28th Jul 2010 07:00
Gemfields PLC
July 2010 Auction Results and Operational Update
7:00 am, 28 July 2010
Gemfields PLC ("Gemfields" or "the Company", Ticker "GEM") is pleased to present the results of its July 2010 rough emerald auction as well as an operational update for the three month period ending 30 June 2010. All figures are unaudited.
Highlights
July 2010 rough emerald auction realises sales of USD 7.5 million, the highest auction revenue to date.
Demand for Zambian emeralds, and more specifically Gemfields' Kagem emeralds, has seen a steady increase across all sectors over the past year.
Per carat prices improved 83% over the last auction of higher quality material held in November 2009.
Four auctions held since July 2009 generated revenues totalling USD 26.2 million.
Quarter ending 30 June 2010 saw solid production volumes, good grades and the lowest quarterly unit production costs achieved to date.
The year ending 30 June 2010 saw Kagem's operating costs fall 42%, with gemstone production down just 38%, representing real achieved economies of scale.
Graphical production update available at www.gemfields.co.uk
Emerald and Beryl Auctions
Gemfields held an auction of (predominantly higher quality) rough emeralds in London from 19 to 23 July 2010. The auction was attended by 37 companies drawn from India, Israel, Germany and the United States. The auction saw 0.85 million carats offered, with 0.80 million carats being sold, raising USD 7.5 million.
Gemfields has now completed 4 auctions in the past 13 months, realising revenues totalling USD 26.2 million.
The results of the July 2010 auction are summarised below, together with those from the previously published auctions held in London, Johannesburg and Jaipur:
AUCTION RESULTS JULY '09 NOVEMBER '09 MARCH '10 JULY '10 SUMMARY AUCTION AUCTION AUCTION AUCTION Dates 20-24 July 23-27 November 11-15 March 19-23 July 2009 2009 2010 2010 Location London, Johannesburg, Jaipur, London, England South Africa India England Type Higher Higher Quality Lower Higher Quality Quality Quality Carats offered 1.36 million 1.12 million 28.90 0.85 million million Carats Sold 1.36 million 1.09 million 22.80 0.80 million million No. of companies 23 19 25 37 placing bids Average no. of bids 10 13 8 18 per lot No. of lots offered 27 19 56 27 No. of lots sold 26 14 49 24 Percentage of lots 96% 74% 88% 89% sold Percentage of lots 99.8% 97.2% 78.9% 94.2% sold by weight Percentage of lots 82% 76% 89% 87% sold by value Total sales realised USD 5.9 USD 5.6 million USD 7.2 USD 7.5 at auction million million million Average per carat USD 4.40 per USD 5.10 per USD 0.31 per USD 9.35 persales value carat carat carat carat
Gemfields' next auction of (predominantly higher quality) rough emeralds is scheduled to take place during December 2010.
Production Update
Gemfield's 75% owned Kagem mine is presently Gemfields' only operating emerald mine. Kagem's key unaudited production parameters by quarter are summarised below:
KAGEM Quarterly Summary to 31 June 2010
30- 31- 31- 30- 30- 31- 31- 30- Quarter Sep- Dec- Mar Jun- Sep- Dec- Mar Jun- Ending: 08 08 -09 09 09 09 -10 10 Gemstone Production (Emerald+Beryl) million carats 9.4 5.3 7.3 6.0 2.9 4.9 3.5 6.1
Ore Production (Reaction Zone) '000 tonnes 21.4 18.7 17.8 22.3 16.0 13.5 12.5 18.9
Grade (Emerald +Beryl/ Reaction Zone) carats/tonne 438 286 409 268 182 365 277 323 Waste Mined (including TMS) million tonnes 1.7 1.0 0.8 0.5 0.5 0.7 0.6 0.7 Stripping Ratio 81 53 43 22 33 49 51 38 Total Operating Cost USD million 8.0 6.2 3.7 3.5 3.3 3.1 3.0 3.1 Unit Production Cost (per carat) * USD/carat 0.85 1.16 0.51 0.59 1.13 0.63 0.87 0.50 Unit Production Cost (per tonne of ore) USD/tonne 372 332 210 159 205 230 241 163 Unit Cost (per tonne of rock handled) USD/tonne 4.5 6.1 4.8 6.8 6.1 4.6 4.6 4.2 Note: All figures are unaudited *excluding Selling Cost
Unaudited unit production costs for the quarter ending 30 June 2010 were USD 0.50 per carat, the best quarterly figures achieved to date. Kagem's unaudited total operating costs for the year ending 30 June 2010 totalled USD 12.4 million (versus USD 21.5 million in the year ending 30 June 2009), implying an average production cost during that period of USD 0.72 per carat of emerald and beryl (versus USD 0.77 per carat for year ending 30 June 2009). Accordingly, unit production costs have decreased despite an overall reduction in the scale of mining (2.6 million tonnes of rock handling in the year ending 30 June 2010 versus 4.1 million tonnes in the prior year) and is indicative of the mine achieving true economies of scale in its reworked mine plan.
Kagem's key annual production parameters are summarised below:
Kagem Annual Production Summary UNITS YEAR YEAR YEAR YEAR YEAR
to 30 to 30 to 30 to 30 to 30 2010 Jun Jun Jun Jun Jun versus 2006 2007 2008 2009 2010 2009 Gemstone Production (Emerald+Beryl) million carats 10.2 9.4 9.9 28.0 17.4 -38%
Ore Production (Reaction Zone) 000 tonnes 22 29 42 80 61 -24%
Grade (Emerald+Beryl/ Reaction Zone) carats/tonne 462 325 233 349 286 -18% Waste Mined (incl. TMS) million tonnes 1.8 2.8 5.1 4.0 2.5 -38% Waste+TMS:Reaction Zone strip ratio 83 96 120 50 42 -16% Total Rock Handling million tonnes 1.8 2.8 5.1 4.1 2.6 -37%
Despite these improvements, the stripping ratio is anticipated to increase in the short to medium term as areas of overburden are mined in order to expand the levels of available ore and is expected to have a commensurate impact on total mining costs.
Gemfields' underground mining project continues to make progress with a total of 76.6 metres having been developed by 30 June 2010. This remains a trial project in which the various challenges and technicalities associated with underground mining within Kagem's specific geological context being tested and refined before expanding underground mining into other target areas across the mining licence area. The projects first production was achieved in February 2010.
While expert assessment of the unique 6,225 carat 'Insofu' rough emerald (discovered in February 2010) continues, indications are that this gem is of high quality, competent and transparent, which makes it an exceptionally rare find. Gemfields intends offering the Insofu to the market in a manner befitting its unique nature, and within the coming months.
Organised illegal mining activity within the boundaries of the Kagem mining licence area is as yet not fully resolved but has largely ceased over the past few months.
A graphical production update can be downloaded from www.gemfields.co.uk
Zambian emeralds market update
Demand for Zambian emeralds, and more specifically Gemfields' Kagem emeralds, has seen a steady increase across all sectors over the past year. The heightened level of interest in Gemfields' emeralds can largely be attributed to the Company's ability to deliver on its vision of providing a consistent supply of high quality, well graded rough emeralds. Supported by the highest levels of environmental and ethical route-to-market standards and wide spread marketing and promotions underpinned by increased demand in all sectors but particularly Asia. These factors have motivated many manufacturers, jewellery designers and retailers to select Zambian emeralds as their gem of choice. As a testament to these achievements, attendance at the recent auction was limited to just 37 premium international emerald companies, with a further 30 companies having applied to participate in the recent auction - a clear increase over the 23 companies that attended Gemfields' July 2009 auction.
This increase in demand is having a positive impact on prices; with a measured price increase of 83% having been achieved since Gemfield's November 2009 auction.
Adrian Banks, Gemfields' Product Director commented; "We are pleased with the positive response we have received at the recent auction, giving a clear indication that demand for our emeralds is growing. We are in the fortunate position of being able to be supplying various industry leaders with the qualities and quantities of products that they are looking for in order to meet their levels of demand. Our grading system has been well received and is supported by well received marketing and promotional initiatives in various sectors. All indications are that the market for emeralds is likely to continue to grow at a considerable pace, supported by strong Asian and worldwide demand, and into the foreseeable future."
Cash Balances
In addition to the auction receivables of USD 7.5 million, Gemfields presently has USD 1.3 million in cash. Kagem Mining Ltd, in which Gemfields has a 75% interest, has bank loans and leases repayable by 31 December 2010 totalling USD 2.4 million. In addition, Gemfields has gemstone inventory estimated by management to exceed USD 10 million.
Ian Harebottle, CEO of Gemfields, commented:
"Gemfields has enjoyed a very good production quarter, a robust year and a highly successful July 2010 auction. The markets for diamonds and gemstones continue to show clear signs of recovery, with per carat prices received by Gemfields rising dramatically. Our marketing initiatives are moving forward apace, as demonstrated by our Emeralds for Elephants project in cooperation with the World Land Trust. Gemfields is delivering solidly on our vision of bringing a regular and reliable supply of emeralds and beryl, from a responsible source, to the market."
Enquiries:Gemfields [email protected] Dev Shetty, CFO +44 (0)20 7518 3402Canaccord Genuity LimitedNominated Adviser and Joint Broker to GemfieldsTarica Mpinga/Andrew Chubb +44 (0)20 7050 6500
vendorRelated Shares:
Gemfields Grou.