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Source Regions - The issue


#1

All, Now you all should understand the issue of source region to
value. I sell To me source region is very important
because it either increases the value of the stone or the salability
of the stone. To an appraiser the source region is not important and
has no bearing on the evaluation of the value of the stone. My
opinion is based upon requests from customers and cost of stones from
suppliers. I pay much more for a location certified stone than I do
for one that does not have a certification. The issue of value as I
see it is rarity of the stone, availability of the stone, and
salability of the stone. There are many side issues to this. One is
gemstone replacement. If a stone is broken during repair is a
replacement from a different location acceptable? How about insured
stones? Is it OK to replace a Kashmir sapphire with a Ceylon
sapphire? This even applies to lesser value stones. Is it OK to
market a similar banded or fortification agate as being from a well
know highly collectable location? For instance Fairburn agates,
Lagune agates, and the list could go on forever. A lot of these
stones have great value and collectability in the rarer sizes,
colors, and formations. I’m talking serious money $10,000 and up.
What are your opinions?

Gerry Galarneau


#2

Dear Gerry, As a retail jeweler and appraiser for over thirty years I
can assure you that I have seen thousands of “certs” The overwhelming
majority of them are pure fraud…phony sales tools designed to dupe
the buyer. The “certs” that come from recognaized gem labs have more
credibility, but they rarely, if ever, “cert” origin. The only person
morally and factually capable of “certing” origin is the poor miner
who wrested it from the rock in which it was imprisoned. And, of
course, this person is often illiterate. Ron at Mills Gem, Los Osos, CA.


#3

Gerry, We have to sort out the apples and oranges here. Specific
collectable like stones, i.e. rare agates with distinctive patterns
from certain mines, unusual crystal formations, unusually large
specimens, etc., will always carry a higher replacement value. They
should, in the event of a loss, be replaced by a stone nearly as
similar as possible. However those are the oranges. The apples are
your basic sapphire, ruby, emerald, etc. material. A blue sapphire is
a blue sapphire. The difference in the value is determined by: color,
clarity and cut of the stone. A ruby is a ruby. Same goes for this.
With emerald, you can add into the factor the relative quantity of
filling that has been done. The ultimate determining factor of the
value is what the darn thing sells for however. Let me give you a
prime example. I have a gem supplier who is from Thailand, runs a
selling operation here, and his family owns an East African sapphire
mine and the cutting facilities in Thailand. I have another dealer
who is a one man operation, buying and selling only, who regularly
carries “Burmese” rubies. Last September I was offered nearly
identical rubies by both dealers. They both weighed exactly one
carat. They were both an intense bright red color, well cut and
fairly clean. The one from the Thai dealer cost me $1200. The one
from the other guy cost me $2400 (and that was after I haggled with
him and offered to pay on the spot–the other guy gave me terms). The
one from the Thai dealer sold within two weeks at a full keystone plus
a little. The other stone I still own and no one is willing to pay
the price for it. Ultimately, I will have to mark it down. It just
isn’t worth what I am asking for it based on it being a "Burmese"
stone, especially when the customers see what they can get for half
the price. There was absolutely no difference between the stones in
the way they looked. Now I know you are going to say why did he buy
the “Burmese” one in the first place. The reason: I saw that guy the
day before I saw the other one. So now let’s say that someone brings
me in a ruby to appraise that looks exactly the same as these two. I
do a color comparison and say "Gee this is just like these stones."
The owner says “I have a cert that says the stone is from Burma”. I
have to then assign a price. The reality is that the retail value
will be much closer to the one I got from my Thai dealer, because I
know that someone can go to a guy like that and get a suitable and
equivalent replacement. In other words, I would even be forced to
appraise my own “Burmese” stone at a value lower than what I am trying
to sell it for. Unfortunately it isn’t even this simple because as an
appraiser I have to take into account what the insurance company will
actually be paying out for it, not the retail price. If they work
directly with a wholesaler (which they usually do) than they will be
paying wholesale plus 15-20%. If I assign a value at full keystone
then the appraisal customer gets screwed out of an unbelievable amount
of money by the insurance company over the 50 years they own the piece
for. Of course there is also the issue of branding involved here and
in the case of selling a branded item I have to use a whole different
set of rules, as branded goods are not available to insurance
companies directly from the wholesaler and they would usually have to
be replaced at full retail value. As to your question regarding
replacing broken stones, if the replacement stone is the same color,
clarity and cut of the broken one, then it doesn’t matter where it
comes from. Getting back to source locations I stand firm on all my
earlier statements. All too often, source is used as a means to boost
the price of an otherwise normal or ugly stone, and I, as an ethical
jeweler, would have to dissuade my customers from attempting to
purchase one. Rarity is a relative term here. By the standards of
rarity, purple sapphires of equivalent color saturation of equal sized
blues, should command a higher price as they are much rarer. The
reality however is that blues are more well known, hence more in
demand, and command a higher price. Please also note that at the
beginning of one of my earlier posts I set a price range of
$200-20,000 per stone. I meant this as a retail price range. When
you get into stones above this range (and in some in the
$10,000-20,000) range source will carry some impact as you are dealing
in truly rare and unusual stones at that point.

Daniel R. Spirer, GG
Spirer Somes Jewelers
1794 Massachusetts Ave.
Cambridge, MA 02140
@spirersomes
http://www.spirersomes.com


#4

All, Summarizing, A miner mines the rock, cleans the rock, sells it
as it is or treats the rock before the sale. This sets a base price
for the untreated rock or the treated rock. The rough rock buyer has
the rock cut. After cutting the rock is evaluated for salability.
If it can be treated to increase the salability the rock is normally
treated. If the cut stone is salable in its untreated state it is
not treated. Outstanding stones are submitted to gem labs for
identification and certification of type, clarity, color, weight,
cut, and source region. Sometimes at this point an appraisal is
sought to go along with the other papers to further increase the
salability, establish rarity, and establish value of the stone. The
stone is sold to a retailer or directly marketed to a customer. The
customer pays for the stone and gets insurance to cover the stone.
The insurance company requires an independent appraisal. All the
paper work is submitted with the stone to another appraiser. This
appraiser looks at the stone compared to the papers and choses which
items on the papers to agree with and which to throw out. All the
people who signed each paper are trained experts in their fields.
The stone owner is left not knowing who to believe and not knowing
what the value is of what he has bought. Follow this scenario from
start to finish and you are left with no other conclusion than you
had better be an expert when you purchase a stone because you will
not know which expert to believe. This is the issue. Who do you
believe?

Gerry Galarneau


#5

Gerry, I really do think that you have “hit the nail on the head” !
When it comes to gemstones it is a matter of quantitative vs.
qualitative. You can weigh them, scratch them, magnify them etc., but
when it comes to assigning value, interpreting color, specifying
origin, describing phenomenal characteristics ,things get fuzzy in a
hurry. The human equation enters the picture, and, because we all see
things differently, each of us has an individualized interpretation.
The “expert” is, presumably, a person with considerable training and
experience. The problem is that greed prompts some people to pose as
experts in order to make a sale or promote themselves. In the long
run, most people who deal in gemstones are conscientious and
dedicated to knowing the truth. Nonetheless, if you were to get a
group of experts together and asked them their opinion about almost
any matter, you would find them disagreeing about many
things…just as we do here on the Orchid forum. There is certainly
nothing wrong with lively debate…it is the quintessential
attribute of an open mind. I still disagree with you about origin
being a concomitant of value, but I do respect your belief. I have
always WISHED that provenance were an aspect of value, but could
never sell the idea to the marketplace. The market somehow determines
what characteristics are most desireable in a gemstone and therein
sets the value. Furthermore, the marketplace is not a constant…it
is extremely fickle and will change at will. I would have to admit,
however, that modern mass merchandising techniques have had an
increasingly more pervasive effect in manipulating the market. Ron at
Mills Gem, Los Osos, CA.


#6

Gerry,

RE your summary on this issue. A wholesaler rarely gets an appraisal
(i.e. a statement of value) before selling the stone. They may get a
gemstone identification, which may or may not state a source region.
This may be used to increase the asking price to the retailer (or
manufacturer) but it does not set a value on the piece. Ultimately
the value is set when the piece goes on sale at a retail level. At
that point an appraisal (a statement of value) can be performed.
Insurance companies are notoriously lax in their demands on the
appraisals, which is one reason so many people get screwed by them
when a loss actually occurs.

If a retail replacement appraisal is properly done it should state a
value based on what similar types of goods, in the area the owner
resides in, or would be able to purchase a new stone in (i.e. the
web), are currently being sold for. This is why the retail
replacement value of most diamonds has actually gone down over the
last 10 years. If you reside in an area where a 1 ct G color, SI1
clarity diamond is sold by a majority of retailers at a 10% markup,
but you a buy the same quality (and cut) stone at a 50% markup, the
real value is much closer to the one at a 10% markup. The reasoning
behind this is that you, or the insurance company, can go out and buy
the goods the same day at a 10% markup. That is why it is unethical
for a jeweler to advertise that their stones will appraise at a higher
value than they are selling them for (with certain exceptions–i.e. a
legitimate once a year sale price). If a customer brings me a stone
and says “I paid $5000 for this diamond but the jeweler says it is
worth $9000”, I always have to point out to them that if they went
back to the same jeweler the next day he could get the same stone for
the same $5000. That is the value of the stone, not some fictitious
retail keystone markup.

Ultimately with colored stones it is the same issue. If there is a
jeweler in the area selling 1 ct. “Burmese” stones at a keystone
markup and all the others are selling similar stones at a 50% markup,
the value, regardless of what the customer pays, is closer to the
lower value. Again, there are exceptions. If the stone came from
Tiffany’s and is in a Tiffany’s setting, the value will be higher
simply based on the fact that the customer won’t be able to get the
same setting anywhere but at Tiffany’s. If you are a designer
jeweler, with some reputation in your area, the same will apply to a
piece you make.

HANUMAN: I have gotten two complaints off list that my long posts are
hard to read without paragraphs, but when I send them to you they are
broken up in paragraphs. Is there a reason that they are reproduced
without paragraphs?

Daniel R. Spirer, GG
Spirer Somes Jewelers
1794 Massachusetts Ave.
Cambridge, MA 02140
@spirersomes
http://www.spirersomes.com