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GEMFIELDS PLC - Final results for the year to 30 June 2012
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PR Newswire
London, October 8
Gemfields plc
("Gemfields" or the "Company")
Final results for the year to 30 June 2012
9 October 2012
Gemfields plc (AIM: GEM) is delighted to release its consolidated financial statements for the financial year ending 30 June 2012.
Key financial indicators:
* Revenue from emerald and beryl sales more than doubled to US$83.7 million
(2011: US$40.2 million);
* Profit before tax and exceptional items increased by 140% to US$47.8
million (2011: US$19.9 million);
* Profit after tax, including the impairment reversal of the Kagem mine, of
US$161.5 million (2011: US$21.4 million);
* Year-end cash at bank improved by 169% to US$36.7 million (2011: US$13.6
million);
* Estimated cost of emerald and beryl inventory on hand of US$26.6 million
(2010: US$18.7 million);
* Post-tax NPV (at a 10% discount rate) of US$372 million from SRK Consulting
(UK) Limited's ("SRK") underground feasibility study for Kagem's principal
pit, based on Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia ("JORC") compliant resource update.
Key operational developments during the financial year:
* Average monthly operating costs of US$1.34 million (2011: US$1.07 million);
* Ongoing significant waste moving programme at the Kagem mine to open new
areas of ore; * Total of 8.7 million tonnes (2011: 3.9 million) of rock handled; * Annual production of 21 million carats, a 36% decrease in year-on-year
production, reflecting the focus on waste removal during the first half of
the year (2011: 33 million carats);
* Grade for the year reduced to 205 carats per tonne, a direct result of the
lower grade areas being mined during the waste moving programme (2011: 478
carats per tonne);
* Acquisition of a 75% stake in the noteworthy Montepuez ruby deposit in
Mozambique completed;
* Certificate of commendation awarded to Kagem by the Zambian Mines Safety
Department in recognition of achieving two million injury-free shifts;
* Dynamic marketing initiatives implemented, increasing consumer awareness
and supporting firm demand.
Key operational developments post financial year end:
* JORC Code compliant resource and reserve update and underground mining
feasibility study for the principal pit at the Kagem emerald mine in
Zambia;
* SRK reported an `Indicated Mineral Resource' for the `Fwaya Fwaya Pirala'
emerald belt at Kagem of 2.75 million tonnes or 1.0 billion carats of
emerald and beryl at 365 carats/tonne and an `Inferred Mineral Resource' of
9,200 tonnes or 223,000 carats of emerald and beryl at 24.5 carats/tonne;
* Completion of the Kagem underground feasibility study. Accelerated
underground construction and development to commence in FY 2014-15;
* Projected 20 year life-of-mine producing approximately 34 million carats
per annum;
* Projected (non-discounted) cash flow over the life-of-mine of approximately
US$855 million;
* Promotion of Mr Devidas Shetty from the position of Group Chief Financial
Officer to Group Chief Operating Officer;
* Appointment of Mr Mark Summers as Group Chief Financial Officer.
The Chairman's statement and the primary financial statements are set out below and are available to view on the Company's website at www.gemfields.co.uk. The full financial statements will be sent to the shareholders.
Ian Harebottle, CEO of Gemfields, commented:
"The past financial year has been an outstanding year for Gemfields. We have more than doubled our revenues, improved our profitability, expanded into new products and broadened the depth and breadth of our marketing and distribution activities. We can to use this position of strength to support future growth and to solidify our position as "The Leading Coloured Gemstone Company". Supported by the unwavering dedication and exceptional talent of my fellow team members, and the numerous exciting opportunities that we continue to be presented with, I remain convinced that this is yet still only the beginning."
Webcast presentation
A webcast presentation will be held at 11am BST on Tuesday 9th October 2012. Participants may join the conference call and webcast of the results presentation by dialling one of the following numbers, approximately 10 minutes before the start of the call:
From UK (toll free): 08003681950
From South Africa (toll free): 0800 983 097
From rest of the world: +44 20 3140 0668
Participant PIN Code: 215704#
A live webcast of the results presentation will be available on the link below:
Click here for the webcast Password: 387453
A recording will be available from 16:00 BST on 9 October 2012 on www.gemfields.co.uk.
Enquiries:
Gemfields dev.shetty@gemfields.co.uk
Dev Shetty, COO +44 (0)20 7518 3402
Canaccord Genuity Limited
Nominated Adviser and Joint Broker to Gemfields
Tarica Mpinga/Andrew Chubb +44 (0)20 7523 8000
Neil Passmore +44 (0)20 7155 8630
JP Morgan Cazenove
Jos Simson/Emily Fenton +44 (0)20 7920 3150
Tavistock Communications Chairman's statement Dear Shareholder,
I am pleased to update you on a year of strong revenue and profit growth, driven primarily by our Kagem emerald mine in Zambia.
The results from our operations, supported by our marketing efforts, clearly indicate that Gemfields remains in a growth phase. I am confident we have built a sound platform on which to further develop the global coloured gemstone sector. Over the last several years, management has committed a great deal of time and effort to improving the prevailing operational efficiencies at each of our respective business units. Those fundamentals ensure that our costs remain well contained, and support an orderly longer term increase in production levels. In order to achieve optimal value for our gems and expand in new markets, the nature of the coloured gemstone industry requires a commitment to branding and promotional awareness initiatives. For this reason, Gemfields has developed a proprietary rough emerald grading system that has allowed us to offer a consistent supply of ethically sourced products at our international auctions. This has resulted in sound relationships with a number of downstream stakeholders who understand and share our vision of growing consumer awareness and demand for coloured gemstones across the globe. It is heartening indeed to see the direct outcome of some of these efforts in this set of results. At Kagem, the past year has focused largely on the high-wall pushback programme to remove waste. This resulted in lower volumes of ore being mined, but has opened additional areas of ore for future production and this should have a positive effect on the forthcoming year's production levels. On the exploration front, we have stepped up our efforts to quantify the considerable number of opportunities that are available to us within our existing Zambian licence areas for additional open pit mining operations. Of particular note this year has been the accelerated development of Montepuez, our Mozambican ruby project, which we believe has the potential to be one of the largest known ruby deposits in the world. At the time of writing, the bulk sampling project, comprising both mining and processing, is on track to commence by the end of the calendar year and we look forward to being able to offer rough rubies to our customers in 2013.
In addition to the various organic growth options available, Gemfields has established a mergers and acquisitions project team charged with evaluating the increasing number of projects offered to us.
Post the year end, SRK, the mining consultancy, concluded their underground feasibility study for the Kagem mine. This will extend the current open-pit operation to include a large scale underground operation. The study showed that the existing pit can be further developed as a high grade, low cost mine with robust project economics and a rapid payback period. This development, earmarked to start in the 2014/15 financial year, should prove to be economically enhancing to the Group and to our shareholders. Much work remains to be done before coloured gemstones achieve the level of consumer recognition and respect that we believe they rightly deserve. However, our ever expanding marketing initiatives, combined with those of our customers and other stakeholders, continue to make inroads into new and established markets despite the prevalent global economic uncertainty. The past year has seen Gemfields firmly establish itself as the leading coloured gemstone producer and the next chapter demands that we continue to build on our successes to date in both the mining and marketing divisions of our business. The Group is well positioned to achieve its goals and I look forward in 2013 to updating shareholders on our progress, inter alia, in the development of our underground operations, the potential for further large scale mining within our existing emerald licences, the addition of rubies to our auctions in 2013 and in promoting greater desirability of coloured gemstones, and those produced by Gemfields in particular, with a global consumer audience.
Kagem Operations
* Mining
Following the decision to open additional areas for future ore mining, large scale (in-house and contractor) waste mining on the high-wall started in earnest in June 2011, with the first sector of the pushback reaching the TMS zone (ore bearing talc-magnetite-schist) in the Chama section of the pit in early January 2012. This programme gained pace throughout the year with over 8.7 million tonnes of waste (including TMS waste) and 103,000 tonnes of reaction zone (ore) having been mined during the period (2011: 3.9 million tonnes of waste and 69,000 tonnes of ore mined) at a stripping ratio of 85:1 (2011: 57:1). Whilst the stripping ratio reduced to 68:1 in the last quarter, management anticipates that this will continue to increase in the near term as larger areas of overburden are mined and the push-back project is accelerated. However, an overall increase in operating efficiencies and performance is expected as the stripping ratio stabilises in the medium term and as Kagem continues to be able to mine both waste and ore more efficiently.
Kagem's key annual production parameters are summarised below:
KAGEM Annual Production Units Yr to Yr to Yr to Yr to Yr to Yr to
Summary 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun 30 Jun
07 08 09 10 11 12
Gemstone Production million 9.4 9.9 28.0 17.4 33.0 21.1
(Emerald + Beryl) carats
Ore Production `000 29 42 80 61 69 103
(Reaction Zone) tonnes
Grade (Emerald + Beryl/ carats/ 325 233 349 286 478 205
Reaction Zone) tonne
Waste Mined (including million 2.8 5.1 4.0 2.5 3.8 8.7
TMS) tonnes
Stripping Ratio 96 120 50 42 57 85
The short-term focus on waste mining, combined with various external factors
(including initial delays experienced by the contractor, heavier than
anticipated rains during the year and reduced accessibility of higher grade ore
areas due to accelerated waste mining) had an overall negative impact on
gemstone production with 21 million carats (of emerald and beryl) produced
during the year (2011: 33 million carats). Gratifyingly, production volumes
continued to increase throughout the second half of the year.
Behavioural-based safety training was reintroduced to all Kagem employees
throughout the year which has had a positive impact on the attitude of
employees towards both work and safety. The mine has remained free of
reportable accidents for the past two consecutive financial years and has
received a certificate of commendation from the Mines Safety Department of
Zambia in recognition of having achieved two million injury-free shifts. This
is a significant achievement and our heartfelt congratulations are extended to
all of our Kagem employees.
Gemfields' trial underground mining project achieved 283 metres of horizontal
advance during the year (2011: 111 metres). Total cumulative linear development
to 30 June 2012 was 471 metres (versus 188 meters at 30 June 2011), with a
total of 4,174 tonnes of ore produced during the year (versus 2,968 tonnes in
the prior year). Production mining has been the focus following the successful
completion of the secondary escape route.
Approximately 353,222 carats were produced by the underground operation in the
year ending 30 June 2012 (versus 117,740 carats in the prior year).
Importantly, the results to date of the trial underground mining exercise,
coupled with the SRK feasibility study for underground mining, provide a high
level of confidence that larger scale underground mining of the Fwaya Fwaya
Pirala belt on the Kagem licence should be pursued and is likely to further
reduce overall operating costs while increasing the life of the mine
considerably.
Approximately US$4.5 million was invested in new and upgraded mining equipment
during the year. Kagem was also successfully connected to the Zambian National
Electrical Grid at cost of US$600,000, reducing our carbon emissions and
further improving operational efficiencies, with a saving of approximately
US$25,500 per month in energy and fuel costs.
* Geology and Exploration
At present, Kagem's principal mining operations lie on the Fwaya Fwaya Pirala emerald belt. Exploration work in respect of other emerald belts available within the Kagem mining licence area, including at Lushingwa, Fibolele and Libwente was initiated in earnest during the year. The exploration work, including extensive diamond-core drilling, is aimed at identifying primary target sites for additional open-pit operations.
Additional drilling and the extraction of more than 3,000 meters of core from the high wall side of the Fwaya Fwaya Pirala ore-body has confirmed the down dip extension of the TMS and pegmatites to a vertical depth of at least 200 meters from surface. An additional 3 kilometres of drilling has also been completed in the Fibolele area of the mining licence, and is soon to be supported by the initiation of appropriate bulk sampling.
* Security
Ongoing investment in security personnel and equipment has continued over the past year to ensure robust protection for Kagem's gemstone inventory, assets and facilities. Projects concluded during the year include upgrading of the CCTV systems, the installation of high power remote-operated PTZ (pan-tilt-zoom) cameras with infrared night capability and the erection of repeater masts for improved communication within the mine site. The success of these initiatives is evidenced by the number of theft attempts that have been thwarted, feedback from the marketplace and the general lack of unrest experienced throughout the licence area.
* Mining Asset
In 2009, the carrying value of Kagem Mining Limited was impaired following the Directors' review and assessment of the fair value of the assets to their recoverable amount. In view of the continued improvement in the market for emeralds and increasing production, the Directors undertook to assess and revalue the Kagem mining asset. Following the completion of the feasibility study and a positive report by SRK, the Directors have decided to reverse the permissible value of the previously impaired mine asset. This has been treated as an exceptional item.
* Environment and Corporate Social Responsibility
Kagem has achieved the highest level of environmental compliance, Category A, following the Zambian Environmental Protection Fund's annual environmental audit. Our commitment to the environment in which we operate continues to go beyond pure compliance and includes baseline bio-diversity studies and a commitment to ensure that we will one day leave the area in a better overall condition than that in which Gemfields first found it.
The Zero Carbon Project
Gemfields long-standing "Zero Carbon Project" has recently been updated to ensure compliance with potential future legislative changes and takes into account the entire Group's projected carbon footprint (covering the United Kingdom, India, Zambia and Mozambique). The rehabilitation of forest areas onsite and adjacent to the mine, through the planting of indigenous trees and the creation of fishing areas and farmland continues.
Corporate Social Responsibility
Gemfields continues to place a high level of importance on the creation and support of sustainable community development projects. These projects are decided on and developed in conjunction with the local communities indigenous to the area. Kagem has to date invested in excess of US$500,000 in the creation and support of two clinics, three schools and two local farming cooperatives. Kagem has continued to extend its support to the smaller scale miners operating within the Zambian emerald community through its Small Scale Miners' Assistance Program whereby geological, mining and other technical support is offered on a no cost basis. Mergers and Acquisitions
Gemfields is increasingly consolidating its position as a global leader in the exploration, mining and marketing of coloured gemstones. Considerable potential with respect to the further development and consolidation of this sector still exists and has been given a degree of priority within the Group over the past year. Various mining prospects exist within close proximity of the Group's existing operations (e.g. the Kafubu emerald area in Zambia and the Montepuez ruby area in Mozambique). In addition to the preferred prospects of the three major gemstones (emeralds, rubies and sapphires), a number of other less common but no less beautiful and fascinating gemstones also exist and often are worth considering. Other opportunities also exist outside of mining, but within the Group's historic core competencies of coloured gemstone mining and marketing (such as cut and polished gemstone sales and branded retailing), with each of these being considered and given the attention that they deserve.
A dedicated and skilled mergers and acquisitions team has been established within Gemfields with a view to improving our ability to appropriately evaluate the increasing number of opportunities offered to the Group.
Kariba Amethyst Mine
In line with the increased level of importance attributed to this project, production at the Kariba amethyst mine (held by Kariba Minerals Ltd in which Gemfields owns 50%, the balance being owned by the Government of the Republic of Zambia through ZCCM-IH) is returning to historic production levels (by volume) and demand continues to improve. The quality and nature of the product supplied to the global markets has also improved significantly of late, delivering encouraging results. Kariba's leading position within the global amethyst market remains unchallenged despite the difficulties that have been faced by the mine over the past few years, and demand for its products remains firm in both of its present primary markets, namely India and China. Subject to the resolution of various discussions that are currently in place between Gemfields and the Government of the Republic of Zambia, a sizeable increase in the level of investment in this mine and associated marketing initiatives to further increase the level of global awareness and demand for its products is due to take place.
Oriental Mining SARL
In 2008, Gemfields exercised its option to acquire the entire issued share capital of Oriental Mining SARL, a company incorporated in Madagascar ("Oriental"). Gemfields was granted the option by Rox Limited ("Rox") pursuant to an agreement between Gemfields and Rox dated 18th December 2007.
Oriental has 15 exploration licences covering emeralds, rubies, sapphires, tourmalines and garnets in the Antananarivo, Fianarantsoa and Toliara provinces of Madagascar. In addition, Oriental has the right to five exploration licences that are pending transfer approval from the Madagascan Ministry of Energy and Mines. Madagascar is recognised as one of the most exciting coloured gemstone provinces in the world today, with several key discoveries having been made there during the last decade. Gemfields believes that, in the medium to long term, gemstone-related activity in the country has the potential to become a valuable part of Gemfields' asset portfolio. Given Madagascar's improving political and security environment, Gemfields has begun to increase its level of focus on Madagascar believing that this country's vast gemstones assets may conceivably offer a fair degree of potential scope for future development, should the current positive political trend continue.
Sales
* Rough Sales and Auctions
Gemfields offers its rough production of Kagem-mined emeralds and beryl to
selected market participants by way of sealed-bid auctions, whereby all
material placed on offer is certified by Gemfields to be natural, untreated and
of Zambian origin. Gemfields benefits from a strong cash position and has
confidence in the growing emerald market, opting not to sell any lots where the
bids received do not meet its pre-determined minimum reserve prices. Unsold
lots are held back and mixed into new inventory for re-offering at future
auctions.
This year, Gemfields achieved record revenues. This milestone is testament to
the high level of demand that continues to be evident for our unique supply of
ethical emeralds, supported by our ability to consistently supply well graded
emeralds to carefully selected distribution partners, coupled with global
marketing initiatives at both trade and consumer levels.
Gemfields held higher quality emerald auctions in July 2011 and March 2012, and
lower quality emerald auctions in November 2011 and June 2011, totalling four
auctions for the year. Selected companies drawn from Germany, India, Israel and
the USA attended the auctions which saw 23.52 million carats of emerald and
beryl being offered in 107 separate lots. The sales from these auctions
totalled US$77.8 million with 74 lots being sold. Total emerald and beryl sales
(including rough material, geological specimens and cut-and-polished gemstones)
totalled US$83.7 million for the period. The results of the auctions are
summarised below.
AUCTION RESULTS JULY `11 NOVEMBER `11 MARCH `12 JUNE `12
Dates 11-15 Jul 2011 21-25 Nov 19-23 Mar 2012 9-13 Jun 2012
2011
Location Singapore Jaipur, India Singapore Jaipur, India
Type Higher Quality Lower Quality Higher Quality Lower Quality
Carats offered 1.07 million 10.83 million 0.77 million 10.85 million
Carats sold 0.74 million 9.82 million 0.69 million 3.47 million
No. of companies 38 27 29 20
placing bids
Average no. of bids 16 9 11 3
per lot
No. of lots offered 25 26 23 33
No. of lots sold 18 19 20 17
Percentage of lots 72% 73% 87% 52%
sold
Percentage of lots 69% 91% 89% 32%
sold by weight
Percentage of lots 91% 80% 94% 60%
sold by value
Total sales realised US$31.6 US$11.0 US$26.2 US$9.0
at auction million million million million
Average per carat US$42.71/carat US$1.12/carat US$38.25/carat US$2.61/carat
sales value
Gemfields continues to test levels of demand for rough emeralds from other sources of supply (i.e. traded emeralds). These emeralds, which are not certified as being mined by Gemfields, were offered at auctions running concurrently to the Kagem auctions. The present income generated from traded emerald rough remains immaterial in the context of Gemfields' own production, and the Group will continue to refine and evolve the opportunities of selling rough from other sources of supply. Looking to the year ahead, Gemfields is expecting continued strong demand, particularly for its higher quality emeralds. The current global economic unease and the weaker Indian Rupee could result in the slowing of demand for the commercial and lower qualities, signals of which were evident at the most recent low quality auction held in June 2012. Given the Group's solid cash position and its vision for the growth and development of the emerald market, Gemfields holds back lots which do not achieve predetermined reserve prices.
* Cut and Polished Sales
In March 2011, Gemfields conducted comprehensive market research in the UK, US and European markets. The results showed that there was a clear need for additional suppliers of cut and polished Zambian emeralds within these markets. Due to the historic lack of reliable supply in these markets, retailers and designers had been reluctant to incorporate Zambian emeralds in their designs and collections, and this was further influenced by limited knowledge of the differences in various sources of origin.
Armed with this research, a Gemfields team was established with the specific aim of accelerating the supply of cut-and-polished Kagem emeralds to these markets and to implement comprehensive staff training and consumer education.
Since its inception in 2011, Gemfields' (London-based) cut-and-polished sales office has achieved a high degree of success, initiating work with a number of leading manufacturers and retailers within the United Kingdom and Europe. Such has been the demand for their comprehensive and bespoke service, that a number of additional offices have been opened including Cape Town, Mumbai and Jaipur. Other key locations are currently under consideration. These four offices, in strategic international locations, fulfil a much needed service and will help to ensure a consistent supply of fine and commercial Gemfields Zambian emeralds globally. Gemfields' cut-and-polished sales division has collaborated with a number of leading international luxury brands, including Gitanjali of India (with their dedicated emerald brand `Envi'), Amrapali in London (with their `Panna' collection) and Fabergé of Switzerland (where Gemfields supplied a suite of hand-picked and exceptionally rare emeralds for their prodigious `Romanov' necklace). The division continues to work on initiatives with international designers globally and is constantly looking at key markets to further sales growth. Marketing and Promotions * Advertising Campaign
The new `Rare Coloured Gemstones' advertising campaign was launched in June 2012 in leading trade, consumer and online publications. The advertising schedule included the UK, India, USA, South Africa and Hong Kong. Positive feedback was received from our retail partners. A news release announcing the advertising campaign was distributed, generating (at the time of writing) in excess of 3,500 online references and news articles internationally.
* PR
Gemfields continues to receive consistent, high quality press features including in publications such as the FT `How To Spend It', Vanity Fair UK and Hello India.
* International Indian Film Awards ("IIFA") Sponsorship
Gemfields co-sponsored `IIFA Rocks' and the `IIFA Green Carpet' together with Indian jeweller Gitanjali. The `IIFA Rocks' fashion show was hosted the day before the main event and included models wearing jewellery featuring Gemfields Zambian emeralds. Gemfields sponsored the IIFA party, attended by more than 500 high net worth individuals, with models wearing Gemfields Zambian emerald jewellery. Gemfields India has already received PR coverage valued at US$350,000 and the greater association with IIFA is expected to generate in excess of US$1 million of PR exposure.
* Collaborations
Gemfields participated in `Brilliance' at the Masterpiece annual show held in London. `Brilliance', curated by Carole Woolton, jewellery editor of Vogue UK, was a fine jewellery exhibition within the Masterpiece show. Gemfields sponsored Shaun Leane's jewellery creation, which featured Zambian emeralds. Other key designers and brands participating included, among others, Fabergé, Victoire de Castellane (for Dior) and De Beers.
Hannah Martin and Jordan Askill created pieces in advance for the Palladium Guild's `Rock Vault' at London Fashion Week in September 2012.
* Gitanjali and Gemfields
Gemfields is partnering with one of India's largest jewellery retailers, Gitanjali (which operates over 4,000 points of sale), to launch a dedicated emerald brand, Envi. Gitanjali is expected to source around US$2-3 million of polished emeralds from Gemfields during each year of the collaboration.
* Gemfields New York Office
Gemfields opened a marketing and PR office in New York in September 2012 which will spearhead Gemfields' growth in the US market.
* Mozambique and Zambia Crossover
Two sets of key Mozambican journalists and a representative from the Ministry of Mineral Resources, Mozambique, visited Zambia to see the level of investment that Gemfields has committed to the Kagem mine. The journalists sent very positive news reports to their relative publications and editorial appeared in `Noticias' and TVM (Mozambique national television) explaining the professionalism and integrity of Gemfields and Kagem.
Post Reporting Period Events
* Resource Update
The Group completed a feasibility study to determine the mineral reserve estimates and viability of underground mining at the Kagem mine in Zambia. The study was prepared by SRK with a view to evaluating the available resource potential and the possibility of progressing the current open pit operation to that of a viable underground operation. The results of the study strongly support the progression to an underground mine and provide an indicative life-of-mine of 20 years.
SRK reported, inter alia:
* `Indicated Mineral Resources' for Kagem (as at August 2012) of 2.75 million
tonnes of mineralised ore at a grade of 365 carats of emerald and beryl per
tonne of ore (a total of 1.0 billion carats of contained emerald and
beryl); and
* `Inferred Mineral Resources' of 9,200 tonnes of mineralised ore wasreported at a grade of 24.5 carats of emerald and beryl per tonne of ore
for a total of 223,100 carats of contained emerald and beryl.
SRK has undertaken a detailed financial analysis for the Kagem underground feasibility study. A model has been constructed using all of the production schedules, costs and financial parameters generated as part of the study. The model is expressed in real terms. SRK notes that at a 10% discount rate, pre-tax and post-tax NPVs are US$579 million and US$372 million respectively.
The base case price scenario provided by Kagem assumes an average emerald and beryl selling price of US$2.44 per carat for 2012-13, which increases to US$2.77 per carat for the period 2014 to 2015 followed by a further increase to US$3.00 per carat thereafter for the rest of the life-of-mine. This profile is in real terms and results in an average price of US$2.95 per carat. It is noted that Kagem is presently realising per carat prices well in excess of the assumptions made in the feasibility study. However, a more conservative price profile has been modelled by SRK for the feasibility study, taking into account the prevailing global economic uncertainty. SRK report that the NPV (at a 10% discount rate) is approximately zero at an average price of USD 1.00 per carat. This, particularly in light of the current average emerald and beryl sales prices being achieved by Gemfields, illustrates robust economics.
An Environmental and Social Review of Kagem was undertaken and successfully completed by SRK as part of the feasibility study. The project was found to be in compliance with applicable Zambian environmental laws. Construction and development of the large scale underground project is expected to commence during 2014/15 financial year.
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