GEMFIELDS might seek a partner to help it develop its Nairoto gold prospect in Mozambique if drilling results support further investment.
Commenting during the ruby and emerald miner’s annual results on Monday, CEO Sean Gilberton stressed, however, Gemfields was not interested in becoming a long-term gold production company. As such another option would be to sell Nairoto.
The direction Gemfields takes would be significantly directed by drilling and assay results from a section of the project called TL5. Gemfields first began work on the project in 2020 before work was interrupted by Covid. Some $20m has been spent on the prospect so far.
“Clearly the fact we haven’t walked away and are still continuing to spend some money suggests we believe it is worth doing so,” said Gilbertson of Nairoto. “We will endeavour to put out some drilling results in a few weeks as it is important stakeholders get a flavour of the actual numbers,” he said.
Gemfields is in need of a fillip following disappointing results for the 12 months to December 2023 in which profits fell despite registering its second highest revenue ever.
It reported a 72% decline in adjusted share earnings of 1.5 US cents and negative cash flow of $29m. At the basic earnings level it reported a taxed loss of $2.8m after accounting for a write-down on its 6% stake in Sedibelo Platinum Mines in South Africa.
It warned today it would drive into net debt this year amid major $49m investment in its Montepuez ruby mine in Mozambique of which $42m was allocated to 2024. Despite this pressure, the company intended to continue paying dividends. The board declared a $10m final dividend equal to 0.857 US cents a share, payable in June.
Shares in the company fell just under 3% lower on the Johannesburg Stock Exchange today taking losses over 12 months to 25%. At R3.5bn, the company is trading at a 50% discount to its net asset value.
“Discounts of that quantum have been applied for a decade or more,” said Gilbertson referring to events in 2017 when there was an attempted £256m takeover of Gemfields plc by China conglomerate Fosun. This was in response to an earlier bid by Pallinghurst Resources, then listed in Johannesburg.
In the end, “the keys were handed” – as Gilbertson described it – to Gemfields. The company was delisted from London with a mandate to invest in rubies and emeralds. The firm withstood near crippling conditions during Covid and posted good results in 2022. Despite this, it has struggled to trade at fair value to its asset base.
“We are trying to focus on the operations and get our efficiencies up and very importantly when current management team were handed the keys to Gemfields in 2017 we committed to trying to get capital in the hands of shareholders,” Gilbertson said.
“We have met with a lot of success so far and if we keep up with that there will be some reduction in the discount,” he said.
At the result presentation Q&A, Gemfields was asked if its low market valuation would invite a takeover attempt. “It is extraordinarily hard to predict,” said Gilbertson. “I’m afraid my crystal ball is not good enough … We leave it to the stars.”
From September 2021 Assore, the iron ore and manganese investment firm owned by the Sacco family, has steadily built a 29.2% stake in Gemfields.
