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Gemfields Assembles the G Factor for Natural Resources

A new measure promoting greater transparency regarding the level of natural resource wealth shared with the governments of host countries.

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Gemfields Assembles the G Factor for Natural Resources

(PRESS RELEASE) LONDON — Gemfields invites collaboration, input and support from governance bodies, mining organisations, industry observers and host governments in adopting the ‘G-Factor for Natural Resources’, a new measure promoting greater transparency regarding the level of natural resource wealth shared with the governments of host countries.

The G-Factor for Natural Resources is intended to be an uncomplicated indicator of the percentage of a natural resource company’s revenue that is paid to the host country government in primary and direct taxes, plus – where the host government is a shareholder – dividends. As such, it is an indicator of the share of natural resource wealth paid to a host country’s government.

The G-Factor for Natural Resources would typically be calculated by each standalone company engaged primarily in the extraction and sale of natural resources, whether in the mining, oil, gas, timber or fishing sectors. Accordingly, multi-national natural resource companies would publish the G-Factor for Natural Resources for each operating subsidiary engaged primarily in the extraction and sale of natural resources.

The G-Factor for Natural Resources takes its name from the “g’s” in “government”, “governance” and “good practice”, with a passing nod to “Gemfields”.

Sean Gilbertson, Gemfields’ CEO, commented: “In an era witnessing significant strides in transparency and governance, and where extensive reporting on so many facets of corporate activity is already required in the annual reports of public companies, it is surprising that practical parameters allowing more direct insight into, and comparison of, the sharing of natural resource wealth still elude us. We invite collaboration, input and support for the adoption of the ‘G-Factor for Natural Resources’ as a step forward. We hope it will be voluntarily adopted by other companies, insisted upon by host countries and incorporated into projects such as EITI.”

The G-Factor for Natural Resources is expressed as a percentage and is calculated as:
Gemfields Assembles the G Factor for Natural Resources

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where:

  • A = the total mineral royalty (tax on revenue) paid by the reporting company to the host country government during the period
  • B = the total corporation tax (tax on profit) paid reporting company to the host country government during the period
  • C = the dividends paid by the reporting company to the host country government during the period (where the host country government is a shareholder in the reporting company)
  • D = the total revenues of the reporting company during the period
  • p = the relevant period, typically calculated for each of (i) the prior year; (ii) the preceding 5 years and (iii) the preceding 10 years
  • The sums actually paid during the period (rather than the sums accrued or falling due during the period) are used for the purposes of A, B and C.

No measure of this type is perfect and it is recognised that:

  1. the G-Factor for Natural Resources is a “rule-of-thumb” – while it has broad application and is a practical indicator, it is not suited to every situation;
  2. there are numerous additional and indirect taxes which are not included in the G-Factor for Natural Resources and which further increase the contribution made to host nations by natural resource companies. Such taxes include but are not limited to area/surface charges, social security contributions, taxation on the salaries of employees, import and export duties, VAT, etc; and
  3. the variety and variations in natural resource deposits, types and occurrences lessens the ability to make direct comparisons between companies.

G-Factor for Natural Resources computations for Gemfields’ two key mining subsidiaries (the Kagem emerald mine in Zambia and the Montepuez ruby mine in Mozambique) are set out below:
Gemfields Assembles the G Factor for Natural Resources

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