ALROSA sells large rough diamonds in Vladivostok for $12.6 mln

ALROSA, the world's largest diamond mining company, has sold special size rough diamonds (over 10.8 carats) at the auction in Vladivostok.

21 september 2018

CTF and GIA launch digital grading reports using blockchain technology

Chow Tai Fook Jewellery Group and GIA (Gemological Institute of America), formally launched a collaboration project in Hong Kong to use blockchain technology for delivering secure, digital diamond grading reports to consumers for the first time...

21 september 2018

BlueRock narrows H1 losses as grades improve at Kareevlei

BlueRock Diamonds reduced its loss for the first half of the year to £789,000 from a £1.3 million loss, a year earlier as average grades and production improved at its Kareevlei mine in South Africa.

21 september 2018

Zim says diamond policy ‘imminent’

BlueRock Diamonds reduced its loss for the first half of the year to £789,000 from a £1.3 million loss, a year earlier as average grades and production improved at its Kareevlei mine in South Africa.

21 september 2018

AGD DIAMONDS enters international diamond market

JSC Arkhangelskgeoldobycha was officially renamed into JSC AGD DIAMONDS, according to the company’s press statement distributed on Wednesday. The change in the corporate name of the joint-stock company was due to its new marketing policy and the brand’s...

20 september 2018

Vladimir Zboykov: New times have come for jewelers

20 august 2018

vladimir_zboykov_xx.jpgHow a personal collection of minerals was thrown on the scrap-heap, who is behind the destruction of gemstone consumption culture in Russia and why jewelers will soon have to choose between business and prison – all this was told to Rough & Polished by Vladimir Zboykov, Executive Director of the Sectoral Department for Precious Metals and Precious Stones at Business Russia, an all-Russia public organization.

The turnover of precious stones in this country is extremely overregulated. In your opinion, how does this affect the domestic market? And what is the reason for such a slow legislative change in this area?

Unfortunately, it has a negative effect. In this country, it is still impossible to buy or sell a mineralogical sample of a precious stone for a personal collection, that is, an unprocessed gemstone, although in the West all this is sold and bought completely freely... Why the legislative change was hampered is also understandable. In 2005, I was an assistant to a member of the State Duma and tried to lobby for free circulation of mineral samples at least for collection purposes. Not diamonds, but all much less expensive gems, so that collectors, for example, could buy a crystal or hand specimen with an emerald in the rock. Although a piece of kimberlite with a diamond is also a mineralogical item, interesting for collections... I was clearly told at ALROSA – Do not even try, we do not need this. I said, but how is it? After all, the gradual development of the domestic market is also in your interests, as this is one of the components of the marketing policy pursued by any company. But I was intelligibly explained - "We are not interested domestically." The most hurting thing was that they also refused to separate diamonds from other precious stones by changing the name of the appropriate industry law for "On Precious Metals and Diamonds" - they do not need this either.

Do I understand correctly that you are talking about the policy of diamond mining company ALROSA?

Yes, sure. When a monopolist ships 98% of its production for export, its lack of interest in the domestic market is logical. However, now, I hope, the time has come, and the matters will get off the ground. Yes, earlier it was not necessary, but now the domestic niche is beginning to attract attention.

Why is this happening? Why there was no interest for many years, and now it suddenly emerged?

The world is changing, and swiftly. Synthetics has already come to the jewelry market and the number of lab-grown stones used in jewelry manufacturing will increase every year. At De Beers, for example, they understand it perfectly and are persuing their policy in line with new realities. And what will happen in the result? At a time when ALROSA will continue to sell only natural diamonds, De Beers will easily sell its stocks and switch over to synthetics – there is no difference what to trade, right? The company will organize its production, and this will be done at the highest level, cuter than all the Chinese taken together, and will become No. 1 in this market as well.

Are synthetic minerals really so cheap and in high demand?

It all depends on a particular mineral. If you take the list of stones, the turnover of which is regulated here by law, there is nothing unequivocal there. For example, synthetic white diamonds are cheaper than their natural analogues by 40%. But synthetic corundum (both ruby and sapphire) is worth a penny and this is partially true for synthetic emeralds and alexandrites. I hope you understand that a synthetic diamond is several times more expensive than almost any natural sapphire? So, it appears that legally, a non-precious diamond is many times more expensive than precious rubies, sapphires, emeralds? Only once again, this time everything rests not even on production, but on legislation, on the law called "On Precious Metals and Precious Stones" and on that very Article 191 [of the Criminal Code of the Russian Federation regarding illegal circulation of precious metals, natural precious stones or pearls – Ed.], according to which these precious minerals cannot even be stored in collections in an unprocessed form.

But in fact, the amendments saying that synthesized minerals will not be equated with natural minerals have already been prepared, haven’t they?

Article 191 of the Criminal Code should be abolished in principle! It has no analogues in the world, there are no such enactments anywhere in the world, well, except maybe in the fraternal countries of the former USSR. I mean the ban on the circulation of precious stones, that is, the ban on their storage, banal storage... At one time, I wanted to write an article on this topic under the title "Confession of a Fool." The gist of the story is that once I used to collect stones and I had beautiful hand specimens with beryls close in color to emeralds, I bought them in the very beginning of the 1990s; there were also some corundum crystals with a color close to sapphires and rubies and so on. And sometime in 2000, while visiting Symphony of Gems [exhibition - Ed.] I saw one hand specimen with an opaque, but beautiful emerald - and bought it, could not resist. However, it turned out that I bought it from ... a colonel of the Interior Ministry, and when I understood this, I naturally thought that I had run into a police mystery seller. And then I got haunted by a real paranoia: I get into my car and he gets into his, I start moving and he starts moving as well, I'm going to my house - and he's going after me...

Did he catch you up and initiate a case against you for illegal storage? Or is this story with a good end?

With a relatively good end. Of course, later I realized that I was mistaken, but still, fear has big eyes. When that day I came home I thought that very soon this Article 191 would knock on my door, and that would be the end of my story. I got panicky, put all my beryls and corundums into a sack, ran out of my house and threw them into the trash, to the devil's mother. By the way, I threw out good money, not millions, of course, but quite a good sum. Certainly, since that moment I stopped buying anything. Although in fact, what kind of crime did I commit? I just gathered a collection of minerals using my own money and kept it…

Do you think the abolition of this article will save the market? What will happen if it is canceled?

Unfortunately, it's too late. The culture of stone consumption in Russia is destroyed. You may ask the visitors, for example, of the Symphony of Gems Show whether it is possible to sell gemstones in general? Well, at least a ring with a diamond. Naturally, it is implied that it is sold freely... And you will be told that "it is possible in a store, but impossible to sell it otherwise"... The population is really intimidated, the culture of consumption of natural stones is killed, and all such exhibitions – they are by and large semi-legal. And if now there will be introduced control over the turnover of semiprecious stones, then all this will mean that millions of our fellow citizens will turn out to be criminals. And each of those who keep – in this way or another - semiprecious stones at their home, will become possibly indicted for their storage. As for the domestic market it will just die, that's all. But who cares?

That is, you, on the contrary, expect tougher legislation? And who benefits in the end from "tightening the screws"? The state?

Not sure. You see, now everything is exported. Where does Rostec [State Corporation for Assistance to Development, Production and Export of Advanced Technology Industrial Products – Ed.] channel all the amber? To China. Where is the jade going they are mining? To China. Where are the emeralds going? To India. Therefore, it is sad to see what is happening now... These are the consequences of the policy pursued over the past decades. And I do not see in this the observance of state interests, as the state does not receive any crazy-high dividends. ALROSA has always been a monopolist, and now Rostec has completely captured the extraction of colored stones. And the population is forbidden to do anything, buy or sell, or even keep precious stones in their raw form - even that is not allowed. But why?!! Are they drugs? Weapons? Why not, if the whole world is allowed to do this? You come to Sri Lanka and see a man going with his pockets stuffed with sapphires, and no one cares. He pays five dollars for a trade license and he is selling, he pays $ 10 for a mining license and he is mining.

Nevertheless, something is happening, some changes are being prepared. In June, Sergey Sitnikov, Governor of the Kostroma Region speaking at the Jewelry Forum of the XIX International Jewelry Festival, "Golden Ring of Russia", promised to change the situation. In what way do these innovations threaten the market?   

Unfortunately, the market stakeholders heard a rather sinister message in his words. The only question is what kind of charges will be brought against those who conduct their business in the "gray" area and are still barely able to make both ends meet. Historically, companies here operate in different ways. There are also those who simply work in the “black” area and do not pay any taxes, and this is now a general trend, it happens throughout the country, and the jewelry industry here is not the cause.

And what is the message? Is there a feeling there will be higher fees?    

Yes, we are facing another increase in fees, stricter legislation and so on. Simply put, there was pursued an incorrect, erroneous policy regarding the turnover of precious stones since the time of the Soviet Union and later the situation was aggravated in 1998 due to the adoption of the law "On Precious Metals and Precious Stones." After all, the culture of stone consumption should be instilled gradually, like everything else, and the marketing policy in this is international. In this country, the culture of gemstone consumption was purposefully choked and as a result it was destroyed. Now the population really does not care what to buy. You may try to sell a fake jade to a Chinese. He will not buy it! For him, it is extremely important to acquire a real jade. And you cannot fool him, they are all connoisseurs there, everyone can distinguish a fake. And here we all do not care; our customers do not see value in natural stones. Therefore, real jewelry in Russia is now being replaced by imitation jewelry. And the world market is growing at the expense of China, at the expense of India, where people become richer and buy expensive jewelry.

That is, you mean it’s true that "world gold will collapse when Indian women will get tired of wearing it"?

Of course! If the world jewelry market could grow at the expense of Europe, it would be a different matter, but it grows at the expense of those countries where people are just starting to earn more and where there is a culture of gemstone consumption. For example, in India, any piece of jewelry is heavy, it has many stones. But compare the weight: if a Russian woman and an Indian woman buy one ring each, the first one will have a ring containing 0.8 grams of gold, while the second will have a ring containing 80 grams of gold.

Turning back to legislative initiatives, do I correctly understand that the Ministry of Finance is still going to use some of your proposals?

Yes, and in my opinion, it is thanks to a very sensible person, Julia Goncharenko [Deputy Director of the Department for State Regulation in the Sphere of Production, Processing and Circulation of Precious Metals, Precious Stones and Currency Control at the Russian Federation Ministry of Finance - Ed.] that we managed to achieve a tremendous breakthrough. In particular, we were able to turn the discussion with Goznak [Russia’s government-owned company producing banknotes and other security papers and documents – Ed.] about special security tags into a normal mode. Supposedly, their original idea was to sell such tags as expendable material, which would cost exactly as much as Goznak would wish to sell it for to jewelers. Well, and jewelers will not have the right to use something else for this purpose. At this date, I was assured by Goznak that they refused this idea. However, if they refused today, it does not mean that they will not introduce it tomorrow. If Goznak will not have control over the marking of jewelry goods, is there anything to prevent it from introducing special security tags to be used in the jewelry industry?

Do you think it is indeed unnecessary? The idea of ​​switching over to QR-codes is not supported unanimously and its opponents believe that the information needs to be duplicated.

This is absolutely not necessary. In fact, this is the introduction of a two-factor identification system. You can compare it with buying a plane ticket - we buy a ticket and we are not afraid that we will not be allowed to get onboard or that someone will print a dozen of tickets for one and the same seat. But the argument of those who say "yes, you can print these QR-codes as many as you want" is sheer nonsense. What is the difference, how many of these codes can be printed, if the count is not done on paper, but using an electronic database, where the product is assigned a unique number? However, I understand that many jewelers are afraid of this innovation and it is because they lack information. We need to work, hold discussions and negotiate with people. And I'm ready to help.

And what is the fate of the "Strategy for the Regulation of the Jewelry Industry," which was developed and adopted by the Russian Jewelers Guild? What will happen to it further? Will it be possible to implement it in some way?   

I hope that it will come in handy. After all, there are no other strategies, no one has developed them. Whether the government will accept this strategy as the main one or not is another matter. Ideally, I would like, of course, that the government could use this strategy to develop its own, because now there is no government strategy for the development of the jewelry industry. There is a certain internal plan for the work of the Ministry of Finance and there is certain work being done at the Ministry of Industry and Trade, as in fact the jewelry industry is currently supervised by these two agencies.

But there is the Federal Customs Service, which also has its own requirements for jewelers, and there is the issue of unified tax on imputed income, the abolition of which is being proactively discussed...

That is why it is so important to have a strategy for regulating this industry! For example, it is possible to abolish the unified tax on imputed income, but what if those who will stop paying it will go into illegal business altogether? How to keep the right balance? Of course, you can assign a whip master to each jeweler to whip everyone who has failed to pay. But in fact, right now it is possible to align the market economically only through the search for reasonable compromises. You see, currently the situation is close to disaster, we are operating in the period of sanctions and crises and the most important thing is that we do not have buyers. Totally and for all - there are no buyers!

Maybe our jewelry industry will be saved by exports?

In order to get engaged in large-scale exports, it is necessary to give jewelers the opportunity to do this without any additional costs and problems. And while there is special state control over such operations, this is almost impossible. For example, consider smartphones – these are goods having a high concentration of value. And there is a product, which is called, for example, an emerald, and it, too, has a high concentration of value. But the first one can be freely sold abroad, while the second has to overcome a lot of obstacles on this way. Add to this that even a finished jewelry product meant for export is subjected to special state control in addition to regular customs control. It is impossible to develop exports under the existing restrictions. We cannot even sell those jewelry pieces that we bring to exhibitions!

But why? We have many talented jewelers who make really unique jewelry.

A jeweler comes to face a problem – for instance, he came to an overseas exhibition investing some money into the trip. But to promote one’s brand, you have to sell your pieces first to one, then another buyer, so that gradually this brand will become recognizable. But this cannot be done today – you will need a contract to sell on international markets... And if you cannot promote your brand, then what? To hope that someone will see your jewelry and say "Oh, what a wonderful design!" and sign a contract for 10 years ahead? This is an illusion, there are no such things. And again, the scale of capitalization of any of our jewelry companies and that of some foreign firms are not comparable. To promote one’s jewelry in international markets, you need to invest a lot of money in marketing.

But after all, you yourself say that, for example, the same Ministry of Finance has now become much friendlier towards jewelers?

Yes, of course, the Ministry of Finance today is a much friendlier agency than a few years ago. But, first of all, not everything depends on them, and secondly, no matter how much we want it, there are also law enforcement agencies, which have their own interest regarding jewelers - control, crime detection rates and so on. Do you really think they are going to cut the bough they are sitting on? It would be naive to expect that they will come and say "No, it is not necessary to control these things, we think that this sector does not need such a tough and strict control."

Well, this is a general view, but it is unlikely that the jewelry industry is so important for law enforcement agencies.

Nevertheless, both inside the Interior Ministry and inside the Federal Security Service, there are units that specialize in precious metals and precious stones. They are not at all going to deprive themselves of their jobs and reduce their staff, are they? In addition, they have a natural need to develop, introduce more and more stringent regulation. They cannot be blamed for this, this is their form of life, the mode of existence, an absolutely natural process.

Turning back to the conference and the speech of Sergey Sitnikov, the governor of the main jewelry region of the country. At this event, it was proposed to discuss the industry regulation strategy, after which the sides had to sign a resolution. As I understand, this did not happen?

This did not happen. From my point of view, the governor very wisely decided to take advantage of the event to explain to jewelers that new times have come. So new that in these new times jewelers should think not so much about increasing their incomes or even preserving business, but about increasing the country’s budget revenues. The governor put this condition - either you start thinking more about the country’s budget, and in the first place about the country’s budget, and only in the second place about yourself, or... And this is really an entirely new approach, the harshest statement of those that were voiced by an official in recent years at similar events. And a very clear prioritization.

And it was said very openly, straightforwardly, without any politics...

Absolutely, and this is a very serious warning for all market stakeholders. Everything has been indicated distinctly, clearly and comprehensibly. This means that such times are coming.

Roman Bizyukov, Rough&Polished