2nd Aug 2011 07:00
Gemfields plc
("Gemfields" or the "Company")
Market Update - Quarter to 30 June 2011
2 August 2011
Gemfields plc is pleased to present an operational update for the three month period and year ending 30 June 2011. All figures are approximate, unaudited and, unless otherwise stated, "carats" includes both emerald and beryl.
Highlights
- Record annual production of 33 million carats
- 90% increase in year-on-year production (17.4 million carats
produced in the year ending 30 June 2010)
- Grade for the year to 30 June 2011 was 478 carats per tonne (versus 286 in
prior year)
- 41% reduction in per carat production costs for the year, from USD 0.73 to
USD 0.43 per carat
- 25% reduction in unit rock handling costs for the year, from USD
4.92 to USD 3.70 per tonne
- The final quarter of the year produced 10.8 million carats at a
grade of 500 carats per tonne and a unit cost of USD 0.32 per carat
- Graphical production update available at www.gemfields.co.uk
Emerald and Beryl Auctions
As previously announced, Gemfields' most recent auction of (predominantly higher quality) rough emeralds was held in Singapore from 11 to 15 July 2011. Some 39 companies were invited to attend the auction, with 38 of these placing bids for the material on offer. The auction saw 1.07 million carats of higher quality rough emeralds mined by Gemfields placed on offer, with 0.74 million carats being sold and generating record sales of USD 31.6 million. When compared with the higher quality auction held in December 2010, average per carat prices improved by 63% from USD 26.20 per carat to USD 42.71 per carat. Gemfields has now completed seven auctions in the past two years, generating total revenue of USD 87.5 million.
Production Update
Gemfield's 75% owned Kagem mine 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:
KAGEM Quarterly Quarter Sep Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Total Summary to 30 June End:
-08 08 09 09 09 09 10 10 10 10 11 11
2011
Gemstone million carats 9.4 5.3 7.3 6.0 2.9 4.9 3.4 6.1 12.8 5.9 3.5 10.8 78.4
Production (E+B) Ore Production '000 tonnes 21.4 18.7 17.8 22.3 16.0 13.5 12.5 18.9 19.5 16.0 12.0 21.7 210.2 Grade
carats/tonne 438 286 410 268 182 365 277 323 658 369 290 500 373
Waste Mined t millions 1.7 1.0 0.8 0.5 0.5 0.7 0.6 0.7 0.9 0.8 0.8 1.3 10.3 (including TMS) Stripping Ratio
81 53 43 22 33 49 51 38 48 48 66 58 49Total Operating USD million 8.0 6.2 3.7 3.5 3.3 3.1 3.0 3.4 3.5 3.6 3.6 3.5 48.3CostGem Production USD/carat 0.85 1.16 0.51 0.59 1.13 0.63 0.87 0.55 0.27 0.62 1.03 0.32 0.62Unit CostOre Production USD/tonne 372 332 210 159 205 230 241 179 178 227 298 160 230Unit CostRock Handling USD/tonne 4.5 6.1 4.8 6.8 6.1 4.6 4.7 4.6 3.6 4.6 4.4 2.7 4.6Unit Cost
Note: all figures are unaudited
The quarter to 30 June 2011 was robust, producing 10.8 million carats at a grade of 500 carats per tonne with unit costs of USD 0.32 per carat. In addition, the unit rock handling costs were just USD 2.70 per tonne. The stripping ratio is expected to increase in the short to medium term as areas of overburden are mined in order to expand the levels of available ore. This will have a commensurate impact on future total mining costs.
Kagem's key annual production parameters are summarised below:
Kagem Annual UNITS YEAR YEAR YEAR YEAR YEAR YEARProduction Summary to 30 to 30 to 30 to 30 to 30 to 30 Jun Jun Jun Jun Jun Jun 2006 2007 2008 2009 2010 2011Gemstone Production million carats 10.2 9.4 9.9 28 17.4 33.0(Emerald+Beryl)Ore Production (Reaction 000 tonnes 22 29 42 80 61 69Zone)Grade (Emerald+Beryl/ carats/tonne 462 325 233 349 286 478Reaction Zone)Waste Mined million tonnes 1.8 2.8 5.1 4 2.5 3.7(incl. TMS)Waste+ TMS: stripping ratio 83 96 120 50 42 54Reaction ZoneTotal Rock Handling million tonnes 1.8 2.8 5.1 4.1 2.6 3.8
The year ending 30 June 2011 saw record annual production of 33 million carats, a 90% increase in the 17.4 million carats produced in the prior year. The grade for the year to 30 June 2011 was 478 carats per tonne, versus 286 in prior year. Per carat production costs fell 41% from USD 0.73 to USD 0.43 per carat and unit rock handling costs fell 25% from USD 4.92 to USD 3.70 per tonne.
Gemfields' underground mining project achieved 45.7 metres of horizontal advance during the quarter ending 30 June 2011 from 48 blasts (versus 6.7 metres in the quarter ending March 2011). The total linear development to date is 187.7 metres (versus 142.2 meters at 31 March 2011). A total of 178 tonnes of ore was produced during the quarter (versus 312 tonnes in the prior quarter) with 535 tonnes of waste removal. Little production mining was done during the quarter as the focus has been on developing a second escape route for the operation. Ramped-up development mining has been achieved following completion of additional roof and wall support system in the previous quarter. Approximately 7,135 carats of gems were produced by underground operation in the quarter ending 30 June 2011, versus 8,305 carats produced in the prior quarter.
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.
A graphical production update can be downloaded from www.gemfields.co.uk
Cash Balances
As of 30 June 2011, Gemfields had USD 13.6 million in cash, prior to receipt of the USD 31.6 million from the most recent auction and Kagem Mining Ltd, in which Gemfields has a 75% interest, is debt free.
Ian Harebottle, CEO of Gemfields, commented:
"Continued price increases for rough diamonds are a good indicator of the strength of the luxury goods sector as a whole. As a relatively new and informal sector coming off a low base, coloured gemstones in general and emeralds in particular are expected to enjoy even greater scope for increases in demand, which is clearly evident from our recent auction results. Gemfields is well positioned to achieve maximum benefit from present trends and feels these key drivers are likely to persist in supporting the popularity of Gemfields' products."
Enquiries:Gemfields [email protected] Shetty, CFO +44 (0)20 7518 3402Canaccord Genuity Limited
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500Neil Passmore +44 (0)20 7155 8630JP Morgan Cazenove
Jos Simson/Paul Youens +44 (0)20 7920 3150Tavistock Communications
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Gemfields Grou.