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Record revenues for Gemfields’ 2015 financial year.
Competent Person’s Reports (CPR) released for Kagem and Montepuez.
Acquisition of two emerald projects in Colombia.
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.
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.
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’ 23 auctions of emerald and beryl mined at Kagem since July 2009 have generated US$437 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.
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.
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.
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.
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.
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
The past year has seen Gemfields making further strides towards becoming the “De Beers for Coloured Gemstones”. There has been good progress in Zambia for our emerald interests and the prospect of entering Colombia cements our position as the world’s largest and most important emerald miner.
Gemfields’ Mozambique operation has now established itself as one of the world’s most important suppliers of high quality rubies. Montepuez markedly increased ruby production during the scaling- up of its operations. The unique auction system continues to generate value, realising attractive returns.
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.