The Worth of Rubies – by Thomas Biesheuvel (Bloomberg News – April 16, 2015)

Ian Harebottle, who’s made his career from mining colored gemstones, has an emerald the size of a pineapple locked away in a safe. He’s not sold the unique bright-green rock because it’s so rare nobody really knows what it’s worth.

Welcome to the topsy-turvy world of colored gems, where abundance can mean higher prices and scarcity makes spectacular stones untradable. It’s a very different business from diamonds, the world’s most popular precious stone, traded in a liquid global market that makes pricing relatively transparent.

For colored stones, prices often increase with supply as jewelers acquire enough stock to justify marketing the gems to customers. Take regular emeralds: their value has appreciated 1,000 percent in five years as Harebottle’s Gemfields Plc and peers expanded mines, while marketing campaigns fronted by Hollywood star Mila Kunis gave demand a boost.

Now Harebottle wants to bring the same game to rubies. Gemfields’ Montepuez in Mozambique, estimated to contain as much as 40 percent of the world’s known supply of the deep-red stones, could triple output from the 8 million carats targeted for this year, according to the executive.

The potential rewards are compelling. At its first Singapore auction last December, Gemfields sold high-quality rubies for an average $689 a carat, dwarfing the $66 a carat for comparable emeralds. Production growth is underpinned by rising demand in China, where the color red symbolizes prosperity, health and wealth, making rubies an auspicious investment.

Double Prices

“With rubies there is a fairly healthy uplift potential,” said Harebottle, who has been chief executive officer of London-based Gemfields since 2009 and presided over an 11-fold jump in its shares in the period. “Over the next couple of years we should be able to double” prices.

His company, which has amassed 20 percent of the emerald market to become the biggest producer, plans to replicate that share in rubies. The December auction generated revenue of $43.3 million after Gemfields’ rubies fetched the highest price at any of its sales. That boost for the fragmented industry, still largely supplied by individual miners from Colombia to Burma, shows the impact of increasing output.

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