Gemfields’ ‘emerald’ profits up 137 percent, says report

Revenue for the world’s largest emerald producer, Gemfields Limited Plc., rose 137 percent during the last six months ending December last year, compared to a similar period a year earlier.

The rise in revenue spurred by its new advertising campaign image entitled ‘The Art of Colour’ unveiled, has boosted the company’s reputation in the precious stone global market, says the company financial report.

Gemfields, which owns 75 percent equity in Kagem Mining Limited, ramped up its production of emeralds during the last six months of 2013 raising its revenue to US$66 million compared to US$28 million generated during the same period, it said in an interim report seen by mining news Zambia.

Net profit, after taxation was US$1.4 million compared to US$4.7 million realized a year earlier. The company’s earnings before interest tax depreciation and amortisation (EBITDA) for the same period dropped to US$18 million compared to US$19.5 million recorded in 2012.

Cash in hand at the close of last year was US$15 million compared to US$11 million recorded earlier. The estimated cost of inventory at hand, excluding fuel and other consumables were US$69.3 million as at 30 June last year compared to US$76.3 million recorded at the close of 2013.

The company produced 10.4 million carats of emerald and beryl during the six months under review compared to 14.5 million carats in 2012; with grade of 267 carats per ton recorded last year compared to 271 carats per ton a year earlier.

The unit production costs of emeralds per carat were US$0.85 compared to US$0.57 per carat, while on cash basis, production costs increased to US$1.32 per carat compared to US$1.12 per carat a year before. Cash rock handling unit costs were US$3.52 per ton compared to US$3.36 a ton.

Rough sales of the emeralds and auction were as at July 2013, predominantly were of higher quality of the rough emeralds sold during the auction floor held in Lusaka. They had during the same period last year yielded an average US$31.5 million, the second highest aggregate auction revenues achieved to date and with a record average price of US$54.00 per carat, it adds.

September 2013 auction of traded rough emeralds were estimated to have raked in US$8.5 million; while Kagem, a unit of Gemfield, finalized a US$3.5 million direct sale representing 11,286 kilograms of Kagem’s lowest two grades of beryl in October 2013.

In November last year, the company’s auction of predominantly lower quality rough emerald and beryl set records for aggregate revenues at US$16.4 million and unit prices at US$3.32 per carat, a 27 percent unit price increase over the previous record for similar quality gemstones.

Kagem paid its first ever dividend of US$8 million, of which US$2 million was paid to the Government of the Republic of Zambia, a 25 percent shareholder in Kagem in December 2013.

On Rubies, the Bulk sampling summary for 75 percent owned Montepuez Ruby Mining Limitada (“Montepuez”) in Mozambique for the period recorded 5.1 million carats of the ruby and corundum extracted compared to 0.16 million carats recorded in 2012. This took the total ruby and corundum extracted to 7.0 million carats; Total rock handling was 525,307 tones, made up of 232,745 tons of ore and 292,562 tonnes of waste compared to 12,371 tons the previous but during the corresponding period.

The total cash operating costs amounted to US$5 million compared to US2 million a year earlier and were the ‘First-of-a-kind’ comprehensive grading and sorting framework for rough rubies completed, with on-going refinement.

The wholly-owned Fabergé Limited (“Fabergé”) saw revenue derived from sales and sales orders agreed during the key Christmas shopping month of December rising 89 percent year-on-year, the report adds. Robert Benvenuto joined Fabergé as President on 28 October 2013.

Its company’s new advertising image “severed” various competitors in the sale of the coloured gemstones on the global market, which has made the company’s gemstones more competitive and a force to reckon with among its peers.

Accordingly, a preview for long-lead press in October last year of “The Fabergé Big Egg Hunt” and scheduled to take place in New York from 1 to 26 April 2014 in collaboration with leading artists and designers, has attracted about 300 egg sculptures to be displayed throughout the city.

This function will use the proceeds to be donated to charities, ‘Studio in a School’ and ‘Elephant Family’.

Future outlook and post reporting period events; Gemfields successful high quality emerald auction held in Lusaka, Zambia, in February 2014 was a milestone in its marketing, having realized revenue in excess of US$36.5 million, recording an average price per carat of US$59.31.

An additional emerald auction and its first ruby auction are scheduled for 30 June 2014. Revenues at Fabergé, derived from sales and sales orders agreed continued the trend experienced in December 2013, showing an increase of 198 percent year-on-year.

Other forecast events to bolster the company’s credibility include the key Fabergé. This will include the presentation of some of the company’s newest jewellery collections at the ‘Doha Jewellery and Watches Exhibition’ from 24 February to 2 March 2014 at the Qatar National Convention Centre in the Qatari capital.

This also includes, the “The Fabergé Easter” promotional and sales event scheduled to take place from 1 to 21 April 2014 in the world famous Harrods department store.

Fabergé will be well represented in addition to its existing retail footprint through an exclusive salon and added exhibition space; and the “mine and market” strategy continues to gain traction as is evidenced by the record prices achieved at the recent auctions.

Gemfields Plc. chief executive officer, Ian Harebottle, CEO of Gemfields, is elated at the company’s achievements.

Gemfields has delivered a very strong first half with a 137% increase in revenues to US$65.7 million and a pleasing EBITDA figure for the period of US$18 million. We have absorbed not only the increased cash requirements from our more recent growth projects, but also the fact that Kagem is now a fully tax paying entity and has distributed its first dividend to our partners in Kagem, the Government of the Republic of Zambia. Demand for coloured gemstones remained upbeat as is clearly indicated by the record per carat prices we continue to achieve” he says.

Production at the Kagem mine in Zambia had performed to expectations and the inclusion of Fabergé into the Gemfields group has seen the levels of our inventory stock reach US$69 million” he adds.

In Mozambique, the company’s bulk sampling programme at its Montepuez project had an excellent first half producing over five million carats of rubies and corundum.  As a result, the company’s strategy of offering rubies to its customers through its auction platform remains on track for the second half of this financial year.

Gemfields’ next chapter as a leading producer, marketer and retailer of emeralds, rubies and other precious coloured gemstones is set to be accelerated in the short term and we look forward to building on our successes to date, underpinned by our broadening footprint, encouraging consumer demand  and our exceptional team, to whom I am eternally grateful,” Says Harebottle.

In October 2013, the Mines Safety Department of Zambia awarded Kagem a certificate recognising more than 2.8 million reportable injury-free shifts, believed to be a record in the Zambian mining industry.

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