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U.S. Gem Industries: Labor Day 2000

Last Updated: 23rd Nov 2011

This is one of the many cursory overviews of published data compiled around the Y2K. This particular article focused on the increasing regulation of natural gemstone and specimen mining including mineral prospecting/collecting occurring on the unappropriated public domain lands.

United States Gemstone Mining, Manufacturing and Marketing Industries:
On the verge of the 21st Century

September 4th, 2000



Tell the miners from me, that I shall promote their interests to the utmost of my ability; because their prosperity is the prosperity of the Nation, and we shall prove in a very few years that we are indeed the treasury of the world.

— United States President Abraham Lincoln; April 14, 1865.


Global Overview

The gemstone industry worldwide is comprised of two distinctly different sectors: one being diamond mining and marketing; the other being production and sale of colored gemstones. Most diamond supplies are controlled by a few major mining companies; prices are supported by managing the quantity and quality of the gems relative to demand. Unlike diamonds, colored gemstones are primarily produced at relatively small, low-cost operations with few dominant producers; prices are influenced by consumer demand in addition to supply availability.

Worldwide production of natural colored gemstones was estimated to have exceeded $2 billion per year in the late 1990's. Most colored gemstone mines are small, low-cost, and widely dispersed operations in remote regions of developing nations. In many foreign locations, production is intermittent and slowing, due to conflicts over mineral ownership rights, inadequate health and safety concerns for workers, and poor mine development design.

Foreign colored gemstone producers and markets were adversely affected by the economic crisis in Asia during 1997. Mining and sales reportedly were disrupted in many Asian countries. Prices world-wide of high-quality colored gemstones, however, did not decline dramatically.

Fortunately for producers of colored gemstones, long-term economic forecasts predict continued growth of discretionary income in the industrialized world, and anticipate even higher growth rates in developing countries such as China and other Asian nations. Gem and jewelry sales in China were reported up 10% in 1999 from the previous year. Chinese platinum jewelry in 1993 accounted for only 1% of total world sales. By 1998, China's platinum sales jumped to 21% of total world sales. China is now the world's second-largest platinum market following Japan.

Domestic Production

To date, commercial mining of gemstones has not been extensive in the United States, although more than 60 different gemstones have been produced commercially from domestic mines. Most of the deposits have been developed on a relatively small scale compared with other industrial minerals mining operations. In many instances, moreover, contemporary gemstone mining in the country is conducted by hobbyists, collectors, mineralogical and lapidary clubs, rather than business organizations. Industry employment is estimated to range from 1,000 to 1,500 workers.

Most natural gemstone producers in the United States are small businesses that are widely dispersed and operate independently. The small producers probably have an average of less than three employees, including those who only work part time. According to the U.S. International Trade Commission, the number of gemstone mines operating from year to year fluctuates because the inherent uncertainty associated with the discovery and marketing of gem-quality minerals makes it difficult to obtain financing for developing and sustaining economically viable deposits.

Lands Involved

In 1993, a U.S. Department of the Interior study indicated that industrial minerals with more than 10% of total domestic production from federal lands include gemstones at 50%. According to the 1999 Hardrock Mining on Federal Lands report published by the National Research Council (NRC) at the request of Congress, the 12 western states contain 99% of the lands administered by the Bureau of Land Management (BLM) and 85% of the lands administered by the Forest Service.

BLM lands in these 12 states total about 260 million acres and Forest Service lands about 163 million acres. These vast areas compare with an estimated 15,000 acres of currently active notice-level mining operations (less than 5 acres each) and 134,000 acres in currently active plan-level mining operations on BLM lands. Based on these data, approximately 0.06% of BLM lands are affected by currently active plan-level and notice-level mining activities.

Not all BLM and Forest Service Lands are available for mineral prospecting and mining. Various categories of these lands have been withdrawn from mineral entry to meet a variety of public purposes. Chief among these are congressionally designated wilderness areas. Other lands have been withdrawn administratively to protect relatively large areas being considered for possible designation as wilderness, areas used for military facilities, and smaller areas for recreation and for other facilities. The NRC requested information about the acreage of BLM and Forest Service lands that are withdrawn from mineral entry, but these data were not readily available.

Regulatory Controls

U.S. Government actions over the past eight years have severely dampened hardrock mining activity in general, and exploration in particular. In 1997, the BLM was directed by the Interior Secretary to adopt new hardrock mining regulations affecting the current mining regulations at Title 43 of the Code of Federal Regulations, part 3800, subpart 3809. These regulations govern the exploration and development of hardrock minerals considered "locatable" under the General Mining Law of 1872, which includes industrial minerals such as gemstones.

In the Secretary's January 6 memorandum to the Assistant Secretary of Lands & Minerals and Acting Director of the BLM, he stated that "It is no longer in the public interest to wait for Congress to enact legislation that corrects the remaining shortcomings of the 3809 regulations." The first 3809 draft was published in April of 1997. Hundreds of citizens and companies, as well as the governors of the western states, told the BLM that changes to the regulations were not needed. The BLM ignored those comments. In 1998 a second pre-decision draft was released covering the proposed replacement of the current 3809 regulations.

The National Mining Association (NMA) responded by stating that if adopted as written, a second draft replacing current surface management (3809) regulations for hardrock mining would "seriously threaten future mineral and exploration development on public lands." This critical evaluation was also shared by the California Mining Association (CMA). The CMA was forced to seek assistance from the California Governor's office because of potentially "profound impacts on the current balance of regulation between the state and federal government."

On February 9, 1999, the BLM published their proposed 3809 rule and Draft Environmental Impact Statement (DEIS) and opened a 90 day public comment period. Congress responded to Western Governors concern by enacting laws which required a study by the National Acedemy of Sciences (NAS) on the effectiveness of the current 3809 regulations; and provided the Interior Secretary with limited authority to issue final revisions to the 3809 regulations "which are not inconsistent with the recommendations" of the NAS/NRC Report.

The NRC report concluded that existing federal and state regulations are generally well coordinated and effective in protecting the environment; and improvements in implementation of the existing regulations represent the greatest opportunity for improving environmental protection and the efficiency of the regulatory process.

On October 26 of 1999, the BLM reopened the comment period on the proposed 3809 regulations for an additional 120 days. Unfortunately for the public, BLM did not provide a supplemental DEIS which analyzes in detail the alternative to the proposed 3809 revisions presented by the NRC Report's conclusions and specific recommendations. Despite intense public concern, BLM is proceeding with the proposed rule that is expected by the agency to adversely affect the small entities within the mining industry, causing an average 25% decrease of small mining operations.

The BLM reports the number of plans and notices of mining operations filed with the agency on an annual basis. These data indicate that the number of plans of operations filed with the BLM has decreased roughly by 50% since 1992. The number of notices has fallen by a greater percentage. Based on existing data, it is estimated that gem mining on federal lands has decreased from approximately 573 workers in 1993, to only 209 workers in 2000, reducing annual domestic gemstone production by 25%. Upon effect of BLM's proposed 3809 regulations, domestic production of gemstones would likely decrease by an additional 25% - devastating annual domestic gemstone production despite increasing market demand, and ultimately reducing the nation's gem mining workforce to a mere 157 workers.

Future Outlook

In 1997, domestic markets for natural, unset colored gemstones totaled approximately $650 million. Demand for colored gemstones is continuing to rise as diamonds become more expensive and retailers promote the popularity of alternatives. Additionally, as the jewelry industry consolidates towards fewer, larger companies and turns more to mass merchandising, smaller dealers will focus on niche markets targeting specific demographics in order to remain competitive. Much greater volumes of gem jewelry are expected to be sold via telemarketing programs and new electronic media, such as the Internet.

Although the United States currently accounts for less than 1% of the total annual global gem production, it is the world's leading gemstone market. On the basis of such indicators as trade data and income growth rates, U.S. gemstone markets, bolstered by a strong national economy and demand among consumers with increasing personal wealth and growing discretionary income, accounted for 35% of world gem demand in 1998. As the world's leading market, the United States is expected to dominate global gemstone consumption well into the next millennium.

Bibliography

Austin, G. T. (1993), Gemstones, 1992, U.S. Department of the Interior, Bureau of Mines, 29 p; Directory of Principal Gem Stone Producers in the United States, Summary Supplement, Mineral Industry Surveys, USDI, Bureau of Mines publication.

Balazik, R. F. (1998), Mineral Industry Surveys, Gemstones, 1997 Annual Review. United States Department of the Interior, U.S. Geological Survey publication, July, 16 p.

Balazik, R. F. (1999), Mineral Industry Surveys, Gemstones, 1998 Annual Review. United States Department of the Interior, U.S. Geological Survey publication, August, 16 p.

California Mining Association (1998), Draft hardrock mining regs pose serious threat to mining on public lands. California Mining publication, November.

California Mining Association (1999), CMA responds to Babbitt-ordered proposals to update hardrock mining regulations. California Mining publication, March.

Engineering & Mining Journal (2000), This month in mining--Asia. Engineering and Mining Journal publication, Overland Park, KS, August, 66 p.

Gemological Institute of America, Inc. (1997a), Market research notes taken from 1994 The Precious and Fashion Jewelry Markets Business Trend Analysis.

Gemological Institute of America, Inc. (1997b), Market research notes taken from 1996 Modern Jeweler trade publication.

National Research Council (1999), Hardrock Mining on Federal Lands. Committee on Hardrock Mining on Federal Lands; Committee on Earth Resources; Board on Earth Sciences and Resources; Commission on Geosciences, Environment, and Resources; National Research Council, Washington, DC, National Academy Press publication, 247 p.

Phelps, R. W. (2000), Be Careful What You Wish For - Editorial commentary, Engineering and Mining Journal publication, Overland Park, KS, August, 66 p.

U.S. Department of the Interior (1993), Economic Implications of a Royalty System for Hardrock Minerals. Washington, DC. U.S. Department of the Interior publication.

U.S. Department of the Interior (1999), Surface Management Regulations for Locatable Mineral Operations (43 CFR 3809) Draft Environmental Impact Statement. Washington, DC. U.S. Department of the Interior, Bureau of Land Management publication, February, 226 p.

U.S. International Trade Commission (1997), Industry & trade summary - Gemstones. U.S. International Trade Commission publication 3018, March, 72 p.




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