Gemfields Posts First Revenues From Emerald Sales In FY 2009, Cuts Operating Costs

Ian Harebottle, Chief Executive of Gemfields

courtesy of Proactiveinvestors.co.uk

Gemfields Plc (LSE:GEM) is a leading international coloured gemstone producer, with production and exploration assets in Zambia and Madagascar. The company seeks to become the leading source of high-quality coloured gemstones through consolidation and vertical integration on an international scale. Gemfields prides itself on its unique ability to bring ethically produced, conflict-free gemstones of certified provenance directly from the mine to the market on an integrated basis.

Gemfields owns a state-of-the-art gemstone cutting and polishing facility in Jaipur, India and holds the exclusive worldwide rights to use the Fabergé brand name on coloured gemstones.

Gemfields (AIM: GEM) said it intended to concentrate on further slashing operating costs and positioning the business for growth for when the conditions in the gemstone market improve, while reporting first revenues from emerald sales in the previous financial year along with successful post-period auctions as production increased.
A total of 28 million carats were produced during the year, compared to 9.9 million in 2008, while ore grades increase to 349 cpt (carats per tonne) from 233 cpt last year. Successful post-period auctions in July and November earned the company US$11.5 million.

Revenues for the financial year to 30 June amounted to US$815,456 compared to none in the previous year, while losses soared to US$0.2 billion after an impairment charge of US$249 million against the value of the Kagem mine in Zambia after writing down its value to zero, saying it was difficult to justify forecasts showing a positive cashflow with “reasonable certainly,” complicating the valuation of the mine. The cash balance stood at US$6.86 million, down from last year’s US$48.07 million.

As the global demand in diamonds fell, the scale of operations at Kagem, which is currently the company’s only operating mine, were reduced. Operating costs at the mine averaged US$241 per tonne of ore compared to US$447 per tonne in 2008.

Gemfields intends to focus on further cost reductions and improvement of operating efficiencies, pledging to limit its expenditure to key projects only until the prospects for a full recovery in the gemstone market take shape.

Other objectives for the next year included the initiation of sales programmes for polished and certified gemstones, expanding mining and exploration activities to include new target sites in the Kagem licence area, the opening of a rough gemstone trading business in Kitwe, Zambia and the establishment of a trial cutting facility on the mine.

“The global economic climate prevailing during the year under review was exceedingly tough on the gemstone and luxury goods sectors, and the impacts thereof seem likely to continue for some time to come. However, despite these factors, I am broadly pleased with the way in which Gemfields has managed to overcome these challenges and with the operational initiatives that have been put in place,” said Chief Executive of Gemfields Ian Harebottle.

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