The relatively flat phase in the world of precious raw materials is enlivened by a true coup de theatre. The first signs were evident in May when Gemsfield announced a halt to its operations in Colombia and Sri Lanka. How could this be? Didn’t they precise that they were strategic? Then, the bad news, the dropping data in the production of emeralds in Zambia. It’s a crash: 4.5 million carats in the first quarter of 2017 after the 7.1 in the previous year. And finally Pallinghurst, a powerful mining group (whose products include platinum, gold, palladium, rhodium but above all manganese) based in South Africa that decided to fight for the acquisition of the full control of the mining giant of gems whose 40.7% of shares it already held. In fact, at its debut in 2009, it brought to the company the concessions of emeralds of Kagem, in Zambia, the true springboard for Gemfields. Something seems to have driven Pallinghurst CEO, Arne Frandsen to give a change of direction and to launch, in May 2017, the decisive offer by which they acquired 75% of the shares. Also Pallinghurst was experiencing some problems due to the decreasing results that improved only in 2016 – not by chance – thanks to the income of the good years obtained through its participation in Gemfields. The attempt to obtain the majority succeeded despite the presentation of another offer by the Chinese Group Fosun Gold that was strongly opposed by the previous management of Gemfields that, later, resigned in August. The era of the historical executive manager Ian Harebottle was then over, a man who won for his company the global leadership in the production of rubies and emeralds, a manager who embodied the philosophy of Gemfieds, that is the vertical control of the precious resources for jewellery, from production to marketing. Harebottle had already experimented this model when he worked for TanzaniteOne. However, Frandsen wanted a break clearly evidencing the reasons behind it. Harebottle would have led to a useless waste of energies beyond the two main drivers of Gemfields income, that is the emeralds of Zambia (a drop equal to 50 million US$) and the rubies of Mozambique (Montepuez). The inconsistent operation carried out to diversify the extraction activities in other countries in search for similar conditions to those already acquired fully failed. Sapphires, in particular, seemed to be the focus of the expansion strategies of the group listed in the London Stock Exchange, which includes plenty of mining companies with interests in Africa. However, Frandsen himself underlined the reasons why the slowing down in the development of the two main extraction sources represents a threat to the take off of Gemfields. They would have run the risk to compromise the outcomes of the main bet, that of becoming exclusive controlling agent of the market of rough gemstones. This is no secret, as the company has always presented itself as a new De Beers for rubies and emeralds, a subject willing to show the benefits resulting from the balance between offer and demand. The million-worth investments in the communication with Mila Kunis showed even the pretence of imitating the De Beers model also in the expensive sell out, the costly stimulation of the demand at consumption. It seems that the new strategy mainly aims at capitalising the acquired advantage in the field of traceability of gems to the detriment of the expansion towards sapphires, the gems that are still lacking in the project of creating a true panel.
Gem News by Trasparenze News, published on Rivista Italiana di Gemmologia #2, September 2017.
