The worldwide marketplace for coloured gems, corresponding to emeralds and rubies, is dominated by a couple of main gamers. One of many largest is Gemfields Plc, a U.Okay.-registered, London Inventory Trade-listed firm with important mining operations in Zambia, Mozambique, India, Sri Lanka and, not too long ago, Colombia.

At first look, issues seem rosy at Gemfields, however a more in-depth look reveals questionable offers and associations. As with blood diamonds, the valuable stone commerce purports to supply transparency, however lots of its practices are murky and darkish.

In September 2015, Gemfields introduced a sequence of acquisitions in Colombia. The primary goal was a 70 % stake within the Coscuez emerald mine within the mountainous province of Boyacá, one of many world’s finest sources of emeralds.

Boyacá was on the heart of the notorious “inexperienced wars” between native factions of the emerald mining enterprise. The Colombian emerald commerce has lengthy been dominated by mafia-like organizations that dabble in paramilitary actions and cocaine manufacturing and trafficking. Former guerrillas, drug lords and personal armies proceed to supply help for mine leaders in trade for defense funds and even fairness stakes in mining operations.

As documented by InSight Crime, a basis that research organized crime in Latin America, focused assassinations inside the trade have escalated lately. Turf squabbles erupted once more after the 2013 loss of life of longtime emerald kingpin Víctor Carranza, who fought fiercely to keep up management over about 40 % of Colombia’s emerald manufacturing. This violence, together with declining revenues from emerald mining, has stored most worldwide firms away, with only a few venturing to take a position – till now.

In accordance with Gemfields’ regulatory filings, the corporate will personal 70 % of a brand new entity referred to as Coscuez NewCo, whose principal asset would be the Coscuez license. The remaining 30 % will stick with the concession’s present proprietor, Colombian agency Esmeraldas y Minas de Colombia SA, or Esmeracol.

Colombian authorities have mentioned that Esmeracol mines belong to one of many nation’s largest drug trafficking organizations, the El Dorado cocaine cartel. The newspaper El Espectador revealed a confidential investigation by Colombia’s Anti-Laundering Unit displaying the leaders of the cartel used Esmeracol and its Coscuez mine to launder $10 billion in proceeds from the sale of 900 tons of cocaine to the U.S. over a decade. These revenues far exceed Colombia’s whole emerald exports, which declined from $480 million a 12 months within the late Nineteen Eighties to $147 million in 2014.

The cartel’s 4 leaders have been arrested by U.S. authorities in 2010 and 2012. However Esmeracol shares stay within the arms of an alleged entrance man for the cartel bosses. This raises the prospect that the cartel will use Gemfields’ emerald funding to revive its operations whereas sustaining a low profile as oblique minority shareholders within the Coscuez mine.

Gemfields additionally acquired majority stakes in a number of smaller Colombian mines, however supplied few particulars of their public filings. Colombia’s Mining Ministry information reveals it has authorised seven mining concessions managed by six native subsidiaries of Worldwide Stone Asia Mine (ISAM). ISAM, which has a three way partnership with Gemfields, belongs to 2 southern Spain scions of a outstanding accounting household agency with no obvious historical past within the mining trade.

A Tangled Historical past

Gemfields’ connections run deep. Based in London in 2004 by Rajiv Gupta, the inheritor to an Indian emerald buying and selling household lively within the enterprise for 50 years, the corporate was initially led by former De Beers govt Jeremy Clarke.

One of many early important seed traders who helped finance Gemfields’ £8.5 million acquisition of 70 % of Zambia’s Ndola Rural Emerald Restricted Space was Frank Timis, a controversial Romanian-Australian pure assets tycoon. Timis’ repute has been tainted by a path of spectacularly failed tasks, irate traders and losses from London to China over the past decade.

Gemfields additionally attracted capital from Brian Gilbertson, former CEO of BHP Billiton Ltd. Gilbertson began Pallinghurst Sources LLP, a U.Okay. non-public fairness agency investing within the mining trade with a main itemizing on the Johannesburg Inventory Trade and a secondary itemizing on the Bermuda Inventory Trade. Pallinghurst and its subsidiaries took management of Gemfields in 2008.

Gilbertson, who serves as Pallinghurst’s chairman, shaped the corporate in 2004 with an preliminary funding of $150 million from his enterprise companion Viktor Vekselberg, a Russian billionaire with longstanding ties to Russian President Vladimir Putin.

In 2004, Gilbertson took the CEO put up at Siberian-Urals Aluminium Firm, or SUAL, a Russian firm owned by Vekselberg. Gilbertson helped oversee SUAL’s 2007 merger with Rusal, an aluminum producer owned by Oleg Deripaska, one other Kremlin-aligned oligarch. The merger resulted in what for a time was the most important aluminum firm on the earth.

Vekselberg and Gilbertson’s relationship soured after the latter exited from SUAL and the 2 ended up going through off in a Cayman Islands court docket over Pallinghurst’s acquisition of the famed Fabergé model in 2007. In accordance with Vekselberg, Gilberston’s buy of the egg model with ties to the Russian czars and treasured stones amounted to a breach of his fiduciary responsibility. The Russian billionaire had helped fund Pallinghurst for the aim of buying Fabergé, which he had lengthy coveted for himself. The long-lasting model operates now underneath the Gemfields umbrella as a part of the corporate’s push to market coloured gems.

White Knights or Darkish Lords?

Each Pallinghurst and Gemfields current themselves as white hats. However firm supplies are slim on specifics.

Gemfields doesn’t belong to any of the main mining self-regulatory organizations, such because the Worldwide Council for Metals & Mining or the Accountable Jewellery Council. The corporate says it makes an attempt to stick to those teams’ pointers “the place potential,” however its language on accountable mining leaves room for selective interpretation. How else to clarify the sample of violence in its African operations?

Equally, Pallinghurst says it makes an attempt to stick to the King III Report on Company Governance, a South African fee that established finest practices. But Gilbertson is Pallinghurst Chairman and likewise an Government Director, which dangers the board’s independence, based on King III ideas.

Pallinghurst doesn’t have an inner auditing division. In its 2015 annual report, it justifies this by saying, “The Board imagine that it could not be applicable for the Group to nominate its personal inner audit operate.” Its exterior auditor’s chairman is a Pallinghurst board member. The 2015 report disclosed this, however dismissed any potential conflicts by describing the connection as “arm’s size.”

To cynics, that is simply one other instance of life within the cutthroat pure assets enterprise. However these info ought to matter to traders. Extra scrutiny and accountability is required.