Gemfields unable to convene gemstone auction owing to COVID-19 travel ban

GEMFIELDS, the coloured gemstone mining and marketing firm, could not provide a forecast for its financial performance in the current financial year as COVID-19 related travel restrictions prevented auctions of rubies and emeralds from taking place.

“Due to the current global travel restrictions the company cannot be certain when or if the ruby and emerald auctions scheduled for the coming months will take place,” it said in notes to a trading statement which showed a strong recovery for its 2019 financial year.

The company, which recently listed its shares in London, said it was assessing “all options” regarding other means of selling its gemstones.

It said net profit after tax would be in the region of $39.1m for the 2019 financial year ended December 31 which compares to a net loss after tax of $60.4m in 2018. In rand terms, the net profit after tax is expected to be R565m (2018: -R801m).

The reason for the improved performance was the suspension by Zambia – where the company operates the Kagem mine – of a 15% export duty which had been applied by the government during 2018. The suspension of the export duty resulted in an impairment reversal of some $21.6m against the Kagem mine.

Gemfields also sold its remaining shares in Jupiter Mines, a steel feed company. Ownership of the shares stemmed from a previous company structure when the company was known as Pallinghurst Resources. This earned Gemfields $30.4m during the period to which was added some  $2.6m in dividend flow from Jupiter prior to its sale and $4.6m in market gains due to the rise in Jupiter’s shares on a mark-to-market basis.

A review of Gemfields shareholding in Sedibelo Platinum Mines, again a remnant from when Gemfields was known as Pallinghurst, resulted in a fair value gain of $7.1m. Gemfields said it intended to sell its stake in Sedibelo Platinum.

Stripping out these exceptional cash and non-cash items, Gemfields expected to report headline share earnings of 1 US cent per share for the 2019 financial year which compares to a 3c/share loss in the previous financial year. In rand terms, headline share earnings are forecast to be 14 cents compared to a 43 cent per share loss in 2018.

The company had cash of about $73.5m as at February 28. Gemfields is due to publish its full-year numbers on March 27.

Investors may be seeking more information on the lay of the land at Gemfields’ other mine, Montepuez in Mozambique.

In February, there were reports of instability at the mine after artisanal miners damaged mine property and attacked employees.

Citing the company, Reuters said the miners torched a car belonging to the mine and attacked the car’s occupants with pickaxes. Three employees and security contractor were injured in the attack, the company said.

Montepuez is situated in Northern Mozambique in a region that is rife with crime, illegal mining and is home to a nascent Islamist insurgency, according to Reuters. The mine is owned by Gemfields subsidiary, Montepuez Ruby Mining (MRM).

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