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Sunday, July 7, 2013

Pressure From Zambia Forces Gemfields to Reschedule Emerald Auction

A Gemfields advertisement for its Kagem emeralds from a recent marketing campaign.

Gemfields has rescheduled its auction of emeralds from the Kagem mine in Zambia due to Zambian officials’ insistence that the company hold its auctions within the country’s borders.

The London-based colored gemstone exploration, mining and marketing company planned to auction higher grade rough emeralds in Singapore from June 10-14, but a change of policy on the part of the Zambian authorities caused the company to postpone the sale, it said through the Proactive Investors website on July 1. The auction will now take place July 15-19 in Lusaka, the capital city of Zambia.

The date change will affect Gemfields financial reporting for the fiscal year, which ended June 30. The delay means the company only completed two auctions during the fiscal year that generated $42 million in revenue, compared with four auctions held during the prior fiscal year that generated $77.9 million.

The directive was issued in April in the form of a written request by the Zambian Ministry of Mines, Energy and Water Development. Despite ongoing discussions, the country’s position apparently hasn’t changed. Even though Gemfields said Zambian officials have insisted there is no ban on overseas auctions.

The government of the Republic of Zambia owns 25 percent of the Kagem mine while Gemfields owns the remaining 75 percent. In addition, the two parties own a 50-50 stake in the Kariba amethyst mine, which will also be affected by the outside selling ban. However, nearly all of Gemfields income comes from the Kagem mine.

What’s at issue is the government’s belief that it isn’t receiving enough of the economic benefits from the mine.

“Zambian gemstones have for a long time been sold on foreign markets, a situation that has contributed to capital flight and denied Zambians of the much needed benefits from the resource,” Yamfwa Mukanga, Zambia mining minister, said in its written request issued in April.

For its part, Gemfields insists that it needs to sell Kagem emeralds at places that will likely get the most interest and the best price in order to compete with other emerald hubs, such as Colombia and Brazil.

Since 2007, Gemfields has been creating a mine-to-market initiative for its emeralds using the Kagem mine as a single, traceable source for its emeralds. In addition, it is working on a program to mine its emeralds in adherence to fair-trade practices and in accordance with environmental, social and safety standards. The distribution of its emeralds includes the Faberge luxury jewelry brand, which it owns. 

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