London-listed Gemfields has been blindsided by the imposition of a double-digit tax on the export of gemstones from Zambia.
The Faberge owner, whose global brand ambassador is actress Mila Kunis, told shareholders on Wednesday that Zambia has reimposed a 15 per cent export duty that had been suspended since 2020, with ‘no notice or prior consultation’.
It warned the tax directly impacts the Zambian emeralds mined by Kagem Mining, 75 per cent of which is owned by Gemfields with the remaining 25 per cent owned by the southern African country’s Industrial Development Corporation.
The export duty will be owed on top of an existing 6 per cent mineral royalty tax, meaning Kagem faces an effective tax on revenue of 21 per cent, according to Gemfields – in addition to corporation tax of 30 per cent.
By contrast, Brazil and Colombia – the world’s other major emerald mine sources – impose an aggregate tax on revenues of 2 and 2.5 per cent, respectively.
Brazil charges corporation taxes of 34 per cent, while Colombia has a rate of 33 per cent.
Actress Mila Kunis is Gemfields’ global brand ambassador
Gemfields says Kagem paid an effective 31 per cent of its revenues to the Zambian government in the form of mineral royalty, corporation tax and dividends in 2023.
It marks another blow to Gemfields after the miner warned investors on Christmas Eve that its operations had become the target of violent protests in Mozambique.
Growing instability in Mozambique is likely to put further pressure on the company to find ways to save money, which could include the sale of the iconic Faberge brand.
Gemfields said: ‘The company will engage with the Zambian Government to seek the re-introduction of the suspension of this export duty or to remove it from the legislation given the impact on sector sustainability and investment attractiveness.
‘The company will keep the market informed of further developments.’
Gemfields shares were down by roughly 3.5 per cent to 6.75p by mid afternoon on Wednesday, having losses around half their value over the last 12 months.
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