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Gemfields’ annual profits almost double as emerald sales values soar

Gemfields, the AIM-listed emerald, ruby and sapphire producer, has reported profits for the financial year ended 30 June 2016 up 91%, to US$23.5m, from the previous year. EPS doubled to US$0.02.

Revenue increased by 13%, to US$193.1m. The biggest increase came from emerald sales, rising from US$64.9m in FY2015, to US$101.2m in FY2016 with record prices paid at a number of the four emerald auctions held throughout the year. Revenue from ruby sales fell from US$88.5m to US$73.1m as the two ruby auctions were for lower-priced mixed stones.

At the Kagem emerald mine, in Zambia, gemstone production at 30.0 million carats (mct) was in line with the previous year. The Montepuez ruby mine, in Mozambique, recorded record production of 10.3 mct of rough rubies and corundum, up 22.6% from the previous year on higher grades and ore production.

Gross profit was up 11% to US$94.3m as cost of sales rose 14% to US$98.8m, due mainly to increased mining costs and despite a reduction in depreciation and amortization charges as the company increased the lives of its mines after updated resource estimates. Mining costs increased from US$46.5m to US$60.9m. Unit costs at Kagem rose by 6.7% to US$1.58 per carat as a result of increased waste stripping and exploration. At Montepuez, although unit costs were in line with the previous year, total costs increased by 21% to US$26.2m.

EBITDA rose 8% due to increased revenues although the EBITDA margin fell slightly to 36% as a result of total cash operating costs. Taxation rose 31% to US%18.4m.

The company ended the year with cash of US$41.5m after net cash generation of US$13.9m for the year. Net debt at 30 June 2016 was US$10.0m.

For the forthcoming 2017 year, Gemfields is targeting four emerald and beryl auctions and two mixed quality ruby and corundum auctions. Production guidance at Kagem is 30-35 mct and at Montepuez 10-12 mct.

Gemfields’ annual profits almost double as emerald sales values soar: GEM

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