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Should You Invest in Tanzanite?

Should You Invest in Tanzanite?

Due to its rarity and limited supply, tanzanite occupies a unique place in the gemstone kingdom. The WealthHow article will help you decide if you should invest in tanzanite or not.
Buzzle Staff
Price on the Rise
As of the first quarter of 2014, prices in Hong Kong and the Tucson Gem Show have led to the belief that tanzanite prices will firm into the fall of 2014. Prices on well-colored, clean gemstones in the 3 to 5 carat size range have been observed between USD 400 - USD 550 per carat, with some priced as high as USD 700 per carat.

Investing in the gemstone business is like investing in the stock market. Among the many gemstones that are traded, currently, one rock that is grabbing attention is tanzanite. As an investor, the logical question that arises is, 'whether tanzanite is a good investment?', the answer would vary between yes, no, no not right now, perhaps, etc. The reason is it is risky, yet, if the right situation exists in the market, the end-deal could be a money spinner.

Tanzanite is a rare gem, and naturally is very precious and expensive. Its beauty, value, and the fact that it is not available in abundance, have led traders and merchants to believe that it would probably be a good investment. However, this needs to be carefully thought over and involves a number of factors. Also, off late, a number of changes have taken place in the market regarding this industry. Learn how to analyze the situation and then decide if you should invest in tanzanite or not.

Some Background Details and Facts
  • Compared to other gems, which were reportedly found thousands of years ago, Tanzanite was discovered only in 1967.
  • The only single source of this stone in the entire world is in the Merelani hills, situated in the northern Manyara region near Mount Kilimanjaro of the Simanjiro district, Tanzania (hence the name). Apparently, this is probably the only place, which provides the right chemical environment for the formation of the gem.
  • The appearance of this stone is normally in bright, blue or violet hues.
  • Since it exhibits pleochroism―the ability of a gem to show different colors when viewed in different crystal directions―it appears in different colors under the light it is being viewed.
  • The species from which the stone is derived is called 'Zoisite', which is a member of the 'Epidote' group. This group also produces various colors other than the well-known blue. This is due to the presence of manganese, chromium, etc.
  • It is almost as hard as an emerald, but is less brittle. Simple precautions can help preserve its beauty better.
  • The Tanzanian government could have cashed in on this gem in order to bring in revenue for the country, but their late independence, lack of infrastructure, and later, the war with Uganda gave rise to a volatile market situation.
  • Realizing the monetary potential and the eventually rising demand for this stone, the market started moving slowly, though, even now, potential investors give it a fair thought before putting in capital for this gem.

Is it a Good Investment?
As mentioned earlier, this depends on various factors like current pricing, mining, demand and supply, market situation, history, etc., to name a few. Consider these couple of essential points before investing.

Market Report History
  • In 1972, the Tanzanian government formed STAMICO (State Mining Corporation) to capitalize on this stone. However, post the Uganda war, the market collapsed, and finally, in 1990, officials split the area into four sections―A, B, C, and D. While A and C were distributed among large-scale miners, B and D were reserved for local miners.
  • Over a period, as advanced companies began to chip in, the market saw a steady rise. Modern operations led to global marketing.
  • An important factor to be mentioned while reviewing market reports is the demand and supply chain.
  • As the market started expanding, the blocks began to increase supply, and miners were kept busy throughout.
  • From 2004 to 2008, the market began to show consistency in demand and supply. Statistically, 70% of the market was controlled by the U.S. alone, and hence, when the American economy began to crumble after 2008, tanzanite production and sale was affected as well.
  • In 2009, there was a dramatic drop in the price per carat, while in 2010, production rates declined drastically.
  • From 2011 to 2014, the rates, demand, and supply have been inconsistent. However, lately, due to the fact that this stone might become obsolete soon and those who possess it might have better business prospects in future, the trade-off and investment strategies are coming into play again.

Price Statistics
  • You could buy shares in TanzaniteOne (TNZ)―an Aim-listed company―if you want to start investing, since this company has the concession to mine approximately 60 square km―50%-60% of the known reserves.
  • The market had 2 million carats' worth released in the first five years after the discovery of this stone.
  • It is currently one of the big four gemstones, and recent figures show that you can get a top quality ring of 5 carats for around USD 15,000 to USD 20,000.
  • In March 2012, a tanzanite and diamond pendant sold for USD 14,640 from the Leonard Joel collection.
  • The same year, in September, a tanzanite and diamond cluster ring was sold for USD 6,700, while in December 2012, and a heart pendant sold for USD 21,960.
  • In June 2013, there was a Leonard Joel jewelry auction again. In this auction, an art deco-style tanzanite and diamond pendant sold for USD 9,700 and a loose heart-cut tanzanite sold for USD 6,700.
  • A tanzanite and diamond ring sold for USD 2,400, below the lower estimate of USD 2,800.
  • As of 2014, richly-colored tanzanite in major metropolitan areas has seen prices as high as USD 1000 per carat, and they are expected to increase further.
All the above prices are including the buyer's premium. As you can see, the prices have been fluctuating for the past few years. Diamonds add significantly to the total value, of course, but the long and short of it is that the appeal of tanzanite is its availability in a variety of sizes and its affordability. It has been a consistent seller during the past 10 years, and lovely pieces in the USD 1,000 to USD 2,000 bracket appear regularly at auctions.

Should You Go For It?
  • Considering the fact that this stone may or may not be available over a period of time, investing in it seems like a good option.
  • Exploring the demand and supply chain, it is obvious that markets rise and fall; however, the rising demand indicates profitable returns.
  • Some may be of the opinion that it is not a very good investment, unless you are dealing with antique pieces. But it is also true that the pieces you would buy now would become antiques over a period of time.
  • One of the few disadvantages may be that the economy suddenly falls again, making this investment highly risky. But again, that is true of every business and does not apply to the gemstone market alone.
  • Tanzanite is rare and its reserves are running out as well, but it has an advantage over other gemstones with regard to the fact that, it is easily transportable as opposed to other commodities.
  • Experts suggest that it could be a blue-chip investment due to its rarity and value. Many other factors also indicate that tanzanite is a potentially excellent investment.
  • A commodity of rare beauty increases in value as time passes, and this is one of the advantages of this lovely gem.
  • However, always remember that the market position and other conditions need to be taken into consideration, analyzed, and discussed before investing.

Scarce and rare gems appreciate in value over time. There are less tanzanite stones in the world than there are diamonds. Experts even predict that the stone will disappear in a decade. It is considered to be a non-renewable resource. This would probably be one of the reasons why experts advise to prefer this gemstone as far as investment opportunities are concerned.