A mining company with a plan to do for emeralds what De Beers has done for diamonds has been delivered a blow by the government it is in partnership with. Seemingly out of the blue, the Zambia Ministry of Mines, Energy and Water Development issued a directive April 5 stating that all auctioning of emeralds be held in Zambia, arguing that their sale in foreign markets contributes to capital flight. The government in a statement said the directive is designed to promote transparency and accountability in the marketing of emeralds, stimulate local demand for emeralds, create more opportunities for small-scale miners to have access to coloured gemstone markets, and increase tourism. "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 the statement. The move seemed to have come as a total surprise to the London-listed company and the markets. Gemfields shares fell 16 percent April 8. The company has a 75 percent stake in the Kagem emerald mine in Zambia with the government in ownership of the other 25 percent. It is believed to be the world's largest emerald mine. In the past, Gemfields held its emerald auctions in other locations, including Singapore and Jaipur, India. The company's next auction of its emeralds is currently being held in Zambia's capital city of Lusaka until April 19. This was already planned. The results of this auction will reveal the impact of the Zambian directive.
Brand ambassador Mila Kunis in a Gemfields ad. The company recently had a string of marketing successes. It signed actress Mila Kunis as its ambassador; released an emerald-specific coloured gemstone jewellery line made by independent jewellery designers ranging from Theo Fennell and Stephen Webster, Shaun Leane and Alexandra Mor, and finalized the acquisition of luxury jeweller Fabergé. 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. Ian Harebottle, Gemfields CEO, didn't mince words, saying the ruling could damage all of the recent strides the company has made. "These developments potentially endanger the health of the sector immediately after they have begun to deliver meaningful positive results on behalf of stakeholders," he said. "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." I've been covering Gemfields since it started this initiative and I've always been impressed with how they are laying the long and difficult groundwork to make this happen. I've also been impressed with how they are using Zambia and the Kagem mine as the centre of its marketing strategy. It would be shame to see this fail because of a well-intentioned but misguided ruling by the government.
