Editor’s Note
As Zambia aims to expand its share of the global gemstone market, this article explores the potential and challenges of its strategy. The push for greater transparency and ethical sourcing in the industry adds urgency to the conversation about where—and how—these precious stones are produced.
Billions are generated worldwide in retail by precious stones such as emeralds, rubies, and sapphires. Zambia, the third-largest producer of emeralds, wants to secure a larger piece of this pie in the future. Whether this strategy will succeed remains to be seen.
Hollywood actress Mila Kunis said this recently and traveled to Africa to visit the world’s largest emerald mine, the Kagem mine, in the north of the African country Zambia. She was not acting selflessly, of course. Rather, it was a PR campaign by the British mining company Gemfields, which signed the beautiful Kunis as its new figurehead for marketing its precious stones in January 2013 and sent her on the trip.
Gemfields was less pleased that this week its customers also had to travel to Zambia to participate in the auction of emeralds from the Kagem mine, in which Gemfields has held a 75% stake since 2008. Typically, Gemfields conducts its auctions in London, South Africa, India, or Singapore, the most important hubs for the global wholesale trade in colored gemstones. However, 25% of Kagem Mining Ltd. belongs to the Zambian government – and on April 5, it surprisingly announced that it intended to ban the auction of Zambian emeralds abroad in the future. First step: The auction of emeralds from Gemfields’ Kagem mine this week was to take place in Zambia’s capital, Lusaka. Gemfields published the Zambian government’s communiqué on April 8, after which the company’s share price fell by 16% on the same day.
The share price has recovered somewhat since then, but the company and investors remain skeptical. Sean Gilbertson, Executive Director of Gemfields, noted after the announcement that possibly fewer traders would participate in auctions in Zambia, which in turn could put pressure on prices and consequently on the revenues of Zambian producers. The result of the auction in Lusaka was not yet known on Friday, but according to Gilbertson, seven out of 31 invited companies did not attend the auction, as reported by Agence France Presse.
The goal of the Zambian government would be to generate additional value-added in its own country by banning auctions abroad and to give the many small emerald producers access to a better – and above all legal – sales market. However, according to a Gemfields spokesperson, a final decision by the government is still pending.
Zambia is one of the most significant producer countries of the green gemstones. There is no official, reliable statistics on the mining and trade of emeralds. According to Gemfields, which relies on US data, the African country produced a volume of over 100 million carats (including lower-quality stones) in 2010. The export value of Zambian emeralds was $25 million. Colombia’s production that year had an export value of $134 million, while Brazil exported emeralds worth $43 million. However, Colombia’s production has since collapsed, and Gemfields estimates that roughly one-third of global production by value each comes from the three countries.
Statistics on the price development of gemstones are also lacking. However, Gemfields publishes the results of its auctions. The average price per carat that the company achieved for raw, high-quality emeralds almost decupled from July 2009 to July 2011 – across a total of five auctions. Compared to the auction in July 2011 ($42.71 per carat), the price at the auction last November was again 30% lower at $29.71 per carat.
By the time the stones are cut, polished, and processed into jewelry and land on the jeweler’s sales shelf, their value naturally increases significantly. The retail value of all colored gemstones (excluding diamonds), which also include rubies and sapphires, is estimated by various sources at $10 billion to $15 billion worldwide, with the share of emeralds accounting for about 12% of that. The figures from the UN database Comtrade are also revealing, showing the value of global exports and imports of colored gemstones after they have undergone a first stage of processing. According to this, colored gemstones worth $2.5 billion were exported in 2011, an increase of almost 36% compared to the previous year. Notably: After the USA, Switzerland, with a share of over 16%, is the second-largest exporter at this intermediate stage of global trade.
The lucrative trade in colored gemstones is highly fragmented, opaque, and susceptible to illegal activities. Therefore, together with the International Colored Gemstone Association and the Vienna International Justice Institute, the UN is striving for a certification system similar to that for diamonds. It is intended to enable traceability of the valuable stones and prevent illegal trade, fraud, money laundering, and the exploitation of the environment and workers. Representatives from Switzerland also participated in a first conference in Turin a week ago.
