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Gemfields loses its lustre: Profits plunge 86% after cancelled auction

Gemfields, a prominent colored gemstones miner based in London, faced significant challenges in 2023, resulting in a notable decline in profitability. Here’s a summary of the key points from the provided information:

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Financial Performance: Gemfields reported an 86% decrease in pre-tax profit for 2023 compared to the previous year. This decline was primarily attributed to several factors, including the cancellation of a high-quality emerald auction in November, a decrease in the number of carats sold, and a write-down in its platinum group metals investments.

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Revenue and Loss: The company experienced a 23% drop in revenue, amounting to $262 million compared to $341.1 million in the previous year. Gemfields recorded a loss after tax of $2.8 million, a significant shift from the $74.3 million profit reported in 2022.

Impact of Investments: Gemfields incurred unrealized fair value losses of $28 million from its equity stake in South African platinum group miner Sedibelo Resources. The estimated value of this investment was revised down to $4 million, contributing to the decline in profitability.

Inflationary Pressures: The company highlighted that inflationary pressures have been affecting its revenues, as operating expenses remain high. Global commodity prices decreased slightly towards the end of 2023, but concerns about high interest rates and geopolitical tensions persisted, leading to increased costs.

Dividend Reduction: Gemfields reduced its final dividend to 0.857 US cents from 4.125 US cents, funding the payment from its income reserves.

Auction Results: Despite challenges, Gemfields completed an emerald auction in March 2023, generating $17.1 million in sales. However, this was lower than the $25.5 million achieved in the previous auction. The offering included a significant quantity of lower-quality emeralds, resulting in a lower overall dollar-per-carat figure realized at the auction.

Historical Performance: Gemfields has a track record of holding successful emerald auctions since July 2009, with 47 auctions generating over $1 billion in revenues.

Overall, Gemfields faced a challenging year in 2023, marked by reduced revenues, losses, and investment write-downs. The company’s performance was impacted by various factors, including the cancellation of auctions and inflationary pressures, highlighting the volatility of the colored gemstones market.

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