GEMFIELDS PLC: Results - Jaipur Rough Emerald and Beryl Auction
("Gemfields" or the "Company")
Results - Jaipur Rough Emerald and Beryl Auction
20 June 2012
Gemfields plc (AIM: "GEM") is pleased to announce the results of the auction of predominantly lower quality rough emerald and beryl held in Jaipur, India from 9-13 June 2012.
- Healthy Jaipur auction revenues of USD 9.0 million
- The auction saw 10.85 million carats of emerald and beryl mined by Gemfields placed on offer, with 3.47 million carats being sold
- Solid overall demand for Gemfields ethical Zambian emeralds continues, with some weakness apparent only in the lowest quality grades
- Four auctions held in the current financial year total USD 77.9 million in revenue
- Ten auctions held since July 2009 total USD 133.7 million in revenue
Gemfields held an auction of predominantly lower quality rough emeralds in Jaipur, India from 9 to 13 June 2012. Twenty five companies attended the auction, with twenty of these placing bids. The auction saw 10.85 million carats of emerald and beryl mined by Gemfields placed on offer, with the 3.47 million carats sold generating auction sales of USD 9.0 million.
Last week's auction was the fourth and final auction of the current financial year (which ends on 30 June 2012). The four auctions, two of which were for lower quality material, have generated aggregate sales of USD 77.9 million while the 10 auctions held since July 2009 have generated USD 133.7 million in aggregate revenues.
The overall quality characteristics of the gems placed on offer at last week's auction were broadly similar to those offered at the previous lower quality emerald auction held in November 2011 in Jaipur (which achieved an average of USD 1.12 per carat for the lots sold). While last week's auction yielded an average of USD 2.61 per carat for the lots sold, in the Company's opinion, this figure is artificially inflated by the number of lowest quality lots that remained un-sold due to the weaker demand experienced at these value points with the current per carat value of this quality material having been largely stable over the past six months.
Given the Company's strong cash position and its belief in the long term fundamentals of the emerald market, Gemfields does not sell lots where the bids do not meet its pre-determined minimum reserve prices. Between November 2011 and June 2012, the Indian Rupee weakened against the US Dollar by 13%, which further negatively affected pricing at this particular auction on account of the large percentage of finished goods produced from this material that is likely to be consumed directly within the Indian domestic retail market.
The results of the four lower quality auctions held to date are summarised below:
AUCTION RESULTS MARCH '10 MARCH '11 NOVEMBER '11 JUNE '12 (LOWER QUALITY) AUCTION AUCTION AUCTION AUCTION
Dates 11-15 March 10-14 March 21-25 November 9-13 June
2010 2011 2011 2012
Location Jaipur, India Jaipur, India Jaipur, India Jaipur, India
Type Lower Quality Lower Quality Lower Quality Lower Quality
Carats offered* 28.90 million 16.83 million 10.83 million 10.85 million Carats Sold 22.80 million 12.98 million 9.82 million 3.47 million No. of companies 25 44 27 20 placing bids Average no. of bids 8 14 9 3 per lot No. of lots offered 56 35 26 33 No. of lots sold 49 34 19 17 Percentage of lots 88% 97% 73% 52% sold Percentage of lots 79% 77% 91% 32% sold by weight Percentage of lots 89% 99% 80% 60% sold by value Total sales realised USD 7.2 USD 9.9 USD 11.0 USD 9.0 at auction million million million million Average per carat USD 0.31/carat USD 0.77/carat USD 1.12/carat USD 2.61/carat sales value
* A larger volume of material was placed on offer in March 2010 following Gemfields extensive inventory building exercise during 2008 and 2009.
The Jaipur auction was again used as a platform to further test levels of demand for rough emerald and beryl made available from other sources of supply (i.e. not certified as having been mined by Gemfields). None of this material is included in the data presented above. The most recent trial comprised of other rough emerald from Zambia and approximately one quarter of this material (by value) was sold. The present net income accruing to Gemfields from traded material remains immaterial in the context of Gemfields' own production, and the Company will continue to refine and evolve the opportunities of selling rough from other sources of supply.
For ease of reference, the results of the six higher quality rough emerald auctions held to date are summarised below:
AUCTION RESULTS JUL '09 NOV '09 JUL '10 DEC '10 JUL '11 MAR ` 12 (HIGHER QUALITY) AUCTION AUCTION AUCTION AUCTION AUCTION AUCTION
Dates 20-24 Jul 23-27 Nov 19-23 Jul 6-10 Dec 11-15 Jul 19-23 Mar
`09 `09 `10 `10 `11 `12
Location London, UK Johannesburg, London, UK Johannesburg, Singapore Singapore
Type Higher Higher Higher Higher Higher Higher
Quality Quality Quality Quality Quality Quality
Carats offered 1.36 million 1.12 million 0.85 million 0.87 million 1.07 million 0.77 million Carats Sold 1.36 million 1.09 million 0.80 million 0.75 million 0.74 million 0.69 million No. of companies 23 19 37 32 38 29 placing bids Average no. of 10 13 18 16 16 11 bids per lot No. of lots 27 19 27 19 25 23 offered No. of lots sold 26 14 24 18 18 20 Percentage of lots 96% 74% 89% 95% 72% 87% sold Percentage of lots 99.8% 97% 94% 86% 69% 89% sold by weight Percentage of lots 82% 76% 87% 99% 91% 94% sold by value Total sales USD 5.9 USD 5.6 USD 7.5 USD 19.6 USD 31.6 USD 26.2 realised at million million million million million million auction Average per carat USD USD USD USD USD USD sales value 4.40/carat 5.10/carat 9.35/carat 26.20/carat 42.71/carat 38.25/carat
The specific auction mix and the exact quality of the lots offered at each auction can vary in characteristics such as colour and clarity on account of mined production and market circumstances. Each auction is thus made up of differing overall quality compositions.
Ian Harebottle, CEO of Gemfields, commented:
"Gemfields is pleased to announce robust results from the recent lower quality emerald auction in Jaipur considering the backdrop of global economic unease and the substantially weaker Indian Rupee against the US dollar. General economic instability typically has a greater negative impact on the lower quality grades than it does on the higher quality material, the latter often being seen as a store of value in times of uncertainty. This effect was clearly seen at this auction, where demand for the lowest quality grades was indeed weaker than it has been for some time. However, due to the Company's strong cash position and operational performance, Gemfields was not obliged to sell lots at sub-optimal prices and is confident in the long term value of these gems.
Overall, the on-going appetite for better grades remains firm and ensured that Gemfields was able to deliver another set of encouraging auction results thanks to our positive momentum, the success of our marketing initiatives and the consistency of the emeralds produced at our Kagem mine. In addition, the results are particularly pleasing given that a large supply of rough emeralds recently entered the Indian market from other sources, creating an isolated period of considerable supply which is not sustainable and which bodes well for future auctions"
Gemfields firstname.lastname@example.org Dev Shetty, CFO +44 (0)20 7518 3402
Canaccord Genuity Limited +44 (0)20 7523 8000 Nominated Adviser and Joint Broker to Gemfields Tarica Mpinga/Andrew Chubb
JP Morgan Cazenove +44 (0)20 7155 8630 Neil Passmore
Tavistock Communications +44 (0)20 7920 3150 Jos Simson/Lydia Eades
Notes to Editors:
Gemfields plc is a leading gemstone miner listed on the AIM market of the London Stock Exchange (ticker: `GEM'). The Company's principal asset is the 75% owned Kagem emerald mine in Zambia, the world's single largest emerald mine. In addition to the Kagem emerald mine, Gemfields has a 50% interest in the Kariba amethyst mine in Zambia.
The Company also owns controlling stakes in a highly prospective ruby deposit in Mozambique and licences in Madagascar including ruby, emerald and sapphires deposits.
In July 2009 Gemfields commenced a formal auction programme for its Zambian emeralds. To date, the Company has held ten auctions which have generated revenues totalling USD 133.7 million.
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