Coloured gems specialist Gemfields PLC (LON:GEM) said its Kagem emerald and Montepuez mines are both on track to meet annual production targets.
First quarter production data demonstrated the inherent variability in the mining process, with production and grades at Kagem this year lower than last year, owing to the fluid nature of the mineralisation and a higher-grade zone having been encountered during the first quarter of last year, while at Montepuez production and grades were up year-on-year.
At Kagem, production in the first quarter Totalled 7.1mln carats of emerald and beryl, versus 9.9mln carats in the corresponding quarter of 2015.
The average grade was 297 carats per tonne (cpt), versus 355 cpt a year earlier.
Total operating costs rose to US$10.3mln from US$9.8mln, while unit operating costs per carat rose to US$1.45 (2015: 99 cents), or 99 cents on a cash basis versus US$1.15 the year before.
Cash rock handling units costs fell to US$2.69 per tonne from US$2.85 per tonne the previous year.
At Montepuez (MRM), production in the first quarter of 2016 rose to 2mln carats of ruby and corundum from 1.4mln carats a year earlier, partially supported by processing of the higher grade, but lower value, amphibolite resources, but offset by prolonged and heavy rainfall during the period.
The average grade rose to 30 cpt from 18 cpt in the first quarter of 2015, which was due to a greater proportion of higher grade amphibolite ore being processed this year.
Total operating costs rose to US$5.8mln from US$4.6mln the year before as operations at Montepuez scale up.
Unit operating costs ebbed to US$2.90 per carat from US$3.29 as a direct result of the increase in carats produced. On a cash basis(c), unit operating costs were US$2.40 per carat versus US$2.64 per carat in the quarter ending 31 March 2015).
Cash rock handling unit costs rose to US$10.18 per tonne from US$7.10 per tonne in the first quarter of 2015, due to higher cash costs in preparation for an increase in the scale of mining operations and a reduction in overall volumes due to the prolonged and heavy rains.
At Fabergé, sales orders agreed fell by 26% from a year earlier, when the Total was inflated by the sale of the high value Pearl Egg in February 2015, while timing differences on orders agreed at BaselWorld also had an impact.
The number of sales transactions during the latest quarter increased by 17% year-on-year while the average selling price per piece increased by 32%.
Total operating costs for the quarter increased by 10% from a year earlier, largely on account of an increase in advertising spend.
"Gemfields has had another pleasing quarter of solid production across its emerald and ruby operations with both Kagem and MRM having maintained the momentum seen over the previous calendar year and well on track to meet their annual guidance. At Kagem this has been aided by an increase in both its processing efficiency and capacity following upgrades to the wash plant, while a shift in mining focus has supported MRM's results as it begins to implement some of its longer term capacity building initiatives,” said Ian Harebottle, chief executive officer of Gemfields.
"The coloured gemstone market remains robust, as is evident from Gemfields auction results, and is further supported by improving consumer demand within the US. To date the company has generated over US$116 million in revenue from auctions held in the 2016 financial year and we look forward to two additional auctions, firstly a lower quality emerald auction in May and another ruby auction in June, prior to the year end," he added.
“The final quarter for the financial year will see a sale of lower quality emeralds in Jaipur, India in the current month and a sale of mixed quality ruby in Singapore in June,” noted broker finnCap, as it retained its price target of 85p.
Shore Capital, meanwhile, noted: “Gemfields is continuing to generate increasing customer support and robust margins from its coloured gemstone operations.”
Shares in Gemfields were up 1.2% at 43p in lunchtime trading.
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