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Coloured Gemstones

The global coloured gemstone market continues to grow strongly and Gemfields has the potential to expand its existing emerald and ruby businesses and to apply its successful model to sapphires and other coloured gemstones.

For more information on Gemfields, please visit: www.gemfields.co.uk

coloured-gemstones

Increased Sales

Record revenues for Gemfields’ 2015 financial year.

CPRs Released

Competent Person’s Reports (CPR) released for Kagem and Montepuez.

Project Acquisition

Acquisition of two emerald projects in Colombia.

Investment Strategy

In 2007, Pallinghurst identified the coloured gemstone sector as an “overlooked” industry that offered a unique investment opportunity. Demand for coloured gemstones by the jewellery and fashion sectors was increasing, but supply was constrained and fragmented due to the lack of large, reliable producers able to consistently deliver sufficient quantities of gemstones. Pallinghurst saw an opportunity to unlock value by bringing capital, scale and professionalism to the industry, to which end it assembled a consortium of Pallinghurst Co-Investors, including the Group.

Kagem, an emerald mine in the “Copperbelt” region of northern Zambia, currently producing nearly a quarter of the world’s emeralds, was the consortium’s first acquisition in the sector. Kagem had been producing emeralds for nearly 20 years but was performing badly due to a combination of poor management, theft, shareholder conflicts and a lack of capital. Through a series of transactions, the consortium acquired 75% of Kagem, with the balance held by the Government of the Republic of Zambia. In pursuing its vision for consolidating the sector, the consortium acquired majority control of AIM-listed Gemfields plc (“Gemfields”) by selling Kagem to Gemfields in a reverse takeover during 2008.

Gemfields began its expansion into other major coloured gemstones in 2012 when it acquired 75% of a large ruby deposit near the town of Montepuez in northern Mozambique. The mining licence covers 340 square kilometres and is believed to be the most significant recently discovered ruby deposit in the world.

Pioneering Auction System

Gemfields implemented an innovative grading and auction system for selling its rough gemstones. The auctions are held in secure locations with the material separated into homogenous lots and certified as either having been produced by Gemfields or obtained by Gemfields from third parties. The world’s leading rough gemstone buyers submit sealed bids for individual lots. A sale occurs if the highest bid received exceeds a pre-determined, but undisclosed, reserve price. The auctions have brought a level of professionalism and transparency previously not seen in the industry.

As there was no industry standard for evaluating rough coloured gemstones, Gemfields established its own grading system to assess each gem according to its individual characteristics (size, colour, shape and clarity). This approach has been instrumental in providing buyers with confidence in the consistent quality of the material on offer. Gemfields used this grading system to develop two auction classes, one offering higher quality gemstones and the other for the larger volume of lower quality gems.

Strong Emerald Auction Results

Since its first auction in July 2009, Gemfields has seen increased demand for its responsibly sourced and transparently supplied emeralds, highlighting the success of its formalised and consistent method of marketing rough coloured gemstones by auction.

Gemfields’ 24 auctions of emerald and beryl mined at Kagem since July 2009 have generated US$459 million in aggregate revenues. Gemfields continues to experience significant demand for its responsibly sourced emerald and beryl with successive auctions regularly achieving record per carat prices and auction proceeds.

May 2016

In  May  2016,  a  predominantly  commercial  quality  rough  emerald  and  beryl  auction  was  held  in  Jaipur,  India generating  revenues  of  US$14.3  million  at  an  average  price  of US$5.15 per carat, almost 20% higher than achieved previously.

September 2016

In September 2016, a predominantly commercial  quality  rough  emerald  auction was held in Singapore. The auction generated revenues of US$10.7 million at an average price of US$3.28 per carat.

February 2017

In February 2017, a predominantly higher quality rough emerald auction was held in Lusaka, Zambia. The auction generated revenues of US$23.3 million at an average price of US$63.61, the third highest to date.

Gemfields' Assets

Kagem Emerald Mine

Montepuez Ruby Mine

Kariba Amethyst Mine

Kagem prides itself on its ability to produce emeralds that are mined in a responsible, transparent and safe manner, with minimised impact on the natural environment. In May 2015, Gemfields’ track record in safety management was once again acknowledged by the Mines Safety Department of Zambia, who awarded Kagem a safety certificate recognising 3.5 million shifts free of reportable injuries.

Gemfields aims to be a leader in sustainable corporate social responsibility ensuring that local communities benefit from the presence of Gemfields in a manner that is meaningful and sustainable. These policies reinforce Gemfields’ position as a reliable and trusted source of ethically produced gemstones. In the context of its sustainable corporate social responsibility programme, Gemfields maintains a focus on four key areas: health, education, farming and cultural awareness.

For a copy of the CPR for Kagem, please click here.

Ruby and corundum production in Gemfields’ financial year to 30 June 2015 increased by 29% to 8.4 million carats.

In July 2015, Gemfields released a CPR for the Montepuez ruby deposit, which includes a maiden Mineral Resource and Ore Reserve Amethyst sorting at Kariba, Zambia. Estimate prepared in accordance with the JORC Code (2012). The results of the CPR include an indicated and inferred mineral resource of 467 million and probable ore reserves of 432 million carats of ruby and corundum. The CPR shows a post-tax NPV of US$1 billion at a discount rate of 10%.

For a copy of the CPR for Montepuez, please click here.

Gemfields owns a 50% interest in Kariba, one of the largest amethyst mines in the world, which is located in southern Zambia near Livingstone. During March and April 2016, at the Lusaka emerald auction, amethyst from Kariba was also sold at the auction, generating revenues of US$220,000 at an average price of US$3.26 cents per carat.

In September 2016, at the Singapore emerald auction, amethyst from Kariba was also sold at the auction, generating revenues of US$400,000 at an average price of USc3.73 per carat, with 86% of the carats offered being sold.

Strong Ruby Auction Results

Gemfields’ success with its second major revenue stream continued during 2015 with three ruby and corundum auctions held, all stone sourced from its Montepuez ruby deposit in Mozambique.

The seven Montepuez auctions held since June 2014 have generated US$226 million in total revenues.

December 2015

In December 2015, an auction of mixed higher and medium grade rough ruby was held in Singapore. The auction generated revenues of US$28.8 million at an average price of US$318 per carat, with 98% of the total carats offered being sold.

June 2016

In June 2016, an auction of mixed higher and medium grade rough ruby was held in Singapore. The auction generated revenues of US$44.3 million at an average price of US$29.21 per carat, with 95% of the total carats offered being sold.

December 2016

In December 2016, an auction of mixed higher and medium grade rough ruby was held in Singapore. The auction generated revenues of US$30.4 million at an average price of US$27.79 per carat, with 85% of the total carats offered being sold.

Gemfields’ ownership of the iconic Fabergé name helps boost the international recognition and appeal of coloured gemstones and has contributed to the increase in demand for Gemfields’ responsibly sourced gems.

Fabergé has focussed on creating new collections including jewellery, timepiece collections in collaboration with world-leading Swiss watchmakers, and bespoke objets d’art.

INCREASED SALES

During its financial year to 30 June 2015, Fabergé saw an increase of 31% in sales orders agreed and launched a range of new jewellery and timepiece collections. The Fabergé Pearl Egg presented at the Doha Jewellery & Watches Exhibition in February 2015 was the first egg created in the “Imperial Class” since 1917 while the Fabergé name and Fabergé family have been reunited.

In May 2015, Fabergé unveiled its new Secret Garden High Jewellery collection which was showcased at the Masterpiece London Fair in June 2015. June 2015 also saw the release of an independently-produced and award-winning documentary entitled “Fabergé: A Life of Its Own” in cinemas around the world, showcasing the rich history of the Fabergé dynasty.

MULTI AWARD WINNING
Lady Compliquée Peacock
"It’s a great honour to win another prize for the Lady Compliquée Peacock, on this occasion for the arresting emerald edition.


After health and family, time has become our most precious possession and it is fitting that it should be respected by special timepieces of unparalleled heritage. We are grateful to the jury for recognising the Fabergé team’s contribution to the world of creative watchmaking."

Sean Gilbertson, Fabergé CEO

In October 2015, two Fabergé timepieces were nominated in the prestigious 2015 Grand Prix d’Horlogerie de Genève. The Fabergé Lady Compliquée Peacock won the Ladies’ High Mechanical category, whilst the Fabergé Summer in Provence was shortlisted in the Jewellery Timepieces category.
Financial

Gemfields achieved record revenues of US$171.4 million and net profit after tax of US$12.3 million for its financial year to 30 June 2015. For the six months to 31 December 2015, Gemfields achieved revenues of US$94 million and net profit after tax of US$8.2 million.

In August 2015, the Company extended a US$10 million short term and unsecured working capital facility to Kagem. The loan was utilised for inventory investment, working capital and general business purposes. The loan was repaid to the Company in December 2015.

In December 2015, the Company extended a US$10 million short term and unsecured working capital facility to Gemfields which has been fully drawn down. Gemfields entered into the facility due to the ongoing costs related to the development of its Fabergé businesses as well as for working capital and inventory investment.

Acquisitions

Gemfields acquired a 75% interest in an emerald exploration licence in Southern Ethiopia through Web Gemstone Mining. The exploration licence covers an area of 200 square kilometres and potentially hosts emerald mineralisation over approximately 45 kilometres.

In September 2015, Gemfields announced it had entered into agreements to acquire controlling interests in two emerald projects with operations and prospects located predominantly in the Boyacà state in Colombia. The first project is a conditional acquisition of 70% of the Coscuez licence, including the Coscuez mine, which has been in operation for over 25 years and has produced some of Colombia’s finest emeralds.

The second project is the acquisition of 75% and 70% interests in two Colombian companies which together hold rights in respect of mining licence applications and assigned concession contracts over approximately 20,000 hectares.

From The Directors

Outlook

Gemfields’ position as the world’s leading supplier of responsibly sourced coloured gemstones rests on its success of applying its unique mining, grading, auctioning and marketing techniques to its operations. The global coloured gemstone market continues to grow strongly, and Gemfields has the potential to expand through its existing emerald and ruby businesses, and to apply its successful model to sapphires and other coloured gemstones.

Target emerald and beryl production from Kagem, and ruby and corundum production from Montepuez, for the financial year ending 30 June 2016, is forecast to be 25 – 30 million carats and 8 million carats respectively. Gemfields is considering the installation of a second wash plant at the Montepuez ruby deposit, which would support increased production volumes of up to 20 million carats per annum by its 2018 financial year.

Gemfields’ strategy remains focussed on investing in its existing operations, as well as targeted expansion opportunities and new projects in order to maintain its position as a global leader in coloured gemstones.