Gemfields concerned with potential sale restrictions in Zambia

AIM-listed gemstone miner Gemfields could be hit by a possible ban by the Zambian government of its ability to sell stones outside of the country, the firm announced on Monday morning, causing shares to tank early on.

AIM-listed gemstone miner Gemfields could be hit by a possible ban by the Zambian government of its ability to sell stones outside of the country, the firm announced on Monday morning, causing shares to tank early on.

"Such measures are potentially detrimental to the Zambian gemstone sector and would prevent the company from being able to freely sell its gemstones in the markets where it believes it would realise the best prices," Gemfields said.

The company's main asset, the Kagem emerald mine, is the single-largest emerald mine in the world. Located in northern Zambia, Kagem is 75% owned by Gemfields and 25% owned by the government of Zambia. Gemfields also co-owns half of the Kariba amethyst mine in the south of the country with the government.

The Minister of Mines, Energy and Water Development (MoMEWD) in Zambia on Friday released a statement restraining Kagem and other producers from selling emeralds outside of the country. According to Gemfields, Kagem's sales have only been abroad, generating $160m of revenue from 11 auctions.

Gemfields' share price was down 21.01% at 23.5p by 08:20.

The firm said: "Gemfields believes that any outright limitation on selling emeralds in other countries could have the potential to materially constrain Kagem's revenues as well as the broader development of the Zambian gemstone sector across the globe. Such a limitation would, inter alia, place Zambian emeralds at a disadvantage relative to other emerald producing countries where no such limitations are in place."

Gemfields is hosting its first auction in Zambia later this month after including it as one of the destinations on its 2013 international auction circuit. However, its next auction is scheduled to take place in Singapore this summer.

The company said that it has requested clarification of the terms, conditions and basis of these measures from the MoMEWD.

Recommended

Share tips of the week – 24 September
Share tips

Share tips of the week – 24 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
24 Sep 2021
Three strong Asian stocks trading at bargain prices
Share tips

Three strong Asian stocks trading at bargain prices

Professional investor Nitin Bajaj of the Fidelity Asian Values investment trust picks three stocks that dominate their industries, earn good returns o…
20 Sep 2021
Why it pays to face up to your investment mistakes
Investment strategy

Why it pays to face up to your investment mistakes

Buying stocks can be a complicated business. But selling stocks can be tricky, too – even if you sell for the right reasons. Max King explains how to …
17 Sep 2021
Share tips of the week – 17 September
Share tips

Share tips of the week – 17 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Sep 2021

Most Popular

Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021