Zambia restrictions hit Gemfields results

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But miner says future is bright with growth opportunities in sapphire.

Zambia’s decision to restrict the sale of its emeralds outside of the country had a direct negative impact on Gemfields’ full year results, said chief executive Ian Harebottle.

The statement comes as the mining group announced that full year revenues to June 30th fell to US$48.4 million, compared to 2012’s full year revenues of US$83.7 million.

Harebottle said: "I remain hopeful that the ongoing discussions with the Government of the Republic of Zambia regarding the geographic location of our future emerald auctions will soon yield a constructive outcome. We will continue our commitment to supporting the competitiveness of Zambian emeralds on the international market.
"Price growth remains robust, as is visible from the last auction held in Lusaka in July post the period under review, where record prices of US$54 per carat were realised after years of dedicated mining and marketing efforts. Had all three auctions initially planned for the financial year to 30 June 2013 come to fruition, we would undoubtedly have seen Gemfields report another year of solid financial performance."

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EBITA for the full year was fell to US$1.2 million from US$54.6 million, and it posted a net loss of US$22.8 million down from US$161.5 million. It listed its cash in the bank as of June 30th as US$11.2 million down from US$36.7 million on the same date the previous year, and its estimated cost of inventory on hand, excluding fuel and other consumables, was US$76.3 million up from last year’s US$26.6 million.

Gemfields said that throughout the year it had sustained an increase in achieved quality-for-quality sales prices for emeralds. It also said that its partnership with US actress Mila Kunis had helped to raise the profile of the company and its products.

It also said that "growth opportunities are currently focussed on sapphire prospects with a number of other gemstone opportunities also being evaluated".

Harebottle said: "Gemfields has performed well operationally during the year ending 30 June 2013 despite the disruptions to our emerald auction schedule, which impacted adversely on the group’s financial performance.
"This year has undoubtedly been one of the busiest years in Gemfields’ history, with strong operational performance at our flagship Kagem emerald mine, promising bulk sampling at Montepuez, completion of the Fabergé acquisition and the appointment of Mila Kunis as Gemfields’ global brand ambassador."

This year Gemfields completed its 100% acquisition of Fabergé and said that the brand achieved record revenues, margins and unit sales during the reporting period.

Harebottle said: "I am pleased to say that the outlook for Gemfields remains bright. Our pursuit of greater value for our shareholders will progress materially with our first ruby auction (due before 30 June 2014), the ramp-up of gemstone extraction at the Montepuez ruby deposit, the expansion of activity at Kagem and the evolution of Fabergé. These next steps will ensure that Gemfields is closer to achieving its strategy of becoming the world’s coloured gemstone champion.”

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