By Mick Elmore, Bangkok Correspondent

CHANTHABURI, THAILAND - The flow of colored stones from Madagascar changed from blue to red early this year, with a flood of new ruby hitting Thailand's two big cutting and polishing centers, Bangkok and Chanthaburi.

The new ruby comes from two principal mines, one about 10 kilometers (6 miles) inland from the coastal town of Vatomandry, and the other approximately 70 kilometers (43 miles) from the town of Andilamena. There are other ruby mines on the island nation, and surely more to be found, but at press time all the stones arriving in Thailand were from those two mines, in different locations but only a few hours from the capital, Antananarivo.

The Vatomandry mine was the first one discovered and is said to produce better-quality material than the mine in Andilamena. The mine was closed in December - shortly after it opened - and remains closed.

"[The government] tried to close Andilamena and couldn't," said Tom Cushman of Allerton Cushman & Co., a U.S.-based gem wholesaler who spends much of his time in Madagascar. "[The area] is out of control; it has produced tons of ruby since January."

The ruby from Andilamena is available in huge quantities, but very little of it is high-quality.

Dealers in Chanthaburi said rubies from the Vatomandry mine are "a little bit purple," and rubies from the Andilamena mine are slightly brown.

"The ruby from Madagascar is clear, with not much inclusion. It is clean and dark. But the color, well, Burmese looks sweeter. The weak point is Burmese has more inclusions, cracks," Smit Lohploy with Lohploy Gems in Chanthaburi told Colored Stone.

Smit Lohploy of Lohploy Gems examines stones on market day. Photo by Mick Elmore.

Talking with other dealers in Chanthaburi and Bangkok, the feelings are pretty much the same - the Madagascan stones are clean, and there is a market for them.

"We started to see a lot in January and February. It was new, so there was a lot of interest, but the Burmese ruby is better so it didn't do well," Khun Tanuson of Tanuson Gems in Chanthaburi told Colored Stone.

Still, there is a lot of material floating around Chanthaburi during the Friday and Saturday market days. Most dealers have the Madagascan ruby, or know someone who has some.

Somsak Obangwai has been dealing in colored stones in Chanthaburi for a quarter-century now and likes the new ruby.

He said Thailand will adapt to the new find, as it has to so many other finds in the past.

Showing a bit of local bias, he said Thai rubies are the best, but they are no longer mined. After that, rubies from Myanmar (formerly Burma) are best, then Madagascan rubies, then the others.

The difficult part for Thai dealers has been deciding where to price them.

Prices for the best of the Madagascan rubies, the clean material from the Andilamena mine, were between 13,000 and 18,000 baht (US$300 to $400) per carat at its high point in March, but were down to about 8,000 baht ($190) per carat in early May.

"People are scared because there is too much production now, and the over-production has driven the price down," said one Chanthaburi dealer with 15 years in the business.

"Some of it is very good. The top is exactly like Burmese," he said, requesting that he not be named because "the tax department gives me too much trouble."

Because the material can be so similar to Burmese ruby, it creates the temptation to sell the better stones as rubies from Mogok, Myanmar's premier mining area, for a Mogok price.

This dealer said some people might do that, but he tells customers the truth.

"I think in time people will accept it because it shines very well under the light and the size is big. The low quality is much, much lower than Mogok, but the top quality [is as good] and [costs] half as much as Mogok," he added.

The Madagascan ruby offers an opportunity that might fall flat on its face. At press time, the price was well below rubies from Myanmar, making it a bargain - but only if the value increases and the price rises accordingly.

"It's difficult right now because everybody is trying to figure out the price. It will take some time to stabilize the price," the tax-shy dealer said.

At the mines themselves, the "gold rush" mentality means that the material will flood the market with little regard for the overall effect on pricing. That only makes the pricing instability worse. While nobody knows where those prices will finally end up, the expectation in Chanthaburi is that they will settle a bit below the price of Mogok ruby.

The fluctuation in prices itself is hurting the market for the material overseas. At The JCK Show in Las Vegas, held at the beginning of June, buyers' reaction to the ruby was lukewarm, even for the finer goods. U.S.-based dealers say they are buying the ruby cautiously, if at all.

"Prices now are a little steep," says Ron Rahmanan of Sara Gem Corp. in New York City. "In a few months prices will go down a bit." He expects that by October prices will have settled, and that will be a better time to buy. The price and the quality will determine whether the material is accepted by the U.S. market. "By Tucson [in February 2002] we will know if it's the right thing for the United States," concluded Rahmanan.

While the Madagascan ruby has generated a lot of buzz, it will be many months before its impact on the market becomes clear. At the moment, the real price pressure in ruby is at the top end of the market, in sizes above three carats and in fine color and quality, and if the Madagascan deposits produce enough high-quality ruby, they may bring prices down overall. In the lower end, the real question will be how well the retailers and manufacturers take to the Madagascan ruby, and that only time will tell.