GEMFIELDS TO HOLD SECOND EMERALD AUCTION IN ZAMBIA

GEMFIELDS AND KAGEM TO HOLD HIGH GRADE EMERALD AUCTION IN ZAMBIA

Gemfields Emerald

Gemfields plc, which operates the Kagem emerald mine in Zambia (and in which the Zambian government is a 25% shareholder), yesterday advised its shareholders that the group will hold another auction of emeralds in Lusaka this month – the second such auction to be held in the capital this year.

The auction, scheduled for July 15-19, will feature higher grade emeralds that were originally due to be auctioned in Singapore on June 10-14. That Singapore auction was put on hold pending further discussions with the Zambian Ministry of Mines, Energy and Water Development.

Gemfields has advised that, at the written request of the Ministry, this auction will now take place in Lusaka. The auction will comprise the rough emeralds that were to be auctioned in Singapore, all of which were mined by Kagem Mining Limited at the Kagem emerald mine in Lufwanyama.

“While we have received repeated assurances that there is no ban on overseas auctions, we have been asked by the Ministry of Mines to host an auction of higher grade emeralds within Zambia as part of a consultative process,” said Gemfields Chief Executive Officer Ian Harebottle.

“Although there is presently no law in Zambia that prohibits the export of emeralds for auction purposes, we naturally wish to ensure that we work collaboratively with the Government of the Republic of Zambia, who are our fellow shareholders in the world-class Kagem emerald mine. It remains our hope that a framework solution which allows Kagem to maximise its revenues will soon be found,” he added.

As a result of the delay in holding the auction, Kagem will have completed only two auctions in the financial year ending 30 June 2013, generating aggregate auction revenues for the year of US$42 million. One of these was an auction of lower grade emeralds held in Lusaka in April this year, raising US$15.2 million. That revenue reflected the elevated quantity of emeralds offered for sale, but also saw a 7 percent decline in average per-carat prices for lower quality auctions.

In the prior financial year (to 30 June 2012), four overseas auctions were held, generating aggregate auction revenues of US$77.9 million. Kagem’s revenues generated by auctions will therefore decline 46 per cent year-on-year as the next auction will take place in the new financial year commencing 1 July 2013.

Both Gemfields and Kagem continue to actively correspond with the Ministry and hope that solutions supporting the optimisation of Kagem’s revenues and the continued growth of the wider Zambian emerald sector will be reached as soon as possible.

On June 18 2013, the Ministry, which appoints one director to the board of Kagem, replaced their incumbent Kagem director with Dr Sixtus Mulenga, a veteran mining-geologist who also serves as a non-executive director on the boards of Mopani Copper Mines plc and AEL Zambia plc. Dr Mulenga also played an instrumental role in Zambia becoming an EITI-compliant country.