Gemfields (LON:GEM) achieved the highest auction revenues to date from its latest event in London, raising US$7.5 million as prices per carat achieved soared 83% from the previous auction of higher quality material held in November. The group noted that demand for Zambian emeralds has increased, while operating costs at the flagship Kagem mine nearly halved.
The auction, which was held on 19-23 July, saw 0.85 million carats offered to the 37 attending companies from India, Israel, Germany and the United States with 0.80 million carats sold. The revenues of US$7.5 million took the total raised from the four auctions held to date to US$26.2 million.
Demand for Zambian emeralds, and more specifically Gemfields' Kagem emeralds, has seen a steady increase across all sectors over the past year, the group said. The number of auction attendees increased from 23 in July 2009 to 37 in the latest auction with a further 30 having applied for the event. The company added that the quarter to 30 June saw solid production volumes, good grades and the lowest quarterly unit production costs achieved to date.
Gemstone production at the Kagem mine increased to 6.1 million carats during the quarter, which is the highest since Q1 2009. Total operating cost stood at US$3.1 million compared to US$3 million for the previous quarter.
Kagem's unaudited total operating costs for the year ending 30 June 2010 totalled US$12.4 million compared to US$21.5 million in the previous year, implying an average production cost during that period of US$0.72/carat of emerald and beryl compared to last year’s US$0.77/carat. Kagem's operating costs fell 42% during the year, with gemstone production down 38% year-on-year at 17.4 million carats, which the company said represented “real achieved economies of scale".
“We are pleased with the positive response we have received at the recent auction, giving a clear indication that demand for our emeralds is growing. All indications are that the market for emeralds is likely to continue to grow at a considerable pace, supported by strong Asian and worldwide demand, and into the foreseeable future,” said product director at Gemfields, Adrian Banks.
In addition to the auction receivables of US$7.5 million, Gemfields presently has US$1.3 million in cash. The company’s 75% owned Kagem Mining Ltd has bank loans and leases repayable by 31 December 2010 totalling US$2.4 million. On top of that, Gemfields has a gemstone inventory estimated at over US$10 million.