Gemfields Plc, the majority owners of Kagem Mines has charged that the intention to ban the sale of gemstones outside of Zambia is potentially detrimental to the country’s gemstone sector.
In a notice to shareholders posted on the London Stock Exchange website, Gemfields says the possible ban by the Zambian government on the Company’s ability to sell its gemstones outside of the country is potentially detrimental to the Zambian gemstone sector.
Gemfields says the ban would prevent it from being able to freely sell its gemstones in the markets where it believes it would realise the best prices.
Gemfields’ principal asset, the Kagem emerald mine in Lufwanyama which it owns 75 percent shares is the single largest emerald mine in the world.
Gemfields also owns 50% of the Kariba amethyst mine in Siavonga, with GRZ owning the other 50%.
At a press conference in Lusaka on Friday 5 April 2013, the Minister of Mines, Energy and Water Development addressed members of the media and distributed a press statement seemingly restraining Kagem and other producers from selling emeralds outside of Zambia.
Since 2009, Kagem’s production has been sold only outside of Zambia, generating USD 160 million of revenue from 11 auctions.
Representatives of GRZ have routinely attended those auctions.
Gemfields says the pronouncement by President Sata that all gemstones should be sold within Zambia if confirmed, would similarly affect the Kariba amethyst mine in which Gemfields has a 50% interest.
It said any outright limitation on selling emeralds in other countries could have the potential to materially constrain Kagem’s revenues as well as the broader development of the Zambian gemstone sector across the globe.
The company said such a limitation would place Zambian emeralds at a disadvantage relative to other emerald producing countries where no such limitations are in place.
Gemfields stated that given earlier verbal requests by the Ministry of Mines, Gemfields and Kagem had agreed to include Zambia as one of the destinations on its 2013 international auction circuit.
It added that accordingly, Gemfields and Kagem will host an auction in Lusaka from 15-19 April 2013 and thereafter, Gemfields’ next auction is presently scheduled to take place in Singapore in June 2013.
The company said it has yet participated in or been invited to any industry or stakeholder consultation process regarding these measures.
The company has since written to the Ministry of Mines requesting clarification of the terms, conditions and basis of the measures.
It added, “The press statement by the Minister of Mines suggests that the sale of Zambian gemstones on foreign markets has contributed to capital flight. Gemfields takes particular pride in the repatriation of Kagem’s auction proceeds to Zambia and in keeping all relevant government departments fully updated in this respect. Gemfields and Kagem set the benchmark for transparency in the sector, publishing detailed auction information including the revenue received for each of its auctions, as well as all of its gemstone production data, including unit costs, on a quarterly basis.”
And Gemfields CEO Ian Harebottle said these developments potentially endanger the health of the sector immediately after they have begun to deliver meaningful positive results on behalf of stakeholders.
“The record shows that Kagem’s financial and operating performance has never been better. The combination of our investments in the mine, our auction practices, proprietary emerald grading system and global marketing campaigns have delivered dramatic results not only for Kagem, but for the wider Zambian gemstone sector. Kagem’s repatriation of foreign currencies, payments of Zambian corporation tax and gemstone royalties stand at all-time highs and we believe the same to be true for total tax and royalty receipts from the Zambian gemstone sector. This record of success and growth should not be put at risk,” Mr. Harebottle stated.
“Since Gemfields acquired Kagem in mid-2008, we have pursued a strategy for Zambian emeralds not only to compete on the world stage, but to lead the sector internationally. Our ambition has been to turn Kagem into a Zambian national champion and a shining example of what can be achieved in well-founded partnerships between government and investors. I believe we have achieved that goal, and can go much further. I therefore hope that we will continue to enjoy a Zambian legal and business framework that enables the Zambian gemstone sector to remain competitive globally”.