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Queries underway on foreign firms’ hand in gem mining

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By Chandeepa Wettasinghe
The National Gem and Jewellery Authority (NGJA) is currently investigating a harrowing trend of foreign companies engaged in gem mining in Sri Lanka through local third parties.

“We are currently investigating whether foreign companies are indirectly operating in the country,” NGJA Land and Mining Director Aruna Gunawardene said.
All foreigners were forbidden from exploring or mining gems in Sri Lanka according to a presidential order this January, in the pretext of them using advanced machinery to deplete mineral veins in a few months and export the gems with adverse effects to the environment and local industry stakeholders.  President Maithripala Sirisena gave the order after local industry stakeholders expressed concerns over Gemfields PLC, a British company, which was said to have acquired a 75 percent stake in 16 gem exploration licences for US $ 400,000.

“Foreigners can’t have mining licences. Locals can. But both locals and foreigners can’t have exploration licences,” Gunawardene said, clearing up the current status of the regulations. 

However, an industry source told Mirror Business that some foreign companies are still engaged in mining activities in Sri Lanka through third parties.
“What happens is that a local sets up a company, brings in the machinery and has the controlling share as a front. But the gems go to them (foreign party). These machines are more suited for mines in Africa,” the source said.

Gemfields PLC is one of the world’s largest coloured gem suppliers.  The company fell into controversy this April after it made a global announcement that it was continuing sapphire mining and explorations in Sri Lanka.

However, NGJA Director General M. Wickramasinghe said that the NGJA had written to Gemfields to retract the message.

Meanwhile, Gunawardene said that NGJA had suspected several foreign parties of conducting indirect operations. However, it is difficult to track down the perpetrators due to the lack of a paper trail.

He also said that NGJA had issued 100s of mining licences to locals since the foreign ban was enacted.

Sri Lanka is home to 70 varieties of the 200 coloured stones discovered in the world and is famous for the Ceylon sapphire. However, the industry has been going through a hard time this year with the gem export income down sharply due to increased tariffs in China to tackle black money being converted into gemstones in bulk.

Instead of investing in value addition and attempting to increase income in the form of jewellery, the industry is now attempting to sell low to medium range stones in bulk to India.

The entire gems, diamonds and jewellery export figures fell 30.4 percent year-on-year (YoY) in June and 13.6 percent YoY for the first six months of this year. 

Industry experts say that Sri Lankan gems and jewellery are losing ground in Europe due to a mismatch in market taste and designs. Exports to the top destination US however remain healthy.
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