“When combined with the pre-existing 6percent mineral royalty tax, Zambian emerald exporters must now pay an effective 21percent turnover tax on their revenues,” Banks said.
Kagem, the world's single largest producing emerald mine, is 75percent owned by Gemfields, and 25percent by the Industrial Development Corporation of Zambia.
“By contrast, the world's second and third largest emerald exporters, Colombia and Brazil, levy 2.5 and 2percent respectively, bringing about a watershed shift in tactical advantage,” Banks said.
“While the 15percent export duty shuts the door on foreign investors and new entrants interested in the Zambian emerald sector, the financial impact is being acutely felt by incumbent producers like Kagem. We continue to liaise with the key government departments in seeking resolution and remain hopeful that a solution will be found.”
Gemfields posted a hefty $60.4million (R869.14m) loss for the year ended December 2018, compared to a net profit of $45.1m a year earlier, saying the export duty on emeralds and beryl had resulted in an impairment charge of $22.6m against Kagem.
Banks said precious metals, including emeralds, were regaining their sparkle after the JSE listed company received an all-time price per carat high at the auction.
He said 45 companies had placed bids in the auction generating $22.4m in revenues, with an overall average value of $71.85 per carat, an all-time record for any Gemfields emerald auction.
“As the results of this auction show, we continue to see encouraging signs of recovery in the emerald sector,” Banks said. He said the emeralds were extracted from the Kagem Mine. “The proceeds of this auction will be fully repatriated to Kagem in Zambia, with all royalties due to the Government of the Republic of Zambia being paid on the full sales prices achieved at the auction,” he said.
The 32 Kagem auctions held since July 2009 have generated $589m in total revenues.
Gemfields, formerly known as Pallinghurst Resources, is the world’s leading supplier of responsibly sourced coloured gemstones. In addition to Kagem, it also operates the Montepuez ruby mine in Mozambique, one of the most significant recently discovered ruby deposits in the world. Gemfields also holds controlling interests in various other gemstone mining and prospecting licences in Zambia, Mozambique, Ethiopia and Madagascar.
Gemfields shares closed unchanged at R1.69 on the JSE yesterday.