Gemfields PLC Wednesday said production from its operations in Mozambique drastically dropped in the third quarter as a result of lower grades whilst its operations in Zambia reported a slight rise.
The miner said production from the Montepuez ruby mine in Mozambique fell to only 500,000 carats in the third quarter of 2015 compared to 2.9 million carats a year earlier as the average grade fell to only 7.0 carats per tonne from 41.0 carats a tonne.
That was a result of the company focusing on delineating additional areas of higher quality alluvial resource which saw a greater proportion of higher quality, but lower grade alluvial ore being processed. Gemfields said there was a 96% increase in higher quality ruby production in the quarter.
“Mining and bulk sampling operations at Montepuez were focussed on the Mugloto block, where the higher value deposit is spread over a large area, as well as a newly identified area with the potential to produce material of exceptional quality. The combination of these efforts resulted in an overall decrease in grade but is more than supported by a 96% increase in higher quality rubies recovered,” said Chief Executive Ian Harebottle.
Operating costs totalled USD6.1 million in the quarter compared to only USD4.3 million a year ago due to the increase in the scale of exploration, processing and mining activities. Unit operating costs soared to USD12.20 per carat from USD1.48 per carat and on a cash-basis this rose to USD10.20 per carat from USD1.28.
However, due to the higher quality ore being processed, cash rock handling costs fell to USD4.50 per tonne of ore from USD6.93.
Gemfields plans to conduct its next auction of the higher quality rubies from Montepuez in December, with its auction in September generating USD440,000 in revenues at an average realised price of 4.32 cents per carat, which was the “highest ever achieved” from any of its amethyst auctions.
An amethyst is a violet variety of quartz often used in jewellery.
Its Kagem emerald mine in Zambia reported a rise in production to 7.5 million carats in the quarter from 6.3 million carats a year earlier as the average grade rose to 237.0 carats per tonne from 214.0 carats.
“Our production at Kagem achieved a 19% increase compared to the same period in the prior year, with the bulk sampling operations at Fibolele and Libwente progressing at a steady pace,” said Harebottle.
Total operating costs rose to USD11.1 million from USD10.3 million, largely on account of the increased scale of mining and exploration activities being carried out across the mining licence.
Unit operating costs fell to USD1.43 per carats from USD1.63 and on a cash-basis that fell to USD1.16 per carat from USD1.48. Cash rock handling costs followed by falling to USD2.12 per tonne from USD2.91.
Gemfields plans to conduct its next auction of emeralds from Kagem later in November after its last auction in September yielded USD34.7 million in revenue.
“We maintain our production target for the 2016 financial year of 25.0 to 30.0 million carats for rough emeralds and 8.0 million carats for rough ruby,” said Harebottle.
Its Faberge business, which designs and makes various products from jewels, reported a 61% year-on-year increase in gross profits in the quarter as its gross margin rose to 51% from 30%. It did not supply any financial figures for the division.
However, it said revenue from the division will be down 4% year-on-year in the quarter, but said this was “skewed by the sale of a single exceptionally high value item”.
Faberge’s total operating costs were up 6% in the quarter as it ramped up its advertising spend.
“Fabergé’s new watch collection has received excellent reviews since being launched and the ‘Lady Compliquée Peacock’ timepiece won the prestigious Grand Prix d’Horlogerie de Genève in Switzerland, in late October,” said Harebottle.
“Demand for coloured gemstones continues to be firm as we look forward to our next lower quality rough emerald and beryl auction later this month and our next auction of predominantly higher quality rubies from Montepuez in December 2015,” he added.
Gemfields shares were down 1.9% to 46.38 pence per share on Wednesday morning.
Source: London South East