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Friday, October 8, 2010

Fair Trade Gem Company Shows Turnaround, Profit

A Gemfields emerald
Mine-to-market gem company Gemfields PLC reported a maiden profit of nearly $2.6 million for the first half of 2010, ended June 30—a marked turnaround from the same period of 2009 in which the London-based company reported a loss of $201.4 million.

In another turnaround revenues from emerald sales for the period were $20 million, compared with $815,456 for the same period in 2009.

While Gemfields has shares in several mining sites, by far its primary source of revenue and its identity is attached to its ownership of the Kagem emerald mine in Zambia, Africa, quite possibly the largest emerald mine in the world. The company is using the mine (which it purchased in 2007) as the sole source of its emeralds. It also owns a cutting and polishing facility in Jaipur, India, opened in 2008. Next, it’s working on building an exclusive distribution network to purchase rough as well as cut and polished emeralds from the mine. It also wants to work with third party companies to create a certification system for its emeralds and create verifiable fair-trade practices. Finally, it wants to develop a marketing program to be used throughout the supply chain.

Miners show an emerald pulled from the Kagem mine.
Gemfields says this mine-to-market strategy allows it to guarantee the provenance of every gem.

“Natural, untreated gems are at the heart of the operation,” the company says on its Web site. “Our focus—reliable and ethically-produced Zambian emeralds—uphold fair-trade practices while remaining in accordance with the highest level of environmental, social and safety standards. This mission holds true for every gemstone in our portfolio.”

It’s quite an ambitious agenda and at least some of it had to be put on hold as the company struggled through the worldwide economic crisis. But now that it has posted a profit, will it be able fully fund its agenda?

“Considering the extent of the challenges that we have faced over the past year, the vast number of new projects and the strategic changes that we have implemented across all divisions within the Group, I am rather pleased with our results and what has been achieved,” said Ian Harebottle, CEO of Gemfields. “We are now well on our way to positioning Gemfields as a market leader within the premium colored gemstone sector.”

The company reported that its cash at hand is $2.6 million, compared with $6.9 million at the same time in 2009. The estimated value of its emerald stock is estimated at $16.5 million, compared with $17.7 million in 2009.

The average revenue per carat of rough emerald and beryl (also mined at the site) is at96 per carat after a July 2010 auction, which took in a total of $7.5 million.

The company was able to cut costs slightly at the Kagem mine to $1.06 million, from $1.6 million in 2009.

Among the company’s marketing and promotional activities for the period included World Land Trust’s “Emeralds for Elephants” campaign and the Indian International Jewellery Show’s “Jewellery Designer of the Year” awards.

Gemfields is owned by Pallinghurst Resources, a South African private equity company. Pallinghurst purchased the Fabergé brand in 2008 and gave Gemfields the exclusive rights to provide Fabergé with emeralds. The first jewelry line under this new structure launched in 2009 aimed at the ultra wealthy consumer, followed by a more accessible 2010 collection.

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