Gemfields halts emerald sales over Zambia export tax

Coloured precious stones miner Gemfields (LSE: GEM; JSE: GML) has paused the sale of emeralds from its Kagem mine in Zambia, but says the government could soon reverse a 15% export tariff reintroduced this month.

Zambia, the world’s largest emerald producer after Colombia, first implemented the 15% export duty in early 2019. It was later scrapped on Jan. 1, 2020, following industry pressure.

Before the recent reintroduction, Gemfields had already suspended production at Kagem, citing market saturation caused by an influx of heavily discounted emeralds.

“Kagem anticipates that the duty may be revoked and allow a commercial-quality emerald auction to go ahead in the first quarter of 2025”, the company said.

Shares in Gemfields gained about 1% to 5.4 pence apiece in London on Friday, valuing the company at £62.5 million. The stock has declined from 20 pence in October. 

Layoffs?

If the tariff remains in place, Gemfields’ 75%-owned local subsidiary, Kagem Mining, will face an effective revenue tax of 21%. That includes the existing 6% mineral royalty tax. This would force the company to lay off employees, CEO Sean Gilbertson said this month.

Zambia’s government is targeting a gross domestic product (GDP) growth rate of 6.6%, an inflation rate between 6% and 8%, and a budget deficit of 3.1% of GDP, according to data from PwC. Revenue projections include a 26% increase in domestic income and grants, with tax generation anticipated to rise by 20%.

Gemfields also said on Friday that production at its Montepuez ruby mine in Mozambique had resumed. Operations were halted in December following violent post-presidential elections incidents that resulted in two deaths.

Despite the disruption, the company confirmed that construction of a second processing plant at the mine remains on schedule and within budget. It expects completion by the end of June.

Gemfields said it would release its annual financial results on March 27.