Gemfields PLC Market Update - Quarter to 30 June 2012
22 August 2012 - 4:00PM
UK Regulatory
TIDMGEM
Gemfields plc
("Gemfields" or the "Company")
Market Update - Quarter to 30 June 2012
22 August 2012
Gemfields plc (AIM: GEM) presents an operational update for the three month
period and year ending 30 June 2012. All figures are approximate, unaudited
and, unless otherwise stated, the phrase "carats" includes both emerald and
beryl.
Highlights
Production summary for the Kagem emerald mine:
The final quarter of the year saw strong production growth to 7.3 million
carats (versus 4.9 million carats in the prior quarter);
Grade for the quarter was 181 carats per tonne (versus 236 carats per tonne in
the prior quarter), with unit production costs of USD 0.57 per carat (versus
USD 0.85 per carat in the prior quarter)
Cash rock handling unit cost were USD 3.5 per tonne (versus USD 3.7 per tonne
in the prior quarter)
Unit ore production costs reduced by 48% from USD 200 per tonne in the prior
quarter to USD 104 per tonne
Kagem's large-scale on-going waste movement programme is progressing well to
open up new areas for future ore production
Revenue of USD 9.0 million from successful Jaipur auction of 3.47 million
carats in June 2012
At 30 June 2012, Gemfields had USD 36.7 million in cash and debt outstanding of
USD 2.9 million
The Montepuez ruby mine in Mozambique is on track to commence bulk sampling in
the coming quarter
Demand for ethical emeralds continues to remain firm across all major markets
with Gemfields' next higher quality rough emerald auction scheduled to take
place in Singapore between the 29 October and 3 November 2012
Ian Harebottle, CEO of Gemfields, commented:
"On the back of solid demand for Gemfields' products, pleasing stock levels and
healthy cash balances, our decision to focus primarily on mine development and
waste mining during the past year is, I believe, well justified. Despite some
early minor delays and slightly lower than anticipated full year production
volumes, the past few quarters have continued to deliver improving production
volumes, a trend that is likely to continue in the near term. This, together
with the progress that has been achieve at our Mozambican ruby mine, provides
management with the confidence that the coming year will continue to underpin
Gemfields' ambitious growth plans."
A graphical production update is available at www.gemfields.co.uk.
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:
Production Performance
Quarterly Summary Units Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 TOTAL
Gemstone Production million 12.8 5.9 3.5 10.8 4.9 3.9 4.9 7.3 54.1
(Emerald+Beryl) carats
Ore Production 'k tonnes 19.5 16.0 12.0 21.7 24.0 17.5 20.8 40.7 172.1
(Reaction Zone)
Grade (Emerald+Beryl/ carats / 658 369 290 500 205 222 236 181 314
Reaction Zone) tonne
Waste Mined million 0.9 0.8 0.8 1.4 2.2 2.2 1.6 2.8 12.7
(including TMS) tonnes
Stripping Ratio 48 48 66 67 92 125 78 68 74
Cash Operating Cost USD 3.5 3.6 3.6 3.5 7.2 7.0 6.0 9.8 44.2
million
Cash Rock Handling USD / 3.6 4.6 4.4 2.4 3.3 3.2 3.7 3.5 3.5
Unit Cost tonne
Financial Performance*
Quarterly Summary Units Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 TOTAL
Total Operating cost USD 3.5 3.6 3.6 3.5 3.9 3.4 4.2 4.2 29.7
million
Unit Production cost USD 0.27 0.62 1.03 0.32 0.79 0.87 0.85 0.57 0.55
per carat /carats
Unit Production cost USD 178 227 298 160 162 193 200 104 173
per tonne of ore /tonne
*Note: With effect from July 2011, Gemfields adopted a new accounting policy
whereby all waste moving costs are capitalised and are then subsequently
amortised when the ore corresponding to that waste is mined. As of 30 June
2012, approximately USD 14.5 million of waste moving costs have been
capitalised and will be amortised later when the associated ore is mined.
The quarter to 30 June 2012 produced 7.3 million carats at a grade of 181
carats per tonne of ore and a unit production cost of USD 0.57 per carat
(excluding capitalised waste moving costs).
The previously announced large-scale waste movement programme to open up new
areas for future ore production continues. This programme has gained pace with
over 8.7 million tonnes of rock having been moved in the past four quarters.
Whilst the stripping ratio has come down over the last two quarters, management
anticipates that this will increase in the near term as larger areas of
overburden are mined in order to further increase the levels of ore available
for future mining and as the push-back project is accelerated. Management
expects an overall increase in operating efficiencies and performance as the
stripping ratio stabilises in the medium term and as Kagem is able to mine both
waste and ore more efficiently.
Approximately 1.9 million tonnes of waste were moved by the contractor during
the quarter (compared to 0.7 million tonnes in the previous quarter), with cash
rock handling unit costs decreasing to USD 3.5 per tonne in the current quarter
(compared to USD 3.7 in the prior quarter).
Kagem's key annual production parameters are summarised below:
Kagem Annual UNITS YEAR YEAR YEAR YEAR YEAR YEAR YEAR
Production to 30 to 30 to 30 to 30 to 30 to 30 to 30
Summary Jun Jun Jun Jun Jun Jun Jun
2006 2007 2008 2009 2010 2011 2012
Gemstone million
Production carats 10.2 9.4 9.9 28 17.4 33.0 21.1
(Emerald+Beryl)
Ore Production '000 22 29 42 80 61 69 103
(Reaction Zone) tonnes
Grade carats/
(Emerald+Beryl/ tonne 462 325 233 349 286 478 205
Reaction Zone)
Waste Mined million 1.8 2.8 5.1 4.0 2.5 3.9 8.7
(incl. TMS) tonnes
Waste+TMS: stripping 83 96 120 50 42 57 85
Reaction Zone ratio
Total Rock million 1.8 2.8 5.1 4.1 2.6 3.9 8.8
Handling tonnes
As a direct result of the short term focus on waste mining and the previously
reported delays, the year ending 30 June 2012 saw annual production of 21.1
million carats, a 36% decrease in the record breaking 33.0 million carats
produced in the prior year. The grade for the year to 30 June 2012 ended at 205
carats per tonne, versus 478 in the prior year. While the achieved grade
remains somewhat below historic levels, such fluctuations are common within
gemstone mining, generally averaging out over time. The past three quarters
have delivered constantly improving production volumes, a trend that is likely
to continue in the near term. Unit production costs increased 73% from USD
0.43 to USD 0.74 per carat and unit rock handling costs fell 50% from USD 3.53
to USD 1.78 per tonne (note the asterisk under the "Financial Performance"
table above).
Gemfields' trial underground mining project achieved 92 metres of horizontal
advance during the quarter ending 30 June 2012 from 88 blasts (versus 73.9
metres in the quarter ending March 2012). The total linear development to date
is 470.9 metres (versus 378.9 meters at 31 March 2012). A total of 1,560
tonnes of ore was produced during the quarter (versus 1,040 tonnes in the prior
quarter) with 40 tonnes of waste removal. Production mining has been the focus
following the successful completion of the second escape route. Approximately
147,805 carats were produced by the underground operation in the quarter ending
30 June 2012, versus 141,315 carats in the prior quarter.
Despite the slightly reduced demand experienced for some of the lower quality
goods placed on offer during the Company's previous auction held in Jaipur in
June 2012, demand for ethical emeralds continues to remain firm across all
major markets. Gemfields next higher quality rough emerald auction is scheduled
to take place in Singapore between 29 October and 3 November 2012.
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.
Start-up operations at Montepuez Ruby Mining Lda, (Gemfields' 75% owned ruby
project in Mozambique) are progressing to schedule, with a core team and
equipment operational and on site. Various targets have been identified and
bulk sampling is set to commence in earnest during the coming quarter.
Cash Balances
At 30 June 2012, Gemfields had USD 36.7 million in cash (and debt outstanding
of USD 2.9 million).
Enquiries:
Gemfields
dev.shetty@gemfields.co.uk
Dev Shetty,
CFO +44 (0)20 7518 3402
Canaccord Genuity Limited
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb
+44 (0)20 7523 8000
Neil Passmore
+44 (0)20 7155 8630
JP Morgan Cazenove
Jos Simson/Emily Fenton
+44 (0)20 7920 3150
Tavistock Communications
Notes to Editors:
Gemfields plc is a leading gemstone miner listed on the AIM market of the
London Stock Exchange (ticker: `GEM'). The Company's principal asset is the 75%
owned Kagem emerald mine in Zambia, the world's single largest emerald mine. In
addition to the Kagem emerald mine, Gemfields has a 50% interest in the Kariba
amethyst mine in Zambia.
The Company also owns controlling stakes in a highly prospective ruby deposit
in Mozambique and licences in Madagascar including ruby, emerald and sapphires
deposits.
In July 2009 Gemfields commenced a formal auction programme for its Zambian
emeralds. To date, the Company has held 10 auctions which have generated
revenues totalling USD 133.7 million.
END
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