GEMFIELDS, which is anticipating a 21% fall in earnings per share for the half year to June 2024, has written down its 6.54% shareholding in platinum group metals (PGM) company Sedibelo Resources, whose operations remain suspended.
At the end of last year, Gemfields’ stake in Sedibelo was worth $4 million (R69m). However, this has now been completely written off.
“The write-down reflects the fact that there has been no further positive news from Sedibelo, that their operations remain suspended and Gemfields management’s view that the prospects in the medium term remain dim,” Gemfields said yesterday.
After this writedown, Gemfields expects its net profit after tax for the interim period under review to amount to $13.7m compared to a net profit after tax of $18.1m in the year earlier period.
In rand terms, Gemfields is expecting net profit after tax to be R255.6m, down from R333.7m.
It attributed the lower profit to lower revenues and higher costs at its operations as well as to the Sedibelo write-down. Gemfields has also cited an increase in net financing costs for the lower profit for the period as group debt increases to help fund the construction of MRM’s second processing plant.
As a consequence of this, earnings per share in Gemfields have been projected at 0.6 cents (USD) for the interim period to June compared to 0.8 cents in the year earlier contrasting period.
Adjusted headline earnings per share, excluding Sedibelo’s fair value loss, is expected to be 1 cent (USD).
Gemfields CEO, Sean Gilbertson, said “while higher-quality gemstones typically remain more robust than lower-quality gemstones in challenging times, we remain vigilant given that the luxury and gemstone sectors are facing greater uncertainty than we have seen in the last three years”.
“While we continue to invest in our future having completed the Kagem processing plant upgrade, and with the construction of MRM’s second processing plant materially on time and within budget, for completion by the end of H1 2025, we will maintain a keen focus on working capital and capital allocation,” he added.
Gemfields had generated auction revenues during the period under review of $120.6m in addition to $6.6m from Fabergé. Gilbertson said this had contributed “to another profitable period albeit at a reduced level when compared to the same period” last year.
“This month we experienced a weaker-than-expected commercial-quality emerald auction. While this increases the uncertainty we face, management considers it unlikely that the November higher-quality emerald auction or the December mixed-quality ruby auction will see below par results of a similar scope,” he said.
Gemfields’ two key operating assets, Kagem Mining and Montepuez Ruby Mining, generated revenues of $51.9m and $68.7m respectively during the period under review.
Demand for rough emeralds and rubies also remained healthy although production of highest-quality gemstones at both mines over this period was below expectations.
“Kagem’s production in August saw a considerable uptick alongside the completion of its upgraded processing plant while MRM continues to be challenged by weaker gemstone production. Fabergé recorded revenues of $6.6m (2023 H1: USD 8.4 million) in a softer luxury-goods market and against a comparative 2023 H1 period that included a one-off sale of legacy jewellery,” said the company.
By yesterday afternoon, Gemfields’s JSE shares have dropped by 1.57% to R2.50.
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