Bahrain Pearls - Bloomberg News 2009

May 13 (Bloomberg) -- The traders at the london metal exchange don't see the luster in calcium carbonate.
"I've never even heard of calcium carbonate," says LME ring trader Andrew Silver at Natixis Commodity Markets Ltd. in London. "We might as well trade cement," says Alex Heath, metals director at RBC Capital Markets, about creating a futures market for the chemical compound used to make schoolroom chalk.

Some 20 feet beneath the Persian Gulf, off the coast of the island kingdom of Bahrain, former Nynex Corp. sales manager Robert Montfort-Jones, 46, reckons that's a harsh assessment. The Englishman and skipper of the 30-foot diving vessel Crow surfaces with his morning oyster catch, grabs a knife and starts shucking for luxury calcium carbonate -- pearls. Natural pearls.
"Squeeze the goo like a pimple and the pearls pop out," says Montfort-Jones. He's general manager ofBeaucraft, one of a handful of recently established pearl-prospecting and marine-service companies run by expatriates seeking opportunity amid the worst economic slump since the Great Depression.

Out they burst, seed pearls mostly, about 0.5 millimeters in size and worth a king's ransom when strung together. But forget about opening a simple oyster shack: Species pinctada radiata makes real money and, Montfort-Jones says, going after them commercially is no Great Depression dream. "All we need is some investment capital," the pearler says.
Christie's Auction

In April, natural-saltwater pearls were on the menu at the Chrisies auction Jewels and Watches Dubai Sale, where a five-strand necklace of 452 natural pearls sold for $158,500.
Montfort-Jones sits on the cutting edge of a nascent enterprise of buccaneers in bathing trunks, scuba tanks and a flare for a swashbuckling lifestyle. While precious-metal experts say there's a buoyant market for Bahrain's natural pearls, they cite a woeful lack of people willing to take the plunge.

"Nobody is really pearling and I need supply," rues Vijay Shah, director of Hashimi pearls in Bahrain. "We have the world's last untapped and sustainable natural-pearl beds, hundreds of miles of them, we're swamped with oysters."
TheUnited nations says that there are more than 50,000 hectares (123,500 acres) of intact oyster beds off Bahrain with an estimated density of between 23,000 and 43,600 oysters per hectare, offering the "highest and finest quality of pearls."
New Revenue

Pearling those beds on a regular basis could "potentially contribute to enlarged productivity" and create "a new source of revenue that never managed to enter Bahraini society," according to a 2008 report filed by the Bahrain government with the UN's World Heritage Committee.
In April, for instance, Shah sold a 63-strand necklace threaded with 100,000 seed pearls to a private European auctioneer for $72,000. "Natural pearls are a much better investment than cultured pearls because they appreciate," Shah says. "Cultured pearls do not appreciate in value, they are the used cars of the jewelry trade."

Perhaps that's why no cultured or freshwater pearls adorn the crown of Queen Elizabeth II. Since 1485, the crown of every British monarch has been studded with natural pearls. The 41- year-old Shah pours a large thimble of them on a velvet-lined tray and serves up a possible reason behind the queen's taste.

"Your basic 1.12-karat natural Bahrain pearl is around $60," Shah says. "That same size in a Pacific cultured pearl is $5 and less than 60 cents for a mass-produced Chinese freshwater pearl."
Chocolate Button

Shah has been in the business since the age of 16, and says he just sold a 9.33-karat Bahrain baroque teardrop with the bulk of a raspberry for $20,736 and a 103-piece, 86-karat pearl necklace for $33,000. His piece de resistance, though, is a chocolate-colored Bahraini "button" pearl the size of a pinkie nail and shaped like a woman's breast with a stout nipple.

"Most unusual, very rare and look, you can see your reflection," Shah says. "Reserve auction value on the button is minimum $9,000, but there are private buyers willing to pay three times that price."

Ali Mohammad Safar, director of Precious Metals & Gemstone Testing at the Bahrain Ministry of industry and commerce, suspects the button may fetch an even higher price. Just about every pearl that comes out of the Gulf passes through his laboratory, and that amounted to 758,000 natural Bahraini pearls in 2008, including one "the size of a fist," Safar says.

"My father was a pearl diver, my grandfather was a pearl dealer, and I'm a pearl detective," Safar says. "Most people think natural pearls are a myth. Cultured K. Mikimoto &co pearls from the Pacific," Safar, 59, sighs, shaking his head over what he calls the Japanese "imposter," the world's largest producer of cultured pearls, which are prohibited by law from being sold in Bahrain.
Bacteria Assault

It takes Safar's eight-person staff as long as two days to verify a natural pearl. Cultured pearls when viewed through the likes of Safar's Raman electron microscope look like olives stuffed with pimentos. Natural pearls are solid creatures created by bacteria that have penetrated the shell.
"We don't value, we verify," Safar says. "Though we did authenticate a 16-inch necklace that later sold for $500,000, the fruit of our shallow and sweet saltwaters."

Back aboard the Crow, Montfort-Jones says that all it takes is "a bucket, a rope and a lot of grabbing" to become part of the entrepreneurial adventure. As he tells it, "the uglier the oyster, the more likely it has a pearl."
Robert Gregory, president of the pearl-diving firm R&R WLL, fires up a cigarette, unties a red sack and displays two handfuls of the more than 100,000 naturals he says he has plucked from Bahrain's waters. Gregory started pearling in 1969, when he was hired as underwater cameraman for the movie "Hamad and the Pirates."

The 58-year-old pearl prospector gives most of his catch to his mother back in England. "She has more pearls than the Queen," he says.
Renting a Skiff

Gregory says the real motherload will remain underwater until he finishes attracting $1.5 million in outside financing to create a truly commercial operation with a return of $6 million after the first year. Montfort-Jones says he can pull it off for $250,000, enough to operate an 80-foot dhow pearl boat and hire a small crew of divers.

Or you could just rent a skiff and set sail 40 nautical miles north to the Shatyyah beds with a sack and a snorkel.
Professional pearlers say that there's more than enough to go around and that so far there's no law against exporting them from Bahrain. Return rates vary from one pearl for every four to six shucked oysters, more if you know where to pick. Between swigs of diet cola, Gregory blusters that he can retrieve five big pearls from every 100 oysters.

"After 4,000 years of pearling, the Bahrainis completely stopped when oil was discovered back in the 1930s, so those beds are overflowing with eight decades of oysters," Gregory says.

Vacant Beds
The result is viable, according to Gati Rabbani, executive director of the two-year-old Pearl Exchange at theDubai multi commodities center.
"The pearl trade is a $400 million a year business and investment in natural pearls is where it's at," Rabbani says from her 62nd-floor office, overlooking the now vacant oyster beds of the United Arab Emirates.
All that's left of Dubai's halcyon pearling days is the exchange, with a volume so far this year of $5.5 million, mostly from the sale of cultured pearls.

Still, Rabbani is bullish. She says that the Bahrain pearl business is poised for a comeback and that her 25-member exchange -- a clearing house that sits pearlers alongside jewelers, individual buyers and auction houses -- sees the recession as an opportunity to encourage fashionistas to trade in their diamonds for the elegant modesty of natural pearls.
Diamonds, Platinum

To drive that style statement home to investors, precious- gem merchants gathered in Dubai last March for the World Pearl forum offered up research that showed the gross margin on the sale of pearls is 58.2 percent more than loose diamonds, diamond jewelry, gold and platinum jewelry.

"The only risk is pearlers don't know what they'll come back with," Rabbani cautions. "But natural pearls will always command a high price and there's no new supply outside Bahrain."

Up the Gulf, Gregory strokes Psyche, his one-eyed pug dog, and has a story to tell. "My record is 209 pearls in one oyster," he says. "Richest single find was back in 2002, a light yellow sold to a Kuwaiti dealer for $21,400. That pearl was so round that you could have played snooker with it.