Precious & Semi-Precious Gemstones - From the Mine to the Market

by Ana J. Business Promoter

How do gemstones get from the mine to the international gemstones and jewellery market? Are there any big buyers who get the first choice of the best gemstones, leaving the second-grade stuff for the rest of us? If you went directly to the mines could you get the best deal on loose gemstones?

To answer these sorts of questions. The supply chain for loose coloured gemstones is a mystery to many, including many gem dealers who don't buy or sell rough gemstones.

By the time coloured gemstones arrive in America or Europe, they may have passed through dozens of hands since they were mined, and each pair of hands that touches the gemstones adds another 20-50% to the final selling price.

The prices would be absolutely incredible, if only the middlemen could be cut out, meaning no more rip-off prices when shopping for gemstones!

Facet Rough Tourmaline from Jaba Mine, Afghanistan

Gemstone Supply Chain

One reason why the supply chain for coloured gemstones is a bit of a mystery is that coloured gemstones, unlike diamonds, are mostly mined by independent, small-scale miners, working in remote locations in faraway places such as Afghanistan, Bolivia, Columbia, Pakistan, Sri Lanka, Tanzania, Madagascar, Myanmar, and Kenya. Mining is usually done with picks and shovels, and rarely with heavy equipment.

For example, In Sri Lanka, there are more than 5,000 registered coloured gemstone mining sites on the island. The majority of these pits are no more than three by three metres, with a maximum depth of 25 metres.

Coloured gemstone mining is so labour-intensive, it is estimated that more than 500,000 people in Madagascar are involved in the gemstone sector, even though Madagascar only became an important gemstone source in the 1990s.

Facet Rough Topaz and Kunzite Lot

Independent miners usually want to turn their hard work into cash as soon as possible. Usually, this means taking the rough gemstones to a local market in the nearest town or selling the rough gemstones to someone who has transportation to the local market.

Miners rarely sell gemstones to foreign buyers at the mine. For several reasons, foreign buyers must find the mine, which is often a dangerous and challenging task. Also, the miner is not really interested in disclosing his mining location!

The Local Gemstone Market

The local gemstone market may or may not be open to foreign buyers. Local business people see an opportunity to act as a middleman who goes between the foreign buyers and the miner, and there may be several levels of middlemen, whom each take a share.

These middlemen know the actual price that the rough gemstone will fetch in the international market, and if the prices for gemstones are too low in the local market, they will arrange to take the gemstones abroad to maximize their profits.

So the idea that you could take a trip to the mining source and buy fine Loose Gemstones at a bargain is really a myth.

These middlemen in the local market are not the only route to the international gemstones market. Many miners realize that selling gemstones to local businessman is not a good economic strategy.

Why let these middlemen take most of the profit when the miner has done all the hard work? Thus many miners establish business relationships with relatives or trusted friends who will take the rough gemstone to the foreign market and obtain a much better price.

Facet Rough Amethyst Crystal

Gemstone Trading in Peshawar, Pakistan

Many of the gemstone traders we see here in Peshawar, Pakistan, have direct relationships with miners in their home country.

These traders come to Peshawar because there are a large number of gemstone dealers here who know how to process the rough gemstone and will pay a fair market price for it. Most importantly, there is constant demand here so that traders are assured that they can move their goods quickly.

A gem processing centre like Peshawar plays an important role in the international supply chain. Since gemstone cutting is still largely a cottage industry here, traders can sell small lots that would not be of interest to a huge factory. Peshawar dealers reach the market for their finished loose gemstones via Bangkok or, through the Internet.

A loose aquamarine from an online website may actually have passed through only a few hands since being mined. This kind of efficiency in the supply chain can lead to huge disparities in price.

Check the price per carat of loose aquamarine, tourmaline and spinel in your local jewellery store, and you will get a clear sense of what happens when there are dozens of steps in the supply chain.