yep

UPDATE - Gemfields resource update and feasibility study point to a sparkling future
2:28 pm by Ian Lyall The news prompted an 11 per rise in the share price to 41.5 pence, valuing Gemfields at over £135 million. -ADDS SHARE PRICE (UP 11%, BROKER COMMENT)-

Gemfields (LON:GEM) this morning unveiled an updated JORC resource statement that points to the huge potential of its Kagem emerald mine in Zambia as well as outlining the robust economics of an underground operation there.

SRK Consulting estimates Kagem’s indicated resource at 2.75 million tonnes of ore, or an impressive 1 billion carats of emerald and beryl at 365 carats a tonne. The inferred resource is put at 223,100 carats.

Possibly more interesting to investors is results of the work carried out to discern whether it would be economically feasible to extend the open-pit operation into an underground mine.

An operation with a 20-year life-span has a the potential to produce 34 million carats a year at an average cash cost of 62 cents per carat, according to the Gemfields-commissioned study.

It would generate US$885 million over the two decades, and SRK projects a net present value for the new underground operation of US$372 million at a 10 per cent discount rate.

The capital costs are estimated to be a relatively modest US$55.1 million over the first five years and US$113.2 million over the life of the mine.

Gemfields said it is to commence accelerated underground construction and development in the financial year 2014-15.

Chief executive Ian Harebottle added: "Today we have achieved a key milestone in the continual development ofGemfields.

“The study shows that extending the current open pit mine at Kagem to a large-scale underground operation will be economically enhancing to the company and to our shareholders.

“The study covers only Kagem's existing principal pit on the Fwaya-Fwaya belt, which is one of several known emerald bearing belts available within the Kagem licence area.

“The study shows that the existing pit can be further developed as a high grade, low cost mine with robust project economics and a rapid payback period.

“The company currently caries no value for the resource but with today's updated estimate will look to correct this in due course.

“We will now look to accelerate the development and implementation of a large-scale underground project at our flagship operation on the Fwaya-Fwaya belt, while continuing to assess the potential future development of the additional belts available within the greater mining licence area."

The news prompted an 11 per rise in the share price to 41.5 pence, valuing Gemfields at over £135 million.

“We see today’s announcement as a significant positive catalyst for Gemfields,” said Canaccord Genuity.

“The viability of a 20-year life of mine operation, versus our previously-expected seven-year open-pit, should drive a re-rating in the share price.”

Gemfields achieves "key milestone"
2:57 pm
Jeremy Naylor: Gemfields reports earnings next week, but ahead of those full-year numbers, the company’s shares traded almost 10% higher this morning at the open after it published an economic feasibility study and a JORC resource statement that points to the huge potential of the Kagem emerald mine in Zambia. Gemfields CEO, Ian Harebottle Joins us now. I want to take a look first at the JORC report. How does this change things at the mine?



Ian Harebottle: Certainly it does change things, in a number of ways. As Gemfields and people who’ve been running and working in this mines industry for a while, we’ve always had a fair level of confidence. We know our industry, we know the mine, and we believe in it. But naturally, when you’re doing work like this, you get external consultants who are always very conservative, and they come in and they give you numbers like this; it just gives you as a company so much more confidence that you can and you should, and you’re going in the right direction in terms of ramping up your production plans and expanding the mine.

The next factor, obviously, that really has a positive impact, is on investors. Because investors aren’t always as intimately related to the mine or the deposit as we are, and it gives them the opportunity, sitting at a small difference, to hear what I say, see what SRK say, put the two together and say “Okay, there really is something there.”

The final one is obviously the coloured gemstone industry. Coloured gems, in terms of formalised mining and formalised marketing and communication and investment, is relatively new. We all know it’s been done with diamonds, gold, platinum etc, but not so much with coloured gems, and up until now it’s been very difficult to get anything more than an inferred resource for coloured gems. For us to have done the work, and for high-level consultants to come in and have the confidence to give a really good indicated resource, I believe it’s really good for the industry as a whole. So in short, I think it’s a great result.




Jeremy: You’re continuing to expand this resource, aren’t you?



Ian: Absolutely. The study itself, in order to get to JORC-compliant resource, really only covers the areas that you’ve worked extensively on and that you’ve drilled extensively. Now, we know within the Kagem mining licence that even the [Chumma-Chumma 0:02:18] and [Fwaya] pit continues quite a lot further at depth, and there are another five known emerald-bearing deposits. So we are continuing to drill and expand on all of these, looking to both, somewhere in the future, have a secondary open pit and go underground in the existing pit.



Jeremy: The economic feasibility study, also out today, shows what SRK says are robust economics. Give us some more detail about just precisely what this report is telling investors.



Ian: Well, robust economics; what they’re saying is that up until now, if you look at Gemfields and Kagen numbers, I think we’ve done fairly well in terms of reducing our operating costs, increasing production and increasing our revenues. But we are working in an open pit; the resource is dipping into the ground at 16 degrees, and as a result of that, you know you’re moving more and more waste in order to access the ore. What it really talks about there is a few things.

First of all, SRK, as with all consultants, are normally quite conservative, and they would have used conservative production numbers, conservative costs, and overestimated maybe the costs, and reduced revenues. But certainly, looking at the economics, it’s [clear 0:03:31] that we certainly can, within this pit alone, continue to reduce our costs, continue to get good recoveries, and most importantly – and this is where the robustness comes – is that it’s sustainable. It’s sustainable for at least 20 years. So it’s not just a short-term project.



Jeremy: Briefly – I know we’ll be speaking to you again next week, when we have those full-year numbers out – we know from the update that was published, I think, in June, that Gemfields has seen strong growth. What should investors, though, be looking forward to in next week’s results?



Ian: Yes, if I can say that what they should really be looking for from Gemfields is pretty much more of the same. Now, what do I mean by more of the same? Up until now, I believe – or over the last few years anyway – Gemfields has become recognised as a company that likes to under-promise and over-deliver, and I believe that the results will continue in this vein, and should be fairly pleasing, and should continue to build confidence that our investors in that, you know, their faith in us has been well-proven.

It also will give a good indication of our plans for continued growth and development, and that we are truly well-set to look at, and start to evaluate opportunities for additional growth and expansion into new areas. So I’m looking forward to meeting investors and announcing our results next week.

Final results for the year to 30 June 2012
Key financial indicators:

* Revenue from emerald and beryl sales more than doubled to US$83.7 million
(2011: US$40.2 million);

* Profit before tax and exceptional items increased by 140% to US$47.8
million (2011: US$19.9 million);

* Profit after tax, including the impairment reversal of the Kagem mine, of
US$161.5 million (2011: US$21.4 million);

* Year-end cash at bank improved by 169% to US$36.7 million (2011: US$13.6
million);

* Estimated cost of emerald and beryl inventory on hand of US$26.6 million
(2010: US$18.7 million);

* Post-tax NPV (at a 10% discount rate) of US$372 million from SRK Consulting
(UK) Limited's ("SRK") underground feasibility study for Kagem's principal
pit, based on Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia ("JORC") compliant resource update.

Key operational developments during the financial year:

* Average monthly operating costs of US$1.34 million (2011: US$1.07 million);

* Ongoing significant waste moving programme at the Kagem mine to open new
areas of ore;

* Total of 8.7 million tonnes (2011: 3.9 million) of rock handled;

* Annual production of 21 million carats, a 36% decrease in year-on-year
production, reflecting the focus on waste removal during the first half of
the year (2011: 33 million carats);

* Grade for the year reduced to 205 carats per tonne, a direct result of the
lower grade areas being mined during the waste moving programme (2011: 478
carats per tonne);

* Acquisition of a 75% stake in the noteworthy Montepuez ruby deposit in
Mozambique completed;

* Certificate of commendation awarded to Kagem by the Zambian Mines Safety
Department in recognition of achieving two million injury-free shifts;

* Dynamic marketing initiatives implemented, increasing consumer awareness
and supporting firm demand.





http://www.moneyam.com/action/news/showArticle?id=4461108