There were fewer bids for Gemfields’ latest high-quality emerald auction as the luxury and gemstone market continues to face turbulent demand dynamics, said Adrian Banks, Gemfields’ managing director for product and sales on Friday.
Gemfields stocks fell 4.8% to R2.00 per share on Friday, and has plunged by 26% and 36% in the last 30 days and year-to-date, respectively.
Gemfields’ latest auction for stones mined from the company’s Kagem operation in Zambia, was conducted between November 4 and November 21, raking in a total of $16.1 million (approximately R290 million) in revenue.
It offered 43 lots for sale under the November auction, with 30 of these or 70% sold.
Under the latest sales lots, and of the 141 084 carats offered, about 200 460 offered were sold off at an average price of $113.96 per carat. Since July 2009, Gemfields has generated $1 billion in revenue from about 50 auctions of Kagem gemstones.
“While the top quality lots in this auction saw bidding within touching distance of our all-time records for emeralds, the overall result for this auction is very disappointing, driven by fewer and poorer bids for lesser quality grades,” said Banks.
He also said that “the wider luxury and gemstone markets are undeniably facing challenging times,” with stronger “customer attendance and engagement” at the auction. There was strong bidding for the top quality lots on offer.
Nonetheless, the company has been facing rising competition from rival producers.
“We continue to see emerald market dynamics considerably disturbed by a competing Zambian emerald producer who is holding regular auctions in September, October and November, with the latter commencing 22 November 2024, in Dubai and promoted as the largest emerald auction in history and selling through their emeralds at what customers are reporting as low prices,” explained Banks.
To counter this, Gemfields said it was taking proactive steps to support the market by withholding certain lots that did not achieve satisfactory bidding. It believes that this approach will help foster a more secure and sustainable market for all stakeholders, including gemstone buyers.
Proceeds of the company’s latest auction are set to be fully repatriated to Kagem in Zambia with all royalties due to the country’s government paid on the full sales prices achieved at the auction.
Profits from half year operations for the period to end June in Gemfields fell from $36.4m to $26.4m after revenues and earnings before interest, tax, depreciation and amortisation slowed down.
Sean Gilbertson, CEO of Gemfields, said the company had operated against a difficult operating environment for the period under review.
“Gemfields is working through a complex year, balancing the availability of cash with the considerable investments we’re making at the Kagem emerald mine in Zambia, the Montepuez ruby mine in Mozambique and our development assets,” he said.
Construction of Montepuez Ruby Mining’s $70m second processing plant in Mozambique was, however, on time and within budget for completion before the end of this year.
BUSINESS REPORT