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Gemfields warns of loss on up to $24 million write-down

Precious gemstones miner Gemfields (LON: GEM) warned on Friday that it expects to swing to a loss of $2.8 million in 2023 from a $74.3 million profit the previous year due to a multi-million write-down in its platinum group metals investments, lower output and the cancellation of an emerald auction. 

The London-based company, which has a 6.54% stake in South African platinum group miner Sedibelo Resources, said that plummeting prices for platinum group metals (PGMs) has affected its bottom line.

Since the beginning of 2023, prices for palladium and rhodium, used mainly in the catalytic converters that clean exhaust fumes in vehicles, have dropped by 44% and 63% respectively. This collapse is attributed to inventory reductions and a sluggish global economy. 

While the decrease in platinum has been less significant, the overall decline in PGMs has had a severe impact on producers’ profits.

Gemfields said it had reduced the value of its Sedibelo investment, which will result in a write-down ranging between $4 million and $28 million. This would translate in a loss of $0.8 US cents per share for 2023, a significant change from 4.8 US cents in earnings per share of achieved in 2022. 

Headline loss per share, which includes Sedibelo Resources’ fair value loss, is likely to be 0.9 cents compared with the prior year’s headline earnings per share of 4.8 US cents.

When it comes to its core business, Gemfields saw revenue from its 75%-owned Kagem emerald mine in Zambia drop 40% to $89.9 million in 2023, from $148.6 million the previous year. Top-line revenue at its Montepuez ruby mine in Mozambique decreased by 9.2% to $151.4 million from $166.7 million in 2022.

“Production of premium rough gemstones has been weaker at both Kagem and Montepuez Rompared to 2022, and resulted in November 2023’s planned higher quality emerald auction being withdrawn from our schedule,” chief executive Sean Gilbertson said.

“We look forward to completing our first auction of the year later on today, with a commercial-quality emerald auction taking place in Jaipur, and our next higher-quality emerald and mixed-quality ruby auctions to take place in Q2,” Gilbertson added.

Gemfields’ luxury brand Fabergé also disappointed, recording revenue of $15.7 million, which is 11% lower than the $17.6 million it had in 2022, mainly due to softer demand for precious stones.

Source: MINING.COM – Read More