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Thursday May 6th, 2021

Sri Lanka tightens mining laws to prevent foreign gemming

EconomyNext – Sri Lanka has introduced new controls to prevent foreign firms doing gem mining in the island after cancelling exploration licences that a multinational precious stones miner had acquired to dig for sapphires.

K L D Dayasagara, deputy director general of the National Gem & Jewellery Authority (NGJA) said the government will not allow mechanized mining by foreign firms as it would quickly exhaust gem deposits.

Sri Lanka’s new president earlier this month cancelled 16 mining licences issued by the previous government to entities controlled by a foreign company to explore for blue sapphires and other gems.

The licences were acquired by Gemfields Plc, a firm which produces about a fifth of the world’s rough emeralds and is listed on the London Stock Exchange.

"The 16 exploration licences were not given by NGJA but by the Geological Survey and Mines Bureau (GSMB)," Dayasagara told

"Now we have a new mechanism where the GSMB does not give licences without our concurrence. We will not give licenses to companies even with foreign directors."

The government cancelled the 16 licences after protests from the local gem trade which feared mechanized mining by foreign firms would exhaust the deposits and also lead to greater control of the market by Gemfields.

Gemfields said in an announcement to the London stock exchange on 9 March that in September 2014 it acquired 75 percent operating interests in 16 exploration licences "covering diverse minerals" for 400,000 US dollars which analysts described as "a relatively small consideration" for the miner.

Gemfields entered into a joint venture with East West Gem Investments Limited (EWGI), a company registered in Jersey, the Channel Islands, a tax haven, in order to "progress opportunities in the Sri Lankan sapphire and gemstone sector via three Sri Lankan subsidiaries which will be 75 percent and 25 percent held by Gemfields and EWGI respectively."

The joint venture will also see Gemfields and EWGI establish a gemstone trading company called Ratnapura Lanka Gemstones (Pvt) Ltd (RLGPL), a company approved by the Board of Investment of Sri Lanka.

"The trading company will focus on sourcing rough sapphires from various sources in the local market," the Gemfields statement said.

It also said a trading licence has been obtained in favour of RLGPL, and a "token shipment of sapphire" made from Sri Lanka to the Gemfields UK office.

"Gemfields is in the process of establishing infrastructure in Sri Lanka and commencing preliminary geological assessment of the permits," the company said.

Gemfields reported first-half core earnings of 61.7 million dollars, more than triple the amount earned a year earlier, after selling more stones at auction, but has said it was looking to expand trading in precious stones.

Gemfields’ mines now stretch from Zambia and Mozambique to Sri Lanka with the joint venture to mine sapphires in Sri Lanka being described as part of its long-held ambition to "become the De Beers of the global coloured stones market."

The Sri Lanka venture will allow the firm it to complete what its Chief Executive Ian Harebottle has called the “traffic light of coloured stones” – emerald, rubies and sapphires: red, green and blue.

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