Gemfields Grou. Regulatory News (GEM)

Gemfields plc

("Gemfields" or the "Company")

Gemfields plc (AIM: GEM) presents an operational update for the three month period ending 30 September 2014. All figures are approximate and unaudited. Unless otherwise stated, the phrase "carats" includes both emerald and beryl in relation to the Kagem emerald mine, and both ruby and corundum in relation to the Montepuez ruby deposit.

Highlights

Emeralds

· Production summary for 75%-owned Kagem Mining Limited ("Kagem") in Zambia for the quarter ending 30 September 2014:

§ Production of 6.3 million carats of emerald and beryl (versus 6.5 million carats in the quarter ending 30 September 2013);

§ Grade of 214 carats per tonne (versus 302 carats per tonne in the quarter ending 30 September 2013);

§ Total operating costs(a) of USD 10.3 million (versus USD 7.1 million in the quarter ending 30 September 2013);

§ Unit operating costs(b) of USD 1.63 per carat (versus USD 1.09 per carat in the quarter ending 30 September 2013). On a cash basis(c), operating costs were USD 1.48 per carat (versus USD 1.06 per carat in the quarter ending 30 September 2013); and

§ Cash rock handling unit costs of USD 2.91 per tonne (versus USD 3.58 per tonne in the quarter ending 30 September 2013).

· August 2014 auction of predominantly lower quality rough emeralds and beryl held in Lusaka, Zambia generated revenues of USD 15.5 million.

· Gemfields' current auction of predominantly higher quality emerald and beryl mined at Kagem will conclude in Lusaka, Zambia on 17 November 2014.

Rubies

· Production summary for 75%-owned Montepuez Ruby Mining Limitada ("Montepuez") in Mozambique for the quarter ending 30 September 2014:

§ Approximately 2.9 million carats of ruby and corundum were extracted during the quarter (versus 2.9 million carats in the quarter ending 30 September 2013);

§ Grade of 41 carats per tonne (versus 118 carats per tonne in the quarter ending 30 September 2013);

§ Total operating costs(a) of USD 4.3 million (versus USD 1.8 million in the quarter ending 30 September 2013);

§ Unit operating costs(b) of USD 1.48 per carat (versus USD 0.62 per carat in the quarter ending 30 September 2013); and

§ Cash rock handling unit costs of USD 6.93 per tonne (versus USD 6.34 per tonne in the quarter ending 30 September 2013).

· Gemfields' next auction of rough ruby and corundum is scheduled to take place in December 2014.

Fabergé

· Wholly owned Fabergé Ltd saw the value of sales orders agreed(d) during the quarter increase by 50% versus the comparative quarter last year.

· Operating costs for the quarter were 26% lower than the comparative period in the prior year.

· In September, Fabergé was awarded the 'Best International Brand Collection 2014' prize at the Andrea Palladio International Jewellery Awards 2014 in Italy for its Spiral, Treillage and Emotion collections.

Sri Lanka

· In September 2014, Gemfields plc entered into a joint venture with East West Gem Investments Limited ("EWGI") in order to progress opportunities in the Sri Lankan sapphire and gemstone sector via three Sri Lankan subsidiaries which will be 75% and 25% held by Gemfields and EWGI respectively.

Ian Harebottle, CEO of Gemfields, commented:

"Gemfields enjoyed a solid quarter of gemstone production notwithstanding lower grades than those in the same quarter last year. Market conditions remain upbeat with ongoing enthusiasm from the trade, retailers and consumers for responsibly supplied coloured gemstones.

We've been pleased to see new world records - on a per carat basis - achieved by both sapphires and rubies at recent auctions held by Sotheby's in Hong Kong and Geneva respectively. In particular, the sale of a 8.62 carat Burmese ruby has raised the world record for rubies at auction by 81% to USD 997,727 per carat. It is against this market backdrop that we look forward to our second auction of rough ruby and corundum which will be held in Singapore next month.

Given the passing of Zambia's President, His Excellency Michael Sata, on 28 October 2014, we adjusted the dates of our current auction (of predominantly higher quality emeralds and beryl) and extend our condolences to his family and the people of Zambia. The current emerald and beryl auction will now complete on Monday 17 November 2014."

A graphical production update is available at www.gemfields.co.uk.

Explanatory Notes:

(a) Total operating costs include mining and production costs, selling, general and administrative expenses, and depreciation relating to both PPE-related capital expenditure and capitalised waste stripping costs, but exclude mineral royalties.

(b) Unit operating costs are calculated as total operating costs (as defined in (a) above) divided by the total gemstone production during the period.

(c) Cash operating costs include mining and production costs, capitalised waste stripping costs, selling, general and administrative expenses, and exclude PPE-related capital expenditure, depreciation and mineral royalties.

(d) Sales orders agreed are sales that Fabergé has agreed and confirmed with customers during the reporting period. Payment and/or delivery may take place later.

KAGEM EMERALDS

Production Update

The 75%-owned Kagem emerald mine is presently Gemfields' only operating emerald mine and is the single largest emerald mine in the world. The key production parameters by quarter are summarised below:

(a) Cash operating costs include mining and production costs, capitalised waste stripping costs, selling, general and administrative expenses, and exclude PPE-related capital expenditure, depreciation and mineral royalties.

(b) Total operating costs include mining and production costs, selling, general and administrative expenses, and depreciation relating to both PPE-related and capitalised waste stripping costs, but exclude mineral royalties.

(c) As at 30 September 2014, a total of approximately USD 43.11 million of waste moving costs has been capitalised and is being amortised as and when the associated ore is mined. The balance of capitalised waste moving costs, net of amortisation, as at 30 September 2014 amounted to USD 18.4 million. Previously-reported accounting costs excluded depreciation, which is included here.

(d) Year-end adjustments have been made in the operating costs in the quarter ending 30 June 2014.

The quarter ending 30 September 2014 yielded 6.3 million carats at a grade of 214 carats per tonne of ore and unit operating costs of USD 1.63 per carat, or USD 1.48 per carat on a cash basis. The quarter saw approximately 3.2 million tonnes of rock moved (compared to 1.9 million tonnes in the quarter ending September 2013). Cash rock handling unit costs were USD 2.91 per tonne (compared to USD 3.58 per tonne in the quarter ending 30 September 2013).

The fourth phase of the high-wall pushback programme continues to be progressed by both our in-house team and a third party contractor. A total of approximately 3.2 million tonnes of waste was moved during the quarter. The exploration and bulk sampling activities in Fibolele and Libwente are progressing well.

Gemfields' trial underground mining project achieved 42.4 metres of horizontal advance during the quarter ending 30 September 2014 (versus 74.2 metres in the quarter ending 30 September 2013). The tunnel support works continued with wire-meshing and lacing sections installed given the ground conditions in the areas targeted for stoping operations. Additional support is being installed where required. A total of 380 tonnes of ore was produced during the quarter (versus 683 tonnes in the quarter ending 30 September 2013). Approximately 20,355 carats were produced by the underground operation in the quarter (versus 35,320 carats in the quarter ending 30 September 2013). The grade for the quarter was 53.6 carats per tonne (versus 51.7 carats per tonne in the quarter ending 30 September 2013) and the grade for the project is 75.4 carats per tonne to date. With a proven resource available in the Chama pit and the continued viability of open-pit operations given robust emerald prices, Kagem has the flexibility to extend the open pit operation with further pushbacks and is likely in the short term to continue underground mining only on a trial basis.

Illegal mining activity within the boundaries of the Kagem mining licence is not yet fully resolved and Gemfields continues to work with key ministries to alleviate this challenge.

Emerald Auction Update

The August 2014 auction of predominantly lower quality rough emerald and beryl held in Lusaka, Zambia saw 11.6 million carats being sold, representing 88% of the value offered, and generating auction revenues of USD 15.5 million. The auction yielded an overall average of USD 1.34 per carat including the sale of 1.5 tonnes of low grade beryl (or a new record average price for lower quality auctions of USD 3.61 per carat if the sale of the low grade beryl is excluded, given that no beryl of this grade was sold in the prior three lower quality auctions). The auction results are summarised below:

Gemfields' next auction of emeralds and beryl mined Kagem is scheduled to complete on 17 November 2014.

MONTEPUEZ RUBIES

Production Update

Bulk-sampling operations at the Montepuez ruby project in Mozambique, in which Gemfields has a 75% interest, are continuing to provide positive results and insight into the geological controls of the deposit. The core infrastructure is largely in place and progress is being made toward formalised mining. The test work has led to an enhanced understanding of the ore characteristics and improved throughput in the semi-mobile processing plant. These improvements saw a two-and-a-half-fold increase in processed tonnes when compared to the same quarter in the prior year.

The key production parameters by quarter are summarised below:

(a) Cash operating costs include mining and production costs, selling, general and administrative expenses, and exclude capital expenditure, depreciation and mineral royalties.

(b) Total operating costs include mining and production costs, selling, general and administrative expenses, and depreciation, but exclude mineral royalties.

Approximately 2.9 million carats of ruby and corundum were extracted during the quarter as part of the bulk sampling operation, as was the case in the same quarter in 2013. The total ruby and corundum extracted at Montepuez since the commencement of bulk sampling stands at 11.3 million carats. Lower grades of ore were processed during the quarter (41 carats per tonne versus 118 in the quarter ending 30 September 2013), accounting in part for the flat gemstone production. Unit operating costs were USD 1.48 per carat (compared to USD 0.62 per carat in the quarter ending 30 September 2013).

Total rock handling during the quarter stood at 533,895 tonnes (compared to 236,561 tonnes in the quarter ending 30 September 2013) of which 81,699 tonnes were ore and 452,196 tonnes were waste, a stripping ratio of 5.5. Cash rock handling unit costs were USD 6.93 per tonne (compared to USD 6.34 per tonne in the quarter ending 30 September 2013).

Given the size and nature of the Montepuez ruby licence, unlicensed mining activity and asset loss remain key challenges although new infrastructure, a significant security presence and ongoing efforts have resulted in a clear improvement. Social initiatives are currently underway in the local community, including renovations to a maternity ward and the installation of two new portable water pumps in the village of Namanhumbir.

Ruby Auction Update

Gemfields' next auction of rough ruby and corundum is scheduled to take place in Singapore in December 2014.

FABERGÉ

Wholly owned Fabergé Ltd saw the value of sales orders agreed during the quarter to 30 September 2014 increase by 50% versus the comparative quarter in 2013. Operating costs for the quarter were 26% lower than the comparative period in the prior year. Fabergé also completed the relocation of its boutique within Geneva.

In September, Fabergé was awarded the 'Best International Brand Collection 2014' prize at the Andrea Palladio International Jewellery Awards 2014 in Italy for its Spiral, Treillage and Emotion collections.

Fabergé continues to work on the expansion of its jewellery and timepiece collections and the introduction of objets, a new category. The related product launches are expected during the second half of the 2015 financial year.

SRI LANKA

In September 2014, Gemfields plc entered into a joint venture with East West Gem Investments Limited ("EWGI"), a Jersey registered company, in order to progress opportunities in the Sri Lankan sapphire and gemstone sector via three Sri Lankan subsidiaries which will be 75% and 25% held by Gemfields and EWGI respectively.

Under the terms of the agreements, Gemfields has acquired 75% operating interests in 16 exploration licences (covering diverse minerals) for a consideration of USD 0.4 million. The joint venture will also see Gemfields and EWGI establish a gemstone trading company called Ratnapura Lanka Gemstones (Pvt) Ltd, a company approved by the Board of Investment of Sri Lanka ("BOI Sri Lanka"). The trading company will focus on sourcing rough sapphires from various sources in the local market.

CORPORATE & CASH

Kagem entered into a USD 20 million revolving credit facility with Barclays Bank Zambia plc of which USD 15 million was drawn down as at 30 September 2014. The funds drawn bear interest at a rate of 3 month USD LIBOR plus 4.5%.

At 30 September 2014, Gemfields had cash and cash equivalents of USD 32.2 million and total debt outstanding of USD 25.1 million, including the outstanding balance of USD 15 million at Kagem.

ENQUIRIES:

Notes to Editors:

Gemfields plc is the world's leading supplier of responsibly sourced coloured gemstones and is listed on the AIM market of the London Stock Exchange (ticker: GEM) where it is a constituent of the AIM50 index.

In July 2009, Gemfields commenced a formal auction programme for Zambian emeralds mined at the Kagem emerald mine. To date, the Company has held sixteen auctions of emerald and beryl produced at Kagem and which have generated revenues totalling USD 276 million. The Company has also held two traded emerald auctions (of gems not obtained directly from the Company's own mining operations) which generated revenues of USD 22.0 million.

The Company also owns a 75% stake in the highly prospective Montepuez ruby deposit in Mozambique as well as licences in Madagascar including ruby, emerald and sapphire deposits. In June 2014, Gemfields held its first auction of rough ruby and corundum produced at the Montepuez ruby deposit, generating revenues of USD 33.5 million. In addition, Gemfields holds a 50% interest in the Kariba amethyst mine in Zambia.

Gemfields acquired the Fabergé brand in January 2013 to create a globally recognised coloured gemstone champion. Fabergé provides Gemfields with direct control over a high-end luxury goods platform and a global brand with exceptional heritage.