Annual Financial Report

 
TIDMGEM 
 
Gemfields PLC 
 
Final results for the year ended 30 June 2009 
 
7 December 2009 
 
Consolidated financial statements of Gemfields PLC ("Gemfields" or "the 
Company"), formerly Gemfields Resources PLC, for the financial year ended 30 
June 2009. 
 
Key financial indicators: 
 
  * Revenue from emerald sales of US$815,456 (2008: nil); 
 
  * Cash at bank of US$6,868,789 (2008: US$48,078,023); 
 
  * Loss for the year of US$201,407,565 (2008: US$30,208,361); 
 
  * Result for the period marred by the US$249 million impairment charge 
    against the value of the Kagem mine. 
 
Key operational developments during the financial year: 
 
  * Ore grade of 349 carats per tonne (2008: 233 carats per tonne); 
 
  * 28.0 million carats of total emerald and beryl production (2008: 9.9 
    million carats); 
 
  * Ongoing reduction in relative costs coupled to increased operating 
    efficiencies; 
 
  * A focus on mining and selling rough gemstones; 
 
  * Option to acquire Oriental Mining S.a.r.l. and its exploration licences in 
    Madagascar exercised; 
 
  * Appointment of Ian Harebottle as new CEO; and 
 
  * Turmoil in the general diamond and gemstone sector, with significant demand 
    and price reductions widely reported. 
 
Key developments since the end of the period: 
 
  * Two successful rough emerald auctions conducted during July and November 
    2009 with sales totalling $US11.5 million; 
 
  * The initiation of co-operative global emerald marketing and promotion; and 
 
  * Illegal mining activity taking place within the Kagem mining licence area 
    being addressed. 
 
The Chairman's Statement and the primary financial statements are set out in 
the Appendix below. The full financial statements will be sent to shareholders 
and they can also be viewed on the Company's website at www.gemfields.co.uk. 
 
Ian Harebottle, CEO of Gemfields, commented: 
 
"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. 
 
While there is still a significant amount that remains to be done, we are 
fortunate to be supported by a solid team of highly competent and dedicated 
people, people who I am very proud to be associated with and who will do 
everything possible to ensure that we move towards our goal of becoming the 
world's leading premium coloured gemstone company". 
 
Enquiries: 
 
Gemfields [e-mail] 
 
Richard James, CFO [phone] 
 
Canaccord Adams Limited 
 
Nominated Adviser and Joint Broker to Gemfields 
 
Mike Jones/Tarica Mpinga/Andrew Chubb [phone] 
 
Appendix 
 
Chairman's Statement 
 
Dear Shareholder, 
 
Welcome to the consolidated financial statements of Gemfields PLC ("the 
Company"), formerly Gemfields Resources PLC, for the year ended 30 June 2009. 
 
While the early signs of a recovery in the prevailing global economic climate 
are noted, there is little doubt that the past year has been a challenging one 
and its implications are likely to prevail well into the foreseeable future. 
 
Gemfields, like so many others, has come through the past year stronger in some 
areas and less so in others. We are likely to face additional challenges in the 
year ahead - some of which have already been identified and are being 
addressed, and others which remain uncertain. 
 
I would like to thank each member of our team for their hard work and dedicated 
efforts over the past year and also for the added effort that I know they will 
be asked to deliver during the coming year. At the same time I would like to 
thank you, our loyal shareholders, for your continued support and your 
commitment to our vision. 
 
Key financial indicators: 
 
  * Revenue from emerald sales of US$815,456 (2008: nil); 
 
  * Cash at bank of US$6,868,789 (2008: US$48,078,023); 
 
  * Loss for the year of US$201,407,565 (2008: US$30,208,361); 
 
  * Result for the period marred by the US$249 million impairment charge 
    against the value of the Kagem mine. 
 
Key operational developments during the financial year: 
 
  * Ore grade of 349 carats per tonne (2008: 233 carats per tonne); 
 
  * 28.0 million carats of total emerald and beryl production (2008: 9.9 
    million carats); 
 
  * Ongoing reduction in relative costs coupled to increased operating 
    efficiencies; 
 
  * A focus on mining and selling rough gemstones; 
 
  * Option to acquire Oriental Mining S.a.r.l. and its exploration licences in 
    Madagascar exercised; 
 
  * Appointment of Ian Harebottle as new CEO; and 
 
  * Turmoil in the general diamond and gemstone sector, with significant demand 
    and price reductions widely reported. 
 
Key developments since the end of the period: 
 
  * Two successful rough emerald auctions conducted during July and November 
    2009 with sales totalling US$11.5 million; 
 
  * The initiation of co-operative global emerald marketing and promotion; and 
 
  * Illegal mining activity taking place within the Kagem mining licence area 
    being addressed. 
 
Strategic Review 
 
Given the turmoil in the world markets, Gemfields initiated a strategic review 
of its group-wide operations. This result was a focus on: 
 
  * reducing operating costs; 
 
  * improving operating efficiencies; and 
 
  * delivering world class rough emerald supply - the key here being the 
    sustainable supply of larger volumes of well graded, high quality emeralds 
    to targeted stakeholders. 
 
We have shown good progress in these areas and have managed to achieve some 
encouraging results. 
 
While Gemfields' performance has been, and is likely to continue to be, 
significantly lower than projected at the time of readmission to AIM in June 
2008, the goal now is to establish a solid base that will be able to support 
future growth and profitability as our operating environments improve. 
 
Operations 
 
  * Mining - Kagem 
 
The Kagem emerald mine in Zambia is presently Gemfields' only operating emerald 
mine, and serves as the source of emeralds for our downstream business. Given 
the decline in global demand for diamonds and other gemstones, Gemfields took 
the decision to reduce the scale of mining at Kagem. During the year, operating 
costs averaged US $241 per tonne of ore (known as "Reaction Zone") compared to 
$447 per tonne in 2008. In addition, and until the prospects for a full 
recovery in the gemstone market are more certain, Gemfields will continue to 
limit its capital, project development and exploration expenditure to key 
projects only. 
 
Despite the reduction in the scale of operations, Kagem was able to show some 
progress during the year: 
 
  * 28.0 million carats of emerald and beryl were produced. For the year ended 
    30 June 2008, production totalled 9.9 million carats; 
 
  * 80,282 tonnes of Reaction Zone was mined at an average of 6,690 tonnes per 
    month. For the year ended 30 June 2008, ore production totalled 42,336 
    tonnes at an average of 3,528 tonnes per month; 
 
  * This resulted in an implied ore grade of 349 carats per tonne for the year 
    ended 30 June 2009 compared to a grade of 233 carats per tonne for the year 
    ended 30 June 2008. 
 
Kagem's key annual production parameters are summarised below: 
 
KAGEM Annual Production Units     Yr to 30    Yr to 30    Yr to 30    Yr to 30 
Summary                           Jun 06      Jun 07      Jun 08      Jun 09 
 
Gemstone Production     million   10.2        9.4         9.9         28.0 
(Emerald + Beryl)       carats 
 
Ore Production          `000      22          29          42          80 
(Reaction Zone)         tonnes 
 
Grade (Emerald + Beryl/ carats/   462         325         233         349 
Reaction Zone)          tonne 
 
Waste Mined (including  million   1.8         2.8         5.1         4.0 
TMS)                    tonnes 
 
Stripping Ratio                   83          96          120         50 
 
Prior to Gemfields' involvement at Kagem, total rock handling capacity was 
approximately 200,000 tonnes per month. This was scaled up to 600,000 tonnes 
per month by the beginning of the year under review. This increase in the scale 
of operations was achieved through the introduction of contract mining, an 
increase in the size and quality of the in-house fleet, improvements to the 
mine's on-site maintenance capacity, improved haulage systems and a focus on 
increasing efficiency across all levels of operations, including security and 
human resources. 
 
By the second financial quarter of 2009 the rock handling capacity had been 
scaled down to around 300,000 tonnes per month and to 200,000 tonnes per month 
by the third and fourth financial quarters of the year. These reductions were a 
direct result of the prevailing global economic conditions. However, ore mining 
performance was maintained at 6,690 tonnes per month throughout the year (up 
from around 2,000 tonnes per month prior to Gemfields' involvement at Kagem). 
This increase in the volume of actual ore mining was made possible by 
fine-tuning the sequence of ore and waste mining, and through the introduction 
of various mechanised methods including mechanical chisels and rock splitters. 
 
During the year, Kagem's operating cost averaged US$241 per tonne of ore (i.e. 
"Reaction Zone") and US$0.69 per carat (counting both emerald and beryl 
production) with mining efficiencies continuing to show an improving trend 
during the period. 
 
  * Geology and exploration 
 
In November 2007, Kagem embarked on a comprehensive exploration programme with 
completion planned for March 2009. The programme included 15,000 metres of core 
drilling, associated geochemical analysis and a high-resolution airborne 
geophysical survey. The objectives of the project included: 
 
  * augmenting the ore resource along 1.8 km of the Fwaya-Fwaya belt to a 
    vertical depth of 150 metres from surface; 
 
  * improving the geological and structural understanding in two of the 
    remaining five known TMS belts that exist on the Kagem licence area and to 
    establish their potential inferred ore resource; 
 
  * various geochemical studies aimed at developing a `Fertility Index' as a 
    possible quantitative and advance guide to emerald mineralisation; and 
 
  * delineating other possible exploration targets within the licence area by 
    identifying potential TMS/pegmatite contact zones through high resolution 
    airborne magnetic and radiometric surveys. 
 
The aim was to establish sufficient ore resources, of dependable confidence 
levels, to support Kagem's targeted expansion plans and to support long term 
life-of-mine planning. 
 
A total of 14,390m of exploratory drilling was completed in the Fwaya-Fwaya and 
Dabwisa belts by December 2008 with the high resolution geophysical survey 
being completed in March 2009. Early results are reasonably encouraging and 
have indicated a number of potential target sites for additional work and the 
expansion of mining operations. 
 
  * Security 
 
The security department has initiated various upgrades during the period, 
including: 
 
  * fencing of the entire camp perimeter, electrified-fencing of the sort-house 
    and treatment plant and the installation of CCTV cameras in the latter two 
    areas; 
 
  * new standard operating procedures covering searching, dress codes, fuel 
    handling, armoury, gate procedures and pit security; 
 
  * the securing of Kagem's boundaries; and 
 
  * the deployment of State Police Officers in selected areas across the mining 
    licence to help in reducing illegal mining within the area. 
 
While these security initiatives have begun to show some positive results, the 
reduction of theft and securing of the mining licence area will remain ongoing 
focal points during the coming year. Some additional projects are being 
considered for the coming year and include the possible acquisition of x-ray 
body scanners and ongoing improvements to the sort-house, treatment plant and 
in-pit production areas. 
 
In September 2009, a company called Bisma Investments Limited initiated illegal 
mining activities within the Kagem licence area, purportedly under a mining 
licence granted by the Director of Mines Development in Zambia on 7 August 
2009. The Director of Mines has since written to these parties to direct them 
to cease their current illegal actions and has revoked their licence. Efforts 
to have them removed from the Kagem licence are ongoing. 
 
  * Sales and Inventories 
 
Gemfields has elected to offer its rough production to the market by way of 
closed tenders (auctions) where all material offered is certified by Gemfields 
as natural, untreated and of Zambian origin. Many of the world's top gem houses 
and emerald lapidaries are invited to attend these events. 
 
Since the balance sheet date, Gemfields has hosted two emerald auctions during 
July and November 2009. Some thirty companies drawn from Germany, India, Israel 
and the USA attended these events which saw 2.51 million carats of emerald 
offered in 46 separate lots. The sales from these tenders totalled US$11.5 
million, with 40 of a total of 46 lots put on offer at the combined events 
being sold. 
 
An auction of lower quality rough emerald and beryl is expected to be held in 
Jaipur, India during the first quarter of 2010. Significant interest to attend 
this auction is clearly evident from all key stakeholders. 
 
Despite improving market conditions and early sales successes, Gemfields has 
opted to take a conservative approach in terms of estimating the possible net 
realisable value of its rough and polished emerald inventory. 
 
The Directors have used the prices achieved in the July 2009 auction as the 
basis for the net realisable value of the remaining rough emerald stock. The 
internal valuation of the net realisable value of Gemfields' cut and polished 
emerald inventory has been estimated using the estimated value of the rough 
material consumed, plus the physical costs of cutting and polishing. 
 
While market volatility prevails and demand and prices continue to be somewhat 
erratic, the actual value realised at the time of sale has the potential to 
differ significantly (either positively or negatively) from the estimated value 
provided here by the Directors. 
 
  * Marketing and Promotions 
 
Gemfields is positioned at the forefront of the gemstone industry and intends 
to play an active part in promoting the value and importance of natural 
untreated gemstones that have followed a transparent and ethical route from 
mine to market. A small but focused marketing division has been established 
within the group and is headed up by Ms. Anna Haber and Mr. Rupak Sen, both of 
whom have many years of experience and are well recognised within the gemstone 
industry. Anna will lead the division and will focus her efforts on the 
European and American markets while Rupak will head up the Group's Middle 
Eastern and Asian marketing initiatives. The Company plans to partner with 
selected retailers, encouraging them to sell, market and promote Gemfields' 
emeralds. These retailers will be supported through high-level introductions to 
Gemfields' preferred emerald manufacturing partners, ensuring that they are 
able to have access to a consistent and reliable supply of quality emeralds. 
 
  * Environment and Corporate Social Responsibility 
 
The Company operates in compliance with international environmental and safety 
standards. This is evidenced by Kagem having been upgraded from category C to 
category B in the Environmental Council of Zambia's (ECZ) inspection for 
renewal of statutory licences and the Environmental Protection Fund's (EPF) 
annual environmental audit reports. 
 
The Zero Carbon Project 
 
Kagem embarked on a "Zero Carbon Project" in March 2009 involving the planting 
of circa 300,000 trees to neutralise the effect of emissions. To date 7,150 
trees have been planted. 
 
Corporate Social Responsibility 
 
Gemfields is committed to investing in sustainable community development 
projects. Such projects are developed in partnership with the local people 
living in close proximity to our operations and include the building and 
equipping of schools and medical clinics and the development of local farming 
projects. A project team has been established to ensure that all social 
projects are undertaken in the best interests and with the support of the 
relevant community. 
 
  * Impairment 
 
The Directors have taken the decision to write down the value of Kagem to zero 
in the financial statements. The ongoing uncertainty in the global economy, the 
loss-making performance during the year and the lack of reliable emerald prices 
make it difficult to justify forecasts showing a positive cashflow with 
reasonable certainty. This in turn complicates valuing the mine. The Company 
remains optimistic that Kagem will become a viable operation over time and 
recognises that much of the value proposition will be derived from trading, 
marketing and other aspects of the downstream business and, accordingly, 
believes the decision to write down the mine itself to be justifiable in the 
current climate. 
 
  * Kariba Amethyst Mine 
 
Production at the Kariba amethyst (of which Gemfields owns 50%) has continued 
at modest levels throughout the year. Critically, the privatisation agreement 
to purchase a further 26% of Kariba still remains unsigned by the Government of 
Zambia. The Company hopes to resolve the future ownership of Kariba during the 
coming year. Gemfields remains optimistic that production could be improved but 
will not commit any additional funds to expanding Kariba until the matter of 
ownership is resolved. 
 
Key financial performance indicators 
 
                                                            2009           2008 
 
Share price                                                GBP0.06          GBP0.38 
 
Cash and cash equivalents                           US$6,868,789  US$48,078,023 
 
Emerald inventory                                  US$17,715,627   US$6,789,231 
 
Revenue from emerald sales                            US$815,456              - 
 
Loss for the year                                 US$201,407,565 US$30,208,361 
 
Result 
 
The result for the year is significantly and adversely affected by the 
impairment charge relating to Kagem. 
 
Given the policy of inventory building adopted prior to the onset of the global 
financial crisis (which was aimed at establishing a base from which to provide 
customers with a reliable and consistent source of supply), no emerald sales of 
any significance took place during the period. 
 
Fabergé Licence 
 
The Company completed the arrangements granting it an exclusive worldwide 
licence to use the Fabergé brand name in respect of coloured gemstones 
(excluding diamonds). 
 
The licence, granted pursuant to an option which Gemfields acquired in June 
2008, covers an initial 15 year term. 
 
Oriental Mining S. a. r. l. 
 
The Company exercised its option to acquire the entire issued share capital of 
Oriental Mining s.a.r.l., a company incorporated in Madagascar ("Oriental"). 
Gemfields was granted the option by Rox Limited ("Rox") pursuant to an 
agreement between Gemfields and Rox dated 18th December 2007. 
 
Oriental has the rights to 15 exploration licences covering emeralds, rubies, 
sapphires, tourmalines and garnets in the Antananarivo, Fianarantsoa and 
Toliara provinces of Madagascar. In addition, Oriental has the right to five 
exploration licences that are pending approval from the Madagascan Ministry of 
Energy and Mines. 
 
Madagascar is recognised as one of the most exciting colour gemstone provinces 
in the world today, with several key discoveries having been made there during 
the last decade. While the country is presently experiencing considerable 
political turmoil, the Company believes that, in the medium to long term, 
gemstone-related activity in the country has the potential to become a valuable 
part of Gemfields' asset portfolio. 
 
Tanzanite One Limited 
 
Gemfields announced details of a proposed offer for Tanzanite One Limited 
("T1") on 12 September 2008. A successful bid would have created an enlarged 
gemstone group with both open-cast and underground gemstone mining expertise, 
positioning the combined group well for future consolidation, and benefitting 
from synergies in processing, sales, branding and marketing. 
 
Gemfields began a stakebuilding exercise in T1 during the year. The exercise 
saw Gemfields purchase 11,668,330 shares in T1 (approximately 16 per cent.). 
This was funded by the placing of 14,712,143 new Gemfields shares at a price of 
29p per share to Rox Limited. 
 
The stakebuilding exercise culminated in a "first come first served" tender 
offer for 30,754,970 T1 shares on 21 October 2008. The offer was oversubscribed 
within four days of its announcement. The T1 board responded by issuing new T1 
shares (constituting more than 50% of the enlarged voting share capital) to a 
T1 subsidiary. This prevented Gemfields from acquiring a controlling stake in 
T1 and the offer was thus allowed to lapse. Gemfields currently has no 
intention of making any revised or further offer for T1. 
 
Appointment of New CEO 
 
Ian Harebottle, a veteran of the coloured gemstone industry, was appointed as 
CEO during the year. 
 
Name Change 
 
The Company changed its name from Gemfields Resources Plc to Gemfields Plc 
during the year. 
 
Outlook and Objectives for the year ahead 
 
Objectives: 
 
  * Building on the solid rough sales platform that has been established and 
    which is showing encouraging signs for further growth. 
 
  * Initiating Gemfields' sales programmes for polished and certified 
    gemstones. 
 
  * Expanding mining and exploration activities to include new target sites 
    within the Kagem mining licence area. 
 
  * A focus on improved and upgraded security across the mine site supported by 
    skilled manpower and additional capitalisation. 
 
  * Subject to the necessary Zambian consents, the opening of a rough gemstone 
    trading business in Kitwe, Zambia (aimed at purchasing rough emeralds from 
    local and small scale operators). 
 
  * The establishment of a trial cutting facility on the mine to establish the 
    feasibility of local beneficiation. 
 
Outlook: 
 
  * The mine plan presently being implemented at Kagem aims to continue the 
    current trend of improving mining efficiencies, further reducing relative 
    operating costs and targeting higher grade areas in pursuit of optimising 
    financial performance. The scale and possible expansion of the mine plan 
    will be re-assessed as operating conditions improve. 
 
  * The Company plans to actively pursue its strategy of consolidating the 
    supply chain and improving consumer awareness and demand high quality, 
    certified and transparent rote to market coloured gemstones. It is hoped 
    that these efforts will increase demand for the Company's products, thereby 
    supporting an increase in prices and achievable margins. 
 
  * The Company is not expecting any significant growth within the coming year 
    and will view this time as an opportunity to cement its current business 
    platform in preparation for future growth. 
 
Graham Mascall 
 
4 December 2009 
 
Gemfields PLC 
 
Consolidated income statement 
 
for the year ended 30 June 2009 
 
                                         Note                2009          2008 
 
                                                          US$'000       US$'000 
 
Revenue                                                       815             - 
 
Mining and production costs                3              (6,316)       (3,024) 
 
                                                         ________      ________ 
 
Gross Loss                                                (5,501)       (3,024) 
 
Other income                                                  246           739 
 
Administrative expenses 
 
Impairment                                27            (254,932)      (19,500) 
 
Depreciation                              10             (14,743)       (3,002) 
 
Other administrative expenses                             (8,213)       (6,370) 
 
Total Administrative expenses                           (277,888)      (28,872) 
 
                                                         ________      ________ 
 
Loss from operations                       4            (283,143)      (31,157) 
 
                                                         ________      ________ 
 
Finance income                             6                1,423           935 
 
Finance expenses                           6              (9,358)         (419) 
 
                                                         ________      ________ 
 
Loss before taxation                                    (291,078)      (30,641) 
 
                                                         ________      ________ 
 
Tax credit                                 7               89,670           433 
 
                                                         ________      ________ 
 
Loss for the year                                       (201,408)      (30,208) 
 
                                                         ________      ________ 
 
Attributable to: 
 
Equity shareholders of the parent                       (164,757)      (29,330) 
 
Minority interest                                        (36,651)         (878) 
 
                                                         ________      ________ 
 
                                                        (201,408)      (30,208) 
 
                                                         ________      ________ 
 
Loss per share 
 
Basic and diluted                          8            US$(0.51)     US$(0.25) 
 
All amounts relate to continuing 
activity. 
 
Gemfields PLC 
 
Consolidated statement of changes in equity 
 
for the year ended 30 June 2009 
 
                 Attributable to equity holders of the parent 
 
                                                  Cumulative 
 
                   Share   Share  Merger  Option Translation  Retained     Total Minority 
 
                 capital premium Reserve Reserve   Reserve    Earnings           Interest    Equity 
 
                   $000s   $000s   $000s   $000s       $000s     $000s     $000s    $000s     $000s 
 
Balance at 30      1,871  33,776  10,500     858         (7)  (14,268)    32,730        -    32,730 
June 2007 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Loss for the           -       -       -       -           -  (29,330)  (29,330)    (878)  (30,208) 
year 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Total recognised       -       -       -       -           -  (29,330)  (29,330)    (878)  (30,208) 
income 
 
and expense for 
the year 
 
Issue of new       4,033  55,910 110,505       -           -         -   170,448        -   170,448 
share capital 
(net of issue 
costs) 
 
Share based            -       -       -     283                     -       283        -       283 
payments 
 
Options expired        -       -       -    (30)           -        30         -        -         - 
 
Minority               -       -       -       -           -         -         -   37,529    37,529 
interest 
resulting from 
acquisition 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Balance at 30      5,904  89,686 121,005   1,111         (7)  (43,568)   174,131   36,651   210,782 
June 2008 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Loss for the           -       -       -       -           - (164,757) (164,757) (36,651) (201,408) 
year 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Total recognised       -       -       -       -           - (164,757) (164,757) (36,651) (201,408) 
income 
 
and expense for 
the year 
 
Issue of new         256   7,137       -       -           -         -     7,393        -     7,393 
share capital 
(net of issue 
costs) 
 
Share based            -       -       -   1,321           -         -     1,321        -     1,321 
payments 
 
Options expired        -       -       -   (228)           -       228         -        -         - 
 
                    ____ _______  ______  ______    ________   _______     _____  _______     _____ 
 
Balance at 30      6,160  96,823 121,005   2,204         (7) (208,097)    18,088        -    18,088 
June 2009 
 
                  ____   ______  ______  ______     ________    ______     _____  _______     _____ 
 
 
The nature and purpose of each reserve within Shareholders' equity is described 
as follows: 
 
Reserve Description and purpose 
 
Share capital Amount subscribed for share capital at nominal value. 
 
Share premium Amount subscribed for share capital in excess of nominal value. 
 
Merger reserve The difference between the fair value of the shares issued as 
consideration for acquisition of subsidiaries in excess of the nominal value of 
the shares, where 90% or more of shares are acquired. 
 
Option reserve Cumulative fair value of options charged to the income 
statement. 
 
Cumulative translation reserve Cumulative gains and losses on retranslating the 
net assets of overseas operations to the presentation currency. 
 
Retained earnings Cumulative net gains and losses recognised in the 
consolidated income statement. 
 
Minority interest Amounts attributable to non-controlling shareholders. 
 
Gemfields PLC 
 
Consolidated balance sheet 
 
at 30 June 2009 
 
                                         Note                2009          2008 
 
                                                          US$'000       US$'000 
 
Non-current assets 
 
Intangible assets                          9                    -             - 
 
Property, plant and equipment             10                5,993       268,663 
 
Available-for-sale Investments            12                2,430             - 
 
                                                         ________      ________ 
 
                                                            8,423       268,663 
 
                                                         ________      ________ 
 
Current assets 
 
Inventory                                 13               18,445         7,500 
 
Other receivables                         14                1,620         1,151 
 
Cash and cash equivalents                                   6,869        48,078 
 
                                                         ________      ________ 
 
Total current assets                                       26,934        56,729 
 
                                                         ________      ________ 
 
Total assets                                               35,357       325,392 
 
                                                         ________      ________ 
 
Non-current liabilities 
 
Deferred taxation                         18              (1,134)      (90,827) 
 
Other non-current liabilities             15              (7,848)      (17,039) 
 
                                                         ________      ________ 
 
                                                          (8,982)     (107,866) 
 
Current liabilities 
 
Trade payables                            17              (2,640)       (2,275) 
 
Current tax                               17                 (23)         (329) 
 
Other current liabilities                 17              (5,624)       (4,140) 
 
                                                         ________      ________ 
 
                                                          (8,287)       (6,744) 
 
                                                         ________      ________ 
 
Total liabilities                                        (17,269)     (114,610) 
 
                                                         ________      ________ 
 
                                                         ________      ________ 
 
Total net assets                                           18,088       210,782 
 
                                                         ________      ________ 
 
Capital and reserves attributable to 
equity holders of the parent 
 
Share capital                             19                6,160         5,904 
 
Share premium                                              96,823        89,686 
 
Merger reserve                                            121,005       121,005 
 
Option reserve                                              2,204         1,111 
 
Cumulative translation reserve                                (7)           (7) 
 
Retained earnings                                       (208,097)      (43,568) 
 
                                                         ________      ________ 
 
                                                           18,088       174,131 
 
Minority interests                                              -        36,651 
 
                                                         ________      ________ 
 
Total equity                                               18,088       210,782 
 
                                                         ________      ________ 
 
Gemfields PLC 
 
Consolidated cash flow statement 
 
for the year ended 30 June 2009 
 
                                          Note               2009          2008 
 
                                                          US$'000       US$'000 
 
Cash flows from operating activities 
 
Loss for the year                                       (201,408)      (30,208) 
 
Depreciation                               10              14,743         3,002 
 
Impairment of intangible assets             9                   -        12,514 
 
Impairment of evaluated mining            10,27           249,731             - 
properties 
 
Impairment of available for sale assets    27               5,201             - 
 
Share-based payments                                        1,321           283 
 
Finance income                                            (1,423)         (935) 
 
Finance expense                                             9,358           419 
 
Tax credit                                               (89,670)         (433) 
 
Impairment of property, plant and          10                   -         6,708 
equipment 
 
Inventory provision                                             -           278 
 
(Increase)/Decrease in trade and other                      (469)           136 
receivables 
 
Increase/(Decrease) in trade and other                    (1,881)      (13,343) 
payables 
 
Increase/(Decrease) in provisions                           (802)         5,050 
 
(Increase) in inventory                                  (10,945)       (2,159) 
 
                                                         ________      ________ 
 
Net cash outflow from operating                          (26,244)      (18,688) 
activities 
 
Cash flows from investing activities 
 
Acquisition of investment                                       -          (22) 
 
Acquisition of available for sale          12             (7,631)             - 
investment 
 
Interest received                                             974           260 
 
Dividend received                                             449             - 
 
Purchase of property, plant and            10             (2,338)         (737) 
equipment 
 
Sale of property, plant and equipment      10                 534             - 
 
Purchase of intangible assets                                   -          (50) 
 
Exploration and development expenditure                         -           (3) 
 
                                                         ________      ________ 
 
Net cash outflow used in investing                        (8,012)         (552) 
activities 
 
Cash flows from financing activities 
 
Issue of ordinary shares (net of issue                      7,360        57,227 
costs) 
 
Exercise of share options                                      33             - 
 
Repayment of borrowings                                   (4,986) 
 
Finance expense                                             (653)         (419) 
 
                                                         ________      ________ 
 
Net cash inflow from financing                              1,754        56,808 
activities 
 
Net (decrease)/increase in cash and                      (32,502)        37,568 
cash equivalents 
 
Cash and cash equivalents at start of                      48,078         9,836 
period 
 
Exchange differences on translation                       (8,707)           674 
 
                                                         ________      ________ 
 
Cash and cash equivalents at end of                         6,869        48,078 
period 
 
                                                         ________      ________ 
 
 
 
 
END