Last checked at 28 Jan 2010 07:18
Gemfields PLC Market Update - January 20107:00 am, 28 January 2010
Gemfields PLC ("Gemfields" or "the Company", Ticker "GEM") is pleased to present a market update for the three month period ending 31 December 2009. All figures are unaudited.
Highlights
Full proceeds of the November 2009 auction of USD5.6 million received.
Ongoing focus on revenue, next auction scheduled for March 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 9 million) of USD 7.2 million (and debt of USD 6.1 million repayable by December 2010 and held at 75%-owned Kagem level).
The production for the quarter ending 31 December 2009 was dominated by a high average grade of 365 carats per tonne (versus 182 carats per tonne achieved in the quarter ending 30 September 2009).
Illegal mining activity taking place within the Kagem mining licence is being addressed but remains unresolved.
Encouraging signs of an increase in demand and interest for emeralds from all key markets, including the USA and the emerging markets of India, China and the Middle East.
Graphical production update available at www.gemfields.co.uk
Emerald Auctions
As previously announced, Gemfields held an auction of rough emeralds in November 2009, realising sales of USD5.6 million. All proceeds from the auction have been received. Gemfields' next auction of (predominantly lower quality) rough emeralds and beryl is scheduled to take place during March 2010.
Production Update
Gemfield's 75% owned Kagem mine is presently Gemfields' only operating emerald mine. Kagem's key unaudited production parameters by quarter are summarised below:
KAGEM Quarterly Summary to 31 Dec 09
30- 31- 31- 30- 30- 31- Sep- Dec- Mar- Jun- Sep- Dec- Quarter Ending: 08 08 09 09 09 09 TOTAL Gemstone Production (Emerald+Beryl) million carats 9.4 5.3 7.3 6.0 2.9 4.9 35.8 Ore Production (Reaction Zone) '000 tonnes 21.4 18.7 17.8 22.3 16.0 13.5 109.7 Grade
(Emerald+Beryl/Reaction Zone) carats/tonne 438 286 409 268 182 365 327
Waste Mined (including TMS) million tonnes 1.7 1.0 0.8 0.5 0.5 0.7 5.2 Stripping Ratio 81 53 43 22 33 49 47 Total Operating Cost USD million 8.0 6.2 3.7 3.5 3.3 3.1 27.9 Unit Production Cost (per carat) * USD/carat 0.85 1.16 0.51 0.59 1.13 0.64 0.78 Unit Production Cost (per tonne of ore) USD/tonne 372 332 210 159 205 232 254 Unit Cost (per tonne of rock moved) USD/tonne 4.5 6.1 4.8 6.8 6.1 4.7 5.3 Note: All figures are unaudited *excluding Selling Cost
Kagem's unaudited total operating costs for the six quarters ending 31 December 2009 totalled USD 27.9 million, implying an average production cost during that period of USD 0.78 per carat of emerald and beryl. Unaudited unit production costs for the quarter ending 31 December 2009 were USD 0.64 per carat, driven ostensibly by the improved grade of 365 carats per tonne (versus 182 carats per tonne in the preceding quarter).
Kagem's key annual production parameters are summarised below:
Kagem Annual Production Summary
UNITS YEAR YEAR YEAR YEAR HALF YEAR to to to to to 30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 2006 2007 2008 2009 2009 Gemstone Production (Emerald+Beryl) million carats 10.2 9.4 9.9 28.0 7.8 Ore Production (Reaction Zone) 000 tonnes 22 29 42 80 29 Grade
(Emerald+Beryl/Reaction Zone) carats/tonne 462 325 233 349 266
Waste Mined (incl. TMS) million tonnes 1.8 2.8 5.1 4.0 1.2 Waste+TMS: Reaction Zone strip ratio 83 96 120 50 40
Cost reduction measures have continued to bear fruit, resulting in reduced unit production cost per carat and unit cost per tonne of rock moved. However, the stripping ratio is increasing and is anticipated to continue this rise in the short to medium term as areas of overburden are mined in order to expand the levels of available ore. This is expected to have a commensurate impact on total mining costs.
Gemfields has initiated a trial underground mining project which is still at an early stage but, if successful, should provide a number of opportunities for expansion into areas that have a history of high quality production but where the dip of the ore body is relatively steep and/or where the overburden is prohibitive. It is expected that the underground operation will produce ore during the first quarter of 2010, a significant milestone in the history of Zambian emeralds.
Kagem continues to experience illegal mining activity taking place within the boundaries of the Kagem mining licence area. While the matter is as yet not fully resolved, various steps have been put in place and the support of all key ministries has been obtained.
A graphical production update can be downloaded from www.gemfields.co.uk
Cash Balances
Gemfields presently has USD7.2 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 6.1 million. In addition, Gemfields has a gemstone inventory estimated by management to exceed USD 9 million.
Gemstone market
While some level of improvement in terms of demand and achievable prices is clearly being evidenced within the diamond market, this is a formalised market and can thus not be directly correlated to coloured gems. However, while the coloured gemstone market (an historically informal market) is likely to lag some way behind the diamond market, Gemfields has noticed encouraging signs of an increase in demand and interest for emeralds. This upward trend in demand is coming from all key markets, including the USA and the emerging markets of India, China and the Middle East.
Ian Harebottle, CEO of Gemfields, commented:
"Gemfields continues to focus on generating revenue and is making encouraging progress in delivering on its vision of bringing a regular and reliable supply of emeralds and beryl, from a responsible source, to the market. Naturally, we're pleased to have seen increased grade in the most recent quarter and which is supported by increased levels of demand from the downstream pipeline. Our forthcoming auction should cast important light on the value of our lower grade inventory."
Enquiries:Gemfields dev.shetty@gemfields.co.uk Dev Shetty,CFO +44 (0)20 7518 3402Canaccord Adams LimitedNominated Adviser and Joint Broker to GemfieldsMike Jones/Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500
vendor