Gemfields PLC (AIM: GEM) said it has received the full US$5.9 million of proceeds from the July 2009 emeralds auction in London and that the response to date from stakeholders seeking to attend the forthcoming event in the last week of November has been “very positive”.
In a market update for the first quarter ending September 30 2009, the company said it realised revenues of US$425,000 from the non-auction sale of two specimens under Gemfields' collective agreement to market and sell emerald mineral specimens in conjunction with Collector's Edge of the US.
Cost-reduction measures have continued to bear fruit, resulting in reduced relative mining costs of the Kagem emerald and beryl mine in Zambia, of which it acquired a 75 percent stake in June 2009.
However, the stripping ratio is anticipated to rise toward the end of the calendar year and is thus expected to have a commensurate impact on total mining costs. Gemfields has initiated a trial underground mining project which is still at an early stage but, if successful, should provide a number of opportunities for expansion into areas that have a history of high quality production but where the dip of the ore body is relatively steep.
Year-to-date production of 2.9 million carats of emerald and beryl, at production cost for the quarter of US$1.18 per carat, was dominated by low grade of 182 carats per tonne, compared with 349 carats per tonne in the year to end-June 2009. “While disappointing, the lower grade can be attributed to a number of factors, some of which were anticipated and are linked to the opening up of new areas for mining, including areas with a reduced stripping ratio,” Gemfields said.
The management of Kagem Mining Ltd, in association with the Zambian government, have had to deal with some illegal mining activity taking place within the boundaries of the Kagem mining licence area over the past few of weeks. While the matter is as yet not fully resolved, various steps have been put in place and the support of all key Zambian ministries has been obtained.
Gemfields presently has US$7.7 million in cash. Kagem has bank loans and leases repayable by December 31 2010 totalling US$6.6 million. In addition, Gemfields estimates the value of its gemstone inventory above US$10 million.
CEO Ian Harebottle commented: “We are confident that the forthcoming auction will build on the success experienced in our July auction. Gemfields continues to make good progress in various areas despite the (first) quarter having been marred by low grade. We hope that the grade will soon return to its long-term average.”