Gemfields results held back by Zambian government discussions

3rd Oct 2013 12:30

Disruptions to its auction schedule held back revenues at gemstone miner and Fabergé owner Gemfields in the year to June, though demand and market prices remain strong. The Zambia-focused company held two auctions in the period compared to four the previous year, as the Zambian government proposed a ban on the auctioning of emeralds outside of Zambia.However, Chief Executive Officer Ian Harebottle said the year had been one of the busiest years in the AIM-listed company's history, with strong operational performance at its Kagem emerald mine, promising bulk sampling at its Montepuez ruby deposit in Mozambique, the acquisition of the Fabergé jewellery house and the appointment of Hollywood actress Mila Kunis as a global brand ambassador. From its one high-quality and one lower-quality auction the company made revenues of $48.4m, down from $83.7m the year before.Admin costs more than doubled to $32.9m, leading to a $20.1m loss before tax. Said Harebottle: "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."He added that emerald price growth remained robust, with July's post-period auction in Lusaka witnessing record prices of $54 per carat, with the government's location requirements not showing a negative impact on attendance or pricing at the high-value auction in Lusaka in July. "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." Looking forward, Harebottle pointed to a ramp-up of gemstone extraction at Montepuez, the expansion of activity at Kagem and the "evolution" of Fabergé. Gemfields has recovered 1.8m carats of rubies from preliminary bulk sampling at Montepuez, with a first ruby auction due to be held in in the current half-year and production expected to ramp to 2.5m carats per month during the full year.Shares in GEM were down 3.4% to 25p at 13:02 on Thursday.OH