Gemfields (LON: GEM; JSE: GML) raised $29.6 million from its first commercial-quality emerald auction in nine months, offering some relief after a difficult year of production setbacks and strained cash flow.
The coloured gemstones miner sold all 44 lots offered from its 75%-owned Kagem mine in Zambia at an average $9.72 per carat. The auction ran in India from Aug. 24 to Sept. 10.
Shares in Gemfields fell 13.5% on Friday to 2.51p despite the positive auction result, valuing the company at £1.07 billion ($1.5 billion).
“It has been nine months since our last commercial-quality emerald auction and I am particularly encouraged by this robust result,” product and sales managing director Adrian Banks said. “Viewing activity in Jaipur was intense throughout the auction, reflecting a high level of customer engagement.”
The result gives Gemfields a welcome cash injection after disruptions at Kagem and its Montepuez ruby mine in Mozambique constrained production, reduced auction frequency and squeezed cash generation over the past year. Prices for higher-quality rubies and emeralds, however, remained relatively firm.
Balance sheet
Gemfields has been cutting costs and selling assets as it works to shore up its finances. Last year, it reduced group operating costs by 17% and sold luxury jewellery brand Fabergé for $50 million, with proceeds aimed at reducing debt and supporting expansion projects.
It also completed a $30 million rights offer as management prioritised liquidity and financial flexibility.
The latest emerald sale points to healthier demand at the commercial end of the market, an important test after the long gap between auctions. Banks said customers also responded positively to the quality of the stones and the composition of the lots.
“This result demonstrates continued strong demand for commercial-quality emeralds and reflects the solid production performance delivered by Kagem over the past year,” he said.
That demand matters more now. Gemfields needs reliable production and regular auctions to turn gemstones into cash while funding its operations and investment plans.
A separate threat has emerged outside the gemstone market. Rising geopolitical tensions in the Middle East have increased fuel costs and raised the risk of supply disruptions at Gemfields’ diesel-dependent mines in Zambia and Mozambique.
The company has warned of a potential fuel “pinch point” and is considering alternative supply routes, additional on-site storage and changes to operations to reduce the risk of interruptions.
