For more information on Gemfields, please visit: www.gemfields.co.uk
Rough ruby and corundum auction produces record revenues of US$55 million at a single auction in November 2017.
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 held three emerald auctions during 2017, which have comprised of rough gems sourced from its Kagem emerald deposit in Zambia.
Gemfields’ auctions of emerald and beryl mined at Kagem since July 2009 have generated US$495 million in aggregate revenues. Gemfields continues to experience significant demand for its responsibly sourced emerald and beryl with auctions regularly achieving record per carat prices and auction proceeds.
Kagem’s ore grade in its financial year ending 30 June 2017 fell to 158 carats per tonne, down 34% from 241 carats per tonne in the prior year. Such reductions in production are not unusual at Kagem and reflect the characteristic volatility of coloured gemstone mining.
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.
For a copy of the CPR for Kagem, please click here.
Ruby and corundum production and grade in Gemfields’ financial year to 30 June 2016 increased by 23% and 5% to 10.3 million carats and 35 carats per tonne respectively.
Production for the six months to 31 December 2016 also saw an increase to 5.6 million carats at a grade of 29 carats per tonne, up from 2.1 million carats in the comparable period.
The wash plant upgrade, featuring integrated dense-media-separation, was completed in December 2016 and included the replacement of almost all components. The improvements are expected to double the throughput rate to a target of 150 tonnes per hour, with a corresponding increase in gemstone production.
Montepuez continues to work with the communities surrounding the mine to ensure that local people benefit from its activities and to supplement the Government’s efforts in improving the quality of life within rural communities. The rehabilitation of a local primary school was completed during October 2016 by Montepuez and construction of three local primary schools is underway.
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, and which is located in southern Zambia near Livingstone. In April 2016, at the Lusaka emerald auction, amethyst was sold generating revenues of US$200,000 with 6.6 million carats sold.
In September 2016, at the Jaipur emerald auction, amethyst from Kariba was also sold at the auction, generating revenues of US$400,000 with 11.6 million carats sold.
Gemfields held two ruby auctions during 2017, which have comprised of rough gems sourced from its Montepuez ruby deposit in Mozambique.
Montepuez’s auctions held since June 2014, have generated US$335 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 2016, Fabergé saw revenues and the number of units sold and delivered increase by 33% and 81% respectively as it continued to expand its global presence with the total number of outlets increasing by 60%.
The global coloured gemstone market continues to grow soundly and Gemfields has the potential to expand through its existing emerald and ruby businesses and to apply its successful model to other coloured gemstones.
Over the past few years, Gemfields has made tangible strides towards becoming the “De Beers for Coloured Gemstones”. Gemfields also has the potential of entering into other emerald areas, which would further cement its position as the world’s leading gemstone producer.
Through its successful auction system, Gemfields has positioned itself as the world’s leading supplier of both rubies and emeralds. Gemfields also continues to explore all avenues for unlocking Fabergé’s value potential.