Lusaka emerald auction a success

Lusaka – Zambia’s emeralds revenue went up 30 percent in a recent auction over previous sales, as the country seeks to maximise economic benefits from its mineral wealth.
The country’s leading emerald producer, Gemfields Plc, said over half a million carats of rough stones were sold at its first high-quality emerald auction in Lusaka last week, raising US$31.5 million compared to the US$13.5 million from its first trading.
Gemfields, the owner of the Fabergé luxury jewellery brand, said it realised an average price of US$54 per carat – its highest in an auction.
The London-based mining and marketing company initially planned to hold the auction in Singapore but had to move the sale to the Zambian capital after the government banned the sale of the precious mineral outside.
Last April, the Ministry of Mines, Energy and Water Development issued a directive that all auctioning of emeralds mined in the country be conducted locally to curb capital flight. Despite earlier reluctance by Gemfields to hold the auction in Zambia, the sale of the high-quality emerald held from July 15-20, 2013, proved a success.
Gemfields revealed that out of the 40 companies ‑ comprising both international and local buyers ‑ that were invited, 37 turned up for the auction and 36 of them placed at least one bid for the 18 allotted lots.
“All indications show that demand for coloured gemstones, and especially emeralds, will continue to increase at a steady pace over the coming year,” Chief Executive Ian Harebottle said in a statement.
Harebottle said: “Even if this auction is a massive success, we must not rest on our laurels. We need [to] keep the momentum going and get a higher price, and a higher price. Let us look and see what is really best for Zambia today, tomorrow and the years to come.”
Gemfields operates the Kagem Emerald Mine in which the Zambian government holds a 25-percent stake.
All the emeralds on offer at the auction were from that mine in Lufwanyama, the single largest emerald-producing mine in the world.
The company also owns controlling stakes in a ruby deposit in Mozambique and emerald, ruby and sapphire exploration licences in Madagascar.
The emerald producer said it had completed only two auctions in the financial year ended June 30, 2013, which it partly blames on government directives to sell the stones locally.
It has generated US$42 million from the auctions compared to US$77.9 million it raised from the four auctions it held in the last financial year.
In July 2009, Gemfields commenced a formal auction programme for its Zambian emeralds. Besides last week’s auction, Gemfields has held 12 auctions, which have generated US$175.8 million.
Reuters has cited analyst, Dmitry Kalachev of Canaccord Genuity as saying that adverse effect on auction attendance or pricing in the near term was unlikely, as the company had already established a loyal customer base.
“Long term, however, the requirement to auction emeralds in Zambia may limit the number of buyers attending that could impact realisations,” Kalachev is cited as saying.
Gemfields shares were down 5 percent at 22 pence on the London Stock Exchange last Monday. They fell as much as 10 percent earlier in the session.
Meanwhile, the government has commended Gemfields Plc and Kagem Mining Limited for the success of the high-quality emerald auction last week. Mines and Minerals Minister, Christopher Yaluma, said he was delighted that the auction attracted buyers from all over the world, “an indication that our emeralds are among the best in the world and the environment in Zambia is conducive for such business events”.
“This long-term strategy to place the Zambian gemstones on the international map is aimed at optimising sales value by assuring buyers of the quality and consistency of supply, thus maximising profitability and hence tax revenue, employment and economic and social benefit for Zambia.
“The government regards Kagem as a flagship of company in the Zambian gemstone sector and as such hopes that together with Gemfields we can build an enabling environment for the continued growth of the industry,” Yaluma said.

July 2013
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