Myanmar and the Stone of Heaven

Hpakant, a township in Kachin State, in northeastern Myanmar, is a living tapestry of Hieronymous Bosch’s Garden of Earthly Delights – a hell on earth of unbridled heroin addiction, violence and rampant HIV.

But what this hell holds is, for the Chinese, the most precious and sought raw-earth mineral of them all – the Stone of Heaven, Jade. “There is nothing in the world of equal value,” the sage Confucius wrote.

He may have been right – certainly in the case of Myanmar which, around Hpakant, has the largest deposits of the finest quality jade in the world, also the world’s most expensive gem except for certain rare colors of diamond, and rapidly growing more expensive. The most valuable is an intense, pure green called Imperial.

Although jadeite also has been found in Guatemala, Russia, Kazakhstan, Japan and California, it all pales in comparison with Myanmar’s. And, despite the Chinese hunger for the precious stone, no gem-quality jadeite is found in the country itself. Ancient Chinese jade is actually nephrite, a far cheaper stone, found in the far west of the country.

Lining up for China

Nephrite is also produced in large quantities in Taiwan, British Colombia, Alaska, Wyoming, Australia, Russia and New Zealand.

As Chinese society has grown progressively richer, particularly among people who are straining the Gini coefficient, they are willing to pay huge amounts for the gems. A jadeite ring sold at Christie’s in Hong Kong in May 2013 for US$2.3 million and prices are continuing to rise almost logarithmically.

While jadeite sometimes occurs in pieces of several tonnes or more, top cut jadeite of even five carats is large and quite valuable. In Myanmar, miners are feverishly combing the ore fields seeking to find it

Unfortunately, economically challenged Myanmar has never directly benefitted from it. A study by the Harvard Ash Center, an adviser to the new quasi-civilian government, estimated that sales of 43 million kilograms of Burmese jade between April 0f 2011 and March of 2013 were worth US$8 billion – twice the country’s natural-gas revenues – and yet the official export figure for the stone was just US$34 million.

Furthermore, jade is not separately itemized in official Chinese import figures – it’s buried somewhere in the Precious Stones & Metals category which, in 2012, was worth just US$293 million.

So where did the rest go? Most still went to China. Annual jade auctions, dominated by Chinese traders, held in the new capita of Naypyidadaw and Mandalay, is one way. Kachin State’s exclusive border with China is the biggest though, with smugglers paying off rival Burmese Army and Kachin Independence Army personnel and local bandits for right of passage.

But the Chinese aren’t just snapping it up at auctions, they are hauling it out of the ground themselves, and on an industrial scale. For though permits aren’t available for foreign firms, most of Hpakant’s 20-largest mines are owned by mainland companies or their proxies.

Some easy mathematics by the Ash Center estimates it costs US$400 to mine a tonne of jade which is worth, conservatively, US$126,000.

And that’s its value before it reaches Hong Kong, the world’s biggest international jade marketplace. Prices here for high-end jade items bask in six figures.

To give an idea, Tiancheng International’s one-day, 2012 autumn jadeite auction raised US$52.3 million. Last year’s event raised US$50.3 million. Jade is everywhere in Hong Kong and the price tags are staggering. And fake jade is everywhere. It is extremely hard to detect, with unscrupulous operators dyeing the stones to get the right shade. It will eventually wear off. There are many other subterfuges including gluing separate pieces together, then waxing over them to make them look all one piece. Anyone seriously considering buying jade absolutely must consult experts.

The reckless exploitation of Myanmar could be about to change and international investors might finally get the chance to enter the trade. Myanmar’s mining sector is set to be overhauled by the reform-led government, with planned new legislation ushering-in openness, accountability and reliable data.

Myanmar has also applied to join the Extractive Industries Transparency Initiative (EITI) – a coalition of governments, corporations and others that provide an international standard for mined resources. EITI members are obliged to provide full disclosure of all payments within the sector and allow public scrutiny of them. The problems are obvious, given the lawlessness of a newly opening country and the understandable determination of the Chinese mining companies to keep their hands on the enormously previous resource.

But as with the slow opening-up of the country’s energy, telecoms and financial sectors to foreign participation, there’s talk of adding minerals mining to the list, putting the Stone of Heaven within everyone’s grasp.

Michael.charnock@asianomicsgroup.com is editor for the Asianomics financial advisory firm, where this appeared originally