Gemfields warns of large loss as Covid-19 hits auctions

Gemfields warns of large loss as Covid-19 hits auctions

Maputo (AIM-New Ziana) -Precious gemstones miner Gemfields said on Monday it expects to swing to an interim net loss for the six months ended June 30 this year as it has only been able to conduct one sale due to the Covid-19 pandemic.

The company, which returned to the London Stock Exchange’s market for juniors in February this year, expects to report a net loss after tax of $56.7 million in the first half of 2020, a figure which contrasts sharply with the $12.4 million profit reported during the same period last year.

Gemfields cancelled auctions originally scheduled for May, June and August this year due to international travel restrictions from the global pandemic.

Before that, the company was able to hold one sale, in February, which yielded $11.5 million.

The company said it was not able to provide reliable guidance about when it might next be able to host auctions, or generate meaningful revenue from gemstone sales due to the uncertainty to travel, quarantine and congregating restrictions put in place to mitigate the spread of Covid-19.

Gemfields also said it will write down its luxury Fabergé jewellery brand by $11.5 million, due to lower than expected sales and a general downturn in the market.

It said a review of the company’s shareholding in Sedibelo Platinum Mines in South Africa will also result in a write-down of between $12.5 million and $45 million.

The effect of the Covid-19 pandemic on the company’s upcoming auctions is not the only challenge Gemfields has had to face this year as in early February, 11 illegal miners died at its Montepuez mine in Mozambique, following a series of tunnel collapses over three days.

About 800 people had trespassed in previous days and, despite warnings by mine staff, began undercutting the outer edge of the Maninge Nice 3 mining pit, which led to several ground collapse incidents.

Weeks later, attackers torched a vehicle and injured at least three workers and a security contractor.

Located in the northern Cabo Delgado province, one of Mozambique’s poorest regions, home to many unemployed young people, Montepuez is the world’s richest known ruby mine, which generated revenue of almost $122 million last year.

The mine has faced incursions in the past, and Gemfields last year chose to pay £5.8 million (about $7.6m) to community members residing near the Mozambican mine, in a “no admission of liability” move that settled a claim of human rights abuses brought against it by locals.

Gemfields also operates the Kagem emerald mine in Zambia.

The company has recently stepped up efforts to market its emeralds and rubies in China after a report highlighted the “huge potential” for ethically sourced gems in that market.

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