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Government directs Kagem to auction emerald locally
16 August 2013, 11:04:53
The action by the minister was precipitated by President Michael Sata’s pronouncement that all gemstones should be sold within Zambia in order for the country to benefit from these resources.

Mukanga added that this action would promote transparency and accountability in the marketing of emeralds and ensure that Zambians got a fair return on it precious resources.

‘Zambian gemstones have for a long time been sold on foreign markets, a situation that has contributed to capital flight and denied Zambians of the much needed benefits from the resource. In an effort to address this problem, government has directed that all auctioning of emeralds be held in Zambia,’ Mukanga said.

Mukanga said this action should create employment and increase the opportunity for small-scale emerald miners to have access to a market where they get a fair return on their produce.

It is estimated that small-scale miners sell most of Zambia’s emeralds to illegal buyers at depressed prices because of lack of a formal market within the country.

Government has for some time been looking at how to increase local demand for emeralds as well as ways to promote value addition to the resource.

Government urged mining companies in the gemstone sector to abide by their directive to avoid the springing up of secondary markets, Mukanga said, ‘Mining companies both large and small should hold joint auctions’ and said Kagem Mining Limited’s auction will be held in Zambia.

Kagem initial emerald auction nets US$ 15.2 million
Soon after the directive Kagem Mining Limited held a landmark auction of Zambian emeralds in Lusaka switching the location which was originally intended to be held in Jaipur, India.

Kagem has held twelve emerald auctions since 2009 however, this was the first in Zambia since operation of the company were taken over by Gemfields in 2008. Previous auctions have been hosted in Jaipur, London, Johannesburg and Singapore generating USD 175.7 million in aggregate revenues.

Following the directive, Kagem invited 31 of the world’s leading gemstone industry specialists to participate in the auction of predominantly lower quality rough emerald and beryl.

Prior to the auction, in a tone that differed from the initial apprehension of holding auctions in Zambia, Kagem’s chief executive Ian Harebottle expressed hope that the auction would place Lusaka ‘firmly on the map as one of a small group of cities recognised worldwide as centres of excellence for gemstone trading’.

With no local participation of small scale gemstone miners at the auction Harebottle said he expected auction prices to be slightly lower than those obtained in Jaipur as a result of the sale of illicit gemstones on the periphery of the event.

The auction saw 17.3 million carats of emerald and beryl extracted from the Kagem Mine in Zambia placed on offer, with 6.3 million carats sold, generating auction revenues of USD 15.2 million. The three previous Jaipur auctions netted US$28.1 million.

Stakeholder responds to emerald sale in Lusaka
Speaking to Commerce Gazette Gemfields executive director Sean Gilbertson, explained that the emeralds on sale at the auction were lower-grade stones that were being offered ‘rough’ as ‘Kagem does not undertake commercial cutting and polishing of gemstones’. He said the company preferred to focus on its core objectives of mining of emeralds.

‘Selling the ‘rough’ is something Kagem and Gemfields have done very well over the recent years. We believe in local value additions but we believe the best way to do that is to do the grading and sorting very professional to make sure that the emeralds are clean of any contaminates before they are seen by our customers.

He said besides mining, Kagem was involved an extensive marketing campaign to promote the use and purchase of Zambia’s emeralds by the world’s leading fine jewellers and their customers.

Among the marketing strategies Gemfields has used to promote the purchase of emeralds is the enlisting of Hollywood actress Mila Kunis as the brand face of Gemfields.  Gilbertson said their concerted action to market Zambian gemstones had seen prices rise three-fold on the international market from US$0.31 per carat to US$1.12.

Gilbertson reiterated that Kagem operation ensure ethical best practices are observed, all taxes are paid to the Zambia Revenue Authority, and all revenues are repatriated to Zambia when it holds auctions abroad.

When asked to explain why Gemfields felt strongly about auctioning on the international market Gilbertson said, ‘It believes that being able to sell Zambian emeralds globally will enable it to obtain the best possible prices for the nation’s resources.’

Adding that the dealers who traveled to Zambia would simply attain it at a cheaper price and resale it to jewelers for a considerable profit margin that would have benefited Kagem had they made the sell directly. He said the overall saving from shipping and the logistic of travel were ‘negligible’ in comparison to the profits that would have been attained abroad. Adding that some jewellers were prohibited from traveling for the auction due to the duration they would spend away from their businesses because Zambia lacks direct flights from Jaipur.

Indian emerald buyer J.P. Tambi, of K.L. Tambi and Company, expressed similar sentiments to Gilbertson, saying the travel was inconveniencing with multi-connections. He said he buying from places like Singapore was more convenient and their clients were within the region.

Meanwhile, current president of the Jewellers Association, Jaipur, Vijay Kedia, of Kedia Gem Impex expressed delight at coming to Zambia saying ‘Zambian emeralds stood as the finest in the world’. Vijay said he was willing to travel to Zambia for the auction anytime as it was in his business interest to purchase high quality stones. He said he traveled constantly in pursuit of gemstones and coming to Zambia was no more tedious than traveling to any other location where he purchased other gemstones.

The quality and consistency of Kagem emeralds removes speculation
Jackson Mtonga, superintendent Kagem Sort-House, lauded the initial auction held by his company saying that it was well attended.

Mtonga said previous emerald auctions that were held in Zambia prior to Gemfields acquiring the mine had outside interference from illegal emeralds miners who would entice their clients from the auction by offering bottom floor prices. This he said discouraged the company from auctioning locally.

Mtonga said since Gemfields acquired Kagem, ‘The trend has been positive in the sense that the production has improved, the price of the caret has improved and the presentation of the product to the buyers has improved.’ This he said has contributed to the company earning good prices for the emeralds.

He praised the introduction of the company’s grading pattern. ‘The buyers say our grading is excellent, and we are able to replicate the grade we are giving them with each sell. There is consistence.’ Mtonga said irrespective of the numbers of years that pass clients can order the same product and it will be given to them at exactly the quality. This he said had reduced product speculation and ensured client confidence which was reflected in the price their customer offered to purchase the stones.’

Mtonga said government’s decision to auction locally was not worrying to him, so long as they addresses the illegal gemstone miners who not only undermined their business but did do not pay royalties or taxes. He urged government to carry out an inventory declaration of every miner as a means or monitoring the sector to ensure fair play.

Kagem Mining in Lufwanyama district is 75 percent owned by UK-listed Gemfields plc and 25 percent owned by the Zambian government. Kagem employs 672 staff and contractors in Zambia,

Officials from the Minister of Mines, Energy and Water Development, Ministry of Finance and the Zambia Revenue Authority oversaw the sale.

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