Gemfields’ sparkle dims, profit falls 86% on nixed sale

Coloured gemstones miner Gemfields (LSE: GEM) posted on Monday a 86% drop in pre-tax profit for 2023 due partly to the cancellation of a high-quality emerald auction in November, a lower number of carats sold and a write-down in its platinum group metals investments.

Pre-taxation profits fell from US$114.6 million in 2022 to US$16.5 million last year, according to its 2023 annual report.

The London-based company also experienced a 23% drop in revenue, amounting to US$262 million from US$341.1 million, and recorded a loss after tax of US$2.8 million, a significant shift from the US$74.3 million profit reported in 2022. 

The decline was attributed partially to unrealized fair value losses of US$28 million from the company’s 6.5% equity stake in South African platinum group miner Sedibelo Resources. 

The estimated value of this investment was revised down to US$4 million, a decrease of US$28 million from its worth in 2022.

Gemfields highlighted that inflationary pressures have been impacting its revenues as operating expenses remain high.

Despite a slight decrease in global commodity prices towards the end of 2023, concerns regarding high interest rates and geopolitical tensions persist worldwide, leading to increased costs, the company said. 

The miner reduced its final dividend to US0.857¢ from US4.125¢, funding the payment from its income reserves.

“Gemfields had a year of both achievements and challenges in 2023, “ CEO Sean Gilbertson said in a statement. “The group recorded its second highest annual revenues [the highest was in 2022] and saw healthy prices paid at our auctions of rough emeralds and rubies.”

Emerald auction completed

The overall lower quality and quantity of premium emerald production at Kagem led to the cancellation of the November auction, which was postponed and ran from March 5 until March 22.

The sale brought in US$17.1 million, down from the US$25.5 million achieved at the previous auction held from August to September 2023.

It sold 93% of the emeralds offered, equivalent to 3.85 million rough stones at an average price of US$4.45 per carat. 

Managing director of product and sales, Adrian Banks, said the March auction included large quantities of lower-quality emeralds, which are typically destined for smaller manufacturers in India, through the company’s direct sales channel.

He said those parcels accounted for 55% of the auction by weight, resulting in the lower overall dollar-per-carat figure realized at the auction.

Since July 2009, Gemfields has held 47 emerald auctions that have generated over US$1 billion in revenues.