How does the supply of gemstones and rough actually work?
There seems to be a lot of confusion on how things actually work. Gemstone supply is a fairly complicated process as you may have guessed.
Here is my experience on how it works and my opinions.
The first thing that is important to know is that the supply of almost all gemstone rough is a long process that involves a lot of people all along the way.
There is not really any one direct “source” or supplier of colored gemstones or rough. With the very rare exception of a few types of stones. Even in most of these very rare instances (where someone has the majority of the supply), there is more than one source or person with the same types and quality of stones usually.
There is a lot of different ways the gemstone rough (cut too) supply gets to the market. About the only gemstone that is really controlled is Diamonds, and frankly that may not last with all of the new diamonds finds being developed all over the world.
But here is how it generally goes with almost all colored gemstones in my experience. In Africa especially. But over all…
Somebody obviously mines the stones. These miners can be working for someone who owns a mine, working as independents or working on shares at a claim. In Africa most of the miners are either independents or working on a percentage at the claim or area. There are a few mines being run by owners, but this is not all that common, however there are some.
In general because of all of the difficulties and government problems in most African countries (some others too) large mining interests with big capital investment is not common at all. There has been a history of any large investment, well being lost. So there is not a lot of big investments or operations, at least in most colored gemstones.
For example, at the Tanzanite locations (there are several pits), the majority of the mining is by hand and there are all types of interests (miners). Big concerns and small independent miners looking to strike it rich… it is a mix.
Because of the way the country’s governments work, most of the mining is, well almost like the California gold rush in the 1800’s. Also because most of the mining is small independent miners there is very little mechanized equipment involved, even the big mines are almost all hand mining. Most of the mining is pick and shovel and relatively near the surface. At least in comparison to the deep mining that we think of in the USA and other modernized countries.
An interesting effect of the lack of heavy mining (gemstone, there is some very heavy gold and metal mining with heavy equipment) is that when they find a nice deposit of rough the area tends to turn into a boom town. Because there is no heavy mining equipment, when the digging begins to get deep where the equipment is needed. Miners move on because in most cases they do not have access to the heavy equipment.
Another reason miners move on is that once the miners/mining area looks like they are really getting into something the local governments tend to move in and mining and business in general gets very difficult. Interestingly that is one reason there is some times a glut of a particular type of rough on the market (the Nigerian Rubellite Tourmaline comes to mind). They mine it and sell it as fast as they can to get as much out as possible before all the… well lets say problems move in.
So how does the rough get to market?
Well in all kinds of ways, but typically in two major ways.
The first way is buyers go to a mining region and usually to a local town in the region. There is almost always a swap meet type of area where gemstone buying takes place. By the way often there are tribal issues and buyers end up dealing with a tribal chief or council depending (in Africa)… This is especially prevalent in the smaller out lying areas.
The local miners bring their rough into these trading areas (in Brazil they are called brouse’s) where buyers and sellers meet. One reason for the way these trading brouse’s developed is that the actual mining areas can be very dangerous. For a lot of reasons… bandits, terrain, animals.
Animals you say? Yes, at one Tsavorite mine that I have seen they have actually had miners killed by lions (2 people the week before). You could see the lion pride not more than 100 feet from the mine. They come in at night and are very dangerous. Also snakes and other things like scorpions, plus the conditions are often just plain primitive.
Another reason is that sometimes miners do not want people to see where they are mining. A brouse is just a lot more convenient for everybody. Also easier and safer to handle the money, although it is never really safe.
Some people do go directly to the mine(s), but keep in mind that depending on the find there is not one place or mine. A lot of the material is alluvial and many areas are quite large with a lot of people working all over. So there is often not one place to go. Another reason for the brouses.
The other major way rough gets to market is… There is a lot of rough being sold by middle men, cousins, brothers what ever all over the place, both there and all over the world. These people are often related to the miners, or have deals with them to handle the rough for sale they dig. Probably as much or more rough gets sold this way as any other way. I deal with people direct from Africa (not the mine necessarily, but sometimes) all the time. It is a common practice and truthfully because of connections, conditions and many other factors a good way to do it.
So some of the rough actually gets sold semi direct I suppose depending on the situation. Keep in mind too that there is a fair amount of selling and bargaining going on even between the miners themselves. So a lot of times rough changes hands even in the mining area. Or gets to other mining areas this way.
Note: This is one reason that I often list an area as a mine location, nobody really knows the exact spot the rough was mined. There is just no way to be sure in a lot of cases.
But no one person sees everything or gets first pick on everything. It does not happen, it is not humanly possible. Think about it… Some people might get first pick on a parcel or from a particular person, but not of a whole area or region. For one thing, think of the money involved…
Think of the amount of material coming out of Africa and the size of the country’s. Think of all of the buyers looking for rough, there are hundreds from all over the world in the mining regions looking. Lots of competition, one person or company cannot possibly get everything.
The statement that one person or company gets “first pick” of all the rough coming out of a country is false. They may get some material first, but not all of it.
Truthfully while one guy is getting “first pick” one place there is probably 100 other guys getting “first pick” some where else… It is a big world.
Also the largest gemstone/rough buyers are not who you might think either. The big guys are dealing in millions of dollars and they are usually behind the scenes, not someone that you will see advertising as the “largest”, “first pick”, or exclusive dealer to the public.
The guys dealing in the millions and tens of millions do not need to bother to advertise or make any claims. They are the literal 600 pound gorilla’s on the block. They operate behind the scenes and rarely want to deal at a level where their average sale might be a few hundred dollars. It is not worth their time…
Most of the large cutting houses deal in huge quantities. For example I have a friend that owns a cutting house in Bangkok, it is not a large cutting house either, just average. They cut 10,000 carats of man-made Tanzanite a month… This is just an example of their production. What do you think they cut in natural rough??? They cut mostly real rough by the way. How much rough do you think all of the cutting house are using all together around the world?
Anybody that claims “they” are getting the whole supply or are the largest exporter is generally either not informed or not being truthful in most cases. There are a few exceptions, but they are very rare.
If you hear someone make the claim. Step back and look at the market they are in and ask yourself. Do you really think these people are the largest or only supplier? The answer is almost always no.
The way gemstones/rough gets to the market is as infinite as the people involved in the business. There is no one supplier or buyer, no one way it all works.
There is literally hundreds, probably thousands of ways that rough gemstones get to the market. If you want to see a microcosm of this process at work come to the February gem show(s) in Tucson, Arizona.
It is an excellent example of how things work.