Faberge owner Gemfields hit by emerald tax in Zambia

London-listed Gemfields has been blindsided by the imposition of a double-digit tax on gemstone exports from Zambia.

The Faberge owner, whose global brand ambassador is actress Mila Kunis, told shareholders on Wednesday that Zambia has reinstated a 15 percent export tax, suspended since 2020, without prior notice or consultation.

It warned that the tax will directly impact Zambian emeralds mined by Kagem Mining, 75 percent of which is owned by Gemfields and the remaining 25 percent owned by the Southern African country’s Industrial Development Corporation.

The export levy will be payable on top of the existing 6 percent royalty tax on minerals, meaning Kagem will face an effective tax on income of 21 percent – ​​in addition to the 30 percent corporate tax, according to Gemfields.

In contrast, Brazil and Colombia – the world’s other major sources of emerald mines – impose a total tax on revenues of 2 and 2.5 percent respectively.

Brazil charges a corporate tax of 34 percent, while Colombia has a rate of 33 percent.

Gemfields says Kagem has effectively paid 31 percent of its revenues to the Zambian government in 2023 in the form of royalties, corporate taxes and dividends.

It marks a further 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, including selling off the iconic Faberge brand.

Gemfields said: “The company will work with the Zambian government to seek the reinstatement of the suspension of this export tax or its removal from legislation, given its impact on the sustainability of the sector and investment attractiveness.

‘The company will keep the market informed of further developments.’

Gemfields shares fell about 3.5 percent to 6.75 pence by mid-afternoon on Wednesday, having lost about half their value in the past 12 months.