How the Hong Kong protests and COVID-19 led to the near collapse of a renowned Calgary-based jeweller

The company that mines Alberta’s official gemstone is on the verge of collapse after pro-democracy protests and the pandemic have combined to wipe out its biggest markets.

Ammolite is a rare iridescent gem found almost exclusively in Alberta, and Korite International, headquartered in Calgary, now produces about 90 per cent of the world’s supply. It was recently a rising star in the world of precious stones, with demand surging in 2017. But the company’s fortunes began to crumble when the unrest began in Hong Kong. The COVID-19 pandemic exacerbated its mounting financial losses, and Korite obtained creditor protection on June 30.

Ammolite is regarded as a Canadian national treasure, meaning the federal government must approve all applications to export it.

Ammolite comes from the shells of fossilized sea creatures called ammonites. It can be found in several places around the globe, but those found in a southern Alberta river basin are unique because of a thick layer of colour and iridescence, which are ideal for manufacturing gems.

“All the colours are on top of each other, the same as a rainbow — and it’s all natural. So that makes it one of the rarest gemstones in the world,” Rene Trudel, Korite’s operation field manager, told CBC News in 2017.

“In this sediment, the preservation is incredible … you cannot find anywhere else the full spectrum [of colours].”

Rainbow-hued ammolite, a rare gem found only in a southern Alberta river basin, studs a piece of shale held by so-called spotters who watch for its shine as the shale is excavated. The ring on the left shows an example of the processed gemstone. (Sarah Lawrynuik/CBC)

Started expanding in 2015

In 2015, a group of Calgary investors, including former company president Jay Maull, took over Korite with ambitious plans to grow the business, scaling up mining operations and partnering with a distributor in Asia as they tried to raise the gem’s profile. 

When they took over, the Korite mine, located south of Lethbridge, was expanded from less than one hectare to more than three hectares as the company said it was scrambling to keep up with surging demand. Executives had also reached a deal with a Chinese distributor to boost sales of ammolite jewelry in that country. 

China has a unique interest in ammolite because Feng Shui experts are said to believe the gems can enhance health, wealth and wisdom. 

In efforts to boost its domestic profile, the company signed a deal to sponsor the Calgary Stampede Royalty and was the official jewelry licensee for Canada 150, the year-long celebration in 2017 that marked the 150th anniversary of Confederation.

This 11-inch ammolite piece has a value of about $500,000. The fossils have been buried for the past 71 million years. The combination of heat and pressure turned the squid-like mollusc called an ammonite into the rainbow-coloured ammolite gem. (VPD)

The financial hardships began last year. A large portion of the company’s sales in Asia were at trade shows in Hong Kong, but those events were cancelled amid ongoing massive and sometimes violent protests, resulting in the loss of over $2.4 million in anticipated sales, according to insolvency documents filed by the company. 

“Hong Kong people appreciate precious gems — the rarer, the better,” said Gordon Houlden, a former diplomat who has worked in Beijing and Hong Kong and is now director of the China Institute at the University of Alberta.

He was in Hong Kong last year when Korite was at an exhibition showcasing its product to Chinese buyers.

“The demonstrations created an unusual situation: Transport was disrupted, occasional disruptions to the airport. I thought overall it was manageable, but it was having an effect on the local economy,” he said.

COVID-19 has been far more challenging for Canadian companies that operate in Asia because of the travel restrictions, he said.

Hunt for investors underway

Korite was unable to recover this year as the situation in Hong Kong persists and revenues elsewhere in the world began to dry up amid the pandemic. 

The first ammolite mine became operational in 1983, and four others have been dug since. (Sarah Lawrynuik/CBC)

The company also sells ammonite in places like tourist shops in Banff, on cruise ships and in Caribbean holiday ports. Those business lines were all hit hard as the COVID-19 pandemic forced the near total shutdown of the travel industry.

Three years ago, Korite had 280 employees worldwide. According to documents, the company currently has 12 staff members and an additional 31 employees who have been temporarily laid-off because of the pandemic.

Since early March, Korite has not recorded any new sales in the retail and cruise sectors, according to the documents, with a loss of over $6.1 million in anticipated sales. 

At the end of April, the company had liabilities of $16.4 million and listed assets of about $20 million, including more than $6 million in property, equipment and mineral rights.

As with so many companies right now, the financial outlook for Korite is difficult to assess as Hong Kong remains volatile for an indefinite period and the global tourism sector is expected to take several years to recover. Even as some retail shops have reopened, there have not yet been any new orders for jewelry.

The company can’t sustain itself and must restructure its balance sheet and operating costs, according to documents.

Calls and emails requesting interviews with company officials were not returned.

The process is underway to find investors or sell either the company or assets, according to court documents, to help pay creditors.

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