Gemfields suffers R1.14bn year-on-year reversal with no immediate prospect of revenue

THE full extent of the Covid-19 pandemic on Gemfields was laid bare today in a trading statement which detailed a R1.14bn year-on-year reversal of fortune and the impairment of its Fabergé investment.

The London- and Johannesburg-listed ruby and emerald mining and marketing firm said in the statement it would report a taxed loss of $56.7m or R959m for the six months ended June which compares to a profit of $12.4m (R177m) in 2019.

The company had convened only one auction of gemstones in the current financial year owing to restrictions placed on international travel. Three auctions of gemstones had been cancelled and the firm did not know when another would be held or when it would “… generate meaningful revenue from gemstone sales”.

Gemfelds is due to report its interim numbers on September 18. Shares in the company were trading nearly 22% lower in Johannesburg on a 12-month basis.

The Fabergé business was impaired by $11.5m owing to lower anticipated revenue this year and a downturn in gemstone jewellery demand. Fabergé was Gemfields only source of revenue, however: it generated $2.5m in sales in the six months compared to sales of $3.8m last year.

A fair value write-down was also booked on Gemfields’ 6% stake in Sedibelo Platinum Mines in South Africa by some $12.5m to $45m. The stake has been marked for sale but the company said this year that whilst there had been interest, a suitable offer had not been received.

Excluding the impairment charge against Fabergé, but including the write-down on Sedibelo Platinum Mines, the headline loss per share is expected to be three US cents (0.57 South African cents/share) for the six month period compared to a headline share earnings of one US cent per share (0.11 South African cents) previously.

Gemfields said in July that cash had dwindled to $9.3m as of June 30 from $25.4m a year earlier and it may, therefore, embark on a rights issue or raise additional debt in order to fund working capital.

The outlook for the remainder of the year was “… bleaker rather than better for the remainder of 2020”, Gemfields CEO, Sean Gilbertson, had said.

Gemfields mines emeralds from the Kagem mine in Zambia and rubies from Montepuez in Mozambique. Both operations were not scheduled to open until about the fourth quarter of this year owing to the Covid-19 pandemic.

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.

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