For those keeping abreast of recent world events, you might have come across the news of protests in Myanmar (Burma) against the military dictatorship there. These protests resulted in a forceful crackdown by the ruling junta. With increasing international attention focused on the Burmese situation, it should be pointed out that most of the world’s rubies and sapphires (both gem types of the mineral corundum: Al2O3) are produced there. Most of the profits of the sales go towards supporting this brutal regime, making these gemstones “blood” sapphires and rubies. The proceeds of these gem stones are used to finance oppression, murder, and torture. This is a strong parallel to the cases in western and southern Africa, where “blood” diamonds we used to finance groups committing terrible atrocities. The Leonardo DiCaprio vehicle Blood Diamond popularized this issue in film.
A Canadian company looking to provide conflict-free coloured gemstones is True North Gems (TSX.V-TGX; Frankfurt-TNF). Currently they have 3 gemstone projects. The Tsa Da Glisza Emerald property, Yukon Territory; the Beluga Sapphire property, Baffin Island; and the Fiskenaesset Ruby project; Greenland. They also possess a nickel property in the Yukon as well. Although the Yukon emerald property was their first major project, the potential of the Greenland project is such that most of the company’s resources are currently focused there.
Located on the southwest coast of Greenland approximately 160 km south of the capital of Nuuk, the Fiskenaesset project consists of 8 claim blocks covering 823 square km and is 100% owned by TGX. Since the project started in 2004, over 65 000 g of gem and over 129 700 g (1 g = 5 c) of near gem ruby and pink sapphire have been recovered from 48 t of material processed. Using those values (keep in mind though this is a combined sample of different areas) this translates into grades of 6 770.8 c/t of gem quality, and 648 548 c/t near gem quality. Like the case in diamonds, all gemstone deposits are difficult to valuate. Independent valuations of a 0.69 c ruby and a 0.96 c pink sapphire from the Aappaluttoq area of the project gave values of (USD) $3 220/c and $460/c, respectively. As with diamond, rubies and sapphires are priced individually on the basis of cut, clarity, colour, and size. Rubies are more valuable than pink sapphires. Geologically speaking, rubies are rarer than diamonds, and produced in only a handful of regions world wide. The world ruby market is not as controlled as the diamond market, but even so rubies are more valuable than diamonds of comparable size and quality.
The gem occurrences on the property comprise 17 metasomatic, 2 regional metamorphic, 2 contact metamorphic, 1 pegmatitic, and 7 hydrothermal types. All of these deposits had fluids of some sort involved with their formation. Fluids travel along faults and joints in the host rocks that act as pathways, and thus many of these deposits are structurally controlled. This means that these deposits can often be predicted if the geometries of these pathways are known. Most of these occurrences are located at the upper contact of the Fiskenaesset layered anorthosite complex with Archean greenstone rocks (e.g. amphibolites). This contact extends for more than 200 km. The deposits predominate when altered chromium (Cr) bearing ultramafic rocks are nearby. It is likely that these Cr-rich rocks were the source for the Cr (substituting for aluminum) in the corundum that gives the gems their blood-red colour. The ratio of ruby to pink sapphire varies from 0 to 2.12, depending on the occurrence. The grades of the occurrences also vary, from 705 c/t to 59 390 c/t. A fully comprehensive 43-101 report on the project with all of the details can be found here.
TGX is currently involved in a pre-feasibility study on the property, beginning this year. After speaking with representative at their booth (which had a stunning array of examples of both rough and cut gems) this March at the Prospector’s and Developer’s Association of Canada convention, they stated that they are in the processes of applying for a mining permit from the Greenland government (Greenland has a large degree of autonomy from Denmark). This will allow them to begin selling the gems they have recovered so far, something their current exploration permit does not allow TGX to do. If obtained, this is good news for TGX as it will allow them to get a positive cash flow. The representative at the booth did not believe that they will have a problem selling their gems for fair values. They even had to regretfully turn down purchase requests for the finished jewelry on display at the convention while I was there. In anticipation of selling their Greenland gems on the market, TGX has opened an office in Bangkok, Thailand, which is to the coloured gem industry what Antwerp is to the diamond industry.
The anticipations of the company; however, rest of the approval of the local government to grant them that permit. Although the representatives were optimistic about getting it when interviewed at the convention. Another issue is the market for the gemstones. In addressing this TGX had contracted MVI Marketing to evaluate their worldwide market for ruby and sapphire. One of the highlights from their report was that the global ruby market is approximately USD $2.1 billion wholesale with slightly declining production and increasing demand for both ruby and associated pink sapphire. Considering the success of certified conflict-free (e.g. Canadian) diamonds in a market rife with ethically questionable competitors, TGX is optimistic about their retail prospects.
Disclaimer: The author holds 1500 shares of TGX. This article is based on personal opinion. Investors are responsible for their own due diligence.