5th May 2011 07:00
Gemfields plc
Market Update - Quarter to 31 March 2011
7:00am, Thursday 5 May 2011 Gemfields plc ("Gemfields" or "the Company", Ticker "GEM") presents anoperational update for the three month period ending 31 March 2011. All figuresare unaudited and "carats" includes both emerald and beryl (unless otherwisestated). Highlights Gemstone production in the first 9 months of the current financial year standsat 22.2 million carats (versus 17.4 million carats for the entire 12 months ofthe prior financial year).
Pleasing production figures in the first six months of the current financial year and anticipated rains during the quarter under review, support a short term shift in mining focus to added waste mining and infrastructural development.
3.5 million carats produced during the quarter (versus 5.9 million carats in the previous quarter).
Grade during the quarter of 290 carats per tonne (versus 369 carats per tonne in the previous quarter).
Unit production costs during the quarter of approximately USD 1.03 per carat (and USD 0.46 per carat in the nine months in the financial year to date).
Record prices of USD 0.77 per carat achieved in the March 2011 lower qualityrough auction held in Jaipur (versus USD 0.31 per carat achieved in the lowerquality rough auction held in Jaipur twelve months prior).
Graphical production update available at www.gemfields.co.uk
Emerald and Beryl Auctions Gemfields' most recent auction of predominantly lower quality rough emeralds(held in Jaipur in March 2011) yielded a record breaking USD 0.77 per carat interms of material of this nature (with a total auction revenue of USD 9.9million). While Gemfields' most recent auction of predominantly higher qualityrough emeralds (held in Johannesburg in December 2010) yielded USD 26.20 percarat (totalling USD 19.6 million), in itself also a record in terms of therevenue achieved at higher quality auctions. Gemfields' next auction ofpredominantly higher quality material is scheduled to take place in Singaporefrom 11-15 July 2011 with results anticipated to be buoyed by a continuedincrease in demand for fine gems across all markets. 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 unaudited production parameters by quarter are summarised below:
KAGEM Quarterly Data to Mar-11
Quarter End: Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09
Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Total
Gemstone Production million
(Emerald+Beryl) carats 9.4 5.3 7.3 6.0 2.9 4.9 3.4 6.1 12.8 5.9 3.5 67.6
Ore Production '000
(Reaction Zone) tonnes 21.4 18.7 17.8 22.3 16.0 13.5 12.5 18.9 19.5 16.0 11.9 188.5
Grade (Emerald+Beryl/ carats/ Reaction Zone) tonne 438 286 410 268 182 365 277 323 658 369 290 359 Waste Mined million (including TMS) tonnes 1.7 1.0 0.8 0.5 0.5 0.7 0.6 0.7 0.9 0.8 0.8 9.0 Stripping Ratio 81 53 43 22 33 49 51 38 48 48 66 48 USD
Total Operating Cost million 8.0 6.2 3.7 3.5 3.3 3.1 3.0 3.4 3.3 3.3 3.6 44.4
Unit Production Cost USD/ (per carat) carat 0.85 1.16 0.51 0.59 1.13 0.63 0.87 0.55 0.26 0.56 1.03 0.66 Unit Production Cost USD/
(per tonne of ore) tonne 372 332 210 159 205 230 241 179 171 206 298 236
Unit Cost (per tonne of USD/
rock moved) tonne 4.5 6.1 4.8 6.8 6.1 4.6 4.6 4.6 3.5 4.2 4.4 4.8
Note: All figures are unaudited While total production for the quarter was lower than that achieved during theprevious quarter, most of the emeralds produced were of a higher quality (goodcolour and clarity), and are likely to deliver above average per carat pricesonce sold at auction. Operating costs were adversely affected by the rainy season, higher strippingratios, increased infrastructural development work and a one-time payment toharmonise Kagem's previously complex employee benefit structures into a singlesystem.
The stripping ratio is expected to continue increasing 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 total mining costs.
Kagem's key annual production parameters are summarised below:
Kagem Annual Production Summary
UNITS YEAR YEAR YEAR YEAR YEAR Year to to 30 to 30 to 30 to 30 to 30 date: Jun Jun Jun Jun Jun March 2006 2007 2008 2009 2010 2011 Gemstone Production million (Emerald+Beryl) carats 10.2 9.4 9.9 28.0 17.4 22.2 Ore Production (Reaction Zone) 000 tonnes 22 29 42 80 61 47 Grade (Emerald+Beryl/ 468 Reaction Zone) carats/tonne 462 325 233 349 286 million Waste Mined (incl. TMS) tonnes 1.8 2.8 5.1 4.0 2.5 2.5 Stripping Ratio 83 96 120 50 42 53 million Total Rock Handling tonnes 1.8 2.8 5.1 4.1 2.6 2.54 In terms of Gemfields' trial underground mining project the bulk of the quarterwas dedicated to the installation of improved roof and tunnel supportinfrastructure, with only 15 days of production taking place towards the end ofthe quarter. The total linear development to date is 142.2 meters (versus 135.5meters at 31 December 2010). A total of 312 tonnes of ore was produced duringthe quarter (versus 1,113 tonnes in the prior quarter) with 63 tonnes of wasteremoval. Approximately 8,800 carats of gems were produced in the quarter ending31 March 2011 (versus 42,000 carats produced in the prior quarter). 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.
A graphical production update can be downloaded from www.gemfields.co.uk
Cash Balances and Auction
As of 31 March 2011, Gemfields had USD 20.6 million in cash and Kagem Mining Ltd, in which Gemfields has a 75% interest, is debt free.
Ian Harebottle, CEO of Gemfields, commented:
"We were particularly pleased by the exceptional quality of our gemstoneproduction this quarter. While the rainy season, lower ore yields, addeddevelopment work and a payment in respect of employee harmonisation resulted ina modest overall production performance, these results are, however, in linewith our overall development plans and the fluid deposition characteristic ofcoloured gemstone mining. We remain well on track to deliver a robustperformance for the current financial year. Demand for Gemfields' emeralds andberyl, supported inter alia by the launch of our 'Uniquely You' advertisingcampaign in the Indian market, continues to grow and we look forward to theoutcome of our rough emerald auction in Singapore in July 2011 and thecontinued positive impact that supply of this nature will have on our sector." Enquiries: Enquiries:Gemfields [email protected] Shetty, CFO +44 (0)20 7518 3402Canaccord Genuity LimitedNominated Adviser and Joint Broker to GemfieldsTarica Mpinga/Andrew Chubb +44 (0)20 7050 6500Neil Passmore +44 (0)20 7155 8630JP Morgan CazenoveJos Simson/Paul Youens +44 (0)20 7920 3150Tavistock Communications
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