Disruptions to the company’s emerald auction schedule spoiled an otherwise excellent operational performance by coloured gems miner Gemfields (LON:GEM) last year.
The decision by the Zambian authorities, seemingly requiring that gems excavated in the country be auctioned in Zambia, obliged the company to postpone an auction set for June in Singapore, which distorted results for the year to 30 June.
Revenue eased to US$48.4mln from US$83.7mln the year before, while underlying earnings (EBITDA) tumbled to US$1.2mln from US$54.6mln.
"Had all three auctions initially planned for the financial year to 30 June 2013 come to fruition, we would undoubtedly have seen Gemfields report another year of solid financial performance,” said chief executive officer, Ian Harebottle.
The coffers had US$11.2mln in them at the end of June, compared to cash of US$36.7mln a year earlier.
The estimated cost of inventory on hand, excluding fuel and other consumables, shot up to US$76.3mln from US$26.6mln at the end of June 2012, reflecting a good year for the company operationally.
Annual production of emerald and beryl from Kagem Mining Limited, its 75%-owned subsidiary in which the Zambian government has a stake, increased 42% to 30.0 million carats in the year from 21.1 million carats last year.
Average monthly operating costs at Kagem were US$1.37mln, or US$ 2.68mln on a cash cost basis (2012: US$1.34 million, or US$ 2.51 million on a cash cost basis).
Unit production costs for emerald and beryl decreased by 26% to US$0.55 per carat, or by 25% to US$ 1.07 on a cash cost basis.
Though currently chiefly known for extracting emeralds, the company also completed a preliminary bulk sampling at its 75%-owned Montepuez Ruby Mining in Mozambique, and is expecting to hold its first ruby auction before the end of June 2014.
It was also a year in which Gemfields completed the acquisition of iconic jewellery brand Fabergé. Fabergé achieved record revenues, margins and unit sales during the reporting period.
“I remain hopeful that the ongoing discussions with the Government of the Republic of Zambia regarding the geographic location of our future emerald auctions will soon yield a constructive outcome,” said Harebottle.
“We will continue our commitment to supporting the competitiveness of Zambian emeralds on the international market,” he pledged.
“Price growth remains robust, as is visible from the last auction held in Lusaka in July post the period under review, where record prices of US$54 per carat were realised after years of dedicated mining and marketing efforts."
Continuing the upbeat theme, Harebottle said: “Our pursuit of greater value for our shareholders will progress materially with our first ruby auction (due before 30 June 2014), the ramp-up of gemstone extraction at the Montepuez ruby deposit, the expansion of activity at Kagem and the evolution of Fabergé. These next steps will ensure that Gemfields is closer to achieving its strategy of becoming the world's 'coloured gemstone champion'."