23rd May 2012 07:00
Gemfieldsplc
("Gemfields" or the "Company")
Market Update - Quarter ending 31 March 2012
23 May 2012
Gemfields plc (AIM: GEM) presents an operational update for the three month period ending 31 March 2012. All figures are approximate, unaudited and, unless otherwise stated, the phrase "carats" includes both emerald and beryl.
Highlights
Waste moving programme continued at the 75% owned Kagem mine to open new areas for future ore production
Production summary:
Gemstone production of 4.9 million carats in the quarter ending 31 March 2012 (versus 3.9 million carats in the prior quarter)
Grade for the quarter of 236 carats per tonne (versus 222 carats per tonne in the prior quarter)
Production costs for the quarter of USD 0.85 per carat (versus USD 0.87 per carat in the prior quarter, with both figures excluding capitalised waste stripping costs)
Unit rock handling costs for the quarter (on a cash cost basis) of USD 3.73 per tonne (versus USD 3.21 per tonne in the prior quarter)
Signing of a USD 9.3 million debt facility with Barclays Bank Zambia plc to part-finance the waste removal programme in the Chama section of the Kagem mine
USD 21.4 million proceeds from March 2012 Singapore auction received in full
USD 46.6 million in cash and receivables as of 31 March 2012
Demand for ethical coloured gemstones continues to increase across all markets.Next lower quality rough emerald auction scheduled to take place in Jaipur inJune 2012
A graphical production update is available at www.gemfields.co.uk
Production Update The Kagem mine, of which Gemfields owns 75% and is presently Gemfields' onlyoperating emerald mine, is the single largest emerald mine in the world and itskey production parameters by quarter are summarised below:Production Performance Quarterly Summary Quarter End: Jun-10 Sep-10 Dec-10
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 TOTAL
Gemstone Production (Emerald+Beryl) million carats 6.1 12.8 5.9 3.5 10.8 4.9 3.9 4.9 52.8
Ore Production (Reaction Zone) 'k tonnes 18.9 19.5 16.0 12.0 21.7 24.0 17.5 20.8 150.3
Grade (Emerald+Beryl/Reaction Zone) Carats /tonne 323 658 369 290 500 205 222 236 352
Waste Mined (including TMS) million tonnes 0.7 0.9 0.8 0.8 1.4 2.2 2.2 1.6 10.7 Stripping Ratio 38 48 48 66 67 92 125 78 71 Cash Operating Cost USD million 3.4 3.5 3.6 3.6 3.5 7.2 7.0 6.0 37.8 Cash Rock Handling Unit Cost USD / tonne 4.6 3.6 4.6 4.4 2.4 3.3 3.2 3.7 3.5 Financial Performance* Quarterly Summary Quarter End: Jun-10 Sep-10 Dec-10
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 TOTAL
Total Operating cost USD million 3.4 3.5 3.6 3.6 3.5 3.9 3.4 4.2 28.9 Unit Production cost per carat USD 0.55 0.27 0.62 1.03 0.32 0.79 0.87 0.85 0.55 /carats Unit Production cost per tonne of ore USD 179 178 227 298 160 162 193 200 192 /tonne *Note: With effect from July 2011, Gemfields adopted a new accounting policywhereby all waste moving costs are capitalised and are then subsequentlyamortised when the ore corresponding to that waste is mined. As of 31 March2012, approximately USD 8.8 million of waste moving costs have been capitalisedand will be amortised later when the associated ore is mined.
The quarter ending 31 March 2012 produced 4.9 million carats at a grade of 236 carats per tonne of ore and a unit cost of USD 0.85 per carat (excluding capitalised waste moving costs).
Kagem's previously announced large-scale waste mining programme to open newareas for future ore production is ongoing, with over 5.9 million tonnes ofrock having been moved in the last three quarters. While the stripping ratiowill continue to increase in the near term as areas of overburden and waste aremined, management expects an overall increase in operating efficiencies andperformance in the medium to longer term as Kagem is able to mine both wasteand ore more efficiently.
This present focus on waste mining, combined with external factors, has had anegative impact on gemstone production in the short term, however, productionis improving quarter by quarter and is expected to continue to increase in
thecoming months.
The harder rock types currently being mined resulted in approximately 0.7 million tonnes of waste being mined by the contractor during the quarter (compared to 1.1 million tonnes in the previous quarter) with cash rock handling costs increasing to USD 3.73 per tonne (compared to USD 3.21 in prior quarter).
Kagem's key annual production parameters are summarised below:
Kagem Annual UNITS YEAR YEAR YEAR YEAR YEAR YEAR YTD Production Summary to 30 to 30 to 30 to 30 to 30 to 30 to 31 Jun Jun Jun Jun Jun Jun Mar 2009 2010 2011 2012 2006 2007 2008 Gemstone million Production carats 10.2 9.4 9.9 28.0 17.4 33.0 13.7 (Emerald+Beryl) Ore Production '000 22 29 42 80 61 69 62 (Reaction Zone) tonnes Grade carats/ (Emerald+Beryl/ 462 325 233 349 286 478 220 Reaction Zone) tonne Waste Mined (incl. million 1.8 2.8 5.1 4.0 2.5 3.9 5.9 TMS) tonnes Waste+ TMS: stripping 83 96 120 50 42 54 95 Reaction Zone ratio Total Rock million 1.8 2.8 5.1 4.1 2.6 3.9 6.0 Handling tonnes Gemfields' underground mining project achieved 73.9 metres of horizontaladvance from 77 blasts (versus 73.8 metres in the quarter ending December2011). A focus on production mining has seen an increase in the number ofcarats produced from the same contact areas. Some 141,315 carats were producedin the quarter ending 31 March 2012 (versus 61,077 carats in the priorquarter), improving the underground project's overall grade to 77.9 carats
pertonne.
Kagem has entered into a USD 9.3 million debt facility at an interest rate of 3month LIBOR plus 4.75% with Barclays Bank Zambia plc. The loan will be drawndown within one year and is repayable over a period of 36 months in monthlyinstalments from the date of first drawdown. Security for this loan comprises acorporate guarantee from Gemfields plc, a charge over the assets of KagemMining Limited (excluding the mining licences) and a cash deposit pledge. Thefacility will be used to pay the contractor undertaking the removal of waste inthe Chama section of the Kagem mine and is an initial step towards Kagem MiningLtd becoming a fully independent and self-funding operation. The initialdrawdown of USD 3.0 million will take place in May 2012 and is in part designedto strengthen Kagem's credit rating for future growth.
Illegal mining activity within the boundaries of the Kagem mining licence is not yet fully resolved and Gemfields continues to work with key ministries to alleviate this challenge.
Cash Balances
As of 31 March 2012, Gemfields had USD 46.6 million in cash and receivables.
Ian Harebottle, CEO of Gemfields, commented:
"As demand for ethical coloured gemstones continues to increase across allmarkets we look forward to our next emerald auction, of lower quality rough,which takes place in Jaipur in June 2012. Gemfields' healthy cash position hassupported the Company's decision to actively pursue the development of otherassets in its portfolio and to increase the scale of operations at its Kagemmine. The recently finalised loan facility will further support Kagem's abilityto operate as a stand-alone company where operational performance will continueto improve post the current high-wall pushback with increased production outputanticipated in the last quarter of this financial year and well into the nextfinancial year." Enquiries:Gemfields [email protected] Shetty,CFO +44(0)20 7518 3402Canaccord GenuityLimited +44 (020 7523 8000
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb Neil Passmore +44 (0)207155 8630JP Morgan CazenoveJos Simson/Lydia Eades +44 (0)20 7920 3150 Tavistock CommunicationsNotes to Editors:Gemfields plc is a leading gemstone miner listed on the AIM market of theLondon Stock Exchange . The Company's principal asset is the 75%owned Kagem emerald mine in Zambia, the world's single largest emerald mine. Inaddition to the Kagem emerald mine, Gemfields has a 50% interest in the Karibaamethyst mine in Zambia.The Company also owns controlling stakes in a highly prospective ruby depositin Mozambique and licences in Madagascar including ruby, emerald and sapphiresdeposits.
In July 2009 Gemfields commenced a formal auction programme for its Zambian emeralds. To date, the Company has held nine auctions which have generated revenues totalling USD 124.7 million.
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