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LONDON (Alliance News) - Gemfields PLC Wednesday said production fell from its emerald and beryl mine during the first quarter of the year as the average grade fell, but said production from its ruby mine increased whilst sales volumes and average prices are increasing at its Faberge unit.
The diamond miner said the Kagem mine in Zambia produced 7.1 million carats of emerald and beryl in the first quarter of 2016, down from 9.9 million carats a year earlier. The fall came as a result of higher grade zones being mined in early 2015 compared to the first three months of 2016.
The average grade fell to 297 carats per tonne of ore compared to 355 carats.
With production considerably lower in the period, total operating costs increased to USD10.3 million from USD9.8 million and unit operating costs rose to USD1.45 per carat from 99.0 cents a year earlier. However, on a cash basis those unit costs fell to 99.0 cents from USD1.15 a year ago.
Cash rock handling costs in the period fell to USD2.69 per tonne of ore from USD2.85 per tonne.
To put those costs into perspective, Gemfields held an auction of predominantly higher quality rough emerald and beryl taken from Kagem in March and April, generating revenue of USD33.1 million at an average price of USD70.86 per carat sold.
The next auction will be held in India later this month, but will involve predominantly lower grade production, meaning the prices are set to come in lower than that previous auction held in Zambia.
At the Montepuez ruby mine in Mozambique, production rose to 2.0 million carats from 1.4 million carats a year earlier as the miner processed higher grades, but lower value, resources. Production was impacted by heavy rainfall in the period as well, the miner said.
The average grade from the mine was 30 carats per tonne compared to 18 carats following that higher grade material being processed.
Total operating costs in the quarter rose to USD5.8 million from USD4.6 million, caused by a rise in staff numbers and a larger fleet as the operation continues to ramp up.
Unit operating costs decreased to USD2.90 per carat from USD3.29 per carat following the lift in production, and on a cash basis those costs fell to USD2.40 from USD2.64.
Cash rock handling costs in the period rose to USD10.18 per tonne of ore from USD7.10 per tonne as the cost of preparing the ore increased due to the increased production and because of the impact of the heavy rainfall, it said.
"The coloured gemstone market remains robust, as is evident from Gemfields auction results, and is further supported by improving consumer demand within the US. To date the company has generated over USD116.0 million in revenue from auctions held in the 2016 financial year and we look forward to two additional auctions, firstly a lower quality emerald auction in May and another ruby auction in June, prior to the year end," said Chief Executive Ian Harebottle.
Its Faberge marketing unit saw agreed sales fall 26% year-on-year in the first quarter of 2016, as the company sold the high value Pearl Egg last year which, unfortunately, was not repeated in the first quarter of 2016.
The volume of sales was up 17% in the first quarter and the average selling price of products was up by almost a third, partly offset by a 10% rise in total operating costs due to increased advertising spend.
On the corporate front, Gemfields said it had cash and equivalents of USD5.6 million at the end of March, but that excludes the USD33.1 million in revenue generated from its most recent auction of material from Kagem. Total debt at the end of the period stood at USD49.0 million.
Administrative and general costs amounted to USD14.6 million in the first quarter of 2016.
Gmefields shares were trading up 0.7% to 42.81 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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