Gemfields has every reason to smile after registering a shattering record revenue of $19,6-million in the rough emerald auction held recently in Johannesburg.
This was the highest record for a single auction and it far outpaced $18.7 million generated from the three previous emerald auctions held during the current 2009/10 financial year.
“This was a highly successful auction indicative of the quality of some of our recent production and strong corroboration for our strategy of bringing a regular and reliable supply of ethically-mined emeralds and beryl, from a responsible source, to the market,” said company chief executive Ian Harebottle.
Emeralds sold at the December auction achieved an average of $26.20 per carat, a price increase of about 180 percent over the $9.35 achieved at the July 2010 London auction.
The group said while evidence exists for some resistance to diamond price increases in certain sectors, demand for emeralds had strengthened across all major markets, providing a level of confidence for continued increases in achievable emerald prices throughout 2011.
Though coloured gemstone deposits are “pockety” in nature, with grade and quality of production changing from month to month, Gemfields’ flagship Kagem mine in Zambia experienced a period of high quality production ahead of the latest auction.
This, the emerald miner said, had led to the considerable unit price increases.
“There is a clear increase in demand for our ethical Zambian emeralds and while it is a little surprising that some parties are yet to grasp the inherent value in what Gemfields and our distribution partners are able to offer discerning consumers, today's outstanding sales speak for themselves and demonstrate the progress we have made with our marketing strategies,” Harebottle said.
Gemfields, however, pointed out that the next auction, which would be predominantly lower quality rough emeralds and beryl, would take place in March 2011.
This meant that the higher prices recorded in the December auction would significantly go down during the March auction.
Nevertheless, the year 2010 appeared to be a year that saw Gemfields registering a turnaround in its fortunes after going through a rough patch that was brought about by the global economic downturn.
The emerald producer posted a maiden annual profit of $2.6 million for the 12 months to June 30.
This was a marked contrast to the $201.4 million loss of the same time the previous year, although that figure was distorted by the write-down of the value of the Kagem mine.
Analysts said there were a number of “value creation triggers”, adding that though cost cutting could come into play, profits were mainly boosted by a rise in the price of emeralds.
This was surely the case as sales in the 12 months to June 30 stood at $19.9 million, up from $815,456 previously.
Production at the Kagem mine also hit record levels in the first month of the new financial year.
The mine produced 3.9 million carats in July – which was a record month and the momentum was carried through to August as well as September.
The price of rough emeralds and beryl also increased to 96 cents during that period.
“Considering the extent of the challenges that we have faced over the past year, the vast number of new projects and the strategic changes that we have implemented across all divisions within the group, I am rather pleased with our results and what has been achieved,” Harebottle said then.
So Gemfields will in 2011 keep an eye on emeralds of a higher quality as these have proved to fetch higher prices.
The “pockety” nature of coloured gemstone deposits is surely detrimental.
Mathew Nyaungwa, Rough&Polished, from Namibia
