The world’s biggest emerald miner has found a gem that weighs more than 1.1 kilograms at its mine in Zambia. Source: Gemfields

JOHANNESBURG – Listed precious stones producer Gemfields tumbled nearly 11 percent in early trade on the JSE on Friday after it flagged that it would fall into the red in the year ended in 2018 on Zambia’s newly introduced export duty that resulted in it impairing Kagem, the world’s largest emerald mine.

Gemfields later recovered to close the day 2.94 percent up at R1.75 after announcing that it would likely swing to a loss of $60.4 million (R874m) for 2018 compared to a $45.1m net profit a year earlier, saying the export duty on emeralds and beryl in Zambia had resulted in an impairment charge of $22.6m against Kagem.

In rand terms, the net loss after tax was expected to be R801m from a R600m net profit after tax for the comparative year, the company said.

In October, resource-endowed Zambia announced a 15 percent export duty on gemstones and precious metals, a hike in royalties and new mining duties to help reduce mounting debt as the nation’s fortunes waned.

Gemfields, which sold  60 percent of its shares in Jupiter Mines, said its remaining stake in the mines had resulted in an unrealised fair value loss of $11.9m for the year due to a decline in the Jupiter share price.

The company said the loss per share was expected to be 5 US cents for the year ended December 31, 2018, compared to earnings per share of 4 US cents for the comparative year. 

In rand terms, the loss per share is expected to be 63c a share from 49c a share earnings for the comparative period.

Gemfields said excluding the impairment charges at Kagem and other Gemfields subsidiary companies as well as the unrealised fair value losses in Jupiter and Sedibelo, the earnings for the year were expected to be $17.1m from the $5.3m loss for the comparative period. 

In rand terms earnings for the year were projected at R227.1m from a R70.5m loss for the comparative period. The company also said a review of its shareholding in Sedibelo Platinum Mines has resulted in a fair value loss of $47.6m for the period.

Its two key operating assets, Montepuez Ruby Mining (MRM) and Kagem, generated revenues of $127.1m and $60.3m respectively and Fabergé recorded revenues of $13.4m, the company said.

In January Gemfields agreed to pay £5.8m (R110.82m) to settle claims of human rights violations to MRM in northern Mozambique.

The agreement was on a no-admission-of-liability basis and would be paid to English human rights law firm Leigh Day.

In addition to the settlement, Gemfields announced plans to establish a new and independent operational grievance mechanism.