Increased processing capacity and efficiency at Gemfields PLC's (LON:GEM) Montepuez asset saw the ruby mine achieve “exceptional production results” in the third quarter.
Plans remain on schedule for the group to meet its annual target production of 40 million carats of rough emeralds from Kagem and 20 million carats of rough rubies from Montepuez within the next three years.
The 75%-owned mine produced 4.5mln carats of ruby and corundrum in the third quarter of 2016, with an average grade of 44 carats per tonne; that's a massive improvement on the 0.5mln tonnes produced in the same quarter of 2015, when the average grade was seven carats per tonne.
Total operating costs eased to US$5.8mln from US$6.1mln the year before.
At the 75%-owned Kagem emerald mine in Zambia, production clocked in at 6mln carats of emerald and beryl with an average grade of 174 carats per tonne, versus production of 7.5mln carats at an average grade of 237 carats per tonne a year earlier.
Gemfields said the difference between this year's third quarter performance and last year's was down to the varied nature of the mineralisation; last year the company was mining a higher-grade zone than it was this year.
Total operating costs at Kagem came down to US$10.2mln from US$11.4mln the previous year.
The group's Fabergé unit saw the value of sales orders agreed fall by 23% from a year earlier, when two new significant wholesale agreements were signed.
The number of sales transactions rose 67% year-on-year, and the average selling price per piece rose by 2%.
Gemfields ended the quarter with cash and cash equivalents of US$24.1mln and Total debt outstanding of US$49.4mln.
"This has been a positive quarter with Montepuez continuing to generate strong results. The increased processing capacity and efficiency has seen us achieve exceptional production results,” said Ian Harebottle, chief executive officer of Gemfields.
“At Kagem production remains consistent and operating costs saw a reduction on the corresponding period last year. In addition, I am pleased to report the quarter saw the completion of two new exciting community projects in the form of new Chapula high school and Nkana Health Clinic.
"These new facilities have been incredibly well received and the local communities are already reaping the rewards. This achievement is as a strong endorsement of the company's CSR [corporate social responsibility] strategy that seeks to engage local stakeholders to conceive and co-develop projects that will have a long-lasting and positive impact in our local neighbourhoods,” Harebottle said.
“Thanks to the full global launch of our new integrated marketing campaign, demand for our coloured gemstones continues to rise, ensuring that achievable prices generate robust auction results," the Gemfields boss said.
Gemfields' next auction of predominantly higher quality rough emerald extracted from Kagem is scheduled to take place in December 2016 in Singapore.
The coloured gems miner's next auction of mixed quality rough rubies and corundrum extracted from Montepuez is also expected to take place next month in Singapore.
The company continues to work towards closing the acquisition of the Coscuez emerald mine in Colombia, noted finnCap, the company’s house broker.
“No deadline has been given for the completion of the deal, but the company has already started work on detailed geological modelling and underground mine planning,” observed finnCap’s Martin Potts.
At Shore Capital, Yuen Low noted the production numbers and the reduced costs, but said “it is auction results that matter most for this company”.
Referring to Kagem, “we noted that ore tonnes were down (i.e. not just grade), but importantly, unit costs were also down on per-ounce and per-tonne bases,” the broker said.
“At Montepuez, Q1 FY2017 [first quarter of fiscal 2017] also saw lower production (vs Q4 FY2016), but this was due to markedly lower grades – tonnages were all up. This resulted in a slight uptick in per-carat costs, but per-tonne costs were pleasingly down,” Low opined.
In a separate announcement, Gemfields announced that chief financial officer Janet Boyce would be joining the board with immediate effect.
“She has built a strong track record ever since she joined the Gemfields group and has a robust insight into the manifold aspects of our business. Her positive, dynamic and thorough approach will further enhance the well-established proficiencies of our experienced and long-standing board," Harebottle said.
Towards the end of the day Gemfields shares were trading at 48.25p, down 0.25p.
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