The Australian sapphire industry is preparing a new, assertive strategy to establish its own reputation in the world gemstone market - a reflection of Australia's growing maturity as a producer of international quality.

Heiress apparent to her effervescent sister the diamond, sapphire has a mysterious, almost mythological attraction - drawing the eye in to their rich iridescent centres, they entice with a promise of hypnotic discovery. We know the diamond well, her sheer blinding brilliance is familiar to the many who have wooed her, but we hover uncertainly two steps away from the enigmatic sapphire, hesitantly awaiting an introduction to this dark lunar lady.

Sapphire has enjoyed multifarious often strangely incongruous uses throughout her history; form being crushed and powdered as medicine, acting as an auspicious business card for the benefit of wealthy French noblemen, to an exotic elixir administered to less than amourous lovers. Sapphire has lived for many years in relative obscurity far away from notoriety in the outback mines of rural Australia. Few would be aware that some of the world's most shining examples of sapphire have been leaving the enclaves of the wide brown land to be sold on the world markets as anything but prize Australian yield. It is not surprising then that Australia herself has been slow to recognise the potential gains of an indigenous sapphire industry.

Gerry Yakoumelis' father knew nothing about sapphires when he established his mixed business in the New South Wales mining town of Inverell in the late 1950's. In fact he would have preferred the cash to the jars of sapphire Crystal tendered to him by the miner's in lieu. Not knowing exactly what it was that he should do with his glittering booty he opted to stockpile it away over several years in three 44 gallon drums at the rear of his shop.

"He had heard of sapphires in much the same way that everyone has", says Gerry of G. & J. Sapphire Merchants. "But he was certainly not familiar with grading the quality or the value. To him they just looked like little blue pebbles.

"At this time, Inverell was just beginning to establish its reputation as a source of sapphires and a few tourists were starting to pass through the town just to see where Australian sapphires were sourced. My father would put together a small parcel of a few pieces and give them to the tourists as incentive for them to buy things from the shop, but even if they didn't he was happy to give them away anyway".

Mr. Yakoumelis' fortunes changed the day that a Swiss Gem dealer arrived in Inverell to investigate the rumours abounding worldwide throughout the industry that Australia was host to a plethora of the rough material. Unsure of where he was to begin in his search, the dealer ended an exhausting bout of fruitless enquiries with a cup of coffee in Mr. Yakoumelis' store. In passing, he asked where he could purchase rough sapphire, whereupon Gerry's father led him to the drums in the back of the shop.

"The dealer sat down and selected a handful of the top quality gem sapphire and the money that my father received from this simple transaction compensated for a whole year of no cash/barter agreements" says Gerry, "But still this was only one man and he seldom came to purchase the stones, so at this stage I would say that it was very much a cottage industry. It took my father about five years to realise the potential of this business but he didn't have any connections apart from the errant Swiss dealer. Eventually one thing led to another and an Englishman approached him on the same basis purchasing a few samples at first and then slowly building up. It wasn't until 1968 that the real buyers started coming".

The history of the sapphire industry in Australia as a whole is an intermittent and colourful as Mr. Yakoumelis' own experience, the latter in fact making an effective allegory with the universal development. Rough sapphire was detected as early as the 1890's in Anakie in Queensland and in 1854 in the New England areas and small scale mining operations there supplied the world with a limited amount of the gems. The fortunes of World War I and the incumbent instability of European politics halted any possibility of development and mining for sapphires did not resume until the early 1960's as an unprecedented demand for rough sapphire turned buyer's eyes towards Australian fields. Strongly represented amongst those searching for the Australian jewel were the Thai's whose influence has dominated the fortunes of the Australian industry ever since.

"Thai buyers initially came to Australia at the request of Eastern Gems which was the first company in Australia to start buying mining and marketing sapphire on a large scale", says Gerry. "Commencing operations in 1964, the company achieved during its years of business, an average annual turnover of $2 million. Today they could have been the Debeers of sapphires had they not encountered crippling financial problems. Their difficulties began when large scale mechanical mining increased causing a flood of sapphires on the market, dropping the price by an incredible 95%. Limited by insufficient funds to continue buying all the production from New England and Queensland sapphire areas, Eastern gems invited their Thai customers to Australia to buy directly from the mines for a commission on the purchases, in a bid to salvage the business.

"The Thai buyers, having been introduced to the miners, no longer needed to buy sapphires from Eastern Gems and the company went into receivership. Additionally, the Thai buyers purchased all of the miners' production - from low grade right up to the top gem quality stones. I am of the opinion that had the financial backers fully understood the mechanisms of the gem business instead of failing to provide Eastern Gems with the funds necessary to continue purchasing, there could have been a substantial sapphire industry in Australia today".

"The creme de la creme is the Kashmire sapphire or the Burmese stone - they certainly command the highest prices", says Brenton Dalheimer, a seventh generation cutter of Mineral in Australia. "The next step down in order of ranking, you have the very good quality Sri Lankan sapphire and then you have the very good quality Australian sapphire which is not necessarily sold in Bangkok as Australian. It really does have a beautiful blue - it commands, say, US $5-6,000 per carat so it isn't a cheap stone by any means". Trying to introduce the top quality Australian stones to the market as just that, 'Australian sapphires', is going to prove a difficult task.

"When the Thai buyers sell stones purchased in Australia to the European markets, they are never sold as Australian", explains Gerry. "They sell the high quality merchandise as Thai, the better quality as Sri Lankan and the even better as Burmese. So when the buyer goes to Bangkok to buy a parcel of say, 100 pieces of sapphire and this parcel is said to be from Sri Lanka, 80 pieces may be from there but 20 pieces could well be Australian. So it is really quite difficult to try to project an image for Australian sapphires as being top quality because there has been fifty years of this continual umbrella marketing and similarly declaring that Australian sapphires are always dark and not of desired quality.

"What we are trying to do is to promote the top end of Australian sapphires - openly voicing that Australia does produce some of the best sapphires in the world. They can compare and compete with the Sri Lankan and even the Burmese and the price is nowhere near what you would pay for the latter".

It has now been established that the desirability of Australian sapphire lies in its uniformity of colour, but as the fledgling Australian industry rested increasingly on the Thai's and their directives, the luckless process of trial and error became the method by which Mr. Yakoumelis Snr. was initiated.

"Possibly my father's biggest mistake during the very difficult 1968-75 period was in not travelling overseas to find real, consistent buyers and in not investigating the real value of sapphires. He didn't even know that Thailand was the major cutting country - there was no-one there to teach him properly, he had very limited information and had to glean what he could from others and nine times out of ten it was the wrong information anyway.

"My father started working for a Thai as a buyer. He would give my father $10,000 and then come over at the end of the month to pick up the parcel, take it back to Thailand, process it and return with $20,000. It would continue to double up each month and my father would get a commission from it so that in effect he was trying to glean someone else's knowledge, but it wasn't valid information - they'd always steer everyone the wrong way. For instance, they would say that the big, blue, dark sapphires were the best when in fact the clear, light blue stones were preferable, so they would pay nothing for the top quality and everyone else was left with the wrong conception of value. My father began to buy up small parcels with his commission and then sell them to other merchants but of course he was unknowingly buying up the wrong ones. After a few years he had a huge parcel of these large, black stones that he had to try to move. It was a situation of the ball being in their court all the time and they taking advantage of it.

"My father finally realised the discrepancies when he would present his parcels to other merchants and they consistently chose the lighter stones. You have to buy everything that the miners show you because they don't just want to sell the top end, so you take the good with the bad and really that was a good way for my father to work out what people really wanted. He presented a mixed parcel, they made their selections and he got a rough idea of the market demand and the best prices. When he finally went to Thailand at the request of his Thai boss, he was shown a vastly pared down version of the mechanisms of the industry and he also took some of his own stones to have cut which were exchanged and an inferior stone was returned to him.

"He first encountered the heat treating process at this time in which inclusions or any silt is cleared from the stone by virtue of a heating process and the stone is made lighter. Today the process involves placing the stones in a very high temperature electric furnace, although in Thailand they still use the older methods whereby the stones are placed in a crucible and then transferred to a coke furnace with an airblower underneath, creating temperatures of about 1500-16000C. Then, the Thai's claimed that the stones were often unavoidably burned and broken which is untrue and they would give back little pieces instead of the original large stone. They really did not want anyone else to learn about the processes and this is why there is such a 'real' sapphire industry in Thailand: they really knew their business".

Mr. Yakoumelis Snr. left the employ of the Thai merchant but agreed to look after the man's son who was to arrive in Australia. As a gesture of appreciation, the son taught him the correct heat treatment methods and basically set the record straight, consolidating his knowledge and pointing Mr. Yakoumelis in the right direction. His own skills had developed after his 12 years in the business to the point where he could grab a handful of stones at random and correctly declare their weight by virtue of his trained eye and experience, a trick that held him in good stead with the fastidious European buyers whom he had wooed, won and who had introduced him to the true top quality in 1973.

Business began to grow at a rapid and steady pace and the Yakoumelis' moved to Sydney with Gerry's father travelling to Inverell each week to scout parcels, returning them to Sydney for sorting, preparations for orders and shipping out. "Things were going very well at this time", says Gerry, "orders were coming in regularly, there was a good continuity of supply, business was growing at a very nice pace, rather than booming: it didn't just shoot up overnight - my father is an extremely cautious man....

"Then in late 1979 to the early eighties, the supply began to slowly dwindle. The biggest mines began to pull out and stop mining due to the lack of stones - it had virtually dried up. We had orders but little supply inasmuch as we could fill existing orders but not enough to search for new customers and that is when things really began to deteriorate, becoming very difficult in 1984. Even now, although the situation is improving, the supply is very small in comparison with our orders, so I have begun to process stones which is a higher risk in that stocks must be held onto longer but there is a greater return in the long term that makes it worthwhile".

"The dealer sat down and selected a handful of the top quality gem sapphires and the money that my father received from this simple transaction compensated for a whole year of no cash/barter agreements", says Gerry, "But still this was only one man and he seldom came to purchase the stones, so at this stage I would say that it was very much a cottage industry. It took my father about five years to realise the potential of this business but he didn't have any connections apart from the errant Swiss dealer. Eventually one thing led to another and an Englishman approached him on the same basis purchasing a few samples at first and then slowly building up. It wasn't until 1968 that the real buyers started coming".

The history of the sapphire industry in Australia as a whole is as intermittent and colourful as Mr. Yakoumelis' own experience, the latter in fact making an effective allegory with the universal development. rough sapphire was detected as early as the 1890's in Anakie in Queensland and in 1854 in the New England areas and small scale mining operations there supplied the world with a limited amount of the gems. The fortunes of World War I and the incumbent instability of European politics halted any possibility of development and mining for sapphires did not resume until the early 1960's as an unprecedented demand for rough sapphire turned buyers' eyes towards Australian fields. Strongly represented amongst those searching for the Australian jewel were the Thai's whose influence has dominated the fortunes of the Australian industry ever since.

"Thai buyers initially came to Australia at the request of Eastern Gems which was the first company in Australia to start buying, mining and marketing sapphire on a large scale", says Gerry. "Commencing operations in 1964, the company achieved during its years of business, an average annual turnover of $2 Million. Today they could have been the Debeers of sapphires had they not encountered crippling financial problems. Their difficulties began when large scale mechanical mining increased causing a flood of sapphires on the market, dropping the price by an incredible 95%. Limited by insufficient funds to continue buying all the production from New England and Queensland sapphire areas, Eastern Gems invited their Thai customers to Australia to buy directly from the mines for a commission on the purchases, in a bid to salvage the business.

"The Thai buyers, having been introduced to the miners, no longer needed to buy sapphires from Eastern Gems and the company went into receivership. Additionally, the Thai buyers purchased all of the miners' production - from low grade right up to the top gem quality stones. I am of the opinion that had the financial backers fully understood the mechanisms of the gem business instead of failing to provide Eastern Gems with the funds necessary to continue purchasing, there could have been a substantial sapphire industry in Australia today".

The lack of centralised cohesion within the Australian industry coupled with international influences, their market demands and buyers and the contrived falsehood that Australian gems are never premium grade quality, have meant that Australia has long been a player on the bench in the global sapphire game. For many years Australian sapphire has been marketed overseas as low or commercial grade quality whilst Australia's top grade gems have been marketed as Burmese, Sri Lankan or Thai when in actual fact it has been estimated that Australia produces as much as 70% of the world's total volume of sapphire with the top grade merchandise comparable to the world's best. Sapphires are not exclusively blue, contrary to popular belief, although the blue shade is the most expensive with the finest examples coming from Kashmir. Sapphires can be seen in yellow, pink, violet and green and a combination of different colours in sapphire is known as 'parti-colours' of which Australia produces some of the most beautiful in the world.

The manner in which sapphires are formed in nature depends very much on the location of the deposits. In Kashmir, Burma and in all likelihood, Sri Lanka, they were formed by a metamorphosis of limestone that contained aluminium oxide impurities and other trace elements for colouring. The Mines Department in Australia has established a new theory although as yet unvalidated that Australian sapphires were formed deep in the earth's crust prior to erupting to the surface. If proved correct, this knowledge would be invaluable in pinpointing previously unexploited areas of deposits.

The colour of sapphires is obtained by impurities - pure sapphire being colourless, blue sapphire coloured by impurities including titanium and iron. A sapphire crystal in its purest form is aluminium oxide and hexagonal in shape, occasionally pointed at both sides like a diamond.

In judging the quality of a good sapphire, the most important element is its colour, irrespective of whether there are slight inclusions or faults inside. If the colour is uniformly good, this will determine its value. Following colour, clarity, cut and brilliance are important considerations.

"In trying to find a good sapphire, I look for a blue which stands out", says Gerry. "I look at it in different lights - in natural and artificial light and in darker areas. I will often place it in areas with lots of shadow, perhaps under a table. If the blue is still prominent and has a glowing effect or lustre then I concede that it is a good stone. If the stone tends to be a bit darker in the shadow or good only in natural light and poor in artificial, then that detracts from the value".

Gerry opted to enter the family business and studied gemology extensively in the United States and in Australia to complement his practical knowledge whilst working for a South African diamond firm with whom his father was affiliated. He established his own business, G. & J. Gem Merchants with his brother in 1984 which sees both facets of the sapphire industry accommodated by the appropriate Yakoumelis - Gerry looking after the cut stones side of the business and his father concentrating on the rough stones. An avid understanding of each other's roles and capacities ensures that Gerry has a strong knowledge of the rough which he feels is invaluable in his side of the business.

Faced with the decrease of supply, Gerry was forced to make a decision as to the orientation of his company and therein lies the dilemma of the Australian industry - whether the emphasis should be placed on rough stones or whether Australia should actively pursue a competitive foray into full scale cutting and processing.

"We had two options, to diversify into other gems or to look for other sources of sapphire - by other sources I mean other countries which were already producing rough sapphire, "says Gerry". At about this time, the New South Wales Department of Mineral Resources placed a reserve over the entire New England area for what was to be the first ever granting of exploration licences. This came after a four year study by the department as to the source of sapphire. Now we had a third option - to stay in Australia and explore for and hopefully mine sapphire. Our experience is neither in exploration nor mining but we have decided to take this new path with high risk but hopefully with more potential reward. We would not have to rely on the supply of rough from an outside source.

"When the Department called for Expressions of Interest we applied for the whole area. From the 23 sectioned off areas we were successful in securing 19 of which we have since dropped three because we felt that there was insufficient deposits to warrant securing the necessary separate mining license and additionally, the whole operation is an extremely expensive exercise. The reason the government allocated us so much of the area is due to the longevity of my father in the business and the fact that he was one of the few Australian exporters when most were selling to the Thai's so that they could export. It really wasn't an Australian industry in this sense, so the government was trying to promote one. We have developed a twelve year strategy to encompass other aspects of the trade, but I believe that it is not to anyone's advantage to rush into territory that is new to them, although the learning period is long and costly.

"It is our dream to see a more closely integrated sapphire industry in Australia and to achieve this we need greater control by producers, without them having to rely on the Thai's as their only source of income. It implies greater co-operation and support between the gem dealers and the miners and it also means that more processing would have to be done by local dealers".

This is a plan avidly supported by Brenton Dalheimer who feels that mining licenses should only be issued to people like the Yakoumelis' who have a genuine interest in doing the cutting and polishing processes in Australia, although the Department of Minerals and Resources does not yet have the legislative authority to declare such a condition.

"The biggest problem that we have in Australia is that there is no aprenticeship scheme for cutters and polishers like they have in Germany where there is a particular town that is basically a gemstone cutting training centre for the rest of the world. It has been established for hundreds of years and they have a fully integrated training scheme whereby people go through a three year period and finish up as qualified cutters. My grandfather in fact was trained there", says Brenton.

"When you are dealing with expensive qualities of sapphire, the important element is to retain as much of the weight from the rough as possible. The general rule of thumb is that you lose two thirds of the material, so that if you have a rough stone weighing 9 carats, you should finish up with a cut and polished stone weighing 3 carats, depending on inclusions. This is considered the industry standard.

"I was Chairman of the Work Force Committee which was part of an organisation known as the Gemstone Working Party which looked at the training systems and the possibilities of what could be implemented in Australia. We put together a number of proposals based on the schools in Germany which we feel could be adapted on a small scale within the Australian industry. However, for an apprenticeship scheme to really work there must be a couple of hundred people going through each year and at this stage that does not seem feasible".

The type of programme is reserved exclusively for handcutting, whereas the general consensus within the industry lies in the future of automatic cutting equipment, often involving hundreds of thousands of dollars in initial investments.

"It is possible to spend up to half a million dollars on the equipment and in terms of having a large output - it really has enormous productivity - if you were to set up properly, you could probably cut and polish 500-600 stones a day", says Brenton. "But there is still a human element involved in that prior to the automated cutting and polishing, there is a pre-shaping process that is all done by hand where decisions are made by the operator as to colour and optimum shape. Only then is the stone put on a 'dipstick' which enables the cutter to hold it. An automatic cutter can hold thirty stones, so all the stones go down together, all the facets are cut, then removed and put in the polishing machine where the whole process is repeated.

"The difficult part at the moment is that all of the automatic cutting and polishing equipment that is available overseas is generally used for much cheaper quality gemstone material - semi - precious stones such as topaz, blue amethyst and aquamarine. The trick is going to be to use this equipment to maximise the yield in terms of the carat weights because it really is quite a wasteful process. But this seems to be the direction to pursue in terms of competing with labour cots per cut and polished finished stone ex-Bangkok - this is the issue that we have to come to grips with. I really think that this is what the Australian industry has to strive to do in order to compete with the Thai's"

Australian ability and technical skill in the area have frequently come under critical scrutiny and inspired a reluctance of dealers here to give Australian cutters consistent work.

"Quite often when I have given an Australian cutter sapphire to cut in order to fill an order, the returned stone has been ruined", says Gerry. "The standard of cutting here is in fact quite high in that the cutter will work the stone and all the facets will meet, the shape will be O.K., the depth will be fair but he still can't bring out the natural colour, retain the maximum weight and bring out the maximum brilliance. For instance, I gave a cutter here a ten carat stone which was a perfect shape and excellent colour for a ring. Because the shape was perfect, I expected 40% return, but he returned 27% and when you are talking about top quality stones like this, each point that is ground away is a lot of money wasted. They just don't have the experience here whereas in Thailand, a cutter may cut thousands of stones per year, although the cutting is not 100% perfect in terms of how the facets are joined, they still retain the colour and the brilliance of the stone. It is their experience that enables them to get the maximum from the stone.

"Heat treating is also another challenge for the Australian industry - the Thai's have been doing it for many years now and certainly the base knowledge of how to treat stones is well within the capabilities of Australian science. The challenge which we face if we really want to further advance the industry is to go beyond what is already being done in terms of heat treatment". It is actually extremely difficult to discern the natural stone from the heat treated sapphire although some needles of rhutile will disappear once the stone has been heat treated and made lighter. Depending on the stone, a dealer can usually get 10-30% more for a natural stone".

It seems as if the Australian sapphire industry is on the verge of an international breakthrough - certainly it is well within its grasp. The deposits in Kashmir are dwindling rapidly, Burma, Sri Lanka and the newly sourced deposits in Africa suffer from a politically unstable climate negating the motivation to invest heavily in mining in these areas. China has been reported as housing sapphire deposits with similar characteristics to the Australian but as yet no production has commenced. And then there is Australia - for so long marked as inferior grade quality and the kudos for the top quality attributed automatically to other international sources. Her day has perhaps arrived.

"If a number of the large producers here in Australia begin to take the initiative to start cutting and polishing within the country, it is obviously going to have an affect on t he gemstone market in Bangkok", says Brenton. "Where the Thai's have been coming to Australia and purchasing all of the rough and processing it in Bangkok, there is of course going to be some impact if all of a sudden the supply situation drops off.

"All in all I think it is going to make the industry much more competitive but we will have to weather a bit of a storm initially because when processing begins on a large scale in Australia, many of the firms will only want to deal in the top quality stones whereas the Thais buy the entire package that the miner's have to offer. The Thais will not want to purchase only the lower grade so there will be a shakeout in the market but from my discussions with people in Thailand in estimating the stockpiled Australian goods in Bangkok, the consensus appears to be that if all the goods that had been stored over years and years were cut and polished, there would only be sufficient supply for one year's cutting and polishing. Unless another major source is found very quickly, which is unforseeable within the next 2-3 years, I think that the natural economics of supply and demand will see the price of Australian sapphire increase rapidly".

"After keeping such a low profile for all these years, we are now going to take a more active role to make sure that the same mistakes are not made as in the past", says a confident Gerry. "The future of the industry now lies in the hands of few people both in the government and in the private sector. It is up to these few people to guide and provide encouragement. Every day is a challenge in this industry".

Motivate and activate are the keys to success and with the bit firmly in the mouths of young entrepreneurs prepared to realise long term goals such as Gerry Yakoumelis, the precious stone that is gearing up to launch an assault on the gemstone market is sapphire - Australian sapphire.