Emeralds, Faberge carry Gemfields in second quarter

Numbers were up at Gemfields' emeralds and luxury goods businesses in the second quarter of its financial year, but production in its ruby division was down as the company focused on higher-quality stones.

During the quarter to 31 December, the AIM-traded firm produced 8.2m carats of emerald and beryl at its 75%-owned Kagem Mining facility in Zambia, up from 5.8m carats a year earlier.

Average grade at the facility was 272 carats per tonne, up from 190 carats per tonne. Total operating costs were down, to $11.3m (£7.9m) from $11.6m.

Unit operating costs reduced to $1.38 per carat, from $2.00 per carat. Cash rock handling costs were $2.68 per tonne, down from $2.93 per tonne.

The November 2015 auction of predominantly lower quality rough emerald and beryl held in Jaipur, India generated revenues of $19.2m, the firm said, at an average value of $4.32 per carat.

It was a record result for lower quality rough emerald auctions to date, Gemfields' board confirmed.

At its 75%-owned Montepuez Ruby facility in Mozambique, a focus on processing additional volumes of higher-quality alluvial resources resulted in the production of 1.6m carats of ruby and conrundum, down from 3.4m a year earlier.

The company said there was a 1,825% increase in the volume of higher quality rubies recovered, however.

Average grade at Montepuez was 22 carats per tonne, down from 34 carats per tonne, with total operating costs increasing to $6.9m from $5.7m.

Unit operating costs were $4.31 per carat, markedly up from $1.68 per carat a year earlier, as a direct result of the steady increase in the scale of operations and a short term decrease in production volumes.

Cash rock handling unit costs were $5.02 per tonne, down slightly from $5.24 per tonne a year earlier.

The company generated revenues of $28.8m at its auction of higher and medium qualities of rough ruby extracted from Montepuez in December, at an average value of $317.92 per carat.

Fabergé - which Gemfields owns - saw sales orders agreed during the quarter increase by 13% on a year earlier. Its gross profit margin on sales orders agreed increased to 49%, from 31%, over the same period.

Unit sales at Fabergé increased by 48%, while total operating costs increased by 16%, largely due to an increase in advertising spend.

The division was also awarded the Grand Prix d'Horlogerie de Genève held in October 2015, the Swiss watchmaking industry's highest honour, in the 'Ladies Hi-Mechanical' category with its 'Lady Compliquée Peacock' timepiece.

"The second quarter of the 2016 financial year has delivered positive results across Gemfields' operations," said CEO Ian Harebottle.

"Kagem delivered a 41% increase in production volumes year-on-year while costs continue to be well maintained. At Montepuez, continuing from the first quarter of this financial year, the bulk sampling operations remained focussed on the processing of ore derived from alluvial resources which are known to deliver lower volumes of significantly higher quality and value production, resulting in a 1,825% increase in the volume of higher quality rubies recovered," he added.

"Fabergé has continued to reap the benefits of its successful watch campaign, launched in early 2015, and has delivered an increase in both unit sales and total sales revenue during the quarter."

Harebottle said the coloured gemstone sector appeared to have avoided many of the challenges being faced within the diamond and wider resource sector in the present economic climate.