Gemfields plc has released its operational update for the three month period ending 30 June 2016 (Q4 FY 2016), reporting the results for both its 75% Kagem Mining Limited (in Zambia) as well as its 75% owned Montepuez Ruby Mining Limitada (in Mozambique). Kagem’s production of emerald and beryl for the period stood at 7.2 million carats, compared to 8.1 million carats produced in Q4 2015, representing a drop of a little over 11%. The Company explaining this fall, said it was “attributable to the varied nature of the mineralization and a higher grade zone having been encountered during the previous comparative period”.
The average grade for the period is also lower than that achieved in the same period of the previous year: in Q4 2016 the average grade stood at 185 carats per tonne as against 222 carats per tonne recovered in Q4 2015. “The varying grade is largely on account of a greater proportion of lower grade bulk sampling pits mined in this quarter,” Gemfields said. Total operating costs were more or less flat at US$ 12.6 million compared to US$ 12.8 million for the same period of the previous year. With these figures, Kagem’s annual gemstone production of emerald and beryl reached 30.0 million carats; and, while in line with the guidance put out by the Company, remained more or less flat compared to an annual production of 30.1 million carats for FY 2015.
The average grade was also similar to the previous year: average grade of 241 carats per tonne for Q4 2016 compared to 242 carats per tonne in Q4 2015. Total operating costs for FY 2016 were slightly higher at US$ 47.3 million as against US$ 44.5 million in the previous year. Gemfields said that the increase was “largely due to an increase in exploration activities carried out across a number of mineralised zones within the mining licence area and a considerable increase in the scale of in-house mining which is now being expensed in the income statement following the change in mine plan to continuous waste stripping resulting in a change in accounting treatment”. “During the financial year 2015-16 Gemfields had four rough emerald and beryl auctions delivering record auction revenues of US$ 101.3 million at an overall average value of US$ 12.22 per carat,” the Company noted.
Gemfields has announced that its next auction of predominantly commercial quality rough emerald and beryl extracted from Kagem is scheduled to take place in September 2016 in Jaipur, India. This will be followed by an auction of higher quality rough emerald to take place in Singapore in November 2016. The Montepuez Ruby Mining Limitada produced 6.2 million carats of ruby and corundum in Q4 2016 compared to 0.7 million carats produced in the quarter ending 30 June 2015- representing a phenomenal jump. This was “supported by processing of the higher grade, but lower value, amphibolite resources,” the Company said. The average grade of ruby and corundum also leapt up similarly – 75 carats per tonne recovered versus 9 carats per tonne recovered in Q4 2015.
Total operating costs for the period at US$ 7.4 million were more or less flat compared to US$ 7.0 million in the quarter ending 30 June 2015. Montepuez’s annual production of ruby and corundum touched 10.3 million exceeding the guidance set at 8 million carats; and also higher that the production of 8.4 million carats for FY 2015. The Company also noted that there was “a 68% increase in the volume of the higher quality rubies recovered during the financial year 2016”. The average grade for FY 2016 stood at 35 carats per tonne as against 26 carats per tonne in the previous year.
Total operating costs amounted to US$ 26.2 million compared to US$ 21.6 million in FY 2015; “due to the increase in the scale of exploration and mining activities being carried out across the licence area”, the Company explained. “During the financial year 2015-16 Gemfields had two rough ruby and corundum auctions delivering US$ 73.1 million in auction revenues at an overall average value of US$ 45.50 per carat,” Gemfields declared. Gemfields’ next mixed quality auction of rough rubies extracted from Montepuez ruby mine is expected to take place by the end of December 2016 in Singapore.
Ian Harebottle, CEO of Gemfields, commented: “Demand for our products and the way in which they are presented continue to rise, achievable prices are on the increase and costs are well contained while the level of work and output has increased significantly.” He added: “The US$ 65 million financing facilities announced in July provide the funding to sustain our growth and expansion plans to increase annual production to approximately 20 million carats of rough rubies in Montepuez and more than 40 million carats of rough emeralds in Kagem within the next 3 years. We look forward to continuing this same level of momentum into the coming year.”