Gemfields shares tumble as miner slides to annual loss

Gemfields expects annual loss after writedown and weaker gemstone sales, sending shares tumbling.

Gemfields shares tumble as miner slides to annual loss
Gemfields Group GEM

Shares in Gemfields Group (LSE: GEM) plunged 5.1% on Friday morning, extending a year-long decline of 26%, after the gemstone miner warned of a swing to an annual loss in 2023.

The company attributed the expected loss to a write-down on its stake in a platinum group metals company and the withdrawal of a key emerald auction. Gemfields now anticipates a loss per share of 0.8 US cents for the full year, a stark contrast to the earnings per share of 4.8 cents reported in 2022.

Part of the loss stems from a fair value write-down of $4.0 million to $28.0 million on their investment in Sedibelo Resources Ltd, a South African platinum group metals miner.

Gemfields also reported lower revenue at its two main mines. Revenue at its 75% owned Kagem emerald mine in Zambia fell 40% to $89.9 million in 2023 compared to $148.6 million in 2022. Similarly, revenue at its 75% owned Montepuez Ruby Mining in Mozambique dipped 9.2% to $151.4 million from $166.7 million the prior year.

The company's luxury brand, Fabergé, wasn't spared either, with revenue declining 11% to $15.7 million due to a weaker luxury market. This all contributed to an expected net loss of $2.8 million, compared to a profit of $74.3 million in 2022.

Gemfields cuts dividend as profits dive on emerald auction withdrawal
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"The loss is primarily driven by the non-cash write-down on our Sedibelo stake and the postponement of the high-quality emerald auction," Gemfields said in a statement. "The postponed emeralds will be offered for sale in 2024 and doesn't reflect the overall strength of our core business."

Gemfields CEO Sean Gilbertson elaborated, stating that lower production of premium gemstones at both Kagem and Montepuez Ruby Mining compared to 2022 led to the withdrawal of their planned November 2023 higher-quality emerald auction.

The company will release its full financial results on Monday.

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