By Brenton Cordeiro
April 22 (Reuters) - Emerald miner Gemfields Plc reported a 7 percent decline in average per-carat prices at itslower-quality gemstone auction earlier this month, hurt by arecent directive by the Zambia government that prevents theoverseas sale of gemstones mined in the country.
The rough emerald and beryl auction in Lusaka, Zambia,generated revenue of $15.2 million, but the gemstones sold foran average of $2.42 per carat, the first dip in per-carat pricesin the last five auctions of lower-quality stones by Gemfields.
"The results were reasonable, but probably not as optimal asthey could have been," Chief Executive Ian Harebottle said.
Gemfields, which mines emeralds at Kagem in Zambia, as ableto sell only 36 percent of the 17.34 million carats offered forsale at the auction.
"A factor in this reduction may have been due to a number ofdeclined auction invitations, which was higher than in priorauctions, most notably due to the travel demands placed onclients in reaching Lusaka, typically involving three flightsand approaching 24 hours of journey time," the company said.
Gemfields said earlier this month that the potential ban onselling gemstones outside Zambia could hurt its competitiveposition against countries like Brazil and Colombia.
Zambia is the third largest producer of emeralds afterColombia and Brazil.
"At this stage, it is unclear whether the (company's)higher-quality auction in Singapore scheduled for June 2013 willgo ahead," JPMorgan Cazenove analyst Alexander Mees said.
"The government of Zambia is a 25 percent shareholder inKagem and so would presumably want to consider the impact of anychanges on the value of its investment as well as the taxremittance currently being generated."
The company said it would continue to seek a resolution tothe prevailing situation.
Gemfields produced 6.6 million carats in the quarter endedDec. 31 at Kagem, its only producing mine, up from 3.9 millioncarats in the prior year.
"We are concerned that volumes have been significantlylighter for the past two auctions, especially as mine productionis expected to increase," Canaccord Genuity's Jeremy Dibb said.
"Though the lowest quality stones are by nature the lowestrevenue contributors this will result in a significant inventorybuild."
Shares in the company were trading down marginally at 26.5pence at 0844 GMT on Monday on the London Stock Exchange.