* Zambia says auctioning of emeralds should be held in thecountry
* Gemfields says its next auction in Lusaka in April
April 8 (Reuters) - Precious stones miner Gemfields Plc said the Zambia government's potential ban on overseasauctioning of gemstones could hurt revenue at its core Kagememerald mine in north Zambia, sending its shares down as much as27 percent.
The Zambian Ministry of Mines, Energy and Water Developmentissued a directive on Friday that all auctioning of emeralds beheld in Zambia as their sale in foreign markets contributes tocapital flight.
"Gemfields has got around 20 percent of the world's(emerald) market, which comes from Zambia," Chief OperatingOfficer Dev Shetty told Reuters.
"Not allowing Gemfields to auction abroad is going to takeus out of the competition with Brazil and Colombia, which holds30 percent each of the world's supply of emeralds," Shetty said.
S.P. Angel analyst Carole Ferguson, however, said Zambia wastrying to flex its muscles.
"It's just a matter of negotiating with the government - Idon't see how the government could realistically expect them(Gemfields) to have all the auctions in Zambia and generate thetype of revenue they're generating," Ferguson told Reuters.
Gemfields, owner of the Fabergé luxury jewellery brand, saidit would host an auction in Lusaka this month and that its nextforeign auction was scheduled to take place in Singapore inJune. Zambia owns the rest of Kagem.
The company, which named actress Mila Kunis as its brandambassador earlier this year, mines mainly emeralds at its 75percent-owned Kagem mine, but also has interests in ruby andsapphire deposits.
Output from Kagem has been sold solely outside the countrysince 2009, generating $160 million of revenue from 11 auctionsabroad.
Kagem generated revenue of $77.6 million in 2012, comparedwith $8.8 million in 2008 when Gemfields bought the mine.
A potential ban would also affect Gemfields' Kariba amethystmine in south Zambia, in which the company has a 50 percentstake, it said.
Gemfields' shares were down 17 percent at 24.75 pence on theLondon Stock Exchange at 1420 GMT on Monday.
Gemfields Grou. (GEM)
