The Prez Sez: Recent Devlopments in Mining and Marketing Montana Sapphire
by Moss Aubrey, Ph.D.

This marks the third and final installment of our series on the recent developments of mining and marketing Montana sapphire. We previously reviewed the history of this gem material and how it has fared in the international gem trade. Our final look will then be focused more towards the American Gem Corp. (AGC) of Montana. The development of this company, and their efforts to create a world market for Montana sapphire, have all been reported in numerous articles in the trade journals. Their efforts to promote sapphire material as a world class gem have been described by several noted authors. AGC has reproduced many of these trade articles and included some copies in their promotional materials and prospectus for investors. Their listed goals are: to control the majority of sapphire being mined in North America; to become one of the world’s largest sapphire producers; and to maintain the highest quality standards in the industry.

These are all admirable goals, and at first glance, it appears that AGC may be meeting them. Further information provided by AGC includes that perhaps 70% of the mined sapphire material becomes suitable for cutting with the proper treatment. They estimate their holdings (that is, untapped reserves) to be over 62 million carats in three categories of quality. However, their own commissioned consultant reported an estimated 48 million carats in holdings. While both figures are impressive, there remains a substantial difference between the two sums. Although AGC states that a “high percentage” of the stones are of fine quality, they do not exactly specify the percentage of mined material that falls into each of the three categories. I find this all rather off-putting in a prospectus for possible investment.

AGC states that all stones are cut for brilliance. Most are also cut to calibrated sizes, except for the especially large stones. They state that Montana produces “on average” sapphire that may be the world’s most flawless and brilliant, found in virtually every color known in sapphire. The literature that they distribute shows impressive stones, and the cutting does appear better than the typical overseas cuts. One journalist who viewed their inventory commented on the uniformity of size, weight, and brilliance (Wise, 1996). Again, while AGC states that a “high percentage” of the stones are fine or very fine in terms of color (i.e., hue, saturation, and zoning), they do not specify the precise breakdown across the categories.

AGC has entered into marketing agreements with both Michael Anthony Jewelers and Landstrom’s. The intent appears to be promoting Montana sapphire as a “home grown” world-class gem. They had trademarked the term “American Sapphire,” which seems to fit the thrust of their marketing approach. However, this leaves me perplexed as to how I now can describe the sapphires that I sell. I can call them Montana sapphires, but, because the name “American Sapphire” is trademarked, I cannot call them American sapphires. Oh, maybe Montana seceded along with that guy in Texas.

I will admit to having envy of this company’s position. As Jimmy Carter once said, I have lusted in my heart. Only in my case, it’s those sapphires I want. But having acknowledged that, I still have one serious concern. The disparate figures AGC themselves have touted regarding their inventory bothers me. Their vice president of sales, Ken Erickson, declared their desire to hold a large inventory of good sapphire material before going public, which I consider to be admirable. He also stated that they counted about 300,000 carats of cut stones in inventory as of June, 1996 (Lurie, 1996). When other journalists toured the AGC facility shortly afterwards (Frazier, 1996), they noted two million carats of cut stones within the vaults. However, AGC’s promotional material (see the March 1996 Issue of Colored Stone, page 36) claims to have counted an inventory of over six million carats. I am confused by this disparity.

I also read that AGC increased their rough production to one million carats per month, with a goal of an annual production of fifteen million carats within five years (Brockelbank, 1996). While I can understand that their inventory may be growing at a substantial pace, and that the more recent figures may show higher amounts than earlier figures, please note that the highest reported figure is from the earliest statement. Also, all of these figures appeared within several months of each other.

I am not the only one having some skepticism regarding AGC’s sapphire holding claims. The Securities and Exchange Commission (SEC) turned down AGC’s bid to be publicly traded, stating they required more information on the existing risks involved, as well as explanations in regard to the estimates of the actual reserves. Despite AGC’s intention to respond to these points and to reapply to the SEC, AGC was not yet granted that status as of my last inquiry.

Well, it does seem that AGC has massive sapphire reserves, regardless of which figure you use. AGC also has demonstrated that they can produce exceptionally well cut stones in closely calibrated sizes, with production figures increasing each successive year. Still, it remains to be seen whether they can accomplish their marketing goal. Personally, I wish them luck, but I will stand back until all the dust has settled.

Brockelbank, T. (1996). “American Gem poised to become a player in the world sapphire market.” The Northern Miner, volume 82 (number 35), reprinted in AGC “Recent Publicity” materials.
Frazier, S. and Frazier, A. (1996). “Rainbow over Big Sky.” Lapidary Journal, volume 50 (9), pages 44-47, 104-107.
Lurie, Mark. (1996). “Will new sapphire sources satisfy sapphire demand?” Colored Stone, volume 9 (2), pages 1, 38-39.
Wise, R. (1996). “Montana sapphire: The great American adventure.” National Jeweler, volume 40 (19), page 46.