Foundations of Opal Value
This article was written by one of our customers who is an opal cutter and investor.
It offers an explanation for the intrinsic value and market price for the opal.
(He owns and cut most of the stones seen here in the Opal Gallery.)
In the Beginning...
Many books and stories have been written about the opal, how it is formed and where
it is found. But there can never be enough said about the rigors of opal mining
and the process by which it comes to market. For not only is it the intrinsic rarity
and beauty of the opal that determines its price; it is the danger, and the risk at
every stage of the process.
There are 'authorities' in the mining areas that appraise rough opal for tax purposes,
and there are individuals whom the miners seek to have it appraised before it is offered
to a buyer.
Depending on the quality of the parcel, the miner seeks out a buyer who will most
likely be able to offer him the best price, in cash. The sale of a parcel is often
something akin to a sumo wrestling match of wits and experience.
The buyer considers the current market, the quality (kicky-ness) of the stones,
and his previous experience with the miner. If the miner is known to be shady,
it is most likely that the best buyers will just pass up the parcel.
One of the most important considerations is the source of the parcel. If it is
from a field that is known for producing 'healthy' opal, and the buyer is confident
of the honesty of the miner, then a sale is imminent.
If the buyer thinks that the miner is not being truthful, or the parcel is from
a field that is known for producing opal that will crack or craze after cutting,
then either he will pass up the parcel, or offer a very low price for it.
It should be noted that both dis-honest miners, buyers, and poor fields are well-known,
and none will last long in the trade.
But it is the buyer who suffers most if he sells poor quality opal. The miner may
be just a weekend warrior, or maybe mines only once a year on vacation. But the
buyer must maintain a reputation both for being fair with the miner (or he doesn't
get offers), and for never knowingly selling 'cracky' opal.
So what's this about 'healthy' Opal ?
The opal has been known for thousands of years. But up until the discovery of
opal in Australia, all sources of opal were prone to producing material that most
often cracked or crazed or turned cloudy within a short time after it was mined
or cut. Such opal is often said to be 'unhealthy'.
One can imagine the source of the myth about 'unlucky opal' as springing from the
fact that an opal cutter might well lose his head should an opal 'die' after having
cut it ...
The most important thing about Australian opal is that for over a hundred years,
it has been known to be very stable. This does not mean that there is no unhealthy
opal in Australia, but rather that a great percentage of its opal is healthy. More so
than from any other source in the world.
At the Field
The government of Australia estimates that only one out of a hundred miners
finds a significant parcel in any year.
The miner normally chooses to dig in known-good fields. Not only is it likely that
he will find opal that has been missed by other miners, but also it is extremely
risky to strike out into areas that have not been proven.
This is not an inexpensive or easy enterprise. If he chooses to mine alone with hand
tools and dynamite, he is in for a long and punishing task. If he chooses to partner
with others and employ large earth-moving equipment, a find is still not guaranteed,
and when found, the profits must be split many ways. The staggering cost of the equipment, fuel and
repairs often outweighs the gains. ( If you are interested in getting the flavor of the hardships of mining, look at the story about mining in
Coober Pedy. )
Although luck plays a large part in the treasure hunt, it is said that the only way
to find the opal is to "move the dirt". And over a long period of time, the miner learns
how better to read the signs in the earth, and at least know when to quit in one spot
and try another.
Most often, mining yields only a meagre amount of lower grade opal, just enough
that the miner can live to dig another hole. If he can stick it out, and develops a
good reputation, he will be invited to join partnerships with others. Although there
is still no guarantee of success, at least the mining goes faster, and much more safely.
Of course, if he becomes known as devious and untrustworthy, he will be shunned.
Not only will he have difficulty finding partners, but reputable buyers will avoid
him. Finding the opal is one thing. Finding a buyer is another.
To the Buyer
The first-level buyer must be very familiar with the miner and be able to appraise the
value of the opal in the rough. This is very difficult because it is offered to him in a
form which has often simply been tumbled and washed. The 'skin' of clay or sandstone
is still present, and often obscures both the quality of the opal and possible cracks or imperfections. With hundreds of thousands of dollars at stake, a buyer can not make
a mistake more than once...!
All buyers are middle-men, but many are specifically interested in only a few second
level buyers such as large consortia in the far-east who buy mostly lower-quality
opal for the production of inexpensive jewelry or the making of triplets.
There are only a few first-level buyers who specialize in the higher-quality opal, and selling to individual jewelers, cutters and lapidarists. It takes decades of experience to develop
a reputation for providing good quality opal. Good luck helps at first, but everyone knows
that luck can only last so long.
The first-level buyer is not an investor, but rather more like a banker. The investor
plans on keeping the opal until a better market affords percentage gains. The buyer
must sell the opal as quickly as possible, and thus always have the cash on hand to
purchase the next parcel. The percentage gain is less, but the profit is returned
thru rapid turnover.
The buyer's life is not easy either. Caught between the need to maintain large
cash stores, and having to wait sometimes months for payment. Although often
living in a nicer home, the fact that it's known that "that's where the money is",
is not conducive to a good night's sleep !
Micro-Mining, or The Great Treasure Hunt
Although there are many investors who put away stones and parcels in anticipation
of a higher return, the most exciting and most perilous task is that of the cutter.
Whenever the miner finds a truly great parcel, he knows it. Even from the edges of
the stones, the fire and color are obvious. These parcels are usually small, but sell
on the field for between $5,000 and $50,000 per ounce !
But, below that point there are parcels that include stones that are truly great,
and will not be discovered until the cutter puts a blade and wheel to the stone.
This is perhaps the greatest treasure hunt in all of the lapidary world !
Whether the parcel costs $100 or $5000 per ounce, there is nothing more exciting
than putting the wheel to the stone. No one can have known before what beauty is inside.
To the true opal-holic, nothing is more satisfying that to give birth to an opal. Skinning
off the outer clay and seeing the color burst forth, makes your heart race and your
hair stand on end !
But this is just the beginning, for now you must decide how best to shape the stone.
Smaller stones are the easiest, often dictating their final form simply by their size.
Larger stones are more difficult, but offer the possibility of choosing the final shape
and orientation for that perfect 'face'.
Herein lies the rub. A larger stone will often have variations of color and patterns
from one end to the other, and it must be decided whether to cut or grind away the
lesser parts in order to expose the greater.
It is a subject of great debate whether to cut away the lesser parts, leaving only
the finest part, or to leave some of the lesser as a 'frame' for the better. Some would
argue that it is sinful to do anything but polish up the whole stone and keep it intact.
It is extremely rare to find a large stone that possesses a uniform balance of color
and pattern throughout. Most often the stone must be cut so that the different patterns and color are isolated, each to a single stone.
In higher grade material, the loss from just the 'kerf' of the saw blade can waste
well over $100 ! And the stone still has to be rounded, smoothed and polished,
wasting even more carat weight. Only experience can teach you how to estimate
the potential yield of finished carat weight in a rough stone or parcel.
Thus it is always advised that you gain experience cutting the lower grades of rough,
or be certain of the one who you choose to do your cutting.
If the cutter is not skilled, the stone might be overheated, perhaps cracking in the process, perhaps crazing some time later.
It is the cutting of the rough that carries the greatest risk, for once you put a
blade or wheel to the rough stone, no dealer will take it back. It's yours.
Lower grade rough often yields great surprises as well as disappointments. Sometimes
you will find a great stone in a parcel that cost only $100 per ounce. Sometimes you
will find that you have to cut 'free-forms' and spend a lot of time digging out clay
and sand spots and then polishing the uneven surface.
Of course the more time you have to spend goes into the equation of profit. So, as you
gain experience and confidence (and the lust !), you will want to buy rough material
where it is evident that it will be an easy cut, and offers a better yield.
As the cost of the rough goes up, so too does the probability of getting better
stones. But even with the highest quality rough, there can be no guarantee that
you will not find flaws that force you to cut smaller stones and lose precious material
in the process.
It has been a matter of honor among cutters and sellers of cut stones that a stone
should not be offered for sale for some time after it is cut. The American Gemological
Society suggests that a guarantee should offer money back or replacement should the stone die within a year of purchase.
Of course, rough opal cannot be so guaranteed because it still has to be cut and set
into the final piece of jewelry. Although the opal is easy to work, it can easily
be mistreated or overheated in the cutting, and then can be over-stressed in the process
The cutter and the jeweler are the ones who take the greatest risk, and therefore
deserve to earn the highest percentage return on their investment !
Properly cut and polished, it is not uncommon to realize two to three times your
original investment !
You will always run the risk of getting unhealthy material. You will always
take the risk of botching the cut. The only thing you can do to protect yourself
is to buy from a reputable dealer, and practice, practice, practice !
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Last modified: July 8, 2007