Release Date: September 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gemfields Group Ltd (STU:5PH, Financial) generated $128 million in revenue for the first half of 2024, showing resilience despite market challenges.
- The Kagem emerald mine in Zambia and Montepuez ruby mine in Mozambique reported no lost time injuries (LTIs) in 2024, highlighting strong safety performance.
- The processing plant upgrade at Kagem has increased capacity by 50%, leading to a significant boost in premium emerald production in August and September.
- The second processing plant at Montepuez Ruby Mining is on schedule and on budget, expected to triple ore processing capacity by the first half of 2025.
- Fabergé, a subsidiary of Gemfields, has not required any funding from the group since late 2022 and continues to generate significant marketing leverage and press coverage for Gemfields' gemstones.
Negative Points
- Production of premium gemstones at both Kagem and Montepuez was below expectations, impacting overall performance.
- The commercial-quality emerald auction in September saw weaker-than-expected results, with only 61% of lots sold.
- Gemfields Group Ltd (STU:5PH) is currently in a net debt position of $44.4 million, with expectations that net debt could exceed $100 million during the next year.
- Operating expenses, particularly fuel and labor costs, have increased, adding pressure on margins.
- The company has written down its 6.54% equity stake in Sedibelo to zero, citing dim medium-term prospects for the platinum group metals company.
Q & A Highlights
Q: Does Gemfields still believe that premium ruby and emerald sales in November will not see a price impact? If not, what sort of fall in prices is predicted?
A: Sean Gilbertson, CEO: It is extremely difficult to predict forward prices. Feedback from recent market assessments indicates that prices for very fine gemstones, particularly rubies, remain robust. While we might see a decline in some prices towards year-end, we do not expect material drops.
Q: Has the Kagem plant upgrade improved premium emerald production yields from the stockpiled ore?
A: Sean Gilbertson, CEO: The increase in capacity from 30 tonnes per hour to 50 tonnes per hour has led to small increases in recovery. However, significant improvements will require new technology, which we are currently testing.
Q: Has the August boost in premium emerald production at Kagem continued into September?
A: Sean Gilbertson, CEO: Yes, the boost in premium emerald production has continued into September.
Q: Is there any impact on the production time for the second processing plant (PP2) schedule due to the solar plant not being finalized?
A: David Lovett, CFO: The solar plant was always planned to come online after PP2. PP2 will initially run on generators, and the solar plant is expected to be operational by the end of 2026. There will be no impact on PP2's production schedule.
Q: Could Sedibelo become a source of ongoing earnings volatility through streams of revaluations?
A: Sean Gilbertson, CEO: It is extremely unlikely that Sedibelo will become a source of ongoing earnings volatility.
Q: Can you provide a clear summary of CapEx for the full year 2024 for the group per operations, including capitalized development expenditures?
A: David Lovett, CFO: CapEx in H1 was just under $4 million at Kagem and around $22 million at MRM. For H2, we expect PP2 payments to be in the region of $20 million to $30 million. Kagem's CapEx is expected to be similar to H1, with no significant CapEx at smaller projects.
Q: Can you provide a CapEx forecast for the full year 2025?
A: David Lovett, CFO: It is difficult to provide an accurate forecast at this point. PP2 costs will continue into 2025, but other significant projects will depend on auction outcomes.
Q: What is the timing for the BCI and ABSA term loans for the payment of the second processing plant?
A: David Lovett, CFO: The BCI term loan has been signed and utilized, with a current balance of around $20 million. The ABSA facility is in the final stages of review and should be signed before the end of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
