Zambia’s coloured gemstones have returned to world markets in a blaze of lucrative African colour.

Providing the new marketing thrust and also mining the coloured gemstones are South Africans, who are using the diamond industry as a model to follow.

While consistent, well-marketed De Beers supply has done a world of good for diamonds, performance on the coloured-gemstones front has been the complete opposite – poor mining and poor marketing by small operators.

Now, Pallinghurst, which is listed on the JSE and chaired by South African mining doyen Brian Gilbertson, and Gemfields, the London Aim-listed company, are putting coloured gemstones back in contention at the Kagem emerald mine, in Zambia, where they are applying modern mining techniques and rehabilitating ground already scarred by mining.

A consistent flow of the radiant green emeralds and the princely purple amethysts is now the order of the day.

Gemfields has also acquired 75% of a ruby resource in Mozambique and it would not be surprising if the company acquired a sapphire resource at some stage, as the company sets out to change the face of the coloured-gemstones business.

A successful emerald auction has just taken place in India and Gemfields, under South African CEO Ian Harebottle, is gearing up to hold an auction every quarter.

At its first auction this year, Gemfields generated revenue of $31.6-million, an indication of the strong growth in both price and demand for emeralds.

Nearly 40 companies attended the auction in Singapore, where Gemfields sold 0.74-million carats of the 1.07-million carats on offer.

Prices for each carat showed a 63% increase from $26.2/ct to $42.7/ct, compared with the rough emerald auction held in Johannesburg in December 2010, which, in turn, exceeded the combined $18.7-million generated from three auctions in the 2009/10 financial year, when 750 000 ct were sold at an average price of $26.20/ct, which was a 180% increase over the $9,35/ct achieved at a previous auction in London.

Surprise Value

Carat for carat, coloured gemstones fre- quently outvalue the finest diamonds.

But despite that, until Gemfields came on the scene, little was done to realise greater value for coloured gemstones.

Now the new order being injected into the business is providing tangible rewards.

“We’re reinstating the value of coloured gems,” Harebottle tells Mining Weekly in a video interview (to watch the video see instructions at the end of this article).

Gemfields achieved an eightfold surge in after-tax profit in the six months to June 30 and a net profit of more than $20-million on the year’s turnover of $40-million. It has $30-million cash on hand.

Operating costs are currently averaging US42c/ct and revenue more than $4/ct.

“The progress has been remarkable,” mining industry doyen and Pallinghurst founder Gilbertson tells Mining Weekly in the same video interview.

Gilbertson has for long maintained that the coloured-gemstone opportunity is potentially as substantial as the diamond opportunity.

Previously Neck and Neck

Until the 1940s, the sales of coloured gemstones and diamonds were neck and neck, but then coloured stones fell back owing to erratic supply, and diamonds surged forward helped by consistent supply.

Gemfields is remedying the problem of inconsistent supply through the introduction of modern mining techniques.

The company’s Kagem emerald mine, in which the government of Zambia holds a 25% interest, is producing between one- million and three-million carats a month of the precious stone.

The Kagem amethyst mine, in which the Zambian government owns 50%, produces 120 t/m of the semiprecious lower-value stone.

The company has also acquired 75% of the Montepuez ruby deposit, in northern Mozambique, which Harebottle believes has the potential to become the world’s largest ruby mine.

Grading System

Although coloured gemstone deposits are reportedly patchy with changeable grade and quality, Gemfields has managed to introduce a grading system for rough emeralds involving a couple of hundred grades, which is enabling cutters and polishers to set up product lines.

The bulk of gemstones are cut and polished in India, which initially favoured coloured gems, but later concentrated on diamonds because of consistent supply

Gemfields is now ensuring that its downstream customers can have a combination of diamond, emerald and amethyst lines, to which rubies can soon be added.

Its sales auctions have also been stepped up to one per quarter to provide more consistent supply.

Environmental Mining

Pallinghurst, which inherited old pits and dumps when it took over Kagem, is neutralising its carbon footprint with the planting of 300 000 trees on the dumps, the filling of pits with water and fish and the introduction of agriculture.

The company buys fresh produce from the local farmers and the overall plan has enabled it to reduce its environmental liability from $5,5-million to $500 000.

A partnership with the World Land Trust is ensuring that its gemstones are ethically and transparently sourced.

In is understood that $150 000 from the $750 000 that Gemfields realised at its latest emeralds auction went to the World Land Trust and the Wildlife Trust for conservation projects in India. The exhibition in Mumbai involved the use of Zambian emeralds in jewellery, which was promoted by Bollywood actress and emeralds ambassador Madhuri Dixit.

With the high level of marketing comes a great need for strategies to control potential damage to the brand, which is why coloured- gemstone mining has its own form of Kimberley Process that tracks emeralds to ensure that they are ethically sourced.

The very finest emeralds also have an opportunity to be embedded with the name Fabergé, which has consumer recognition.

Gemfields and Fabergé are but two of the ‘cylinders’ on which the Pallinghurst ‘limousine’ is currently firing.

There are also two others – platinum and ‘steel feed’, the latter being company speak for the ingredients that go into the making of steel – manganese and iron-ore for the moment.

Pallinghurst is exploring the potential for a London Stock Exchange listing to provide some lustre to its share value on the JSE, where it is battling to close the gap between asset value and share price.
The aim of the London listing would be to broaden the shareholder base and stimulate demand for the company’s shares.

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