29th Nov 2011 07:00
Gemfields plc
("Gemfields" or the "Company")
Market Update - Quarter ending 30 September 2011
29 November 2011
Gemfields plc presents an operational update for the three monthperiod ending 30 September 2011. All figures are approximate, unaudited and,unless otherwise stated, the phrase "carats" includes both emerald and beryl.
Highlights
* Ongoing significant waste moving programme at the Kagem mine to open new
areas for future ore production. Once completed, management expects an
overall increase in operating performance in the medium term as Kagem will
be able to mine both the waste and ore more efficiently. Due to the planned
impact of the waste moving programme and the areas currently being mined:
* Gemstone production of 4.9 million carats in the quarter ending 30 September 2011 (versus 10.8 million carats in the prior quarter)
* Grade for the quarter was 205 carats per tonne (versus 500 carats per tonne
in the prior quarter)
* Production costs for the quarter increased to USD 0.79 per carat (versus
USD 0.32 per carat in the prior quarter)
* Unit rock handling costs (on a cash basis) were USD 3.28 per tonne (versus
USD 2.39 per tonne in the prior quarter) * A graphical production update is available at www.gemfields.co.uk
* Second escape route shaft to the underground workings completed during the
quarter
* As of 30 September 2011, Gemfields had USD 32 million in cash
Production Update
The Kagem mine, of which Gemfields owns 75%, is presently Gemfields' only operating emerald mine. Kagem is the single largest emerald mine in the world and its key production parameters by quarter are summarised below:
Production Performance Quarterly Quarter Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 TOTALSummary End: * Gemstone million 7.3 6.0 2.9 4.9 3.4 6.1 12.8 5.9 3.5 10.8 4.9 68.6 Production carats (Emerald+Beryl) Ore Production 'k 17.8 22.3 16.0 13.5 12.5 18.9 19.5 16.0 12.0 21.7 24.0 194 (Reaction Zone) tonnes Grade Carats 410 268 182 365 277 323 658
369 290 500 205 354 (Emerald+Beryl/ /tonne Reaction Zone) Waste Mined million 0.8 0.5 0.5 0.7 0.6 0.7 0.9 0.8 0.8 1.4 2.2 9.9 (including TMS) tonnes Stripping Ratio 43 22 33 49 51 38 48 48 66 67 92 51 Cash Operating USD 3.7 3.5 3.3 3.1 3.0 3.4 3.5 3.6 3.6 3.5 7.2 41.4 Cost million Cash Operating USD / 4.8 6.8 6.1 4.6 4.7 4.6 3.6 4.6 4.4 2.4 3.3 4.1 Cost tonne per of rock moved Financial Performance Quarterly Quarter Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 TOTALSummary End: * to Sep-11 Total Operating USD 3.7 3.5 3.3 3.1 3.0 3.4 3.5 3.6 3.6 3.5 3.9 38.0 cost million Unit Production USD 0.51 0.59 1.13 0.63 0.87 0.55 0.27 0.62 1.03 0.32 0.79 0.55 cost per carat /carats Unit Production USD 210 159 205 230 241 179 178 227 298 160 162 196 cost per tonne of /tonne ore *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. To dateapproximately USD 3.35 million of waste moving costs have been capitalised andwill be amortised later when the associated ore is mined.
The quarter ending 30 September 2011 produced 4.9 million carats at a grade of 205 carats per tonne with unit costs of USD 0.79 per carat.
As announced on 3rd October 2011, Gemfields has embarked on a significant wastemoving programme to open new areas for future ore production. This initiativewill be the primary area of focus at the Kagem mine in the short term and issupported by the Company's strong cash position. As a result, the strippingratio will continue to increase in the near term as areas of overburden aremined in order to expand the levels of ore available for future mining. Oncecompleted, management expects an overall increase in operating performance inthe medium term as Kagem is able to mine both the waste and ore moreefficiently.
This focus on moving waste and the areas currently being mined will have a negative impact on gemstone production on the quarter under review and the quarter ending 31 December 2011, however, production is expected to increase considerably thereafter.
About 938,000 tonnes of waste was moved by a contractor during the quarter (compared to 166,000 tonnes in the prior quarter). Cash unit rock handling costs also increased as a result to USD 3.28 per tonne in the current quarter (compared to USD 2.39 in prior quarter).
Kagem's key annual production parameters are summarised below:
Kagem Annual UNITS YEAR YEAR YEAR YEAR YEAR YEAR YTD Production to 30 to 30 to 30 to 30 to 30 to 30 to 30 Summary Jun Jun Jun Jun 2009 Jun 2010 Jun 2011 Sep 2011 2006 2007 2008 Gemstone million 10.2 9.4 9.9 28 17.4 33.0 4.9 Production carats (Emerald+Beryl) Ore Production `000 22 29 42 80 61 69 24 (Reaction Zone) tonnes Grade carats/ 462 325 233 349 286 478 205 (Emerald+Beryl/ tonne Reaction Zone) Waste Mined million 1.8 2.8 5.1 4 2.5 3.9 2.2 (incl. TMS) tonnes Waste+ TMS: stripping 83 96 120 50 42 54 91 Reaction Zone ratio Total Rock million 1.8 2.8 5.1 4.1 2.6 3.9 2.2 Handling tonnes Gemfields' trial underground mining project achieved 43.3 metres of horizontaladvance during the quarter ending 30 September 2011 from 56 blasts (versus 45.7metres in the quarter ending June 2011). The total linear development to dateis 231.2 metres (versus 187.7 meters at 30 June 2011). A total of 167 tonnesof ore was produced during the quarter (versus 178 tonnes in the prior quarter)with 493.5 tonnes of waste removal. A second escape route to the undergroundworkings was completed during the quarter. The collaring, support and haulagepreparations are being completed at this second entrance. Four productiondrives have been started to access the nearby discordant pegmatite to evaluatethe ore and production potential. Approximately 3,025 carats of gems wereproduced by the underground operation in the quarter ending 30 September 2011.Illegal mining activity within the boundaries of the Kagem mining licence isnot yet fully resolved and Gemfields continues to work with key ministries
toalleviate this challenge.Cash Balances
As of 30 September 2011, Gemfields had USD 32 million in cash, and Kagem, in which Gemfields has a 75% interest, is debt free.
Ian Harebottle, CEO of Gemfields, commented:
"Gemfields'mine to market strategy continues to reap benefits for Gemfields,itsproductsand its partners. This is clearly evidenced in thefirmdemand forcoloured gemstones stemming from both developed and emerging marketsalike. Gemfields' healthy cash position has supported the Company's decision toactively pursuethe development of other assets in its portfolioand to increasethe scale of operations at itsKagemmine, whereoperational performance willcontinue to improve post the current high wall pushback project. Significantlyincreased production outputs are anticipated in the lasttwo financialquarters."
Enquiries:
Gemfields [email protected]
Dev Shetty, CFO +44 (0)20 7518 3402
Canaccord Genuity Limited +44 (0)20 7050 6500
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb
Neil Passmore +44 (0)20 7155 8630
JP Morgan Cazenove
Jos Simson/Lydia Eades +44 (0)20 7920 3150
Tavistock Communications
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