31st Jan 2011 07:00
Gemfields PLC
Market Update - January 2011
7:00am, Monday 31 January 2011
Gemfields PLC ("Gemfields" or "the Company", Ticker "GEM") is pleased to present an operational update for the three month period ending 31 December 2010. All figures are unaudited and the gemstone carat figures provided include both emerald and beryl (unless otherwise stated).
Highlights
- Record single auction proceeds of USD19.6 million achieved in December 2010 (against a total revenue of USD 19.9 million for the FY ending 30 June 2010)
- Gemstone production in the first six months of the current financial year (18.7 million carats) has exceeded the entire prior year's production of 17.4 million carats
- The significant increase achieved per-carat prices as a result of continuing increase in demand primarily from within Asia and India
- 5.9 million carats produced during the quarter (versus 12.8 million carats in the previous record quarter).
- Grade during the quarter was 369 carats per tonne - slightly above the average prevailing during the last 2 years.
- Unit production costs during the quarter were approximately USD 0.56 per carat versus an historic average of USD 0.64 per carat.
- All bank loans and leases repaid, leaving the key Kagem asset debt free.
- "Gem Mining Company of the Year Award" to be received during the 57th Annual Tucson Gem and Mineral Show.
- Graphical production update available at www.gemfields.co.uk
Emerald and Beryl Auctions
Gemfields held an auction of (predominantly higher quality) rough emeralds inJohannesburg from 6 to 10 December 2010. The auction was attended by 32companies drawn from India, Israel, Germany and the United States. The auctionsaw 0.87 million carats placed on offer, with 0.75 million carats being soldand generating record sales of USD 19.6 million. This single auction exceededthe USD 18.7 million generated from the three auctions held during thefinancial year ending 30 June 2010. The significant increase in achievedper-carat prices can be attributed to the exceptional quality of some of thematerial on offer, a continuing increase in demand primarily from within Asiaand India and as a result of Gemfields on-going efforts to both formalise theemerald market and the promotion of ethical Zambian emeralds.
Gemfields next auction will be of predominantly lower quality material and will be held in Jaipur, India from 10-14 March 2011.
Gemfields has now completed five auctions in the past 18 months, realising revenues totalling USD 45.8 million. The results of the December 2010 auction are summarised below, together with those from the four preceding auctions held in London, Johannesburg and Jaipur:
AUCTION RESULTS JULY `09 NOVEMBER '09 MARCH '10 JULY `10 DECEMBER `10 SUMMARY
AUCTION AUCTION AUCTION AUCTION
AUCTION
Dates 20-24 July 23-27 11-15 March 19-23 July 6-10 December 2009 November 2010 2010 2010 2009Location London, Johannesburg, Jaipur, London, Johannesburg, England SA India England SAType Higher Higher Lower Higher Higher Quality Quality Quality Quality QualityCarats offered 1.36 million 1.12 million 28.90 million 0.85 million 0.87 millionCarats Sold 1.36 million 1.09 million 22.80 million 0.80 million 0.75 millionNo. of companies 23 19 25 37 32placing bidsAverage no. of 10 13 8 18 16bids per lotNo. of lots 27 19 56 27 19offeredNo. of lots sold 26 14 49 24 18Percentage of 96% 74% 88% 89% 95%lots soldPercentage of 99.8% 97.2% 78.9% 94.2% 86%lotssold by weightPercentage of 82% 76% 89% 87% 99%lotssold by valueTotal sales USD 5.9 USD 5.6 USD 7.2 USD 7.5 USD 19.6realised million million million million millionat auction
Average per carat USD 4.40 per USD 5.10 per USD 0.31 per USD 9.35 per USD 26.20 per sales value carat carat carat carat carat
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 Summary Quarter Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- End: 08 08 09 09 09 09 10 10 10 10 TOTALGemstone Production(Emerald+Beryl) million carats 9.4 5.3 7.3 6.0 2.9 4.9 3.4 6.1 12.8 5.9 64.1Ore Production(Reaction Zone) '000 tonnes 21.4 18.7 17.8 22.3 16.0
13.5 12.5 18.9 19.5 16.0 176.5
Grade (Emerald+Beryl/Reaction Zone) carats/tonne 438 286 410 268 182 365 277 323 658 369 363Waste Mined(including TMS) million tonnes 1.7 1.0 0.8 0.5 0.5 0.7 0.6 0.7 0.9 0.8 8.2Stripping Ratio 81 53 43 22 33 49 51 38 48 48 47Total Operating Cost USD million 8.0 6.2 3.7 3.5 3.3 3.1 3.0 3.4 3.3 3.3 40.8Unit Production Cost(per carat) USD/carat 0.85 1.16 0.51 0.59 1.13
0.63 0.87 0.55 0.26 0.56 0.64
Unit Production Cost(per tonne of ore) USD/tonne 372 332 210 159 205 230 241 179 171 206 231Unit Cost (per tonne ofrock moved) USD/tonne 4.5 6.1 4.8 6.8 6.1 4.6 4.6 4.6 3.5 4.2 4.9
Note: All figures are unaudited
Kagem's unaudited total operating costs for the quarter ending 31 December2010 totalled USD 3.3 million (unchanged from the prior quarter ending 30September 2010), implying an average production cost during the quarter of USD0.56 per carat of emerald and beryl (compared with USD 0.73 per carat for yearending 30 June 2010).
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 total mining costs.
Kagem's key annual production parameters are summarised below:
Kagem Annual Production Summary
UNITS YEAR YEAR YEAR YEAR YEAR HALF YEAR to 30 Jun to 30 Jun to 30 Jun to 30 Jun to 30 Jun to 31 Dec 2006 2007 2008 2009 2010 2010 Gemstone Production(Emerald+Beryl) million carats 10.2 9.4 9.9 28.0 17.4 18.7 Ore Production(Reaction Zone) 000 tonnes 22 29 42 80 61 35 Grade (Emerald+Beryl/Reaction Zone) carats/tonne 462 325 233
349 286 527
Waste Mined (incl. TMS) million tonnes 1.8 2.8 5.1
4.0 2.5 1.7
Waste+ TMS: Reaction Zone strip ratio 83 96 120 50 42 48
Total Rock Handling million tonnes 1.8 2.8 5.1
4.1 2.6 1.7
Gemfields' underground mining project continues to make progress with a totalof 40.2 meters of horizontal advance during the quarter from 45 blasts (versus11.2 meters in the quarter ending September 2010). The total lineardevelopment to date is 135.5 meters (versus 95.3 meters at 30 September 2010).A total of 1,113 tonnes of ore was produced during the quarter with no wasteremoval (versus 719 tonnes at the end September 2010). About 55,000 caratswere produced in the quarter ending 31 December 2010 (versus 66,000 carats inthe 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 December 2010, Gemfields had USD 15.6 million in cash (excluding a refundable VAT deposit of US$3.1million). Kagem Mining Ltd, in which Gemfields has a 75% interest, has paid back all bank loans and leases repayable by 31 December 2010 and is now debt free.
Ian Harebottle, CEO of Gemfields, commented:
"Kagem has delivered a phenomenal quarter in terms of sales and enjoyedanother robust production quarter. We look forward to the forthcoming auctionin Jaipur and the encouraging outlook for the company and our partners in thecoloured gemstone sector. Gemfields is honoured to have had its progressrecognised in terms of the "Gem Mining Company of the Year Award" due to bereceived during the 57th Annual Tucson Gem and Mineral Show taking place thiscoming week".Enquiries:
Gemfields [email protected]
Dev Shetty, CFO +44 (0)20 7518 3402
Canaccord Genuity Limited
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500
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