Gemfields (AIM: GEM) has sold US$5.6 million worth of rough emeralds at the second auction it held this year after raking in US$5.9 million in July, achieving a higher average sales value of US$5.10 per carat compared to US$4.40 in the first auction.
A total of 1.12 million carats were offered in the second auction, which was attended by more than 20 companies from India with 19 of them placing bids and buying 74% of the lots, which represents 97.2% of lots by weight and 76% of lots by value. The lots offered ranges in value from US$1 per carat to US$200 per carat.
As no meaningful quantities of lower quality material have yet been sold, Gemfields said it was difficult to predict the average per carat revenues derived from its overall production profile.
“While the gemstone markets remain relatively weak in the wake of the global financial crisis, it is clear that our marketing and promotional initiatives are working and that the emerald market is gathering momentum. We will continue to work, in conjunction with selected customers, to stimulate demand for emeralds that have followed a transparent and ethical route to market,” said Chief Executive of Gemfields Ian Harebottle.
The company now expects to hold an auction of lower quality rough emerald and beryl in Jaipur, India in the first quarter of 2010.
Gemfields has produced a total of 28 million carats during the year, compared to 9.9 million in 2008, while ore grades increased to 349 cpt (carats per tonne) from 233 cpt last year.
Revenues for the financial year to 30 June amounted to US$815,456 compared to none in the previous year, while losses soared to US$0.2 billion after an impairment charge of US$249 million against the value of the Kagem mine in Zambia after writing down its value to zero, saying it was difficult to justify forecasts showing a positive cashflow with “reasonable certainly,” complicating the valuation of the mine. The cash balance stood at US$6.86 million, down from last year’s US$48.07 million.
As the global demand in diamonds fell, the scale of operations at Kagem, which is currently the company’s only operating mine, were reduced. Operating costs at the mine averaged US$241 per tonne of ore compared to US$447 per tonne in 2008.
Gemfields intends to focus on further cost reductions and improvement of operating efficiencies, pledging to limit its expenditure to key projects only until the prospects for a full recovery in the gemstone market take shape.
Other objectives for the next year include the initiation of sales programmes for polished and certified gemstones, expanding mining and exploration activities to include new target sites in the Kagem licence area, the opening of a rough gemstone trading business in Kitwe, Zambia and the establishment of a trial cutting facility on the mine.
The company’s flagship Kagem mine covers an area of 43 sq km (square kilometres) with the license area hosting six known TMS belts with over 13 km (kilometre) strike length. Kagem has sold 11.4, 13.7, and 14.9 million carats of emerald and beryl, generating revenues of US$6.4, US$9.5 and US$12.6 million in 2005, 2006 and 2007 respectively.