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Precious stones miner Gemfields (LON:GEM), the world’s biggest coloured gems producer, has pushed an auction of emeralds from its Kagem mine in Zambia to next year as the bulk of its customers are from India, which is in the throes of what the company calls a “demonetization” drive.
Move comes as most of Gemfields customers are from India, which is in the throes of what the company calls a “demonetization” drive.
While such sale has been moved to February, Gemfields said an auction of mixed quality rubies, from the Montepuez deposit in Mozambique, would proceed as planned later this month.
Last month, India’s government withdrew two ubiquitous currency notes — 500 and 1,000 rupees (about $7.50, $15) — turning 86% of the cash in the country to paper in a measure aimed to crack down on “black money” or illegal cash holdings.
“The new demonetisation programme will require an adjustment period to allow industries and stakeholders to adapt to the new policies,” chief executive officer Ian Harebottle said in the statement.
Until last year, Gemfields was synonymous with emeralds. But the world’s biggest producer of the green gemstone has done quite well with rubies ever since. A cache of exceptional-quality red stones from its Montepuez mine in Mozambique have made their way onto jewels by the likes of Fabergé, Georg Jensen and Miiori – modelled by brand ambassador actress Mila Kunis.
The miner has said it expects trading in rubies to account for a “sizeable chunk” of its revenue over the next five to 10 years.
Comments
Altaf
The demonetization will have two way impact on luxury products, be it gems, sports cars, swanky real estate.
One is with overnight loss of legality for the owners of 1000/500 bills, they are under immense pressure to convert the same to other meaningful instruments and they will be stuck up for quite some time.
The second is overall, in the nation as a whole, liquidity is sucked out overnight. Overnight, liquidity is sucked out of the system. Government is asking people to deposit their 1000/500 bills in banks, but have no small denomination notes to replace the bIgger ones. ts like suddenly closing all doors of a theater and switching off air circulation. Everybody inside has to manage with limited oxygen.
Its only in the recent past of 5-10 years that middle class is getting a feel of the gems as an asset class. A small segment of middle class are breaking away and elevating themselves from gold to gems. Industry is trying to establish foothold in Indian markets. With the ability of the middle class to spare cash for this asset class damaged, it will be a big hit to the nascent gem industry.
Two things may happen.
One is with less demand, prices may go down which will bring more people into the range of gem buyers. More of the black money may shift to gem assets which is easy to hide from the vultures called government.
Second is with their ability to buy gems with undeclared assets gone, they will be kicked back to stone ages where they will settle with gold or even silver and read about gems in history books.