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London - Gemfields is lobbying the Zambian government to extend its emerald auctions beyond the African country where it mines the precious stones, as part of its quest to become the De Beers of international emerald trade.
Gemfields, a London-listed miner, has ambitions of creating a stable world market for emeralds and polishing the gem's image in the same way that Anglo American's [JSE:AGL] De Beers has long championed diamonds from London's Bond Street to China.
The company, which produces about a fifth of the world's rough emeralds, was selling output from its flagship Kagem mine around the world until the Zambian government said in April that all emeralds mined in the country must be auctioned at home.
"The concern is (that), if we are going to have it in only one place, then it has a long-term impact," chief executive Ian Harebottle told Reuters in an interview on July 30.
Zambia, Colombia and Brazil each produce about a third of the world's rough emeralds. Harebottle said that, historically, Colombian stones have been regarded as the premium brand, while Zambia has been "at the very bottom of the pecking order".
The Zambian Ministry of Mines, Energy and Water Development said in April that the sale of the country's emeralds abroad contributed to capital flight. The country also wants to carve itself a niche in the global auction circuit.
With sales restricted to one location, however, Zambian emeralds would be at a disadvantage relative to those mined in other countries, Gemfields said in a statement in April.
The company had planned to hold its final auction of the fiscal year to June 30 in Singapore.
The switch to Lusaka, Zambia's capital, pushed that auction into the current fiscal year and led the company to forecast a 46% fall in auction revenue for the year ended June 30.
Faberge appeal
Emerald miners expect demand from affluent customers in Asia to drive growth. About 60% of Gemfields' production is consumed in the region, Harebottle said, with demand strongest in India, Arab countries and China.
"In China, emeralds are just starting to take off," he said. "Jade was very dominant, but I'm very pleased to say the demand for emeralds is increasing exponentially every day - but off a low base."
Gemfields, which has a market value of £118.8m owns 75% of the Kagem mine in northern Zambia. The Zambian government owns the other 25%.
Gemfields acquired ownership of Kagem in 2008. Until April this year, it had sold all of the mine's production outside Zambia, generating $160m from 11 auctions in locations including London, Johannesburg and the Indian city of Jaipur.
The first Lusaka auction was held in April. The second, in mid-July, achieved an overall average value of $54 per carat - the highest average unit value of any Gemfields auction. The rough emeralds on offer were of predominantly higher quality.
"We had a very successful auction," Harebottle said, "but the auction wasn't successful just because it was held in Lusaka."
He said Gemfields was not opposed to holding auctions in Lusaka, but that the company - which named actress Mila Kunis as its brand ambassador this year - also wanted other locations to be included on its circuit.
Harebottle said a large part of the latest auction's success could be attributed to the luxury Faberge brand, which Gemfields bought in November.
The $142m deal would add to Gemfields' profit within 24 months of the acquisition, Harebottle said.
Faberge, founded by Gustav Faberge in 1842, is famous for a series of jewelled eggs commissioned by the Imperial Russian family from 1885 through to 1916.
"The reason we went for Faberge is it's more of a brand. It has a limited number of outlets, very high-end position and (is) part of the continued marketing and promotion of colour," Harebottle said.
He said emerald prices had risen significantly in the last few years, and that he expected retail prices to rise another 10% over the next 12 months.
Gemfields, a London-listed miner, has ambitions of creating a stable world market for emeralds and polishing the gem's image in the same way that Anglo American's [JSE:AGL] De Beers has long championed diamonds from London's Bond Street to China.
The company, which produces about a fifth of the world's rough emeralds, was selling output from its flagship Kagem mine around the world until the Zambian government said in April that all emeralds mined in the country must be auctioned at home.
"The concern is (that), if we are going to have it in only one place, then it has a long-term impact," chief executive Ian Harebottle told Reuters in an interview on July 30.
Zambia, Colombia and Brazil each produce about a third of the world's rough emeralds. Harebottle said that, historically, Colombian stones have been regarded as the premium brand, while Zambia has been "at the very bottom of the pecking order".
The Zambian Ministry of Mines, Energy and Water Development said in April that the sale of the country's emeralds abroad contributed to capital flight. The country also wants to carve itself a niche in the global auction circuit.
With sales restricted to one location, however, Zambian emeralds would be at a disadvantage relative to those mined in other countries, Gemfields said in a statement in April.
The company had planned to hold its final auction of the fiscal year to June 30 in Singapore.
The switch to Lusaka, Zambia's capital, pushed that auction into the current fiscal year and led the company to forecast a 46% fall in auction revenue for the year ended June 30.
Faberge appeal
Emerald miners expect demand from affluent customers in Asia to drive growth. About 60% of Gemfields' production is consumed in the region, Harebottle said, with demand strongest in India, Arab countries and China.
"In China, emeralds are just starting to take off," he said. "Jade was very dominant, but I'm very pleased to say the demand for emeralds is increasing exponentially every day - but off a low base."
Gemfields, which has a market value of £118.8m owns 75% of the Kagem mine in northern Zambia. The Zambian government owns the other 25%.
Gemfields acquired ownership of Kagem in 2008. Until April this year, it had sold all of the mine's production outside Zambia, generating $160m from 11 auctions in locations including London, Johannesburg and the Indian city of Jaipur.
The first Lusaka auction was held in April. The second, in mid-July, achieved an overall average value of $54 per carat - the highest average unit value of any Gemfields auction. The rough emeralds on offer were of predominantly higher quality.
"We had a very successful auction," Harebottle said, "but the auction wasn't successful just because it was held in Lusaka."
He said Gemfields was not opposed to holding auctions in Lusaka, but that the company - which named actress Mila Kunis as its brand ambassador this year - also wanted other locations to be included on its circuit.
Harebottle said a large part of the latest auction's success could be attributed to the luxury Faberge brand, which Gemfields bought in November.
The $142m deal would add to Gemfields' profit within 24 months of the acquisition, Harebottle said.
Faberge, founded by Gustav Faberge in 1842, is famous for a series of jewelled eggs commissioned by the Imperial Russian family from 1885 through to 1916.
"The reason we went for Faberge is it's more of a brand. It has a limited number of outlets, very high-end position and (is) part of the continued marketing and promotion of colour," Harebottle said.
He said emerald prices had risen significantly in the last few years, and that he expected retail prices to rise another 10% over the next 12 months.
