April 11 (Bloomberg) -- Gemfields Plc, the world’s biggest emerald producer, is considering installing x-ray body scanners to fight theft at its Kagem mine in northern Zambia that robs it of as much as a fifth of the operation’s total revenue.
The theft probably cut about $17 million from Gemfields’ sales in the last financial year, Sean Gilbertson, a director at Gemfields, said in an April 9 interview at the Kagem mine, the world’s top source of the green precious stones, accounting for about 20 percent of supply. The company has reduced theft from as much as 50 percent of potential revenue to less than a fifth, said Lameck Malipilo, head of security at Kagem.
“It was so bad, that if you go to town on Friday, you would find Kagem employees buying crates of beer,” he said. “The first crate of beer was to wash his car.”
The trade in stolen gems in Zambia, Africa’s biggest emerald producer, is a key reason London-based Gemfields opposes a possible ban on emerald auctions outside the country that Mines Minister Yamfwa Mukanga said on April 5 the government was considering. Stolen emeralds sell for as little as a 10th of what Gemfields would auction them for, Gilbertson said.
Gemfields will hold its first local emerald auction from April 15 to 19 in the capital, Lusaka, Mukanga said. The company lost 16 percent of its market value on April 8, after announcing the potential ban. It also has an amethyst mine in Zambia and ruby project in Mozambique that is not yet in production.
Gemfields was unchanged at 24.75 pence as of 10:38 a.m. in London. The stock has declined 39 percent in the past six months.
Buyers of the stolen gems are generally based in Kitwe, about 33 kilometers (20 miles) north of Kagem, and are believed to be West African, according to Malipilo. They send couriers known as “go-comes” to purchase emeralds from miners or security officials at Kagem, who usually travel to the mine at night, he said.
The dealers often bribe security or mineworkers with money, televisions or cars, according to Gilbertson, who is the son of Brian Gilbertson, the former chief executive officer of BHP Billiton. The mine fires about 6 percent to 7 percent of its 530-strong workforce each year because of theft, he said.
“If we continue on that trajectory and get a better grip on theft and the illegal market, we should be able to get Kagem to a point where its revenue is above $100 million,” Gilbertson said.
Zambia competes with Colombia, Brazil, Zimbabwe and the U.S. in the global export market for emeralds.
To try to curb theft, the company installed security cameras and employed security guards from countries including Nepal, making communication with miners more difficult, said Malipilo. Every person leaving the mine is searched.
Gemfields is talking to government and labor unions about installing x-ray body scanners, which is an “emotional issue,” Gilbertson told reporters on a bus to Kitwe, as he pointed to a silver pick-up truck with a shattered windscreen driving toward Kagem.
“Go-comes,” he said.
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