Gemfields produces mined grade gemstones in Q2 and sees encouraging signs in all key markets

Gemfields (AIM: GEM) said the emerald market is showing encouraging signs of increased demand and interest from all key markets, including the USA, India, China and the Middle East. In an update for the three months ended 31 December 2009, the company also revealed the production of higher grade emeralds and beryl from its Kagem mine in Zambia.

Production during the quarter was dominated by a high average grade of 365 carats per tonne, compared with the 182 carats per tonne achieved in the preceding quarter. In the second quarter Gemfields produced 2 million carats more than in the previous quarter, in Q2 emerald and beryl production totalled 4.9 million carats.

Also Gemfields said its cost reduction measures continued to bear fruit, resulting in reduced unit production costs and unit cost per tonne of rock moved.  The second quarter unit production costs were USD0.64 per carat, below the average production cost of USD0.78 over the six quarters ended 31 December 2009.

“Naturally, we're pleased to have seen increased grade in the most recent quarter and which is supported by increased levels of demand from the downstream pipeline”, Gemfields CEO Ian Harebottle said, "Gemfields continues to focus on generating revenue and is making encouraging progress in delivering on its vision of bringing a regular and reliable supply of emeralds and beryl, from a responsible source, to the market.”

Gemfields presently has US$7.2 million in cash and has a gemstone inventory with an estimated value of at least US$9 million. Its 75% joint venture company, Kagem Mining Ltd, has bank loans and leases repayable by 31 December 2010 totalling USD 6.1 million.

In November 2009, Gemfields realised sales of US$5.6 million through the auction of rough emeralds. The next auction of rough emeralds and beryl is scheduled for March 2010. According to Harebottle, the forthcoming auction should cast light on the value of Gemfields's lower grade inventory.

While the illegal mining within the Kagem boundaries is not yet fully resolved, Gemfields has taken various steps to prevent this activity and it said it has the support of all key ministries in Zambia.

The company initiated a trial underground mining project during the period, and whilst it is still at an early stage, it could provide a number of opportunities for expansion into areas with a history of high quality production. The company expects the underground operation to produce ore during the first quarter of 2010, which will represent a significant milestone in the history of Zambian emeralds, Gemfields assed.  http://www.proactiveinvestors.co.uk/companies/news/12715/gemfields-produces-mined-grade-gemstones-in-q2-and-sees-encouraging-signs-in-all-key-markets-12715.html