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Gemfields, Fabergé sales orders increase 95% versus same quarter 2015.

Gemfields (GEM:AIM)

Announces second quarter operational update for the period ending 31 December 2016.

Production at the 75% owned Kagem Mine was 4.7 million carats of emerald and beryl with an average grade of 156 carats per ton, versus the quarter ending 31 December  2015 of 8.2m carats with an average grade of 272 cpt. The decline in production was due to the varied nature of the mineralisation and a lower-grade mined in the current quarter. Total operating costs were $10.2m compared to US$12.1m in the same period 2015. The lower number of carats recovered in the quarter resulted in an increase in unit operating costs to US$2.17 versus US$1.48 for the same period 2015; while on a cash basis unit operating costs were US$1.60 versus US$0.98. The higher quality rough emerald auction in Lusaka, Zambia was postponed to February 2017 from December 2016. The company continues to focus on improvement in operational efficiencies and the opening of new areas for future production. Exploration and bulk sampling activities at the Fibolele and Libwente sectors continued in the current quarter.

Production at the 75% owned Montepuez Ruby Mine was 1.1 million carats of ruby and corundum with an average grade of 12 carats per tonnne versus 1.6 million carats with an average grade of 22 carats per tonne in the quarter ended 31 December 2015. The total operating costs of US$6.6 million were slightly lower than the same period in the previous year of US$6.9 million. The decrease in carats produced caused the unit operating costs to rise to US$6.00 per carat from US$4.31 for the same period 2015. On a cash basis, unit operating costs were US$5.00 per carat versus US$3.31 per carat. The stripping ratio decreased to 4.7 from 6.9 in December 2015 due to the mining of exposed ore in Mugloto and Glass pits. Operations commenced at a new pit within the Mugloto and a new bulk sampling block called, Maninge Nice East was also opened in the quarter.

The Montepuez wash plant processed 89.4 thousand tonnes; 25% more in the quarter  compared to the same quarter 2015. Planned upgrades to the processing plant were completed in December 2016; the plant is expected to double the operational throughput from 70 tonnes to 150 tonnes per hour once fully operational.

An auction of mixed quality rough rubies and corundum held in Singapore from 12 – 16 December 2016, generated revenues of US$30.5 million at an average value of US$27.88 per carat, this compares to revenues of US$28.8 million at average carat value of US$317.92 for the December 2015 auction.

Fabergé sales orders increased 95% and the number of sales transactions increased 48% during the quarter versus the same quarter in 2015. Operating costs increased by 2% due to increased investment in marketing.

The company had a cash position of US$12.3 million as at December 31, 2016. The total debt outstanding was US$58.3 million. Total sales, general and administrative expenses were US$14.8 million in the quarter.

Ian Harebottle, CEO of Gemfields commented:

New projects continued at a steady pace including the addition of a further 116 sq km of highly prospective ruby licencing being added to the Company’s Montepuez project via a 75% stake in the JV Eastern Mining Ltd, as well as particularly good progress being made in Ethiopia. Here, bulk sampling is expected to commence by the end of 2017 following encouraging results from the Phase 1 diamond drilling programme.

 It is also pleasing to see that the luxury market has started off the year with a buoyant note with Fabergé showing solid January sales demand and a positive market sentiment noted by our customers who attended the Tucson gemstone fair. All of our customers are confirmed to attend the next auction of predominantly higher quality rough emeralds from 13 to 17 February 2017 in Lusaka, Zambia, and I look forward to sharing with you the results.”


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