GEMFIELDS was considering raising additional debt by year-end and may conduct a rights issue in order to remain afloat after its mines were shut in March and April and emerald and ruby gemstone auctions have proved impossible to convene.
The UK-listed company said in a trading update today that cash had dwindled to $9.3m as of June 30 from $25.4m at the end of December. The outlook for the remainder of the year was “… bleaker rather than better for the remainder of 2020,” said Sean Gilbertson, CEO of Gemfields.
Operations at Gemfields Kagem emerald mine in Zambia was likely to remain shut until November, especially as there had been a spike of Covid-19 infections in the mine’s region, whilst at Montepuez, a ruby mine in Mozambique, operations were closed until September.
International auctions and other marketing events have been suspended. Gemfields reported a dramatic 83% decline in interim revenue to $15m as a result of Covid-19 lockdowns and travel restrictions.
“Should it become clear that hosting gemstone auctions by the end of December 2020 is unviable, additional cash maintenance measures will be implemented and the company is reviewing the requisite workstreams to prepare fund raising options, including a possible rights issue,” Gemfields said.
Gemfields had taken the knife to its operating expenses. Monthly cash operating expenditure was lowered to $5m for June compared to a monthly average last year of $12.1m. Average cash operating expenditure in the six months ended June was below $7m per month.
“There remains considerable uncertainty as to whether Gemfields will be able to successfully host gemstone auctions by the end of this year,” said Gilbertson.
“Our last auction revenue was $11.5m in February 2020 and we should typically be above $100m of auction revenue by this time of the year,” he said.
One mote of good news is that Fabergé, Gemfields’ consumer brand, reported a 350% increase in online sales of some $350,000 during the period.
Gemfields also said that it had held a meeting with some shareholders regarding objections to the firm’s remuneration plan. The discussion centred on the total number of shares issued to directors and the vesting period under the plan which exceeded recommended guidelines on both counts.
Shareholders also questioned the lack of operational key performance indicators being used by the company when awarding bonuses to executive directors and the level of basic remuneration of executive directors when benchmarked against some Johannesburg and London-listed companies.
Gemfields cut executive and corporate staff pay 20% and placed UK employees on a four day working week in order to contain costs. These cost saving measures were expected to remain in place until September 30, the company said.