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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.

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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.

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