Gemfields Extends Mine Life of World’s Largest Emerald Mine

PUBLISHED: Oct 02 2012 @ 09:04 | Comments (2) | More info about Kenneth G. Mondero

Precious stones miner Gemfields (LSE:GEM) will have another 20 years to exploit the world’s largest emerald and beryl resource located in Zambia and will shift to underground mining in two years’ times, the company said today.

The decision was based on the new underground feasibility study and mineral resource estimate of Gemfields’ 75%- owned Kagem mine, which now has a billion carats of emerald and beryl recoverable for two decades, the extended life of mine based on the new JORC-compliant resource estimate.

Economically Enhancing

Switching to underground mining, according to Gemfields, is “economically enhancing” as it will be “significantly cheaper” compared to a continued open pit operation, which increases the cost in handling waste.

Gemfields estimated about US$57 million in production costs for the next two years of open pit mining operations, while only around a maximum of US$15 million a year will be spent to maintain an underground mining through 2031.

However, production performance report submitted in August 2012 revealed reduction in average grade of emerald and beryl mined in the past two years, from around 658 carats per tonne in September 2010 to only about 181 cpt.

Kagem mine’s new resource estimates placed around 2.75 million tonnes at 365 cpt or about 34 million carats a year of the green and multi-coloured gemstones.

Robust Economics

Gemfields also projects to achieve US$372 million post-tax net present value to its newfound resource and a projected nominal cash flow of US$ 855 million over the life of the mine, based on the average selling price of US$2.44, US$2.77, and US$3.00 per carat for 2012-2013, 2014-215, and the rest of the mining life, respectively.

Latest auction price for the company’s low quality gemstones averaged US$2.61 per carat, held last June 2012.

“The study shows that the existing pit can be further developed as a high grade, low cost mine with robust project economics and a rapid payback period,” Chief Executive, Ian Harebottle, said in a statement.

Gemfields’ new resource was only taken from the existing belt within its licence and the company plans to explore other areas within the Kagem mining licence.

Company Spotlight

Trading on the Alternative Investment Market on the London Stock Exchange, shares of Gemfields rose as much as 41.52 pence earlier today, equivalent to 10.8% of its price yesterday.

At 10:30 AM GMT, stocks are valued at 39 pence a share, following trading of over 400,000 shares.

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