Gemfields earns topdollar from auction, bemoans inhibitive tax regime

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    LUSAKA- Gem Producer Gemfields which is world leading supplier of coloured gemstones has bemoaned the punitive mining tax regime in Zambia as inhibiting growth and operating viability.’

    Announcing results of a recent commercial quality gem auction conducted in Zambia, the company said it generated total revenues of USD 18.6 million with an overall average value of USD 4.75 per carat.

    Gemfields’ 33 auctions of emeralds and beryl mined at Kagem since July 2009 have generated USD 608 million in total revenues.However turning to tax regime Gemfields said its biggest impediment remains the 15% Zambian export duty imposed on emeralds since 1 January 2019.

    “When combined with the pre-existing 6% mineral royalty tax, Zambian emerald exporters must now pay an effective 21% turnover tax on their revenues.

    The financial impact is being acutely felt by incumbent producers like Kagem, severely inhibiting money available for capital investment in growth and handing the tactical advantage to other emerald-producing countries like Brazil and Colombia, neither of which have any export duty on emeralds” the company said in a statement accompanying the results of the auction.

    Gemfields said it continues to liaise with the key government departments in seeking resolution and remain hopeful that a solution will be found.

    Gemfields operates and controls 75% of both the Kagem emerald mine in Zambia and the Montepuez ruby mine in Mozambique. It also holds controlling interests in various other gemstone mining and prospecting licenses in Zambia, Mozambique, Ethiopia and Madagascar.

    In 2018 the Zambia Chamber of mines estimated that mining companies in Zambia may lay off more than 21,000 workers due to reduced capital expenditure over the next three years once government introduces the higher taxation which later came into effect earlier in 2019.

    Zambia increased its sliding scale for royalties of 4 to 6 percent by 1.5 percentage points from Jan. 1 and introduced a new 10 percent tax when the price of copper exceeds $7,500 per tonne. The Chamber also estimated that capital expenditure could reduce by $500 million annually.

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