Gemfields Grou. Regulatory News (GEM)

28 Apr 2010 07:00

Gemfields PLC

Operational Update - April 2010

7:00 am, 28 April 2010

Gemfields PLC ("Gemfields" or "the Company", Ticker "GEM") is pleased to present an operational update for the three month period ending 31 March 2010. All figures are unaudited.

Highlights

- Full proceeds (USD 7.2 million) of the March 2010 auction in Jaipur received.

- 3 auctions in 9 months realising revenues totalling USD 18.7 million.

- Ongoing focus on increasing revenue flows, next auction scheduled for July 2010.

- Ongoing focus on improving mining and operational efficiency and reducing relative operating costs.

- Cash balance (exclusive of gemstone inventory internally estimated at over USD 10 million) of USD 7 million (and debt of USD 3.4 million repayable by December 2010 and held at 75% owned Kagem level).

- Discovery of an exceptional 6,225 carat Zambian emerald.

- The production for the quarter ending 31 March 2010 was dominated by a loweraverage grade of 277 carats per tonne (versus 365 carats per tonne achieved inthe quarter ending 31 December 2009).

- Graphical production update available at www.gemfields.co.uk

Emerald Auctions

Gemfields has delivered 3 auctions in 9 months realising revenues totalling USD 18.7 million. As previously announced on 17 March 2010, the third auction of lower quality rough emeralds was held in March 2010 in Jaipur, realising sales of USD 7.2 million. All proceeds from the auction have been received.

The results of the March 2010 auction are summarised below, together withthose from the previously published higher quality auctions held in London andJohannesburg: JULY `09 AUCTION NOVEMBER '09 AUCTION MARCH '10 AUCTIONDates 20-24 July 2009 23-27 November 2009 11-15 March 2010Location London, England Johannesburg, South Jaipur, India AfricaType High Quality High Quality Low QualityCarats offered 1.36 million 1.12 million 28.9 millionNo. of companies 23 19 25placing bidsAverage no. of bids 10 13 8per lotNo. of lots offered 27 19 56No. of lots sold 26 14 49Percentage of lots 96% 74% 88%soldPercentage of lots 99.8% 97.2% 78.9%sold by weightPercentage of lots 82% 76% 89%sold by valueTotal sales realised USD 5.9 million USD 5.6 million USD 7.2 millionat auctionAverage per carat USD 4.40 per carat USD 5.10 per carat USD 0.31 per caratsales valueGemfields' next auction of (predominantly higher quality) rough emeralds andberyl is scheduled to take place during July 2010.

Production Update

Gemfield's 75% owned Kagem mine is presently Gemfields' only operating emeraldmine. Kagem's key unaudited production parameters by quarter are summarisedbelow:KAGEM Quarterly Summary 9 MONTHSto 31 March Quarter YEAR to to2010 Ending: 30-Sep-08 31-Dec-08 31-Mar-09 30-Jun-09

30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10 31-Mar-10

GemstoneProduction million(Emerald+Beryl) carats 9.4 5.3 7.3 6.0 28.0 2.9 4.9 3.5 11.3Ore Production '000(Reaction Zone) tonnes 21.4 18.7 17.8 22.3 80.2 16 13.5 12.5 42Grade(Emerald +Beryl/ carats/Reaction Zone) tonne 438 286 409 268 349 182 365 277 269Waste Mined million(including TMS) tonnes 1.7 1 0.8 0.5 4 0.5 0.7 0.6 1.8Stripping Ratio 81 53 43 22 50 33 49 51 43Total Operating USDCost million 8 6.2 3.7 3.5 21.4 3.3 3.1 3 9.4Unit Production USD/Cost (per carat)* carat 0.85 1.16 0.51 0.59 0.76 1.13 0.64 0.84 0.83Unit ProductionCost USD/(per tonne of ore) tonne 372 332 210 159 267 205 232 241 224Unit Cost(per tonne USD/of rock moved) tonne 4.5 6.1 4.8 6.8 5.4 6.1 4.7 4.6 5.2Note: All figures are unaudited*excluding Selling Cost Kagem's unaudited total operating costs for the three quarters ending 31 March2010 totalled USD 9.4 million, implying an average production cost during thatperiod of USD 0.83 per carat of emerald and beryl. Unaudited unit productioncosts for the quarter ending 31 March 2010 were USD 0.84 per carat, drivenostensibly by the reduced grade of 277 carats per tonne (versus 365 carats pertonne in the preceding quarter).

Kagem's key annual production parameters are summarised below:

Kagem Annual Production Summary UNITS YEAR YEAR YEAR YEAR 9 MONTHS to 30 Jun 2006 to 30 Jun 2007 to 30 Jun 2008 to 30 Jun 2009 to 31 Mar 2010Gemstone Production million(Emerald+Beryl) carats 10.2 9.4 9.9 28.0 11.3Ore Production 000(Reaction Zone) tonnes 22 29 42 80 42Grade (Emerald+Beryl/ carats/Reaction Zone) tonne 462 325 233 349 269 Waste Mined million(incl. TMS) tonnes 1.8 2.8 5.1 4.0 1.8Waste+TMS: stripReaction Zone ratio 83 96 120 50 43Cost reduction measures have continued to bear fruit, and Kagem recorded thelowest quarterly production cost since Gemfields commenced management ofKagem. However, the stripping ratio is anticipated to increase in the short tomedium term as areas of overburden are mined in order to expand the levels ofavailable ore. This is expected to have a commensurate impact on total miningcosts.Gemfields' underground mining project continues to make progress with a totalof 59 metres having been developed by 31 March 2010. The first congruentpegmatite and its associated reaction zone ore was intersected at 33 metres ondip. This remains a trial project in which the various challenges andtechnicalities associated with underground mining within Kagem's specificgeological context can be tested and refined before expanding undergroundmining into other target areas across the mining licence area. The projectsfirst production was achieved in February 2010.The unique 6,225 carat rough emerald named `Insofu' was discovered in February2010. Whilst specialised light sources have been ordered to assist the expertsin determining the value of this unique piece of rough, all indications arethat the Insofu is competent and transparent which makes this an exceptionallyrare find. Gemfields is waiting for the experts' valuation and is planning tooffer this exceptional emerald to the market at the appropriate time, in amanner befitting its unique nature.

While the illegal mining activity taking place within the boundaries of the Kagem mining licence area has largely ceased over the past few months, this matter is as yet not fully and formally resolved. Various steps have been put in place and the support of all key ministries is ongoing.

A graphical production update can be downloaded from www.gemfields.co.uk

Cash Balances

Gemfields presently has USD 7.0 million in cash. Kagem Mining Ltd, in which Gemfields has a 75% interest, has bank loans and leases repayable by 31 December 2010 totalling USD 3.4 million. In addition, Gemfields has gemstone inventory estimated by management to exceed USD 10 million.

Ian Harebottle, CEO of Gemfields, commented:

"Gemfields has delivered 3 auctions in 9 months realising revenues totalling USD 18.7 million - a solid performance given the global events of the past year and a sign of encouragement for the future as the markets for diamonds and gemstones continue to show clear signs of recovery. Our operating costs are satisfactory, our trial underground mining project is progressing to expectation and our marketing initiatives are moving forward apace. I thus believe that we're making tangible progress in delivering on our vision of bringing a regular and reliable supply of emeralds and beryl, from a responsible source, to the market."

Enquiries:

Gemfields dev.shetty@gemfields.co.uk

Dev Shetty, CFO +44 (0)20 7518 3402

Canaccord Adams Limited

Nominated Adviser and Joint Broker to Gemfields

Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500