American Gem loses big in quarter

Sales of sapphires mined by American Gem (GEM-T) were not sufficient to offset losses incurred in the second quarter.

American Gem lost US$1.75 million in the 3-month period ended June 30 (or US6 cents per share), compared with a loss of US$1.1 million in the same period a year earlier. Revenues were US$86,736, compared with US$79,049 for the same quarter in 1995.

According to Michael Lee, American Gem’s acting chief financial officer, the large quarterly loss stems from higher-than-normal administrative costs incurred by relocating to a new office building, combined with consulting fees related to ongoing merger talks with Australian sapphire miner Great Northern Mining.

Great Northern, which operates sapphire mines in Australia and has gem-cutting facilities in Sri Lanka, controls sapphire resources totalling 300 million carats, whereas American Gem has a resource of 62.9 million carats in Montana.

The cost of mining operations in the quarter was more than double that of a year ago (US$308,206, compared with US$130,747) — mostly, says Lee, because a new plant was commissioned on its Gem Mountain complex just after the quarter ended.

At US$86,088, American Gem’s sapphire sales were up from the US$69,921 generated a year earlier, and Lee says sales for the quarter ended Sept. 30 should be significantly higher because of the establishment of some large new accounts.