From Mining to Markets: Sri Lanka’s Gem Industry

Gem mining has always been a rugged business. It involves hard and uncomfortable physical labor, high risk of injury, and a lot of patience. But it can also pay off. The dream of a big find has been attracting humankind to the trade for centuries. If you are lucky, you may not have to work another day in your life. If, that is.

THE GEMSTONE MINE

The trip to Ratnapura offered me the unique opportunity to get a feel for gem mining firsthand.

While I have been to mines in Tanzania and in Colombia – and even ventured 300 meters into an emerald mining tunnel in Chivor – I had never climbed down into a mine below ground.

In Sri Lanka, much of the sapphire mining is done at a specific depth where you reach a layer of old river sediment consisting of pebbly rock that is washed (or rinsed, really) in the hopes of finding small pieces of rough in between. In the mine we visited, this layer was found about 15 meters below ground. To get to this level, a vertical shaft is created and secured with thick cross beams, which then leads to another shaft a few feet away. In some parts of the world, i.e., Tanzania, these shafts can go several hundred meters below ground that you climb down through a system of ladders; or, as in this case, you climb down the cross beams, while holding on to a wooden pole that is tied to the beams with a rope. The beams can be far apart, not like a ladder, and they are not always directly underneath one another, so as you go down your foot dangles in the air looking for the next ‘step’. If you have a little bit of climbing experience, you can let yourself ‘hang back’ so you can look underneath the next beam to see where you have to place your foot. Just don’t let go of the pole!

For an added level of challenge, the beams can be wet from the water seeping through the porous ground and dripping all over the place. This happens especially when mining occurs near rivers and when your level of depth is at ground water and below. I was pretty wet when I arrived at the layer of sand on the bottom. Also, you have to climb bare foot because even a shoe with a tread designed for rock climbing will not properly grip when the surface is wet.  

At the bottom of the shaft, workers collect the rocks to be washed and gather them into sacks that are transported up on a hook with a rope that winds around a wheel on the surface. This system can also be used to bring down other things – like my cell phone inside a plastic bag so I could take video.

Air is pumped into a shaft through a long hose that is fueled by a generator, and for communication there is a pipe you can yell into. Once above ground, the sacks are emptied into large sieves (the sacks are white and probably made of nylon, think of the large bags used for rice or beans you might see at a large wholesaler like B.J.s – just to give you a more familiar image). The sieves are made of wicker; they are a good foot or more across and to get rid of the dirt, they are moved around in a circular motion inside a man-made pool filled with muddy water up to your waist.

Once the rock is washed, the sieve is brought to a dry area and searched through by hand to look for the promising pebbles of treasure. Months can go by without a good find.

This method of mining has been in place for centuries. These days, larger companies bring in excavators that can till the ground in a matter of weeks – compared to the months, or even years, it takes with the old fashioned method. But excavators are a big expense requiring funds that most locals cannot raise, thus putting the less fortunate parts of the population at a disadvantage; and of course also destroying an ancient trade. Such is a sad aspect of the advance of technology.

INVESTMENTS AND RETURNS FOR THEM

While we are on the subject of funding, let me give you some idea of how money is raised and distributed in the industry. The mine we visited had four owners: the owner of the land and three investors, one foreign, two local. They each receive a contractually arranged percentage of the yield. The miners themselves get paid a daily wage (the equivalent of $7 a day in this case), plus lunch, and they will also get a small share of the profits if they find something. Pay for miners varies widely around the world of course. In some countries they get only food and lodging plus a profit share. In other nations, notably more industrialized ones, they do not get a share of the yield but they receive a regular monthly salary.

Once enough gemstone rough has been found, it is sold at market via a broker (unless of course the mining operation also handles cutting and distribution as is the case with larger mines such as the main Tanzanite mines in Merelani, Tanzania). Or, if cutting options exist in nearby villages, the gem is cut first and then sold.

In Sri Lanka, the government prohibits the export of all gemstone rough so the gems are cut in the country. This is sometimes done by hand with old equipment where the cutting wheel is turned by rope. And with very sophisticated cutting machines, all the angles are worked out and set by computer.

THE ROLE OF GOVERNMENT

The reason why a government might regulate the trade and prohibit the export of gemstone rough is because much, if not most, of the profit, is generated after cutting. This is when the true value of a gem can be determined. The reason for this is that the yield of a piece, while predictable with some degree of exactness, is not 100% certain until after the gem is actually cut. (I am skipping, for the sake of this discussion, far more sophisticated prediction methods in use in the diamond trade, where a piece of rough can be scanned and analyzed with 3-D software. That is another blog entirely).

Countries with older mining histories, such as Sri Lanka but also Colombia, prohibit the export of gemstone rough. Countries that have entered the gem industry more recently, such as Madagascar, do not have these regulations - yet. Other countries, like Tanzania, have switched around between different regulations depending on the current government in place. This can wreak havoc - at least in the short term - because gemstone cutting requires years of training and that training has to be provided. Alternatively, cutters must be ‘imported.’ A lot of Sri Lankan cutters are employed in Tanzania for example.

THE TRADE

Gem trading in Sri Lanka has a history as long as that of gem mining, and with some modifications, it also operates in the same way it did centuries ago. The main gem trading takes place in Ratnapura, but there is also a market for rough gems in the neighboring village of Nivitigala. My supplier Dudley Blauwet sources his gemstone rough mainly from there.

Trading mostly takes place in the open air, along the road or in the market square where you can sit at tables and purchase tea or cold drinks. The Ratnapura market square is really a triangle, and it is set up for the express purpose of trading by the town itself. Along the trading street that is widely referred to as ‘Gem Street’ there are also small booths, like open front offices you can rent, where the tenant can keep a safe and you can make purchases away from the public eye.

Street trading is cash based. Sometimes you can use foreign currency like US Dollars. You can also exchange dollars and Euros for Rupees at a local bank or directly in the street. Credit cards are not a thing but I assume that larger transactions are not all cash but make use of wire transfers and the like.

The government exacts a tax for all exports which means you do need receipts for your gems when you take them back. And if you are not just a tourist with a small purchase, you have to get your export assessed and evaluated at the mining office in Colombo where you will also pay your taxes. There, you will receive export clearance for customs at the airport. Evaluation at the mining office can take several hours if there are long lines, so it is best to save a half a day for it at the end of your trip. If you are travelling for the trade, it is also advisable to get a business visa instead.

As I have said before, gem trading is not for the uninitiated! Once you arrive at Gem Street and make your interests known – essentially by loudly saying into the crowd what you are looking for – you will quickly get approached with cut or rough gems in parcel papers. Jochen, my travel partner, looks mostly for terminated crystals that are not for cutting, so once he starts being shown stuff, he yells “crystals only” into the assembling crowd. I took some nice video of how he does it and you can see how quickly it can work when you are buying lots of small items.

For more valuable items, you can take your trading elsewhere, i.e., you can rent a space from a local shop owner where sellers (a mix of owners and brokers) can approach you one by one. I spoke to one such buyer, strangely also from New Jersey, and he told me this has worked well for him and gives him more private space for purchase and negotiating.

For my two German buying buddies and myself, our hotel owner Bhanu had arranged things ahead of time. He had built a well-lit, open windowed office right at the roadside next to the hotel entrance. It was quiet and fully air conditioned (thank you Bhanu).

Every morning, sellers would line up outside the office, enter one by one or in small groups and present their parcel papers. We had brought tweezers and loupes though Bhanu had some as well, and one of our companions, Joerg, had also brought a scope for inspecting sapphires for heat.

Now while I would hardly say that sellers will outright cheat you, assertions that a gem is unheated need to be taken with a grain of salt. For my part, I verify these claims when I get home by taking the gems to a lab, and I will take only low financial risks when told a sapphire is unheated. When you come as a tourist you are more likely to be told what you want to hear (it’s the best, cleanest, and certainly most valuable gem you have ever seen, and it is totally natural… yada yada). As possibly repeat and larger buyers, we were approached with more caution. All sales are final, so if a trade goes south, you are not likely to come back or deal with the same vendor again. That is not in anyone’s interest.

And in the next blog, I will tell you how my own buying adventures went. Meanwhile, keep looking out for Etsy listings of my treasures.