing the gem's
image as more than an exotic coloured stone.
"We are very fortunate because we can look at De Beers'
history and say: let's do what they did well, better, and let's avoid what they
did wrong," Harebottle told Reuters in a telephone interview from the
company's Kagem emerald mine in Zambia.
Gemfields begins with an advantage over De Beers in that
emeralds do not have the stigma of "blood diamonds", or such gems
mined in a war zone and sold to finance insurgency.
The company says it carefully promotes a mission to mine and
market emeralds in an ethical, legal and environmentally friendly way to
attract customers who want to know that its miners are well treated and do not
Gemfields produces 20% of all the emeralds in the world,
most of that coming from its mine in Zambia. It is the largest player in emerald
mining and each month extracts 2 million to 3 million carats of the gemstones.
Carat prices for small, high-quality emeralds have risen 1
000% in the past three years to around $40 for a stone that is uncut and in the
rough, according to industry analysts.
In the past three years, Gemfields' stock price has soared
from 3 pence a share to 38p a share on the AIM.
But its small market capitalisation of $208.5m has kept some
investors away. Other money managers are worried that a single shareholder, a
division of South African-based private equity firm Pallinghurst Group, owns
63% of Gemfields.
Political risk is also a factor, as a change in Zambian
government policy could negatively affect the company's operations. It's one
reason Gemfields is looking at Colombia as a place to open a second mine, said
a person familiar with the company but unauthorised to speak for it.
Ironically, after years of drug violence and political
corruption, Colombia is now seen as a more hospitable environment for some
In addition, the company's long-term prospects come down to
supply and demand. Like any other gemstone producer, Gemfields' business
remains sensitive to consumer preferences and disposable income.
"We are selling a luxury good. It is not food, it is
not fuel, so there is a dependence on people's ability to buy something of
luxury," Harebottle said.
Yet some analysts view this alternative market as a solid
diversification tool, and a good store of value, in an adventurous investor's
portfolio given its upward trajectory in an otherwise sputtering global
"As liquidity in the company improves, Gemfields is
starting to get a broader audience of investors who are having a look at it
because they can actually make some good money," said Alexander Mees,
equity analyst at JP Morgan Cazenove.
That said, it is unlikely that diamonds will be overtaken as
the top-selling precious stone anytime soon. But in a world where high-yield
investments are few and far between, some believe coloured gemstones such as
emeralds are making a mark.
"People are looking for a safe haven to put their dollars,
which are worth less every day, into something that has strong intrinsic value
or something that will appreciate," said Jeffrey Roseman, president of
David Harvey Jewelers, based in Darien, Connecticut.
"There is no question people are seeking fine gemstones."