Gemfields considers X-ray body scanners to fight theft at Kagem mine

Ian Harebottle, CEO, Gemfields, during the Gemfields 2013 global launch and collaboration with jewellery designers in New Delhi on Tuesday. — Kamal Narang

Gemfields, the world’s biggest emerald producer, is considering installing X-ray body scanners to fight theft at its Kagem mine in northern Zambia that robs it of as much as a fifth of the operation’s total revenue.

The theft probably cut about $17m from Gemfields’ sales in the past financial year, Sean Gilbertson, a director at Gemfields, said on Tuesday in an interview at the Kagem mine, the world’s top source of the green precious stones, accounting for about 20% of supply.

The company has reduced theft from as much as 50% of potential revenue to less than a fifth, said Lameck Malipilo, head of security at Kagem.

“It was so bad, that if you go to town on Friday, you would find Kagem employees buying crates of beer,” he said. “The first crate of beer was to wash his car.”

The trade in stolen gems in Zambia, Africa’s biggest emerald producer, is a key reason London-based Gemfields opposes a possible ban on emerald auctions outside the country that Mines Minister Yamfwa Mukanga said on April 5 the government was considering. Stolen emeralds sell for as little as a 10th of what Gemfields would auction them for, Mr Gilbertson said.

Gemfields will hold its first local emerald auction from April 15 to 19 in the capital Lusaka, Mr Mukanga said.

The company lost 16% of its market value on Monday, after announcing the potential ban. It also has an amethyst mine in Zambia and ruby project in Mozambique that is not yet in production. Gemfields was unchanged at 24.75p in London on Thursday morning. The stock has declined 39% in the past six months.

Buyers of the stolen gems are generally based in Kitwe, about 33km north of Kagem, and are believed to be West African, according to Mr Malipilo. They send couriers known as “go-comes” to purchase emeralds from miners or security officials at Kagem, who usually travel to the mine at night, he said.

The dealers often bribe security or mine workers with money, television sets or cars, according to Mr Gilbertson, who is the son of Brian Gilbertson, the former CEO of BHP Billiton. The mine fires about 6% to 7% of its 530-strong workforce each year because of theft, he said.

“If we continue on that trajectory and get a better grip on theft and the illegal market, we should be able to get Kagem to a point where its revenue is above $100m,” he said.

Zambia competes with Colombia, Brazil, Zimbabwe and the US in the global export market for emeralds.

To try to curb theft, the company installed security cameras and employed security guards from countries including Nepal, making communication with miners more difficult, said Mr Malipilo. Every person leaving the mine is searched.

Gemfields is talking to government and labour unions about installing x-ray body scanners, which is an “emotional issue”, Mr Gilbertson said.