Gemfields Grou. Regulatory News (GEM)

21 Dec 2007 07:00

Gemfields Resources Plc Final results for the year ended 30 June 2007

21 December 2007

Gemfields Resources Plc ("Gemfields" or "the Company", Ticker "GEM") is pleased to report its final results for the year ended 30 June 2007.

Highlights

* The commencement of trial mining at the Mbuva-Chibolele Emerald Mine. * The construction of Phase I of the washing plant at Mbuva-Chibolele. * The first two auctions for the sale of emeralds. * The completion of the acquisition of Sarina Global Limited and its Mitondo East exploration licence in the Ndola Rural Emerald Restricted Area, Zambia. * The signing of an option agreement to acquire the Jagoda Pink Tourmaline Mine. * A cash placing of 8,000,000 ordinary shares for ‚£3,200,000. * The post-year end acquisition of a 75% interest in the Kagem Emerald Mine in Zambia. * The post-year end acquisition of an option to acquire a portfolio of in excess of 25 licences and licence applications for gemstone exploration in Madagascar. * The post-year end acquisition of an option to acquire a worldwide and exclusive 15 year licence to use the Fabergƒ© brand name in respect of gemstones (excluding diamonds). * In consideration for these post-year end acquisitions Gemfields will issue 137,910,340 new ordinary shares in the Company to Rox Limited, a Pallinghurst Resources portfolio company.

The Chairman's Statement and the primary financial statements are set out below. The full financial statements have been sent to shareholders and they can also be viewed on the company's website at www.gemfields.co.uk.

Enquiries:

Gemfields

Richard James, CFO richard.james@gemfields.co.uk

+44 (0)20 7016 9416

Conduit PR

Leesa Peters/Ed Portman +44 (0)20 7429 6600

+44 (0)781 215 9885

Canaccord Adams Limited

Robin Birchall +44 (0)20 7050 6500

Chairman's statement

__________________________________________________________________________________________

Dear Shareholder,

Welcome to the consolidated financial statements for Gemfields Resources PLC ("the Company"). A great deal has been achieved in the year ended 30 June 2007.

Operations

* Mbuva-Chibolele Mine

Trial mining at Gemfields' 100% owned Mbuva-Chibolele Mine commenced ahead of schedule. The construction of Phase I of the washing plant, which involved the erection of a primary crushing and screening circuit, was also completed.

Two emerald sales have already been held. A total of 607,912 carats of emeralds were sold in November 2006 with proceeds of US$768,246. Then, in February 2007, a total of 385,085 carats of emeralds were sold with proceeds of US$1,028,121.

A trend for better quality emeralds has emerged as we continue to mine. As the mine deepens we anticipate that the quality of the emeralds will keep improving as we move away from the near surface, lower grade mineralisation.

* Kariba Amethyst Mine ("Kariba")

Production continued at the 50% owned Kariba Amethyst Mine with sales of US$2,133,088 for the year. The completion of a privatisation agreement to purchase a further 26% of Kariba from the Zambian government has taken much longer than had been anticipated but the Company expects it to be signed in the near future. A feasibility study is underway at the property and management believes that production can be increased significantly.

Securing of Further Gemstone Projects in Zambia

The following further gemstone projects were secured during the year:

* Sarina Global Limited ("Sarina")

Gemfields completed the acquisition of 100% of the share capital of Sarina for US$1,432,500 consideration, which was payable in the form of 1,500,000 shares in the Company issued at ‚£0.50 per share. With this acquisition, the Mitondo East Exploration licence was added to Gemfields' other six exploration licences in the Ndola Restricted Emerald Area.

* Large Scale Amethyst Prospecting Licence

A large scale amethyst prospecting licence PLLS-300 was approved by the Ministry of Mines in favour of Gemfields covering an area of 80 sq kms. This licence is adjacent to the area covered under the gemstone licence held by Kariba Minerals Limited, in which Gemfields holds a 50% equity stake. Kariba's amethyst mineralisation is hosted in one of the several parallel shear zones in the area. Gemfields has acquired this prospecting licence to explore the potential of additional mineralisation in the other shear zones.

* Jagoda Pink Tourmaline Mine ("Jagoda")

An option agreement for the acquisition of Gemstone Mining Licence number GL 205 was also signed. The licence area covers approximately 3.75 sq kms including the Jagoda mine which has recorded production of over 40 tonnes of pink tourmaline between the mid 1990s and 2005. Gemfields paid US$50,000 for an option to acquire the licence for a price of US$1.95m. This option expired at the end of September 2007 but a further US$50,000 has since been paid to extend the option period to the end of March 2008.

Cash Placing

The Company raised a further ‚£3,200,000 during the year with a placing of 8,000,000 ordinary shares at ‚£0.40 per share.

These funds have been earmarked for the development of Kariba and Jagoda.

Post- Year End Acquisition

The Company is pleased to announce that subsequent to the year end it has conditionally agreed to acquire from Rox Limited ("Rox", a Pallinghurst Resources portfolio company) a 75% interest in the Kagem emerald mine in Zambia.

Rox has also granted to Gemfields an option to acquire a portfolio of in excess of 25 licences and licence applications for gemstone exploration in Madagascar held through its subsidiary Oriental Mining.

In addition, Fabergĩ Limited, another Pallinghurst Resources portfolio company has agreed to grant Gemfields an option to acquire a worldwide and exclusive 15 year licence to use the Fabergĩ brand name in respect of gemstones (excluding diamonds).

Under the proposed transaction, Gemfields is to acquire Greentop International Inc. ("Greentop") (a BVI company) and Krinera Group SA ("Krinera") (a Panamanian company), the holding companies through which Rox's interest in the Kagem mine is held (via intermediate holding companies). In consideration for the acquisition of Greentop and Krinera, Gemfields will issue to Rox 137,910,340 new ordinary shares in the Company (constituting 55% of Gemfields' share capital after implementation of the transaction on a fully diluted basis).

As the proposed transaction is classified as a reverse takeover under the AIM Rules, the transaction is conditional, amongst other things, on Gemfields obtaining the approval of its shareholders. Gemfields' shares have been suspended from trading since the announcement of the acquisition pending the preparation and publication of a Circular and notice of extraordinary general meeting ("EGM") setting out the details of the proposed transaction and seeking shareholder approval. Competent persons reports are being prepared and it is expected that the Circular and notice of EGM will be sent to shareholders in the first quarter of 2008.

Outlook

The future is looking very positive for the Company.

* The anticipated quality of the Kagem resource is expected to transform the performance of Gemfields. * Further exploration of Gemfields' properties has produced encouraging results. * Negotiations are continuing for further acquisitions of various coloured gemstone properties. Graham Mascall20 December 2007

Consolidated profit and loss account for the year ended 30 June 2007

Year ended Year ended 30 June 30 June 2007 2006 (restated) US$ US$ Turnover Group and share of joint venture 2,862,911 1,171,332 Less: share of joint venture (1,066,544) (1,171,332)turnover ________ ________ 1,796,367 - - ________ ________ Cost of sales (5,865,121) - - Administration expenses (3,604,417) (3,068,170) ________ ________ Group operating loss (7,673,171) (3,068,170) Share of operating loss in: Joint venture (181,356) (228,131) ________ ________ Loss on ordinary activities before interest, taxation and disposal (7,854,527) (3,296,301)of fixed assets Profit on disposal of fixed 186,044 - -assets - group Profit on disposal of fixed 4,548 assets - joint venture ________ ________ Loss on ordinary activities before interest and taxation (7,663,935) (3,296,301) Interest receivable - group 524,218 371,310 Interest receivable - share of 411 - -joint venture Interest payable - group 5 - - (8,025) Interest payable - share of joint (18,980) (37,684)venture ________ ________ Loss on ordinary activities (7,158,286) (2,970,700)before taxation Taxation on loss on ordinary (116,160) 48,106activities ________ ________ Loss for the year (7,274,446) (2,922,594) Loss per share Basic and diluted US$(0.07) US$(0.04) ________ ________ All amounts relate to continuing activity.

Consolidated statement of total recognised gains and losses and reconciliation of movements in shareholders' funds for the year ended 30 June 2007

2007 2006 (restated) US$ US$ Statement of total recognised gains and losses Loss for the financial year - Group (7,150,275) (2,704,885) - Joint venture (124,171) (217,709) ________ ________ Total gains and losses for the year before currency adjustments for translation differences on consolidation in respect of exchange translation (7,274,446) (2,922,594)differences Exchange translation differences (7,204) 52,802 ________ ________ Total recognised gains and losses for (7,281,650) (2,869,792)the financial year ________ ________ Prior year adjustments - Personnel costs (385,930) - - ________ ________ Total losses recognised since last (7,667,580) (2,869,792)financial statements ________ ________

Consolidated balance sheet at 30 June 2007

2007 2007 2006 2006 (restated) (restated) US$ US$ US$ US$ Fixed assets Intangible assets 12,461,205 10,834,190 Tangible assets 9,712,608 10,357,816 Investment in joint venture - share of gross assets 1,006,107 696,823 - share of gross (1,013,384) (572,724) liabilities ________ ________ (7,277) 124,099 ________ ________ 22,166,536 21,316,105 Current assets Debtors 1,051,072 734,084 Stocks 2,190,472 12,270 Cash at bank and in hand 9,835,940 12,873,317 ________ ________ 13,077,484 13,619,671 Creditors: amounts falling due within one year (2,343,728) (2,700,111) ________ ________ Net current assets 10,733,756 10,919,560 ________ ________ Creditors: amounts falling due after one year Deferred taxation (176,826) - ________ ________ Total assets less current 32,723,466 32,235,665liabilities ________ ________ Capital and reserves Called up share capital 1,871,166 1,685,128 Share premium account 33,775,898 28,011,141 Merger reserve 10,500,346 9,096,496 Option reserve 858,469 443,663 Profit and loss reserve (14,282,413) (7,000,763) ________ ________ Shareholders' funds - 32,723,466 32,235,665equity ________ ________

Company balance sheet at 30 June 2007

2007 2007 2006 2006 (restated) (restated) US$ US$ US$ US$ Fixed assets Tangible assets 4,199 4,390 Investments 11,370,276 9,937,776 ________ ________ 11,374,475 9,942,166 Current assets Debtors 29,055,567 19,675,183 Stocks 33,018 - Cash at bank and in hand 9,531,928 11,843,680 ________ ________ 38,620,513 31,518,863 Creditors: amounts falling due within one year (7,761,497) (6,325,657) ________ ________ Net current assets 30,859,016 25,193,206 ________ ________ Total assets less current 42,233,491 35,135,372liabilities ________ ________ Capital and reserves Called up share capital 1,871,166 1,685,128 Share premium account 33,775,898 28,011,141 Merger reserve 10,500,346 9,096,496 Option reserve 858,469 443,663 Profit and loss reserve (4,772,388) (4,101,056) ________ ________ Shareholders' funds - 42,233,491 35,135,372equity ________ ________

Consolidated cash flow statement for the year ended 30 June 2007

Year ended Year ended 30 June 30 June 2007 2006 US$ US$ US$ US$ Cash outflow from operating (8,600,194) (2,785,824)activities Capital expenditure and financial investment Payments to acquire (50,000) (2,448,853) intangible fixed assets Payments to acquire tangible (978,808) (2,434,076) fixed assets Proceeds from disposals of 289,777 - fixed assets Exploration and development (144,515) (2,743,805) expenditure ________ ________ (883,546) (7,626,734) ________ ________ Cash outflow before use of liquid resources and (9,483,740) (10,412,558)financing Financing Issue of shares (net of issue 5,922,145 18,902,788costs) Return on investments and servicing of finance Interest received 524,218 371,310 Interest paid - (8,025) ________ ________ 524,218 363,285 ________ ________ (Decrease)/Increase in cash (3,037,377) 8,853,515 ________ ________ 1