JOHANNESBURG (miningweekly.com) – Aim-listed Gemfields said on Monday that it was in discussions with the Zambian Mines Ministry over the auctioning of emeralds outside the country.
The company had to postpone its June 10 to 14 emerald auction in Singapore, pending clarification from the Zambian Ministry of Mines, Energy and Water Development regarding proposed restrictions on certain forms of emerald exports.
This related to Zambian Mines, Energy and Water Minister Yamfwa Mukanga’s announcement in April in which he seemingly restrained the auctioning of gems mined in Zambia outside the country.
Gemfields indicated that it was actively corresponding with the Mining Ministry to find solutions supporting the continued growth of its 75%-owned Kagem, as well as the wider Zambian emerald sector, as soon as possible.
Gemfields CEO Ian Harebottle stated that while there presently was no law in Zambia that prohibited the export of emeralds for auction purposes, the firm aimed to ensure that it worked collaboratively with the Zambian government, which the balance of Kagem.
He highlighted Kagem’s marked contribution to the country’s economy, quoting figures recently released by the Zambian Revenue Authority that showed that the mine paid about 80% of the gemstone sector's aggregate royalties and that, last year alone, it paid about 40% of the total cumulative gemstone royalties collected in the seven-and-a-half years since 2006.
“As such, there is a strong incentive for all parties to ensure that the remarkable growth Kagem has enjoyed in recent years – and the benefits that this growth has provided for the wider Zambian gemstone sector – are not impeded," Harebottle urged.
London-based mining analyst Liberum Capital said in a note to clients that Gemfields was rightly seeking clarity before progressing with its next sale.
“With Kagem representing the majority of Gemfields’ earnings, expect weakness in the shares today. We retain strong conviction in the long-term prospects in the coloured gemstone market. Positive resolution of this issue should serve as an opportunity for new investors to consider buying Gemfields shares as the best exposure in London,” the firm said.
Meanwhile, Investec Securities indicated that while it was disappointing that the Gemfields would not generate revenue in June as it awaited clarification, the company still had the stones to sell at an appropriate opportunity.
“We hope to see the Zambian government clarify and soften its stance on sales and allow the company to sell gems in regions where demand is strongest,” Investec Securities stated.
Gemfields traded 6.74% weaker on the London bourse on Monday morning.