The coloured stones specialist Gemfields PLC (LON:GEM) said it enjoyed a “pleasing” final quarter of the year as it said output from its ruby operation would exceed guidance.
Annual production from Montepuez in Mozambique is slated to be 10.3mln carats of ruby and corundum, some 2.3mln carats ahead of forecast. Output hit 6.2mln carats in the three months to June 30 (the final quarter of the financial year).
The biggest contributor to revenues and earnings is the Kagem Emerald Mine in Zambia, where production is dictated by the variability of the grade of the ore mined.
So in the final quarter Gemfields unearthed 7.2mln carats of emerald and beryl, which was around 900,000 carats lower than the same point last year.
However for the year production was steady at 30mln carats, as was the grade, while cash operating costs for the 12 months rose marginally to US$47.3mln from US$44.5mln. The company raked in a record US$101.3mln from auctions.
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At Montepuez the grade increased (35 carats per tonne versus 26 carats a year ago). And while Total costs edged up, unit costs and rock handling costs fell.
Chief executive Ian Harebottle said the US$65mln financing facility agreed last month would “sustain” Gemfields’ growth and expansion plans.
Specifically, it will be used to increase annual production to approximately 20mln carats of rubies at Montepuez and more than 40mln carats of emeralds in Kagem within the next the years.
“Demand for our products and the way in which they are presented continue to rise, achievable prices are on the increase and costs are well contained while the level of work and output has increased significantly,” Harebottle said.
“This is an exceptional achievement in itself, but is even more impressive when considered against a backdrop of market uncertainty in a number of jurisdictions and Gemfields' ever expanding operating footprint.”
Finally, the company’s luxury brand Fabergé enjoyed a strong end to the financial year with the value of sales orders up 14% in the final quarter and number of transactions more than doubled. Total operating costs fell 28%.
Boss upbeat on prospects
Speaking to Proactive’s Juliet Mann, chief executive Ian Harebottle talked about growth plans, funded by the new financing package, as well as some of the potential challenges.
Kagem: “We expect in the next three-to-four years to ramp production up to 40-45mln carats.”
Expansion plans: “We’ve also got a lot of other potential expansion plans we’re looking at: Ethiopia for emeralds, Columbia for emeralds, Sri Lanka for sapphires; so some of it [new funds] will go into those newer projects as well.”
Market challenges: “Some are in our consumer base (Russia, China and some of the Arab states). But fortunately our product is consumed on a global basis, when one market goes up another comes down. I think compared to the sector we have done very well.”
Faberge: “It has done very well. Unit sales have gone up, margins are well-maintained, revenues have gone up and costs have come down; all in a period when most of the luxury houses have gone backwards.”
Brokers remain bullish on the stock
The shares rose 5% to 38.77p in morning trade, valuing the business a £208mln. The specialist commodities broker SP Angel values the stock at 82p, while finnCap reckons it is worth 85p.