Gemfields generates more than 90 percent of its revenue from emerald and ruby auctions. Photo: Reuters
Gemfields generates more than 90 percent of its revenue from emerald and ruby auctions. Photo: Reuters

Gemfields expects profits to tumble as travel curbs halt auctions

By Dineo Faku Time of article published Sep 15, 2020

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JOHANNESBURG – Gemfields on Monday flagged that it expected to go into the red during the six months to the end of June after auctions were halted due to travel restrictions to prevent the spread of Covid-19.

The London-headquartered supplier of coloured gemstones said its profits were expected to tumble nearly a billion rand during the period.

Gemfields, which operates mines in Zambia and Mozambique, said its net losses after tax would plummet a hefty R959 million compared with a R177m net profit in the corresponding period last year.

Gemfields generates more than 90 percent of its revenue from emerald and ruby auctions.

The miner said its 2020 auction schedule had been severely impacted by the many travel, quarantine and congregating restrictions put in place to mitigate Covid-19 contagion.

“As a result of the Covid-19 pandemic, Gemfields has only been able to host one auction in 2020, yielding $11.5 million (R192.44m) from the sale of commercial quality emeralds in February 2020.

Auctions originally scheduled for May, June and August 2020 had been cancelled due to the Covid-19 pandemic,” said Gemfields.

In 2019, Gemfields’ Montepuez Ruby Mining (MRM) in Mozambique and the Kagem mine in Zambia generated revenues of $50m and $33.2m, respectively.

The group previously said operations at MRM were suspended in April and were expected to remain suspended until the end of the month, while operations at Kagem were suspended at the end of March and are likely to remain suspended until the end of next month.

“Gemfields remains unable to provide reliable guidance as to when it might next be able to host gemstone auctions or generate meaningful revenue from gemstone sales,” said the group yesterday, although it previously said it intended to hold its next auctions in December.

In April, group chief executive Sean Gilbertson said some 93 percent of group revenue was derived from gemstone auctions last year, and once the travel restrictions were lifted, it would take some time for life and business to return to a relative “normal”.

Gemfields said that jewellery firm Fabergé recorded $2.5m in revenue, 34 percent lower than the $3.8m a year earlier due to the severe impact of the Covid-19 pandemic.

“Gemfields recognised an $11.5m impairment charge has been recognised against Fabergé’s intangible asset for the period, driven by lower expected revenues as a result of Covid-19 and the general downturn in the market,” it said.

Gemfields said a review of its shareholding in Sedibelo Platinum Mines in South Africa had resulted in a fair value write-down of $12.5m to $45m.

Excluding the impairment charge against the Fabergé intangible asset and including the fair value loss against Sedibelo, Gemfields said the headline loss per share was expected to be 57 cents from headline earnings per share of 11c for the comparative period.

BUSINESS REPORT

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