Gemfields Kagem Emerald Mine Showed Solid Annual Growth Despite Conflict With Zambian Government

Coomi 20K yellow gold with Gemfields’ Zambian emeralds, 120.34 carats and diamonds, 5.21 carats.

Production at the Gemfields Kagem emerald mine in Zambia increased 42 percent to 29.99 million carats for the 12-month period ended in June.

The average grade for the year increased 38 percent to 283 carats per ton, the company said Monday through the Proactive Investors website. Meanwhile, production costs fell 26 percent in the year.

Gemfields is a colored gemstone exploration, mining and marketing company. The Kagem mine is the London-listed company’s biggest asset and it provides nearly all of its revenue, even though it has interest in other colored gemstone mines. It owns a 75-percent share of the Kagem mine with the Zambian government owning the remaining 25 percent.

One of Gemfields other mines is the Montepuez ruby deposit in Mozambique. The company said it is on track to hold its first auction of rough rubies in the first quarter of 2014.

Gemfields also owns Fabergé, which it fully acquired in January. The company said the luxury jewelry brand achieved a record number of unit sales for the year.

A sale of lower quality emeralds in April netted $15.2 million, Gemfields said. Not included in the annual results was its latest auction of higher quality emeralds, held in the Zambian capital of Lusaka. This brought in revenues of $31.5 million, the second highest total ever for an auction of its kind.

The auction was originally scheduled in June in Singapore but pressure from the Zambian government to move the auction to Zambia caused the auction to be postponed until July, after the reporting period. Where to hold auctions has been a source of debate since April when the government of Zambia, Gemfields business partner, issued a directive for Gemfields to hold its auction within the country’s borders, citing capital flight.

Ian Harebottle, Gemfields CEO, said through Proactive Investors that communication between the two parties is now “much, much better” and more interactive.

However, Harebottle said the company continues “to seek guidance and to interact with the Government of Zambia.” Gemfields argues that it needs to sell Kagem emeralds at places that will likely get the most interest and the best price.

“While the two auctions held in Lusaka this year have certainly been successful, the key question, of course, remains what they would have generated had they been held abroad (where competing and undermining sources of supply, frequently illegal, are not readily available to our customers) and their potential impact on the long term growth of this sector,” he said.

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