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LONDON (Alliance News) - Gemfields PLC on Wednesday said pretax profit fell in the last financial year as higher costs and a lower gross margin offset a significant rise in revenue after a surge in production.
The miner said its mines in Africa together produced around 38.5 million carats during the year, and Gemfields reiterated its plan to get that production figure up to 60.0 million carats per year by the 2018 financial year.
The diamond miner reported a fall in pretax profit to USD12.3 million in the year ended June 30, from the USD16.3 million profit made a year ago, despite revenue rising to USD171.5 million from USD160.1 million.
Although revenue rose in the period, its margin was squeezed as it only managed to generate a USD85.0 million gross profit in the year, slightly down from USD85.1 million a year earlier.
Other contributions to the fall in profit included higher selling, general and administrative costs of USD55.3 million compared to USD48.1 million a year ago and finance costs increasing to USD4.3 million from only USD716,000.
However, earnings before interest, tax, depreciation and amortisation rose to USD64.4 million from USD59.3 million.
"Gemfields maintains its target of a 30-40% Ebitda margin and will continue its focus on key marketing initiatives in existing target areas such as the US, Europe and India but it will also look to accelerate activities in China and the Middle East," the company said.
Operationally, production from Gemfields' Kagem mine in Zambia totalled 30.1 million carats of emerald and beryl compared to only 20.2 million carats a year ago. The mine's average grade fell to 242 carats per tonne from 253 carats but its unit operating costs also fell to USD1.48 per carat from USD1.58 per carat a year earlier.
In the current financial year, Gemfields is aiming to produce between 25.0 million and 30.0 million carats from the Kagem mine and that is part of a longer-term plan to ramp-up production to up to 40.0 million carats by the 2018 financial year.
At the Montepuez ruby mine in Mozambique, production rose to 8.4 million carats from 6.5 million carats. However, the mine saw its grades halve to only 21 carats per tonne from 41 carats and its unit operating costs substantially increase to USD2.57 per carat from USD1.12.
In the current financial year, Gemfields is aiming to produce 8.0 million carats from the Montepuez mine and will focus on exploration as it has only explored around 10% of the licence area, it said.
Gemfields also is considering the installation of a second wash plant in addition to a further upgrade of the existing wash plant, which would support an increased in production volumes up to 20.0 million carats per annum by the 2018 financial year.
"I am pleased to present yet another strong year of growth and performance for Gemfields in which we have achieved record revenues and met or exceeded production guidance at each of our Kagem emerald and Montepuez ruby operations," said Chief Executive Ian Harebottle.
"At Kagem, we have announced what is believed to be the world's first gemstone reserve in the proven category together with a 25 year life of mine and increasing production to 40.0 to 45.0 million carats per annum, while at Montepuez our maiden resource and reserve statement has provided a 21 year mine life producing 20.0 million carats per annum," he added.
Gemfield shares were down 3.8% to 57.25 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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