Gemfields PLC
Market Update - January 2010
7:00 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 3402
Canaccord Adams Limited
Nominated Adviser and Joint Broker to Gemfields
Mike Jones/Tarica Mpinga/Andrew Chubb +44 (0)20 7050 6500
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