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Pallinghurst H1 Loss $81M Due Mainly To Drop In Gemfields Valuation

The Kagem emerald mine's ore grade dropped during the period

Coloured gemstone producer Gemfields parent Pallinghurst Resources Limited posted a total comprehensive loss of $81 million for the six months ended June 30, 2017, almost all of which, it said, is due to unrealised write downs in asset valuations.

Pallinghurst said are two areas where the write downs took place, the first being the decline in the share price of Gemfields since its 2016 year-end valuation and the subsequent Pallinghurst buy-out. The second is an unrealised $16 million value adjustment for its Sedibelo Platinum Mines Limited.

Pallinghurst said that in future years, it will consolidate Gemfields operating results, which should reduce these (sometimes radical) swings in asset values being reflected through the Consolidated Statement of Comprehensive Income.

Meanwhile, Pallinghurst said, Gemfields experienced a challenging period, with auction revenues declining by 24 percent to $133 million in its financial year ending 30 June 2017 from $174 million in the prior year. While performance at the Montepuez ruby mine remained strong, the Kagem emerald mine saw gem production fall more than 37 percent to 19 million carats, the lowest figure in seven years.

Emerald prices remained robust, but lower production, especially of high value gems, meant Kagem’s auction revenues fell 53 percent to $47.5 million in its financial year ending 30 June 2017, as against the $101.4 million in the prior year.

Gemfields held one rough ruby auction in the first six months of the year, in June 2017 in Singapore, and achieved its highest ever auction revenue when $55 million of rough rubies were sold at an average price of $61.13 per carat. This was the eighth auction of rubies and corundum produced at Montepuez, which have collectively generated revenues of $281 million.

Demand for Gemfields’ emeralds remains strong with Gemfields holding two auctions in the first six months of the year. A higher quality rough emerald auction was held in February 2017 in Lusaka, Zambia which generated revenues of $22 million at an average price of $63.61 per carat.

In May 2017, a commercial quality rough emerald auction was held in Jaipur, India generating revenues of $15 million at $4.68 per carat, the second highest average price ever achieved for a commercial quality rough emerald auction. All of the emeralds offered at the Jaipur auction were sold, a strong indication of the continued demand for Gemfields’ responsibly sourced gems, Pallinghurst said.

Kagem’s ore grade in its financial year ending 30 June 2017 fell to 158 carats per tonne, down 34 percent from 241 carats per tonne in the prior year. During the same period, ruby and corundum production at Montepuez fell by 14 percent to 8.8 million carats from 10.3 million carats in the prior year on a grade that declined from 35 carats per tonne to 16 carats per tonne.

Gemfields’ luxury brand, Fabergé, saw both an increase in the number of pieces sold and a decrease in operating costs during the first six months of the year when compared to the prior year period. Fabergé’s presence at BaselWorld saw it launch the Visionnaire Chronograph timepiece, alongside new jewellery pieces.

Gemfields announced the cessation of operations in both Colombia and Sri Lanka. The withdrawal from Colombia was primarily due to the conditions precedent not being satisfied in the stipulated timeframe. Gemfields interests in exploration licences in Sri Lanka are currently being maintained. Gemfields is currently focussing on optimising its existing portfolio of core assets, namely Kagem, Montepuez and Fabergé. Bulk sampling operations have also commenced at the Dogogo South emerald prospect in southern Ethiopia.

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