The world’s top producer of emeralds is eyeing investment in Colombia as the Andean nation quietly moves to put a stop in its faltering production and prevent a so-called “mafia war” from breaking out over the stone trade.
Gemfields Plc. said that it is interested in investing in Colombia, but needs both the assets and a secure environment to open mines in the emerald-rich, conflict-torn nation.
“Colombia’s got some wonderful emeralds,” Chief Executive Officer Ian Harebottle told Reuters. “We’ll move there when we find the right asset.”
Harebottle added that security, reliable partners and the ability for mine expansion are all important to Gemfields plans in Colombia. For its part, the Colombian government is desperately looking for investors in the notoriously corrupt business, as overall emerald production in the country has dropped over the last decade from nine million carats a year to 2.6 million.
Colombia is still one of the three largest emerald producing nations in the world, along with Brazil and Zambia, but aging machines at the country’s mines and a lack of foreign investment have put the production rates on the decline, while the more easily accessible gems are becoming scarcer.
“Geologically speaking, Colombian emeralds are the purest because the emerald deposits are the only ones on earth found in sedimentary host rock rather than igneous rock,” CiCeRi LLC, a Colombian emerald company said on its website.
While emerald mining in the country goes back to the Spanish colonial rule, it ramped up in the last 40 years as its worldwide demand nearly doubled its price on the global market. Coinciding with this rise in price, however, was the infiltration of drug cartels into the trade.
In the late 1980s, Víctor Carranza, dubbed the “emerald Czar” by Colombian newspapers, successfully fended off a bloody attack by Medellín cartel boss Gonzalo Rodríguez Gacha for control of the industry, in which thousands of people died. Carranza, who then fought off other attacks by Marxist guerrilla groups and rival emerald clans, died last year April from cancer and his death has sparked concern that a fight will erupt for control of the industry.
President Juan Manuel Santos has made a concerted effort to quell any threat of violence, sending troops to emerald-rich state Boyacá after emerald baron Pedro Rincón was injured in a grenade attack last year.
“We definitely don’t want to go into an area where there is a risk of crime and irregularities,” Harebottle said. “The government is very supportive of getting things right and moving in the right direction, supporting foreign investment and increasing transparency.”
Both Colombian officials and industry experts are also working to stem the image that Colombia’s emerald market is impossible to enter and controlled by mafia-like groups.
Some have said that companies like Gemfields would be remiss not to invest in Colombia, given the quality of the gems mined there, but also warned that they should wait until there is full government backing.
“Investors would be incredibly skeptical if they were to establish an operation in Colombia without government support,” said Kieron Hodgson, an analyst with Charles Stanley Securities.
Besides concern over the emerald industry, Colombia has also faced bloody violence in regards to its gold mining operations.
According to a study released by the Spanish conflict-analysis organization the Toledo International Center for Peace (CITpax), illegal gold mining has overtaken coca production as the top source of income for Colombia’s organized crime and guerrilla groups, including the Revolutionary Armed Forces of Colombia (FARC). Potential cocaine production in Colombia is down by 72 percent since 2001 and the country now ranks third in cocaine production, behind Perú and Bolivia, Gil Kerlikowske, director of the Office of National Drug Control Policy, said earlier this summer.
The report states that in eight of Colombia’s 32 provinces, gold mining has become the top source of income for these groups who have taken an advantage of an uptick of so-called “mom-and-pop” mining operations through extortion.
The rising price of gold on the world market – an ounce currently is worth over $1,700 – has helped contribute to a proliferation of the business, said Adam Isacson, a senior associate for regional security policy at the Washington Office on Latin America. A small mine is also easier to hide, as opposed to a coca field, and illegal gold mining is off the radar of U.S. authorities more concerned with anti-drug tactics, he said.
The CITpax report states 86 percent of Colombia’s gold is mined illegally, with around 20 percent of the profits from mines going to the FARC, and the National Liberation Army (ELN) and other criminal organizations controlling smaller shares.