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Gemfields withholds interim dividend as production and revenue lose their shine

Gemfields is a precious stone miner and owner of Fabergé. File: Reuters

Gemfields is a precious stone miner and owner of Fabergé. File: Reuters

Published Sep 26, 2023


Gemfields, the precious stone miner and owner of Fabergé, said on Friday that it had not declared an interim dividend due to a decline in production and revenue.

In its interim results for the six months ended June 30, 2023, the supplier of coloured gemstones reported that headline earnings per share (Heps) was down 78.4% to 0.8 US cents (R0.15) while profit slid 68% to $18.1 million.

Gemfields CEO Sean Gilbertson said recent production at Gemfield's Kagem emerald mine had been lower than they would have hoped, both in quality and quantity.

"This resulted in our decision to withdraw November’s higher-quality emerald auction from this year’s schedule and bring the available production to market in 2024.

“This is understandably disappointing, but such periods have been seen in the past, and we always wish to ensure we have an optimal offering when we bring our gemstones to auction. Given the withdrawal of this auction, we are not presently positioned to match 2022’s standout financial performance in 2023," he said.

The group reported that revenue dropped by 20.5% to $154m, earnings before interest, taxes, depreciation, and amortisation (Ebitda), by 30.4% to $73m, and free cash flow declined by 70.9% to $25.2m.

Gilbertson said the company's rough emeralds and rubies continued to be in demand after the step-change in market pricing seen last year. Coloured gemstone prices continued to rise given their rarity, increasing global desirability and a market long bifurcated into two vastly different price brackets for natural and lab-grown gemstones.

"Gemfields is uniquely positioned to benefit from these trends and to further develop the coloured gemstone market," he said.

Gemfields chair Martin Tolcher said it was clear that inflation, particularly in Africa, was continuing to result in rising costs across all operations.

"In particular, the cost of fuel and food is still increasing, alongside almost all other required inputs, such as explosives for Kagem in Zambia, and security at Montepuez Ruby Mining (MRM) in Mozambique. It is imperative to control costs and maintain strong margins.“

The group reported that it started construction at its Montepuez ruby mine of the second processing plant, the single largest ever investment as a group.

"The plant is expected to become operational during the first half of 2025 and will be a game-changer in terms of our ability to process our sizeable stockpile, and to bring new ruby products to market and explore more of our licence area," it said.

Looking ahead, Tolcher said the first half of the year had been a strong revenue-generating period in comparison to historic results.

"However, as stated in the full-year results for 2022, it will be difficult to continue a strong financial performance if prices paid for the group’s rough emeralds and rubies soften, particularly given the challenge of controlling costs in this inflationary environment and the decision to cancel the November higher-quality emerald auction.

"Gemfields has a considerable investment programme ahead, including the construction of MRM’s second processing plant, which will take some time to yield results," he said.

The share price fell 1.23% to R3.22 on the JSE on Friday.