Gemfields Falls on Possible Zambian Law to Ban Foreign SalesThomas Biesheuvel
Gemfields Plc, the biggest emerald producer, slumped the most in more than four years in London trading after saying Zambia may ban the sale of the precious stones outside the country.
The shares fell 16 percent, or 4.75 pence, to 25 pence by the close of trading, the steepest decline since March 2009. The company said in a statement that the restrictions could “materially constrain” revenue from its Kagem emerald mine, the world’s largest.
Gemfields, which sells its emeralds at auctions in India and Singapore, produced 21 million carats of the stones at Kagem last year. The company said it’s seeking a meeting with Zambian President Michael Sata and is unsure whether it will need to move all its emerald sales to the southern African nation.
“It’s 50-50 whether we need to hold them inside the country,” Chief Executive Officer Ian Harebottle said today. “I don’t think it will have any negative impact in the short term; in the long term the lack of clarity and lack of stability certainly has the potential to have a negative impact.”
Zambia’s Minister of Mines, Energy and Water Development Yamfwa Mukanga announced the measures at a press briefing on April 5, saying “if possible, we would want all gemstones to be sold in the country,” according to London-based Gemfields.
Zambia said last week that selling its gemstones on foreign markets had contributed to “capital flight” and that companies marketing emeralds should plan to join auctions in the country.
“It’s difficult to read as there is a mixed message,” Harebottle said in an interview. “The verbal message we’re getting in the meetings is there needs to be one auction.”
Gemfields agreed last month to hold its next sale in the Zambian capital Lusaka.