yep

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