Zambian Market conditions remain sluggish, Ethiopian operation on hold
Johannesburg Stock Exchange (JSE) listed Gemfields mulls listing on the London Stock Exchange (LSE) this year. This will be a score board listing with zero capital raise, to address the gap of lack of broker research and share trading liquidity.
Gemfields share price valuation was 40% lower for 2018 which was driven by operational hurdles in Zambia, Mozambique and Ethiopia, chairperson Brian Gilbertson said on 25 March.
Despite the fall in its share price, the year was capped by Gemfields having achieved cumulative revenue from 41 auctions of Zambian emeralds and Mozambican rubies since June 2009, of over a billion dollars.
Zambia and Mozambique generated revenues of USD$60.3 -million and USD$127.1-million, respectively, in different market circumstances.
The reopened Mbuva-Chibolele operation continued to display encouraging signs, including the production of more than 5.5-million carats since production restarted in December 2017.
Gemfields continues to progress the incorporation of Mbuva-Chibolele and other wholly-owned Zambian emerald licences into its 75% owned Kagem mine, in order to create a larger company with greater operating scale and enhanced efficiencies.
While Kagem’s production was buoyant, market conditions for Zambian emeralds remained sluggish, the miner said on 25 March. The four emerald auctions held during 2018 generated $60.3-million in revenues.
CEO Sean Gilbertson lamented that the tax regime changes introduced in Zambia on January 1, 2019, have had a clear and detrimental impact on profitability, cash flows and the development of the gemstone sector in Zambia.
He remains hopeful, however, that the miner’s ongoing dialogue with the Zambian government will have a positive outcome.
Meanwhile, in Mozambique, 2.9-million carats of ruby and corundum were produced in 2018, with a “premium ruby” production of 92 200 ct.
Auger drilling in both the western and southern licences of Megaruma Mining Limitada has shown positive signs of secondary ruby mineralisation and has been helpful in delineating gravel beds at these licences.
Two Montepuez ruby mine auctions of mixed-quality rubies during the year generated record revenues of $127.1-million, with the June 2018 auction having achieved an auction record of $71.8-million.
In Ethiopia, Web Gemstone Mining (WGM) continued to produce emeralds from the Dogogo South bulk sampling pit.
Since emerald production began in October 2017, the Ethiopian operation has produced 283 535 ct, of which 11 190 ct were in the emeralds grade.
However, operations at WGM have been put on hold since June 2018, when the operations were overrun by a mob who looted the site and destroyed core sampling stores.
In the interim, developments are being monitored and discussions with stakeholders are being held in the hopes of restarting bulk sampling in future.
Overall, Gemfields Group generated earnings before interest, taxes, depreciation and amortisation (EBITDA) of $58.9-million and recognised free cash flows of $26.9-million before movements in working capital, Brian Gilbertson said.
Revenues were used to fund the development of a sort house at MRM, the replacement of the ageing fleet at Kagem, and the development of new mining projects in Zambia and Ethiopia, he added.
Meanwhile, in bringing its “mine and market” vision to life, Faberge recorded revenues of $13.4-million in 2018, marking a new record for Gemfields. EBITDA loss was $4.6-million, a material improvement on prior comparative periods, Sean Gilbertson noted.
Faberge’s operating performance has improved owing to reduced operating costs, improved operating sales margins and an increasing emphasis on e-commerce.
According to Sean Gilbertson, Gemfields’ outright ownership of Faberge enables the miner to optimise the positioning, perception and consumer awareness of colored gemstones, which advances the “mine and market” vision.
He added that Faberge’s emphasis for the year was on reducing operating costs and increasing sales from the e-commerce, wholesale and direct sales channels.
During the year, Faberge repaid its third-party debt facility.
Jupiter Mines, in which Gemfields Group owns about 7.4%, and which, in turn, owns 49.9% of Tshipi é Ntle Manganese Mining, has, through its successful partnership with Ntsimbintle, built Tshipi into a large, long-life and low-cost operator of the Tshipi Borwa manganese mine.
According to Brian Gilbertson, Tshipi continues to achieve a strong performance and expects to sell over three-million tonnes of high-grade manganese ore in its financial year ended February 28, 2019.
Meanwhile, the miner’s platinum group metals (PGMs) investment, namely a 6.5% stake in Sedibelo, and which entered its tenth year of production during the period, continues to focus on minimising production costs, on cash preservation and on optimising operating efficiencies.
Sedibelo dispatched 113 000 oz of platinum, palladium, rhodium and gold during the nine months to September 30, 2018, 22% up on the comparative period.
Sedibelo successfully commissioned construction of its chrome extraction plant, with the first cash flows being received during the period.
Additionally, given the miner’s focus on precious coloured gemstones, it will seek an orderly disposal of its interest in Sedibelo.
The weakening of the rand against the dollar has relieved some pressure on South African PGMs producers, and as a result, Brian Gilbertson noted a renewed optimism and growth prospects among the major producers.
Source: Mining Weekly
