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7/28/2019 A Vision for Zambian Emeralds
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A VISION FOR
ZAMBIAN EMERALDS
2013 Zambian Emerald Summit
Lusaka
30 31 May 2013
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Gemfields plc
The Coloured Gemstone Company
FABERGKagem
Emerald MineMontepuezRuby Mine
KaribaAmethyst Mine
MadagascarLicences
100% 75% 50% 100%75%
Hundreds ofshareholders
Pallinghurst ResourcesLtd
51% 49%
Who is Gemfields?
1. Gemfields plc is publicly listed on the London Stock Exchanges AIM list.2. As such, any person can purchase shares in Gemfields.
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0
5
10
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25
30
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FY to 30 Jun 06 FY to 30 Jun 07 FY to 30 Jun 08 FY to 30 Jun 09 FY to 30 Jun 10 FY to 30 Jun 11 FY to 30 Jun 12
Kagem Annual Gemstone ProductionEmerald + Beryl (millions of carats)
GEMFIELDS acquires 75% of Kagem
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Kagem: Total Monthly Carats Produced
Even for a very large operation, gemstone production is very erratic.
Erratic production = high level of risk (requires capital to survive the lean times).
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Jan'05
Apr'05
Jul'05
Oct'05
Jan'06
Apr'06
Jul'06
Oct'06
Jan'07
Apr'07
Jul'07
Oct'07
Jan'08
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Jul'08
Oct'08
Jan'09
Apr'09
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Oct'09
Jan'10
Apr'10
Jul'10
Oct'10
Jan'11
Apr'11
Jul'11
Oct'11
Jan'12
Apr'12
Jul'12
Oct'12
Jan'13
Kagem Monthly Gemstone Production (carats)
Emerald+Beryl
GEMFIELDS acquires 75% of Kagem
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Emerald Geology on a Page1. Emerald ore, known as Reaction
Zone (RZ), is created when a
pegmatite cuts through a layer or
belt of talc-magnetite-schist
(TMS).
2. A complex reaction between the
pegmatite and the TMS results in
a layer of RZ of varying thickness
and quality. This reaction gives
rise to emerald and beryl crystals.
3. RZ contains emeralds and beryl.
Both TMS and pegmatite are
essentially devoid of emeralds and
beryl.
4. TMS belts are typically 10-40
metres thick.
5. Pegmatites vary from a few
centimetres to tens of metres
thick.
SIMPLIFIED STRUCTURE DIAGRAM
TMS
BELT
PEGMATITE
REACTION
ZONE
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Kagem Emerald Mine Total Rock Handling
Kagem is close to moving 1 million tonnes of rock EACH month!
Very heavy investment in further opening the pit during the last 18 months.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Jan'05
Apr'05
Jul'05
Oct'05
Jan'06
Apr'06
Jul'06
Oct'06
Jan'07
Apr'07
Jul'07
Oct'07
Jan'08
Apr'08
Jul'08
Oct'08
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Apr'09
July'09
Oct'09
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Apr'10
Jul'10
Oct'10
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Apr'11
Jul'11
Oct'11
Jan'12
Apr'12
Jul'12
Oct'12
Jan'13
Kagem Total Rock Handling (tonnes)
GEMFIELDS acquires 75% of Kagem
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Kagem Emerald Mine Total Cash Operating Costs
Total spent on operating Kagem since July 2008: USD 106 million
This excludes capital investment in equipment and infrastructure!
700
1,200
1,700
2,200
2,700
3,200
Jul'08 Oct '08 Jan'09 Apr'09 July'09 Oct'09 Jan'10 Apr'10 Jul'10 Oct'10 Jan'11 Apr'11 Jul'11 Oct'11 Jan'12 Apr'12 Jul'12 Oct'12 Jan'13
KAGEM's TOTAL MONTHLY CASH OPERATING COSTS
USD '000 (UNAUDITED)
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Kagem: Carats per tonne of rock
Kagem produces about 3 carats of emerald and beryl per tonne of rock mined(average during the last 12 months)
This equates to 0.6 grams per tonne (less than one part per million) If one excludes beryl (i.e. emerald only), this becomes less than 1 part in 5 million!
0
5
10
15
20
25
Jan'05
Mar'05
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Jan'12
Mar'12
May'12
Jul'12
Sep'12
Nov'12
Jan'13
Mar'13
Gemstone carats per tonne of rock mined and handled (carats per tonne)
Emerald+Beryl
GEMFIELDS acquires 75% of Kagem
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We invest in marketingour 1st campaign
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Advertising Campaign #2: Assisting The Downstream Industry
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2012 Advertising Campaign Rare Coloured Gemstones
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Gemfields MarketingFT How To Spend It at Kagem
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The Romanov Necklace by Faberg (featuring ZAMBIAN emeralds)Retail Price USD 2.85 million (excl. VAT!)
A super duper necklace, but it perpetuates one of the emerald sectors greatest myths:That all emeralds are equal, and that they are all worth a fortune.
Er, no!
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MYTH BUSTING: EMERALD VALUES (ROUGH)
Once all of this has averaged out at Kagem, the average equates to around USD3.50 per carat (or USD 17.50 per gram) when sold as rough at international auction
US$ 10,000 per gram
US$ 0.02 per gram
PRICE INCREASES
(500,000 times!)
Qualitydeteriorates
dramatically.
and production
volume/weightincreases dramatically
70% of totalrevenue comes
from just 10% of
the weight.
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MYTH BUSTING: CUTTING & POLISHING I
August 2008: Gemfields decides to add value with cutting and polishing Sets up in India due to dramatically lower labour cost (and a world leader) The exercise failed (margins, client universe, consignment!) By August 2009: THE FACILITY WAS CLOSED. FACT: Today, Gemfields has NO cutting & polishing (outside Zambia)
IDIOT!August 2008
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MYTH BUSTING: CUTTING & POLISHING II
The biggest margin is in MINING PRODUCTION The second biggest margin is in RETAIL Overall, cutting and polishing is a fairly low margin business.
A BAIN STUDY ON THE DIAMOND SECTOR:
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Emerald Prices Performing Well
Source: Forbes India, August 2012
vs.
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KAGEMS INTERNATIONAL EMERALD AUCTIONS: AMAZING RESULTS!
0.31
0.77
1.12
2.61
2.42
4.375.12
9.35
26.19
42.71
38.25
29.71
0
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0.00
0.50
1.00
1.50
2.00
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3.00
Jul09
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Jul11
Sep11
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Mar12
May12
Jul12
Sep12
Nov12
Jan13
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May13
Jul13
Kagem Rough Emerald & Beryl AuctionsActual Sales Prices (USD/carat)
Calculated as: USD Received / Total Weight Sold
Lower Grade (Left Axis)
Higher Grade (Right Axis)
Why seek to stop a method that is clearly working?
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MYTH BUSTINGThe Hidden Billions
1. Kagems total revenues to 30 June 2012 were USD 78 million
2. If Gemfields was engaging in transfer pricing, or was somehow making additionalrevenues or profits offshore, those additional revenues would show up in the
audited, published accounts for Gemfields plc (a London-listed company)
3. Gemfields total consolidated revenues to 30 June 2012 were USD 84 million
4. So, Gemfields revenues exceed those ofKagem by only USD 6 million.
5. The USD 6 million is explained by:
50% stake in Kariba
Commissions earned when assisting clients with selling their polished gems Acquiring and selling rough from other markets like Brazil and Jaipur
So, who is making the allegations that Gemfields / Kagem are hoarding revenues and
profits offshore?
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A REQUEST TO GRZ TO AID TRANSPARENCY:
Commence publishing key emerald sector data
KEY ZAMBIAN EMERALD SECTOR DATA UNITS 2006 2007 2008 2009 2010 2011 2012 2013*
INPUT DATA
1 Corporation Tax Paid by Emerald Producers Kwacha Rebased
2 Minera l Royalty Collections i. r.o. Emerald/Beryl Kwacha Rebased 597,200 4,592,407 304,533 2,994,198 3,690,141 17,730,376 16,805,197 6,648,6763 Total Weight of Declared Zambian Emerald/Beryl Exports Grams
*YTD
OUTPUTS
4 I mplied value of all Emerald and Beryl Exports Kwacha Rebased
5 U nit Value of Zambian Emerald / Beryl Exports Kwacha / Gram
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OBSERVATIONS I
The KEYS to the growth of the Zambian emerald sector include:
Transparency
Consistent, Reliable and Secure supply
International Marketing Reputation Building
Communication & Collaboration
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OBSERVATIONS II
1. The entire planet is moving to a new era of transparency EMBRACE IT.
2. Gemfields and Kagem WELCOME government involvement and monitoring in gemstonemining and sales.
3. Zambia is the third biggest emerald producer (behind Colombia and Brazil)a. We must remain competitive, reliable and secureb. Wobbles in Zambia make customers nervous
4. Mining generally works better when the scale is bigger. Small-scale producers may findsynergies in teaming up or merging their operations / licences.
5. Transform local value addition with cleaning, grading and sorting MUCH better marginsthan cutting and polishing.
6. Clamp down on illegal dealers and traders they destroy prices.
7. A possibility: Gemfields plc listing on the Lusaka Stock Exchange.
8. An idea: a dedicated GRZ Emerald Taskforce to oversee the sector and publish production,export and value information for all to see.
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A PROPOSAL: FAIR PRICES FOR THE INFORMAL MARKET
Kitwe Emerald Co-Op [/Exchange?] Ltd
Gemfieldsplc
BuyingMember 2
BuyingMember 3
Owners: ESMAZ and possibly others
100%Any roughemeraldsellers
1. An open, voluntary, multi-party buying platform = fair prices2. Proper recording of Buying Members purchases for export / ZRA purposes3. Kagem/Gemfields would identify and fund the set-up of a suitable location as one
of their CSR projects4. The Co-Op would earn a commission on all transactions to fund its operating costs5. If desired, Kagem/Gemfields would provide training and skills-transfer during the
first year to aid in operating the facility, and would for up to one year providethe requisite operating costs.
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THANK YOU.