According to Kennedy Mupeseni of the Times of Zambia, Kagem Mining Limited held an auction between the 15th – 17th April 2021. The result of the auction is revenue to the value of $31 million or K600 million. The revenue comes from the combination of 5 mini auctions which were being held. The mine managed to achieve an average price of $115.5 per carat. This is one the back of the Gemfields company reporting a loss of $93 million due to the COVID 19 restrictions on auctions in 2020.
The Auction Details
According to Mining Weekly, the rough emeralds sold at the auction were all extracted, prior to March 2020, from the mining license held and operated by Kagem Mining. Ninety-seven per cent of the lots on offer and 99 per cent of the carats on offer were sold.The lots contained a selection of grades that were typically offered at Kagem Mining auctions of higher-quality emeralds.Selected lots were made available for in-person and private viewings by customers in Tel Aviv, Dubai and Jaipur. Following the viewings, the auctions took place on an online auction platform.
Kagem’s Head of Sales, Adrian Banks, said:
“This was Kagem’s highest auction revenue since March 2016 and we were very pleased to see such strong demand and pricing. Because operations were suspended at Kagem in March 2020, the world’s largest emerald mine produced no new emeralds for more than a year.”
The company has pledged that all the revenue earned on the sale will go straight back to Kagem Zambia and all monies owed to the government through dividend will be settled soon. He claims client appetite for emeralds has increased substantially as the reset in supply and demand has created an opportunity.
Kagem Mining Zambia Limited
Kagem Mining Zambia Limited is the operator of the largest gemstone mine in the world located in Ndola. The company is owned 25% by the Zambian governments and 75% by the Gemfields Group Ltd, one of the worlds largest producers of Gemstones globally with earnings of $70 million annually. The Gemfields Group was founded in 2007 by a consortium of South African financial institutions led by Christo Wiese. Zambia is one of the worlds largest suppliers of Gemstones responsible for more than 25% of global supply. Kagem’s emerald mine in Lufwanyama is the world’s single largest producer of gemstones in the world. It covers an area of approximately 41 square kilometres and is located in the central part of the Ndola Rural Emerald Restricted Area (“NRERA”), in the Copperbelt Province of Zambia.
According to the group this was the first auction since March 2020 when the mine was closed due to fears of uncertain cash flows. Over the course of the COVID-19 industries dependent on independent consultants and auctioneers suffered as customers were less likely to bid millions of dollars on an online platform. Despite this the company held its auction online and managed to attract more than 100 customers to the showroom. The last auction was Kagem’s most successful since 2016. They hope that the opportunity to hold more auctions over the course of the year can hopefully raise more in revenue as the market begins to boom. Just last week a single emerald ring sold for $5.5 million at a valuation of $9,800.
The Gemstone Mining Industry
The gemstone industry operates similarly to highly secure and diligent processes which are established for precious metals (diamonds, silver, gold). The value of a gem stone is decided by the tiers or amount of people needed in order to access the stone. This includes considerations of the dealer, wholesale and collector markets where the price ceiling is set. Over the last few years there has been an increasing market demand for so-called ‘coloured gemstones’. The industry is dominated by Zambia and Columbia, as the two countries have increased exploration into the rare minerals and governments are looking to mitigate smuggling.
Kagem is special as they have adopted an innovative structure which sees the mine in charge of the mine-to-market supply chain. This includes the processing, sorting and grading of the Gemstones, the company then markets the goods and auctions them in their own auction room. Gemfields offers expertise in capital investment, mining, marketing, best business practices, government and local partnerships, and sustainability—a complete strategy that carries all the way to its auctions.
Conclusion
This comes at a convenient time for Zambia. Currently the price of copper hit $9000 for the first time since 2011. This means the country’s copper revenues are substantially increasing whilst debt restructuring efforts have seen our credit rating rise to a stable CCC. This means that with the right decisions Zambia could easily be on the road to a full economic recovery soon.