Gemfields Resources Plc on Tuesday said it will reduce the scale of activity at its Kagem emerald mine in Zambia, its key production asset, and that it will post a loss for the 2009 financial year.
The company also said that it would minimize all nonessential capital, project development, and exploration expenditure, until the gemstone market started recovering.
“The current global financial crisis and the sharp falls in gemstone prices experienced since October 2008 have resulted in significant uncertainty about emerald prices and demand for the remainder of 2009,” the London-based mining company said in the statement. “Given the weakening markets and the associated uncertainty, Gemfields’ performance for 2009 will be significantly lower than projected during 2008 … and will result in a loss for the financial year.”
Gemfields said it has $16 million in cash and Gemfields’ management estimates the value of current inventory (comprising both rough and polished emeralds) at $18 million. The company has to date not made significant sales of either rough or polished stones, having favored a policy of building sufficient inventory to provide customers with a reliable and consistent source of supply. The sale of polished stones will begin in the second quarter of 2009 with some rough sales expected during the first quarter of 2009.
Gemfields, bought a 75 percent stake in Kagem in June. The company said that between July and December of 2008, the mine produced 14.7 million gemstone carats (comprising emerald and beryl), up from 3.7 million carats in 2007, and 5.5 million carats in 2006.