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Gemfields has reported on another healthy quarter and a strong annual production result for its Kagem emerald mine (Kagem) in Zambia.

This is according to an operational update for the three month period ending 30 June 2013 has been presented by Gemfields.

Ian Harebottle, CEO of Gemfields, commented: “Emerald and beryl production increased 42% year-on-year and were further supported by better grades and lower unit costs. We achieved record revenues from our most recent auction of lower quality rough emerald and beryl, despite a small drop in the average per carat price achieved. The outcome of our auction of higher quality rough emeralds, which took place after the end of the financial year, yielded record per carat prices and is clearly indicative of the continued increase in demand for consistently supplied high quality coloured gemstones.

He stated that the company continues to seek guidance and to interact with the Government of Zambia – fellow shareholders in Kagem. “This is with respect to possible restrictions on the ability of Gemfields and Kagem to freely choose the locations of its auctions and thereby our ability to sustain the current levels of growth in demand for Zambia’s magnificent and long undervalued gems. In that light, and in order to further a broader understanding of the emerald sector, we were pleased to sponsor the first-of-its-kind ‘2013 Zambian Emerald Summit’ in Lusaka at the end of May and to facilitate highly interactive discussion among some of the global emerald sectors leading stakeholders. While the two auctions held in Lusaka this year have certainly been successful, the key question of course remains what they would have generated had they been held abroad (where competing and undermining sources of supply, frequently illegal, are not readily available to our customers) and their potential impact on the long term growth of this sector”.

 

Highlights

Annual production summary for the Kagem emerald mine for the financial year ending 30 June 2013:

–       Annual gemstone production increased by 42% to 29.99 million carats (versus 21.06 million carats in the year ending 30 June 2012)

–       Grade increased by 38% to 283 carats per tonne (versus 205 carats per tonne in the year ending 30 June 2012)

–       Unit per carat production costs (on an accounting basis) for the year decreased by 26% to USD 0.55 per carat (from USD 0.74 per carat in the year to 30 June 2012)

–       Cash rock handling unit costs decreased by 2% to USD 3.35 per tonne (from USD 3.43 per tonne in the year to 30 June 2012).

Quarterly production summary for the Kagem emerald mine for the quarter ending 30 June 2013:

–       Gemstone production in the final quarter grew to 8.9 million carats (versus 7.3 million carats in the quarter ending 30 June 2012)

–       Grade for the quarter increased to 322 carats per tonne (from 181 carats per tonne in the quarter to 30 June 2012)

–       Unit per carat production costs for the quarter decreased by 13% to USD 0.50 per carat (from USD 0.57 per carat in the quarter to 30 June 2012)

–       Cash rock handling unit costs increased by 1% to USD 3.60 per tonne (from USD 3.55 per tonne in the quarter to 30 June 2012).

One auction, of predominantly lower quality emerald and beryl, was held during the quarter. The auction was held in Lusaka, Zambia from 15-19 April 2013 and yielded revenues of US$15.2 million, resulting in the highest aggregate revenues on record for a lower grade auction to-date but at a seven per cent decline in per carat prices when compared to the previous lower quality auction of a similar quality mix.

A further auction, of predominantly higher quality emeralds, was held after the quarter end. This auction was held from 15-19 July 2013, also in Lusaka, Zambia and yielded aggregate revenues of US$31.5 million, the second highest aggregate auction revenues achieved to date, and with record per carat prices of US$54.00 per carat (reflecting an increase of 26% over the previous high of US$42.71 per carat achieved in the July 2011 Singapore auction).

Encouraging bulk sampling activities continue at the Montepuez ruby deposit in Mozambique, with the first auction of rough rubies likely to take place in the first quarter of the 2014 calendar year.

Fabergé, acquired in January 2013, achieved a record number of unit sales in the year ending 30 June 2013.

At 30 June 2013 (just prior to the most recent higher quality auction), Gemfields had cash of USD 11.6 million and total debt outstanding of USD 11.6 million.

All figures are approximate, unaudited and, unless otherwise stated, the phrase “carats” includes both emerald and beryl.

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