News Bureau

 
 
August 01, 2020

Gemfields updates trading & Covid-19

The Company hereby provides a trading and corporate update including in respect of the Covid-19 pandemic. Gemfields’ priority remains the health and wellbeing of its employees, host communities, and customers while striving to safeguard the viability and value of the Company. In each of its countries of operation, Gemfields continues to monitor closely the guidance and advice of the relevant authorities.

The financial information within this announcement is the responsibility of the directors and has not been reviewed or reported on by the Company’s external auditors.

Montepuez Ruby Mining, Mozambique:

All but critical operations at the Montepuez Ruby Mine (MRM) in Mozambique were suspended from 22 April 2020 and are presently expected to remain suspended until at least 30 September 2020. Security, maintenance, and other essential services continue in order to ensure that MRM is properly secured and well placed to resume normal operations as soon as it is both safe and practicable to do so.

Employees not required for ongoing critical services have been placed on suspended contracts under prevailing Mozambican law and will for the time being receive reduced remuneration. The same applies to MRM’s board of directors. These measures have reduced the overall wage bill at MRM by approximately 25%.

MRM confirmed 10 cases of Covid-19 in onsite employees on 12 July 2020 following routine testing. The bulk of the cases were asymptomatic and all of the affected employees were placed in self-isolation under medical supervision. All those who might have come into direct contact with these employees and those who are vulnerable either due to their age or underlying medical conditions have also been self-isolated. Social distancing measures remain in place at MRM.

All significant capital expenditure projects, including the second ore treatment plant, remain suspended for the foreseeable future. MRM’s cost-saving measures during the crisis have resulted in cash operating expenditure being reduced from approximately USD 2.6 million per month (the monthly average for the 3 months to 30 June 2019) to circa USD 1.8 million per month.

Kagem Mining Limited, Zambia:

Principal operations at the Kagem Emerald Mine in Zambia were suspended from 30 March 2020, putting on hold a good run of premium emerald production. The sort house was partially reopened in June 2020 to clear a backlog of sorting, grading, and referencing of emeralds. Given prevailing circumstances, principal operations are presently expected to remain suspended until at least 31 October 2020.

Employees not involved in the ongoing delivery of critical services have been placed on reduced remuneration since May 2020 under available provisions in Zambia’s New Employment Code Act. The same applies to Kagem’s board of directors. Operationally critical employees have remained on full pay throughout the pandemic. These measures have reduced the overall wage bill at Kagem by approximately 20%.

Zambia has experienced an exponential rise in the number of Covid-19 cases in July 2020 and a fourfold increase in the number of deaths. Zambia’s Copper belt province – where most of Kagem’s employees reside - remains severely impacted. However, there have to date been no known cases of Covid-19 at the Kagem mine itself.

Social distancing measures remain in place at Kagem. Of the 49 expatriate employees who had remained on-site, 15 were given a passage home on special repatriation flights arranged by the Government of India. An additional 19 expatriates will go on leave to their respective countries when flights become available. All significant capital expenditure projects remain suspended for the foreseeable future.

Kagem’s cost-saving measures during the crisis have resulted in cash operating expenditure being reduced from approximately USD 3.4 million per month (the monthly average for the 3 months to 30 June 2019) to approximately USD 1.3 million per month (the monthly average for the 3 months to 30 June 2020). Kagem presently has sufficient inventory to support one higher quality and one commercial quality emerald auction.

Fabergé:

Fabergé’s directly operated retail operations have now reopened. Harrods (which closed its doors on 25 March 2020) re-opened on 15 June 2020. Fabergé’s Houston boutique (which closed its doors on 19 March 2020) partially re-opened on 1 May 2020 with a by-appointment service that remains in place today. Fabergé’s partner-operated mono-brand boutiques have also re-opened.

The Fabergé Dubai Mall boutique (which closed on 20 March 2020) re-opened on 28 April 2020. Fabergé’s partner-operated boutique in Kiev, Ukraine (which closed on 19 March 2020) re-opened on 22 May 2020. In addition, the majority of the multi-brand retailers that Fabergé sells to have also reopened. Although the luxury retail market has been severely impacted by COVID-19, Fabergé is starting to see gradual signs of recovery in the market.

Fabergé’s revenues (on an IFRS reporting basis) have been severely impacted during the first half of 2020, bringing USD 2.5 million compared with USD 3.8 million in the first half of 2019, a decline of approximately 34%. Fabergé has sought to further reduce its operating costs and increase its online sales.

Operating costs during the 3 months ending 30 June 2020 were approximately USD 1.7 million (versus USD 2.4 million for the same period in 2019), a reduction of approximately 29%. Fabergé’s online sales have increased from USD 80k in the first half of 2019 to USD 360k in the first half of 2020, an increase of some 350%.

UK & Corporate:

In light of the severe impact which Covid-19 has had on the Group’s revenue stream and operations, the Company has instigated measures that progressively reduce costs as the anticipated impact of the pandemic protracts.

On 1 May 2020, all UK staff members, including the Board of Directors of the Company, switched to a 20% remuneration reduction with UK employees being placed on a 4-day working week. These cost-saving measures are presently expected to remain in place until at least 30 September 2020 with the market and COVID-19 developments being closely monitored.

Operational Market Update to 30 June 2020:

The Company has today also released, on its website, monthly operational performance data up to and including 30 June 2020 in respect of the Kagem emerald mine, the Montepuez ruby mine, and Fabergé. In addition, the Company has released on its website a document entitled ‘Gemfields Inventory Accounting’ in order to assist interested stakeholders in better understanding the accounting treatment of Gemfields’ rough gemstone inventory.

 

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