Gemfields PLC Market Update - Quarter to 30 June 2012

 
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 
[e-mail] 
Dev Shetty, 
CFO [phone] 
 
Canaccord Genuity Limited 
Nominated Adviser and Joint Broker to Gemfields 
Tarica Mpinga/Andrew Chubb 
[phone] 
 
Neil Passmore 
[phone] 
JP Morgan Cazenove 
 
Jos Simson/Emily Fenton 
[phone] 
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