January 2012 Newsletter

Best Wishes for the 2012 New Year!
As we approach the 2012 New Year we wish all of our friends and customers a
happy, healthy, and prosperous New Year.

2011 marked a turning point for us. This was the first year we experienced an
increase in business since 2006! Although the turn around is most welcomed we still
have a long way to go to reach the levels we saw during 2006 but hopefully we will once
again achieve that level of business in the future.

One of our main areas of growth this year was with the gems that we cut. The
slowdown over the past five years increased the amount of time John was able to devote
to faceting gems, an activity that he both enjoys and looks forward to whenever possible.
During October he was able to facet more gems in that month than any other month
during his gem cutting history.

We will be focussing more on the gems that John cuts and directing our purchasing
efforts to finding quality rough and well as searching for it during our field trips. We will
continue to purchase finer single gems while moving away from lots of smaller, less
expensive gems.

We look forward to serving our customers and their gem interests in the coming year
and hopefully for many years to come.

Near Disaster
Speaking of John’s cutting, he almost experienced a disastrous event in early
December.

We returned from the Boulder Show late the night of December 11th to cold weather
and a cold home. We use a wood stove to heat our house whenever possible and did so
that night. While reaching behind the stove to turn off a manual fan which circulates the
hot air John lost his balance and fell against the stove, pushing Donna into the wood piled nearby and landing on the hot stove with his hands.

John experienced second degree burns on the palms of both hands with a blister on
his left hand achieving the size of a large plum. We dressed and took care of the burns
and blisters for four days before puncturing it to release the pressure caused by the fluid
buildup. During this time there was very little pain from the burn and once the blister
was punctured John was able to cut gems again.

Now three weeks and nearly twenty gems later John’s hands have healed nicely. He
will certainly be much more cautious while working around the wood stove in the future.


More Frequently Asked Questions (Last Month's FAQ's available below)

Do you cut all of your gems?
This question is frequently asked at shows and although we would certainly like to
sell just gems that John has cut it would be nearly impossible to do so. We do believe
that because of John’s gem cutting interest that we select gems to offer that are usually
well cut by someone else to offer on our website, in our newsletter, and at shows.

The difficulty in offering only gems that John has cut arises in the time involved in
the process.

On average it takes approximately 3 hours to cut a gem from start to finish. An
average newsletter lists approximately 100 gems. If the average time to cut a gem is three hours the 100 gem represents 300 hours of work in a month. This would
represent about one half of the time in a month which would not leave much time for
other activities (Yes, we do have a life outside of gems).

The other factor that needs to be considered is that we often offer gems for sale for as
little as $5. If John were to have cut that gem and it took him 3 hours his gross wage for
the effort would be about $1.66 per hour. Back during the 1960’s John’s first job paid
$1.60/hour but since then the economy has changed and things cost much more (John’s
first job was pumping gasoline that cost 31.9 cents/gallon!). Also the $1.66/hour also
includes the cost of the rough gem and equipment and supplies so his net wage would be even less.

We often joke with our overseas sources who run cutting factories that when times
are tough we will be moving closer to their cutting factory in order that we can work for
them. Both of us usually get a good laugh out of the suggestion as their cutters make
more than $1.66/hours these days but certainly not what is necessary to partake in gem
cutting in the United States today.

Do you conduct field trips?
We have in the past announced when we would be going on a trip to collect rough
gems and minerals and invited our customers along. The vast majority of people who
have joined us are gemaholics much like us who find a weekend afternoon digging for
gems much more desirable than watching professional sports (or in John’s case working
around the house). When the weather is good it is time to head for collecting locations
and we still invite others to join us.

Our Gem Fest in the past included a trip to our peridot claim located about 25 miles
from our home in Salida where we crawled on our hands and knees and picked up the
grains of loose peridot that could be found on the surface. Since 2011 was our last year
for Gem Fest we still invite people to join us when we go to our claim and enjoy the
search for pieces of peridot that are large enough to facet.

We currently own or have an interest in three gemstone claims. The peridot claim
mentioned above, a newly acquired topaz claim in the Tarryall Mountains, and a sunstone claim near Plush, Oregon. These claims are open to casual collecting to our friends and customers who collect responsibly without major disruption to the surface. If we know in advance of your interest we may even join you on our claim and assist with your search.

We also announce major trips to collect well in advance.

Each May, John and friends meet at the sunstone claim for assessment work as well
as digging for gems. Traveling to and from the sunstone mines includes stops at Clear
Lake, Utah for labradorite and possibly Grand Junction, Colorado for barite. We also
have tentative plans to visit the quartz mines near Hallelujah Junction, Nevada to do some gem mining.

During July we make an annual pilgrimage to Montana for digging at Crystal Park
and some sapphire mining at the Gem Mountain Mine. We are looking to add some
additional locations to this trip in the future.

In September we hope to return to the sunstone mines and dig at both our claim and
at the Dust Devil Mine where we have been most welcomed in the past.
There is lots to do each year and we usually run out of time long before we run out of
interest in collecting gems.




Frequently Asked Questions (FAQ’s)
We are often asked questions concerning our business and its history in emails, at
shows, and over the telephone. We will attempt to address many of these questions here and in the future and will keep them posted on our website. If you have a question you would like us to address bring it to our attention and we will attempt to answer it for all to see and enjoy.

When did you first become interested in gems and minerals?
One of my first recollections in life was playing with my older sisters in a vacant lot
behind our home in West Reading, Pennsylvania. This lot used to be a limestone quarry.
When I was about three years old I found a piece of limestone with transparent calcite
crystals on it. It seems that from then on I was always drawn to transparent, glassy
minerals which also in many cases could be cut into gems.

What was the first gem you sold?
The first gem I sold occurred when I was finishing up my gemologist’s certificate at
the Gemological Institute of America. I was attending the labs each day in order to
complete my training sooner. Back then when you had to identify gems you were sent a
set which you identified and sent your finding back to GIA. An instructor would grade
your results and send them back. This could take weeks. By attending the lab it could be done in hours.

While at the lab another student was having a problem with an identification. I
looked at the gem and told him it was a kornerupine. He asked how I knew and I told
him I had one in my reference collection. He asked if I could get him one which I could.
I sold my collection gem to him at twice what I paid for it and subsequently sold about six other gems during the remaining days I spent at the
lab.

When was D&J Rare Gems founded?
We founded D&J Rare Gems soon after completing my gemologist’s certificate in
July of 1985. Our first advertisement was a classified ad in Lapidary Journal. A friend
continued to assist us while we were living in Malawi, Africa from July 1986 until
September 1988. Upon returning home from Africa we made the decision to develop the
business into a full time venture.

On a side note, it was not until October of 2005 that I completed the requirements for
the Graduate Gemologist’s Certificate. Today GIA limits its students to five years from
the time they initiate their studies until they can complete them for a G.G. certificate.

How and when did you get started cutting gems?
I was always fascinated with cut gems and wanted to see how they were cut. When
we visited Sri Lanka during 1988 we visited a cutting factory and watched while gems
were cut. This stuck with me and when I was offered a Raytech Shaw faceting machine
in September 1989 I jumped at the opportunity to purchase it. I had a lot of gem rough
that I acquired while in Malawi and I also had some that I had collected here in Colorado
so I had plenty of material on which to practice.

What was the first gem you ever faceted?

The first gem John faceted, October 1989, a 3.24 carat quartz from Missouri Ridge, Colorado

The first gem I ever faceted was a colorless quartz that I had collected on Missouri
Ridge in Chaffee County, Colorado. I cut a round brilliant gem that turned out pretty bad
as I did not have anyone to instruct me as to what I was doing. All I did was read the
instruction manual that accompanied the faceting machine and did my best. My second
gem was also a round brilliant colorless quartz from Missouri Ridge that turned out much
better. My third gem was a round brilliant smoky quartz from Mt Antero, Colorado that I
ended up selling for $18.00. Since then I have cut thousands of gems and look forward to
the opportunity to cut one whenever I can.

Subsequently I did receive lots of instruction and advice from many of the gem
cutters here in Colorado and around the country. I’ve always appreciated their assistance
and gladly provide similar advice to others when they have a question or a problem that
they can’t solve.

How much of the rough gems that you cut do you collect yourself?
Most gem cutters would love to say they’ve collected all that they cut but that would
be extremely limiting in what they can offer.

I would say that less than 5% of the gems that I cut and offer in our newsletter or on
our website are gems where I collected the rough. I do enjoy going in search of gem
rough and make annual trips to collecting areas here in Colorado, Oregon, Montana, and
other areas just to search for rough and rarely do I not return without anything. The
biggest problem is finding something of substantial value but then if it was easy more
people would be doing it and the value would not be there. A lot of the value in the gems
that I cut where I have found the rough is in the time and skill it takes to cut one. We
open these field trips to our friends and customers and find that the experience if often far more valuable than anything that any of us finds.

Do You Buy Gems?
Although the answer to this questions seems obvious to most people it is probably
one of the most frequently asked questions at shows and over the internet.

Yes, it would be nice if all the gems we offer came to us for free either by cutting
them (we would still have to purchase the rough) or by some magical means where an
exchange of money does not take place.

We estimate that over 95% of the gems which we offer we have purchased from
an outside source. We have been in business for twenty six years and during that time we have spent many hours contacting various sources around the world either by direct
contact at shows, email contacts, or as during our early days via snail mail. When we
lived in Africa our only means of contact was by snail mail and with a lack of other things
to do spent many of our evenings typing out letters of inquiry to various sources.

During all these years we have established probably fewer than a dozen sources that
we can depend on to offer us gems at prices which we feel we can offer at competitive
prices. These gems represent most of what is available in the world such that if we
receive a request for something we usually know where to obtain it.

Now this presents a dilemma that people who want to sell us gems do not
understand.

If someone tries to sell us some gems we have to look at it in several ways.

First of all do we need what is being offered?

Say for example someone wants to sell us ten 8x6 mm amethysts of medium color.
This is what we would consider commercial goods. There are a lot of sources out there
that will sell us such gems and generally we have an idea just how much we would have
to pay for them should we need some. In order to purchase the amethysts they would
have to be priced at an incredibly low price in order to be attractive.

Second, can we expect to sell the gems being offered in a reasonable amount of
time?

Often when we are purchasing a collection we must evaluate how quickly we can
recover the money we are spending and then make a profit.

A few Summers ago we were offered a collection of some very fine gems. The price
for the collection was such that we felt we could recover what we paid within six months
and then with what remained make a profit over time. There were also a few things in the
collection that we did not mind keeping around. We purchased the collection and within
six months recovered the money we paid, however, even though this purchase was made
almost three years ago we still have some of the collection in our inventory and
occasionally sell a gem from what remains.

Third, what is the quality of what we are being offered?

Many years ago we were approached at a show to assist in identifying gems that a
person had purchased. It turned out that they had purchased 50 carats of gems over the
internet for $16.95. Being courteous we took a look and during the course of the next few
hours when we had time we were able to identify most of the gems in the parcel,
however, these gems were at best what would be considered rejects. Many of the gems
were what we call “parcel worn”. That is they had been handled in parcels for so long
that their contact with each other had abraded them. Other gems in the parcel were cut by apprentice facetors who were learning how to cut on low quality, included rough of little value and in general were very poorly cut.

The person who owned these gems offered any that we were interested in for sale,
however, there were none there that offered any value to us and we declined their offer.

Finally, are what we are being offered something we do not mind having in our
inventory at the price we have to pay?

What a dealer has in inventory will determine what that dealer’s prospective
customers will be.

We hope to evolve into a dealer who deals just in high end, expensive gems but that
takes time, however, if one even wants to achieve that status he or she must have high
end gems in their inventory to attract high end customers. We have purchased some high end gems for our inventory over the years with that in mind and still have some of them in stock, but as is said “You can’t sell what you do not have” so when such gems are offered at a good price we will purchase them.

We have received requests to keep October's new article on appraisals available for awhile. It appears below.

Appraised Value
Unfortunately at the recent Denver Show we were approached by more people
wanting to sell gems than wanted to purchase them. This trend has been occurring more
and more frequently during the past three years and in all likelihood will not subside
anytime soon.

Most commonly the price these people were asking was based on some form of retail
appraisal and often they were hoping to sell their gems at retail prices or more.

There are many types of appraisals and the value of the items being appraised can
vary dramatically depending on what type is represented. We will try to explain each one
and hope that it clears things up for those considering selling their gems or jewelry.

The first type of appraisal we refer to as an “Issuing Seller Appraisal” or "Inhouse Appraisal". These are the appraisals often referred to by TV gem channels to get the purchaser to think they are getting a real bargain. The values stated in these appraisals are often highly inflated far above what one would pay for at normal retail jewelers. We recall one such channel a few years ago selling 2 to 9 carat spessartite garnets of fair cutting and quality offering the gems at $350/carat and telling the viewers that they were appraised at $1,800 to $2,500/carat. They failed to tell the viewer that these appraisals were conducted in house and that no independent appraiser would either agree or give a similar value to the gems. These “fake” appraisals are often used to convince the potential buyer that they are a great “investment”. When you hear such claims on a TV gem network we would recommend that you change the channel quickly or get a good laugh from their false claims.

The next type of appraisal is a “Retail Appraisal” or “Retail Replacement Appraisal”. This type of appraisal is more realistic in that it will more accurately reflect how much it would cost to replace the item described within today’s market. This type of appraisal does not necessarily mean that should you experience a loss or theft you will receive the retail value in cash given in the appraisal. It does mean that an effort will be made to replace with like kind and quality costing up to that amount. One of our earliest
experiences in the jewelry and gem world was working at a wholesale jeweler that
worked closely with insurance companies and would often replace a lost or stolen items
for around half of the retail value. This often created hard feelings around Christmas
when someone would “lose” and item and come into the store wanting to be cashed out
for the full retail value. Fortunately we left that up to the insurance company but had
many nasty encounters with those who thought we were cheating them.

The next type of appraisal would be a “Wholesale Appraisal”. This type of
appraisal would assure the replacement of a lost item but would not carry the high value
of a retail appraisal. Most home owner’s insurance policies have riders for items that
exceed policy limits usually $500 to $1,500 in cumulative value. If you have total
jewelry valued above this amount you would purchase a rider that would insure an item
above these limits. Such riders would cost approximately 1% per year. So for a $5,000
engagement ring one would pay an additional $50 per year to insure it. A wholesale appraisal would value the same item around $2,500 and reduce the yearly rider fee to $25. One can see that if a person owns a lot of jewelry that the riders can become quite expensive and such an appraisal can greatly reduce that cost. Most cities have wholesale jewelers who work closely with insurance companies that will replace lost or stolen jewelry at wholesale appraised amounts.

Another type of appraisal would be an “Estate Appraisal” where the value is
established to allow for the distribution of someone’s estate after they have passed away. The value stated in this type of appraisal is often 1/3 or less of retail value to reflect similar reductions in value of other items within the estate may have experienced.

Another type of appraisal would be a “Cash Value Appraisal” or "Liquidation Appraisal". The value expressed in this type of appraisal would reflect what could be receive for the item if one wanted to sell it quickly or liquidate it. This value is often 1/5 or less of retail value. If the item is in great condition or of a particularly valuable gem it could be higher in that the item could be resold quickly. The value indicated in this type of appraisal reflects what most jewelers would pay for the item on the spot.

The next type of appraisal would be a “Scrap Appraisal”. The value indicated in this
appraisal would be an indication of what the metal and gems are worth in the current
market. Deductions may occur such as a 10% reduction below spot prices for gold and in all likelihood a 50% reduction of the value of diamonds below wholesale prices.

The worse type of appraisal would be a “Pawn Appraisal”. This type of appraisal
lists the value a pawn shop would assign to your jewelry. This would be well below scrap
value because the shop owner would offer to buy it at a price he or she knows they can at least scrap it out at the still make money. Because pawn shops are the easiest place to sell jewelry they can prey upon those people coming in the door that have no other outlet to sell their jewelry quickly.

There are many other factors that will affect what you can sell your jewelry or gems
for. We recall many years ago when we operated a jewelry store a couple came into the
store and asked us if we would like to purchase an imperial topaz ring. We estimated the gem to be at least 15 carats in size. At the time we had $900 in our bank account and offered all of it for the ring. The couple obviously offended by our offer left never to be
seen in our store again and surely feeling we tried to cheat them but had we offered
money we did not have and they accepted we would have looked foolish.

An additional factor that may affect the selling price of a gem would be the current
inventory holdings of the buyer. If someone was to offer to sell a fine two carat tsavorite
garnet at a great price and the buyer did not have one in stock he or she might be inclined to pay slightly more for it. If they have several such gems in inventory and have not sold one in awhile they would most likely offer quite a bit less.

More recently with the rapidly changing price of gold and silver the percentage of
daily spot price for gold or silver that may be offer to purchase such metal may be less
than if the price had been stable for several months.

Finally current trends may affect the appraised value of an item. The popularity of
tanzanite may cause a buyer to pay more for it and thus its cash appraisal value would be higher than say for a gem such as garnet or amethyst which right now experience minimal demand.

Keep this article in mind or make a copy of it so that you can refer to it should you decide to sell some of your jewelry or gems in the future. It should at least give you an idea of what to expect and open you to some options as to how to sell your items.




A poem By Donna Rhoads

We drove, we dug, we played & stayed
at many cool places this year.

We danced, we laughed, we shared
in the lives and hearts of our friends.

We hunted, we found, we prised and appraised
Many gems that abound on this earth.

We studied, we cut, some failed, some sailed
into new homes and collections around.

We thank you very much and wish you a
Merry Christmas and Happy New Year in 2011!

Donna and John Rhoads
D&J Rare Gems, Ltd.