Results - Jaipur Rough Emerald and Beryl Auction
June 20 2012 - 1:00AM
UK Regulatory
TIDMGEM
Gemfields plc
("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.
Highlights
- 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
SA SA
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"
Enquiries:
Gemfields dev.shetty@gemfields.co.uk
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.
END
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