Wrap Text
Gemfields Group Limited Interim Report 2018 for the six months ended 30 June 2018
--------------------------------------------------------------------------------------------------------------------------------------------
GEMFIELDS GROUP LIMITED
(formerly Pallinghurst Resources Limited)
(Incorporated in Guernsey)
(Guernsey registration Number: 47656)
(South African external company registration number 2009/012636/10)
Share code on the BSX: GML.BH ISIN: GG00BG0KTL52
Share code on the JSE: GML
("Gemfields" or "the Company")
GEMFIELDS GROUP LIMITED
INTERIM REPORT 2018
for the six months ended 30 June 2018
CHAIRMAN'S STATEMENT
This is our first Interim Report as the newly formed Gemfields Group Limited ("GGL" or "the Company"). Our new name marks the start of a
new chapter in our history as an operating mining and marketing group focused on supplying precious coloured gemstones to global markets.
The year to 31 December 2017 was transformational for our strategy, interests and assets. The acquisition of the balance of Gemfields
Limited (formerly Gemfields plc) by GGL (formerly Pallinghurst Resources Limited) was the culmination of a long relationship during which
Gemfields Ltd rose to world leadership in supplying responsibly sourced emeralds and rubies to world markets.
Following that acquisition and Gemfields Ltd's subsequent delisting from AIM in July 2017, expensive international expansion ambitions were
curtailed in order to focus on our principal mining operations, the emerald mine of Kagem Mining Limited ("Kagem") and the ruby operations
of Montepuez Ruby Mining Limitada ("MRM"), and on addressing our high corporate cost base.
Operations in Colombia and Sri Lanka were terminated and significant cost reductions and operational efficiencies pursued throughout GGL.
Whilst only a short period has passed, and it is too early to declare success, encouraging results are emerging with significantly higher
'premium emerald' production at Kagem, the highest ever auction revenues achieved at MRM's ruby auction in June 2018 and record revenues at
Faberge.
The next major step was GGL's decision to support the IPO of Jupiter Mines Limited ("Jupiter") in its April 2018 Australian Securities
Exchange ("ASX") relisting and in the process to dispose of approximately 60% of GGL's stake in Jupiter. That decision made it clear that
Pallinghurst Resources Limited's former strategy of developing as a diversified mining group should be ended and that it should instead
focus on and develop as a "pure-play" precious coloured gemstone producer, culminating in the change of name from Pallinghurst Resources
Limited to Gemfields Group Limited on 26 June 2018.
Today, GGL retains small minority stakes of approximately 7.4% and 6.5% in Jupiter and Sedibelo Platinum Mines Limited ("Sedibelo")
respectively. Neither are core holdings and, if attractive opportunities were to arise, they would be sold in an orderly manner.
Within today's GGL, the Kagem emerald and MRM ruby mines provide the bedrock for the vision of becoming "the De Beers of coloured
gemstones". The mines are supported in that vision by a unique and industry-leading auction platform, by developments in proof-of-origin
technology and by active marketing campaigns to drive demand for coloured gemstones. The two mines have enjoyed good production during the
period with two emerald auctions and one ruby auction being held.
Kagem and MRM generated revenues of US$21.1 million and US$71.8 million respectively in what was a contrasting period for the markets for
the two gemstones. The emerald market suffered from the tightening of liquidity and regulatory oversight in India following the reaction to
the Nirav Modi scandal and a deflating property market in Jaipur, whilst the ruby auction resulted in a second year of record results.
Overall, GGL generated EBITDA of US$30.7 million and recognised negative Free Cash Flow (as defined in Note 2) of US$1.7 million. Revenues
were used to fund expansionary capex at MRM, update an ageing fleet at Kagem and fund the development of the new projects in Ethiopia and
Zambia. During the period, GGL paid US$9.2 million and US$8.4 million of corporation tax and mineral royalties respectively. At 30 June
2018, GGL was in a net cash position of US$31.6 million (31 December 2017: net debt of US$25.7 million) following the receipt of
approximately US$64 million from the Jupiter IPO and the repayment of Faberge's Gordon Brothers loan facility during the period.
GGL is now in a strong position to support the planned growth of the underlying mining operations in Zambia and Mozambique, to further
develop Faberge and to progress bulk-sampling in Ethiopia should the situation in Ethiopia stabilise.
Bringing our "mine and market" vision to life, Faberge recorded revenues of US$7.0 million for the period, an all-time high against
historic, like-for-like periods. The operating sales margin for the period also improved significantly and an increasing emphasis on
e-commerce has been rewarded by triple-digit growth in online sales. Operating costs were rigorously reduced, including by Faberge's
decision to withdraw from the BaselWorld fair. As such, Faberge's operating loss also showed significant improvement.
Our platinum group metals ("PGM") investment, a 6.5% stake in Sedibelo, has seen that operation enter its tenth year of production. The
PGM industry remains in testing times, highlighted by the challenges experienced by Sedibelo's high profile competitors. Sedibelo is not
immune to the challenges facing the industry and remains focussed on minimising production costs, cash preservation and on optimising
operating efficiencies. The weakening of the South African Rand against the United States Dollar has relieved some pressure on all South
African PGM producers as their operating costs are denominated in Rands and revenues are received in US Dollars. With Sedibelo's unique
PGM open pit mine and exceptional safety record, it is well placed to recover should market conditions improve. Should suitably attractive
opportunities arise, GGL would pursue an orderly disposal of its interest in Sedibelo given it is non-core for GGL.
Jupiter, which owns 49.9% of Tshipi, has through its successful partnership with Ntsimbintle built Tshipi into a large, long-life and
low-cost operator of an industry-leading manganese mine. Supported by a strong and sustained manganese price throughout the first six months
of 2018 and continued tight control over operating costs, Tshipi continues to see record performance. For its financial year to 28 February
2018, Tshipi produced 3.6 million tonnes and sold 3.3 million tonnes of manganese ore. Due to strong prices, Tshipi enjoyed its strongest
financial performance to date. During 2018, GGL received buy-back distributions of approximately US$7.7 million in addition to the US$15
million received during the 2017 financial year. In April 2018, Jupiter relisted on the Australian Securities Exchange ("ASX") with GGL
supporting Jupiter in this initiative by selling approximately 60% of GGL's Jupiter shares at AUD0.40 per share (a higher value per share
than our valuation of Jupiter shares at 31 December 2017) and resulting in AUD83.1 million of net proceeds for GGL.
GGL will seek the orderly disposal of its remaining interest in Jupiter at an appropriate time, subject to voluntary escrow arrangements.
Until then, GGL will continue to benefit from the ongoing strong performance signalled by Jupiter. The Tshipi distributions appear set to
continue with Jupiter announcing that the Tshipi board has resolved to distribute a further ZAR1.5 million to its shareholders for its half
year ending August 2018. With Jupiter now relisted on the ASX, valuation of GGL's shareholding is less subjective given we now have a listed
share price to refer to.
As a result of the above changes in strategic direction, senior executive management positions were revisited. After 11 years as Chief
Executive, Arne H. Frandsen has stepped down and been replaced by Gemfields Limited's Chief Executive Officer Sean Gilbertson. Andrew
Willis, after 11 years as Finance Director, has stepped down and been replaced by David Lovett, who takes over as Chief Financial Officer
of GGL. I pay tribute to and thank Arne and Andrew for their 11 years of leadership as its founding Chief Executive and Finance Director
respectively.
I elected to transition from Executive Chairman to Non-Executive Chairman with effect from 1 January 2018 (and in line with the guidelines
of the King IV report). This change, along with an extensive review of executive remuneration, has seen significant reductions in overall
board level remuneration when compared with those originally approved by shareholders at our General Meeting held on 26 June 2017. As more
than 25% (29.6%) of the votes at the Company's 2018 AGM voted against the Company's 2017 Remuneration Policy, the Company is in the process
of consulting with its shareholders to further align the incentivisation of its executives with the expectations of shareholders.
Despite the progress achieved in the period, assorted matters will challenge management in the months ahead.
In June 2018 our emerald bulk-sampling operations in Ethiopia were overrun by a mob (estimated to have been between 300 and 500 persons)
with property, equipment and gemstone inventory being stolen. Our employees, contractors and service providers were safely evacuated with
two of our employees sustaining minor injuries. We are continuing our dialogue with the relevant authorities in the hope of recommencing
the bulk-sampling work once we again have access to the licence area.
The legal case brought against Gemfields Ltd in relation to alleged human rights abuses in the Montepuez area of northern Mozambique
continued, with the parties agreeing to a stay of the proceedings until 17 December 2018.
In concluding, I thank my fellow Directors and our hard-working teams for their substantial contributions during the past six months. We
are on a clear strategic path and I look forward to the next chapter of GGL's evolution as "the De Beers of coloured gemstones".
Brian Gilbertson
Chairman
27 September 2018
OPERATIONAL REVIEW
ZAMBIA
Location: Copperbelt Province, Zambia
Acquisition by Gemfields: November 2007
Ownership structure: 75% Gemfields, 25% Government of Zambia
Gemstones: Emerald and beryl
Mining method: Open pit
Potential mine life: 27 years
OPERATIONS IN ZAMBIA COMPRISE THE FOLLOWING:
Kagem, the world's single largest emerald producing mine. The 41 square kilometre licence area is in the Ndola Rural Emerald Restricted
Area and lies south of Kitwe and west of Ndola, in Zambia's Copperbelt Province. It is 75% owned by GGL and 25% owned by the
Government of the Republic of Zambia. The mine comprises, amongst others, the following open pits:
- Chama, a 2.2-kilometre open pit mine, supplying approximately 25% of global emerald production.
- Fibolele, a 600-metre-long open pit in bulk sampling phase.
Gemfields Mining Limited ("Mbuva-Chibolele"), located on the prolific Fwaya-Fwaya - Pirala Belt in the Kafubu Emerald Restricted Area, on
the southern banks of the Kafubu River. This lies adjacent to the Kagem licence area, to the southwest. Operations ceased in 2007 to allow
focus on Kagem and resumed in late 2017.
KAGEM
The following operational review represents the six-month period from 1 January 2018 to 30 June 2018, covering the period post acquisition
of Gemfields Ltd, and its subsidiaries, by the Company. Please note that any comparative figures quoted below are based on the
pre-acquisition figures for the 12 months to 30 June 2017.
Auction results
Kagem held a commercial-quality auction in Jaipur, India, in February 2018 which generated US$10.8 million and a higher-quality auction in
Lusaka, Zambia, in May 2018 which realised revenues of US$10.3 million. The higher quality auction in May 2018 saw the second-highest
average price ever achieved of US$66.21 per carat.
At the May 2018 higher-quality auction, 9 lots of the 17 lots on offer featured the new "Provenance Proof" nanoparticle technology
developed by the renowned Swiss gem laboratory, Gübelin. The nanoparticles tag the emeralds as having been mined at Kagem and allow
identification of the mine of origin for decades to come, providing unparalleled traceability for the coloured gemstone sector. The auction
offered the smallest quantity of higher quality emeralds of any auctions to date with only a little over half of the gemstones being sold.
The bulk of Kagem's emerald customers operate in India, where the gemstone and jewellery sectors are suffering from the fallout of the
Nirav Modi fraud in which Indian banks suffered significant losses. Consequently, access to traditional sources of finance has been
restricted for many companies in the Indian gemstone and jewellery industry. With reduced funding available, customers had to be much more
selective about the auction lots they wished to secure. Given the confidence in the value and high quality of the gemstones offered,
auction lots that did not meet our reserve prices were held back to aid market stability during the present period of turbulence.
Post the period end, a predominantly commercial quality auction was held in Lusaka in July 2018, generating revenues of US$10.9 million.
The auction results provide confidence over the continuing demand for emeralds. The auction takes Kagem's total auction revenue since July
2009 to US$527 million.
Mining
The Chama open pit mine is supported by a SAMREC-compliant Resources and Reserve Statement produced by SRK Consulting (UK) Limited ("SRK"),
published in April 2018, which confirmed a 27-year open pit Life of Mine Plan ("LoMP"). There have been no material changes to the ore
reserves and mineral resources as disclosed in the Annual Report 2017.
During the period, Kagem progressed its programme of overburden removal at the Chama pit, clearing material that sits above emerald
formation, facilitating bigger fleet usage, enabling more efficient and therefore more cost-effective operations. In addition, having
increased the strike length during the course of the year, process efficiency continues to improve with better space utilisation and
productivity, and with additional exposure of the emerald and beryl mineralisation.
In-house mining and rock handling was 5.15 million tonnes for the period despite the longer haulages distances and harder rock being mined
in the deeper part of the mine as continued monitoring of the fleet and allocation of heavy earth moving machinery using a GPS-aided fleet
monitoring system improved efficiencies. Further efficiencies were gained in the adoption and roll-out of several best practice techniques
in blasting and machinery usage.
Production
The completion of the Chama pit extension led to an improvement of ore volumes improved as new areas were opened, creating greater working
spaces for the operation of a larger fleet. A new production strategy was adopted, principally focussing on emerald recovery rather than
total rock moved, usage of jack-hammer drilling and blasting at production contact points to retain crystal quality and size, chiselling
the in-situ ground for recovery of emeralds and manually treating the ore at contact point to enable quality production. Implementation of
this strategy necessitated an increased number of chisel men, technique improvements and enhanced security and ultimately has seen an
increase in the quantity and quality of emeralds being produced.
Gemstone production for the period was 17.3 million carats of emerald and beryl, with 130,705 carats of premium emerald, an increase in
premium production of more than 200% over the 12 months to 30 June 2017. Of the total production, the Chama pit contributed 16.3 million
carats and the bulk sampling project Fibolele contributed 1.0 million carats. The Production Linked Incentive Scheme (PLIS) threshold was
triggered in all the months of the review period (6 consecutive months), thus creating an all-time record since the inception of the
incentive scheme in 2008.
Kagem's key operational parameters for the six-month period to 30 June 2018 are summarised in the table below.
Kagem's key operational parameters 6 months to 30 June 2018 12 months to 30 June 2017
Gemstone production (premium emerald) in thousand carats 130.7 37.8
Gemstone production (emerald and beryl) in million carats 17.3 19.1
Ore production (reaction zone) in thousand tonnes 96.9 120.7
Grade (emerald and beryl/reaction zone) in carats/tonne 179 158
Waste mined in million tonnes 5.1 11.0
Total rock handling in million tonnes 5.2 11.1
Stripping ratio 52 91
Processing
Improvements at the wash plant continued during the period, with implementation of specific control measures resulting in a lower spillage
across the various picking belts. In addition, the team's picking abilities have been improved by slowing the plant feed rate from 72 tonnes
per hour ("tph") to 44 tph, and adjusting the feed split to make greater use of the newer facilities.
Operating costs
Total operating costs for the period were US$20.0 million, with a unit cash operating cost of US$1.01 per carat, representing a 40%
improvement on the per carat cost for the 12 months to June 2017. Cash rock handling unit costs (defined as total cash operating costs
divided by total rock handled) were US$3.39 per tonne for the period (US$2.81 per tonne in the 12 months to 30 June 2017) as the focus
continued on emerald recovery, rather than total rock moved.
Total operating costs include mining and production costs, selling, general and administrative expenses, depreciation and amortisation, but
exclude capitalised costs and mineral royalties. Cash operating costs include mining and production costs, capitalised costs, selling,
general and administrative expenses, but exclude property, plant and equipment capital expenditure, depreciation, amortisation and mineral
royalties.
Capital expenditure
During the period, US$2.4 million was invested in mining and ancillary equipment and infrastructure improvements as Kagem sought to
replenish its ageing fleet (US$1.9 million spent in the 12 months to 30 June 2017).
Security
The implementation of high-resolution digital surveillance CCTV (20 mobile CCTV cameras and 8 PTZ cameras with recording capability) and
radio communication continued to aid effective and efficient management of the security systems, with permanent patrol teams being stationed
in and around all the dump sites to provide robust protection and surveillance over the mining licence area. To further enhance the sort
house security system, the electric fence and the intruder alarm system are now serviced by a new third-party provider, with weekly tests
performed to ensure reliability.
Health, safety and environment
Kagem continues to pride itself in, and endeavours to maintain its ability to conduct mining in a responsible, transparent and safe manner
with minimal impact on the natural environment. With a vision of attaining a zero-harm (injury-free) culture where health and safety are
not only considered critical to the operation, but also ultimately the responsibility of each individual employee, training of employees in
various safe work practices continues to be rolled out. A number of strategies aimed at improving the near miss and incident reporting
culture among employees have also been introduced with the aim of drilling down to actual root causes and eliminating them to ensure a safer
work place.
A culture of common responsibility for safety stewardship continues to be encouraged, with a safety theme for each month that dwells on a
particular safety topic being discussed at pre-shift safety talks that continue to be rolled out.
Kagem recorded three lost-time injuries during the period January to June 2018, with two resulting from the same incident.
Sustainability and corporate social responsibility
Corporate Social Responsibility ("CSR") and employee welfare were a key focus during the period and several committees were formed to
improve overall life outside the work areas.
Kagem's Community Sustainability Development ("CSD") is directly in line with the Group's sustainability strategy to support health,
education and agricultural projects in the two areas ruled by local chiefs. This strategy enables Kagem to have a more transparent,
equitable and interactive relationship with all local stakeholders and is already leading to improvements with the local community.
The CSR department has completed projects focussed on education, health, agriculture, infrastructure development. Further, it has continued
to engage the key stakeholders in meeting its strategic objectives. In the current year, it has planned to help communities in Lumpuma and
Nkana.
More details on the CSR projects can be found in the dedicated CSR section of the 2017 Annual Report.
Human resources
For the period ending 30 June 2018, a total of 49 new employees were added to the workforce, filling both new and replacement posts, taking
the total number of people directly employed by Kagem to 723. The total number of contractor employees as at 30 June 2018 was 232.
Kagem successfully concluded negotiations with the Trade Union over improved conditions of service and salaries for employees. The
Collective Agreement covers the period 1 April 2018 to 31 December 2019 with a 10% increase this year, and a further 10% increase next year
to all unionised workers.
A total of 308 staff members were trained in various fields, including safety, health, environment and quality, medical, HR, management
development/team building, engineering, finance, IT and mining. In addition, a total of 16 Zambian students completed their internships at
Kagem in various departments such as finance, HR, engineering and mining.
Kagem continued with the scholarships programmes for students in the schools of engineering and mining at the University of Zambia and
Copperbelt University to develop more coloured gemstone industry-oriented graduates that are up to date with technical and practical
knowledge of gemstone mining.
Other
In August 2018, the Zambian Revenue Authority ("ZRA") issued two search warrants in respect of Kagem and Limpopo Polygraphs CC ("LPCC") a
South African company conducting periodic polygraph testing at Kagem. The search warrants authorise the ZRA to take wide-ranging documents
and files including those allegedly "used by the two parties to evade the payment of Value Added Tax, income tax, withholding tax and other
taxes". GGL understands that the aggregate value of all work conducted to date by LPCC for Kagem is less than US$7,500. The outcome
of the investigation remains pending.
GEMFIELDS MINING
Mbuva-Chibolele
The Mbuva-Chibolele property is located on the Fwaya-Fwaya - Pirala Belt in the Kafubu Emerald Restricted Area, on the southern banks of
the Kafubu River. This lies along the west-southwest strike from the nearby Fwaya-Fwaya emerald mining zone adjacent to the Kagem licence
area. This pit was under care and maintenance since 2007, when operations ceased to focus on operations at Kagem, until late 2017 when
operations were resumed.
Exploration and bulk sampling
Having been dormant for a considerable period, the preparation and dewatering of the pit was an essential activity before exposing the ore.
The dewatering of the pit, bridge construction between Kagem and Mbuva-Chibolele, and initial waste mining and pit rehabilitation were
performed by a contractor, with ore mining expected to be done in-house. The contractor completed the initial waste mining phase in June
2018, having moved 400,957 cubic metres of waste. Bulk sampling commenced in August 2017 and continues to yield positive results.
The operation has a dedicated mining and geology team, along with a fleet of two excavator and three dump trucks. Appropriate security
arrangements have been put in place to ensure the safety and security of product and premises.
Production and processing
During the period, approximately 1,105 thousand tonnes of total rock handling was done, of which approximately 803 thousand tonnes of waste
were mined by the contractor and approximately 253 thousand tonnes were mined by the in-house crew, resulting in a total of 23,700 tonnes of
ore, of which 17,126 tonnes have been processed to date. The production from Mbuva-Chibolele was 469,925 carats of emerald, an encouraging
sign for future operations.
MOZAMBIQUE
Location: Cabo Delgado Province, Mozambique
Acquisition by Gemfields: November 2011
Ownership structure: 75% Gemfields, 25% Mwiriti
Gemstones: Ruby and corundum
Mining method: Open pit
Potential mine life: 38 years
OPERATIONS IN MOZAMBIQUE COMPRISE THE FOLLOWING:
MRM, located in the northeast of Mozambique within the Cabo Delgado Province, is believed to be the most significant recently discovered
ruby deposit in the world, with the mining title covering an area of 34,966 hectares. MRM is 75% owned by GGL and 25% owned by local
Mozambican minority partner, Mwriti Limitada.
Megaruma Mining Limitada ("MML"), a company registered in Mozambique with GGL holding 75% interest in two mining licences located in
the Montepuez district of Mozambique and each sharing a boundary with the existing MRM deposit, covering approximately 19,000 hectares and
15,000 hectares of area, respectively.
Eastern Ruby Mining Limitada ("ERM"), a company registered in Mozambique with GGL holding 75% interest, covering an area of
approximately 11,600 hectares and sharing its western boundary with the southern licence of MML.
Campos de Joia Limitada ("CDJ"), a GGL holding company in Mozambique which holds one mining title and has three exploration licences
under application at present, totalling an area of approximately 45,200 hectares.
MONTEPUEZ RUBY MINING ("MRM")
The following operational review represents the six-month period from 1 January 2018 to 30 June 2018 covering the period post acquisition
of Gemfields Ltd, and its subsidiaries, by the Company. Please note that any comparative figures quoted below are based on the pre-acquisition
figures for the 12 months to 30 June 2017.
Auction results
MRM held a mixed-quality auction during the period in Singapore in June 2018, achieving record revenues of US$71.8 million, the highest
figure attained at any GGL auction, with an average price per carat of US$122.
Mining
The Montepuez ruby deposit is supported by a SAMREC-compliant Resources Statement produced by SRK, expected to be published in the fourth
quarter of 2018, which confirms a 38-year open pit LoMP and is well positioned for growth in production.
The Mineral Resources and Mineral Reserves Report Summary for MRM, as included in the 31 December 2017 Annual Report, was extracted from
the CPR, which is subject to final approval by the Johannesburg Stock Exchange ("JSE"), and may require amendment before formal approval is
granted. The Probable Reserves are derived from Indicated Resources, the validity of which has been questioned by the JSE. Should all or
part of the Indicated Resources be downgraded to an Inferred Resource, this will be disclosed by the Group. Should this materialise, the
Group will be required to make a Stock Exchange News Service ("SENS") announcement detailing the updated Mineral Resources and Mineral
Reserves statement, together with a link to the final approved CPR on the Group's website.
The mining operations at MRM comprise a number of shallow, open-cast pits split between four main operating areas: the Mugloto Block, the
Maninge Nice Block, the Maninge Nice East Block and the Glass Block. Mining is carried out as a conventional open pit operation utilising
excavators, loaders and articulated dump trucks. Loaded trucks haul ore to stockpiles adjacent to the processing plant, while waste is
backfilled into excavated areas, returning the area to its natural aesthetic.
No new blocks were opened during the period. However, intensive mining continued in the additional pits of Mugloto, with limited mining in
the Maninge Nice block. Overall, the results have been encouraging. Optimising mining operations by balancing the requirement of primary
(low quality and high incidence) and secondary deposits (high quality and low incidence) will continue to be the strategy moving forward.
Total rock handling during the period equated to 2.30 million tonnes, comprising 0.32 million tonnes of ore, 1.75 million tonnes of waste
material and 0.23 million tonnes resulting from slimes handling and road maintenance. The overall production stripping ratio was 5.4.
Excavation was primarily focussed on the Mugloto Block (79%) to extract higher-quality ruby-bearing ore. Remaining excavation took place in
the Maninge Nice/Glass A Block (11%), and others (10%).
Production
A total of 1.68 million carats of ruby and corundum was produced during the period, with a focus on high-quality, low-incidence deposits,
which provide premium rubies.
Out of 1.68 million carats of production for this period, 0.72 million carats were recovered from Maninge Nice secondary ore, 0.41 million
carats from Mugloto secondary ore, 0.54 million carats from the fines (under 4.6 mm material) classified in Jaipur India, and 0.01 million
carats from other test pits.
MRM's key operational parameters for the six-month period to 30 June 2018 are summarised in the table below.
Montepuez key operational parameters 6 months to 30 June 2018 12 months to 30 June 2017
Gemstone production (premium ruby) in thousand carats 51.1 104.4
Gemstone production (ruby and corundum) in million carats 1.7 8.8
Ore mined (primary and secondary) in thousand tonnes 323.4 743.2
Ore processed (primary and secondary) in thousand tonnes 416.2 553.9
Grade (ruby and corundum/ore processed) in carats/tonne 4 16
Waste mined in thousand tonnes 1,749.1 3,514.4
Miscellaneous rock handling in thousand tonnes 231.7 141.0
Total rock handling in thousand tonnes 2,304.1 4,398.6
Stripping ratio (1) 5.4 4.7
(1) Miscellaneous rock handling is not included in the calculation of the stripping ratio.
Processsing
Ore processed at the treatment plant totalled 416,221 tonnes (12 months to June 2017: 554,000 tonnes). This increase was partly facilitated
by a second de-grit unit, which was added to the circuit of the treatment plant in November 2017, resulting in de-bottlenecking, and partly
by increased preserving of ore. The overall throughput rate stood at 129 tonnes per hour during the period.
During the period in review, all conveyors in the wash plant were fitted with belt scrapers, minimalising spillage.
A change in production strategy to focus on the processing of a greater proportion of lower-incidence but higher-quality ore was reflected
in the overall ore grade realised during the period, at four carats per tonne, compared with the year to June 2017 of 16 carats per tonne.
Operating costs
Total operating costs for the period were US$15.7 million whilst total cash operating costs were US$12.1 million, with total rock handling
unit cost of US$5.25 per carat (12 months to June 2017: US$4.91 per carat).
Total operating costs include mining and production costs, selling, general and administrative expenses, depreciation and amortisation, but
exclude capitalised costs and mineral royalties. Cash operating costs include mining and production costs, capitalised costs, and selling,
general and administrative expenses, but exclude property, plant and equipment capital expenditure, depreciation, amortisation and mineral
royalties.
Capital expenditure
Total capital additions for the period amounted to US$11.5 million (12 months to 30 June 2017: US$19.2 million), including US$9.5 million
invested in the new sort house, and US$0.2 million of cost associated with the Resettlement Action Plan ("RAP").
The RAP costs arise as MRM has an obligation to compensate the households and other land users who are physically or economically displaced
by the proposed mining in its concession area, in accordance with the local legislative requirements. A provision is recognised for the
present value of such costs, based on management's best estimate of the obligations incurred, and is depreciated based on the ratio of ore
mined during the period to the total volume of ore expected to be mined in the future, based on the estimated reserves.
Enhancement of the production facilities continued, with the ongoing construction of the new sort house. The US$12 million facility will
greatly enhance operational capacity and is expected to be commissioned by the end of 2018.
Geology and exploration
Exploration undertaken during the period mainly consisted of diamond-core drilling intended to explore primary rubies from the amphibolitic
source at Maninge Nice, which are typically high-incidence (large volume) but lower quality. A total of 4,292 metres of core drilling was
completed during the period under review (12 months to June 2017: 8,335 metres).
A new, 10 tph capacity exploration jig was acquired during the period, which will assist in exploration and the initial processing of newly
opened pits.
Diamond-core drilling was focused on high-magnetic lineaments towards the north of the Mugloto Block, previously identified by aerial
geophysical maps. Various ruby-bearing lineaments were successfully delineated. Mugloto Pit 9 has continued to provide high-quality rubies
since bulk sampling commenced during the last review period. Furthermore, a new bulk sampling pit was opened and designated "Maninge Nice
Pit 5" with initial bulk sampling and processing producing promising results to date.
It should be noted that the Glass B and Maninge Nice East Blocks were not included in the 2015 SRK Mineral Resources and Mineral Reserves
Statement due to paucity of exploration input. These blocks have now been incorporated in the resource review process that is being carried
out by SRK, with the final report due in the fourth quarter of 2018.
Security
Security operations continues to make good progress, registering a significant decline in illegal mining within and around the concession
area, with a new Head of Security being appointed in January 2018. During the period, MRM continued to enhance the surveillance capacity
with 23 CCTV cameras at the stock yard, five wireless cameras installed on high masts at various gates and important dump sites across the
mine providing improved visibility over critical areas. In addition, to enhance the monitoring and to extend the reach and quality of the
security patrols on the MRM concession, patrol teams continued to make use of body cameras, with 20 new body cameras purchased.
The way information is reported and used in the areas of security has been deemed as a critical path at MRM. To further this area, a
security firm has rolled out predictive intelligence and risk software that uses internal data and information to enable users to map and
display issues, incidents, and areas which may require attention identifying the individual factors which are shaping the threats to the
mine operations.
MRM also continues with training in the United Nations Voluntary Principles on security and human rights, social media, awareness, conflict
resolution, and juveniles in illegal mining delivered by reputable trainers for their personnel, contractors and the National Resource
Protection Force (N.R.P.F).
Health, safety and environment ("HSE")
Health and safety policies and procedures have been developed and incorporated into all aspects of the business with the intention of
creating a safer and healthier working environment. MRM was issued a category A environmental licence. MRM's HSE management plans were also
approved by the Departmentof Health, Safety and Environment ("MIREM").
Only one lost-time injury, one medical treatment injury and two first-aid injuries occurred at the mine site during the six-month period.
From the perspective of reducing the frequency rate of injuries, a series of internal and external health and safety training modules were
incorporated in the HSE programme and provided for all employees, with a focus on first aid, firefighting and safe driving.
MRM made good progress in post-mining environmental rehabilitation, with a total of 287,000 square metres of land reclaimed since inception
in 2012, of which 53,412 square metres has already been rehabilitated. The saplings used for rehabilitation of mined area were grown in the
in-house nursery. Environmental air quality, ambient noise level and water extraction were continuously monitored during the period and
results were below the threshold limits.
Regarding MRM's Resettlement Action Plan (RAP), the Provincial (Cabo Delgado) governor conducted a ground-breaking ceremony and official
Moratorium Disclosure on 3 April 2018 at an official ceremony to start the RAP implementation. MRM's RAP has also been published in the
official Mozambique Gazette (Bolentim da República) on 1 May 2018. Furthermore, a Technical Committee (Provincial and District) on
Resettlement Supervision and Monitoring has been announced by the District Administrator on 1 June 2018. On 7 June 2018, the Technical
Committee on Resettlement Supervision and Monitoring (CTASR in Portuguese abbreviation) held the first visit to the MRM's RAP implementing
activities after the RAP approval. A bush clearing permit/licence for the RAP host area was issued on 20 June 2018, to safeguard the
Mozambican Environmental Law compliance. A consulting firm was awarded the bush clearing for the village construction in the RAP host area
and bush clearing in the second half of the year.
Sustainability and corporate social responsibility
In line with our philosophy of creating a sustainable community development programme, various Corporate Social Responsibility ("CSR")
initiatives in the areas of education, agriculture and health continued during the period.
MRM's CSR activities are aligned with the policies of the government of Mozambique and supplement the government's efforts in improving
the quality of life of the community. The local community programme, which includes developing community engagement and investment projects,
is driven by a local community engagement team, led by experienced professionals. MRM has ongoing and extensive programmes and partnerships
with all communities in and around the concession area. This strategy has helped improve MRM's relationship with the community, providing
local stakeholders with more opportunities for engagement.
More details on the CSR projects can be found in the dedicated CSR section of the 2017 Annual Report.
Legal
In April 2018, Gemfields Ltd was served with a claim coordinated by a UK-based law firm (the 'Firm') in the English High Court alleging
human rights abuses at MRM and seizure of land without due process. The Firm represents 112 claimants from the vicinity of MRM's mining
concession near Montepuez, northern Mozambique. Gemfields Ltd is working with its advisers in England and Mozambique to ensure the claim is
fully investigated, and such investigations are now at an advanced stage. Gemfields Ltd and the Firm have agreed a stay of the proceedings
until 17th December 2018, after which Gemfields Ltd will be required to serve its defence to the claim. At this stage, Gemfields Ltd
intends to robustly defend itself against the claim.
Human resources
As at 30 June 2018, a total of 1,161 people were employed by MRM, of which 444 were directly employed and 717 were through various
contractors. During the review period, various internal and external training programmes were attended, including human rights, managerial
skills, health and safety, finance, security and specialised software programmes. Local students also took part in internships at the
operations during the period.
MEGARUMA MINING LIMITADA ("MML")
MML holds two ruby mining titles, 7049C and 7057C, located in the Montepuez district of Mozambique. These titles each share a boundary with
the existing MRM deposit and cover approximately 19,000 hectares and 15,000 hectares, respectively. Exploration activities such as high-
resolution aeromagnetic surveys, geological mapping, and core drilling totalling 572 metres in 10 holes had been completed. Based on the
findings of these exploration efforts a total of 3,281 metres auger drilling in 553 holes was carried out in selected zones covering both
the licences in November and December 2017. The gravel bed samples recovered from auger drilling were washed and sorted for rubies. A
prospective area has been identified in the western licence (7057C) for carrying out bulk sampling, which commenced in July 2018.
An environmental licence (Category B certificate) for 7057C was obtained in May 2018 and the licence boundary demarcation of both the
licences (7049C & 7057C) was completed in thesame month. Survey and ground control points were established in 7057C along with the
identification and delineation of locations for the camp, wash plant, stock yard and dump site. The camp and wash plant erection are
expected to be completed in the second half of the year.
EIA studies of 7049C are in process, and the project was classified as "Level 2" during May 2018, which incorporates bulk sampling, pitting,
trenching, auger and core drilling activities.
EASTERN RUBY MINING ("ERM")
The mining licence 8277C held by ERM, a joint venture company registered in Mozambique with GGL holding a 75% interest, was issued in
November 2016 and is valid for 25 years. The licence covers an area of 11,600 hectares and shares its western boundary with the southern
licence of MML (7049C). Exploration activities are expected to commence in 2019.
CAMPOS DE JOIA ("CDJ")
CDJ, a GGL holding company in Mozambique, holds a mining title (7427C) located to the north of the MRM concession. Another set of
three exploration licences 6114L, 9059L and 9060L are in aan dvanced stage of processing at the ministry. The total area covered by these
four licences is approximately 45,200 hectares.
NEW PROJECTS AND OTHER ASSETS
ETHIOPI"
GGL owns 75% of Web Gemstone Mining plc (“WGM"), a company that holds a 200-square-kilometre emerald exploration licence in southern
Ethiopia. Exploration activity began in June 2015 in an area to the north of the licence, called Dogogo South Block. The area was selected
based on favourable geological settings and evidence of past artisanal activity.
GEO-POLITICAL AND COMMUNITY RELATIONS
Ethiopia has undergone a period of significant political unrest over the last two years that resulted in a nationwide state of emergency
following multiple deadly protests, culminating in the resignation of Prime Minister Hailemariam Desalegn in February 2018. Mr Desalegn was
replaced by Prime Minister Abiy Ahmed in April 2018, a concession aimed at calming restive state of Oromia, WGM's home state.
The unrest in the country coupled with certain local issues related to the Web village (including possible third-party provocations),
resulted in the complete stoppage of operations at WGM for 30 days between mid-February and mid-March 2018. In an effort to reset relations
with the local community and authorities, WGM upgraded a 16km stretch of public road that serves as the main route out of the licence area
for the entire local community. Operations resumed simultaneously with the start of the road upgrade and ran smoothly for several months
until late June 2018.
A consultant from the social risk consultancy firm, Trubshaw Cumberlege, visited the project site for 16 days in March 2018 to conduct a
social risk assessment and a human terrain survey of the surrounding area. The data generated from these surveys was planned to be used to
create a Stakeholder Engagement Plan and a Community Development Plan, which were intended to counter any third-party provocation and
community friction, however the project was overrun before the plans could be implemented. A full-time Community Engagement Manager was
recruited in June, and a Community Steering Committee had been formed to coordinate these projects.
On 29 June 2018, a protest organised by local youth groups at the Dogogo South bulk sampling block escalated into a violent mob of circa
500 people that attacked company staff and assets and overran the operations area, offices and campsites, resulting in the complete
evacuation of the project area. WGM has not been able to access the licence area since, however, the company has received reports that
it is still occupied by a large number of people, including sensitive areas such as the ore stockpile, the sort house and the bulk sampling
pit. All emerald, beryl, ore, geological samples and data produced over the course of the project were stored at these locations and are at
risk. On 31 July 2018 an armed mob breached the sort house and strong room and looted all stock stored on site, subsequently ransacked the
campsites, offices and operations areas, destroying all remaining property on site.
As a result of the aggression against WGM, the team has been reduced to a skeleton crew whilst WGM and GGL engage with local
authorities and communities in an effort to resume operations, however such efforts are anticipated to take a number of months to conclude.
Bulk sampling exercise
A bulk sampling exercise was initiated in August 2017 in the Dogogo South Block to further advance the understanding of the ore grade and
value and to determine the economic viability of the deposit. During the period under review, excavation was focussed in and around the
central part of the pit, which covers 160 metres of strike length, measuring 100 metres wide and includes the old artisanal pits. The
average depth of pit at the footwall is approximately 15 metres. Following resumption of the operation in March, daily operational hours
were increased from 8 to 12 hours per day to maximise on daylight to make up for the lost time and to accelerate the accumulation of data
required for the prefeasibility study.
Total rock handling up to 28th June is 529,238 tonnes, including 27,955 tonnes of potential ore, and 41,349 tonnes of nonmining activity
(road construction). The stripping ratio at this stage of the operation is 1:16. As at 25 June 2018, 25,550 metres of blast hole drilling
was carried out using three drilling machines (1 x wagon drill and 2 x jack hammers), resulting in 96,320 cubic meters of rock being
blasted since the first blast took place in October 2017.
The results obtained so far are encouraging, but the data gathered thus far is still inadequate for resource estimation and to determine
the economic viability of the project.
Geology and survey
Floor and wall mapping of the excavated area and x-ray fluorescence analysis of the mine face are constantly carried out. Productive
reaction zones have been exposed in several places at contacts between pegmatite and talc-mica-schist (TMS), yielding gemmy-quality emerald
and beryl. Chromium values at the reaction zones and production areas are consistent with the ranges encountered during the core drilling
programme that was completed in December 2016, therefore the bulk sampling exercise further confirms the findings of the core drilling
programme.
A topographic survey of the Dogogo South Block, including the existing drill hole collars, trenches, stockpile and surrounding areas has
been completed. This data is considered final and will be used in all future planning and reporting.
Operational developments
A 30 x 30 metre area has been designated as a makeshift wash plant area, which presently comprises a platform for a vibrating table, a
ramp for offloading ore material on to the table, a sprinkler system, an underground water reservoir, an overhead water tank and a sorting/
wet sieving table. The vibrating table was commissioned in January 2018 and has been undergoing trials and refinement. A feeder ramp and a
new wet sieving table were commissioned in late 2017. Procurement of a crusher, double-deck screen and conveyors are underway to increase
throughput to 20 tonnes per hour (tph). Commissioning of a fully mechanised wash plant with 40 tph capacity has been postponed until the
mining phase.
As of the 28th June 2018, the pilot wash plant has processed a total of 367 tonnes of ore, an average of 8 tonnes per day following the
table upgrade. It has produced 800 carats of emerald, 11,670 carats of beryl-1 and 39,130 carats of beryl-2.
Incremental upgrades to the sort house have occurred throughout the period under review to improve security, including erection of an outer
wall to reinforce the vault room. The majority of production is occurring directly from the bulk sampling pit. As of the 28 June 2018, the
bulk sampling pit has produced 10,390 carats of emerald, 62,990 carats of beryl-1 and 158,555 carats of beryl-2.
Total production as of the 28 June 2018 stands at 283,535 carats out of which 11,190 carats are of emerald category.
Stakeholder developments
A delegation from the Zone Authorities visited the project on a fact-finding mission in March 2018 in response to the stoppage of
operations. In a related development, the company was informed about a joint site visit by Federal and State Authorities to review
operations and to reconcile differences in understanding about jurisdictional disputes between the Federal and State Governments (another
contributing factor to the disruption). The visit was originally proposed for 15 June 2018, and was postponed by the authorities to 22 June
2018, and then further postponed until July 2018, and has since been unable to proceed due to the present unrest.
MADAGASCAR
Oriental Mining SARL, a 100% subsidiary of GGL, holds a number of concessions for a range of minerals, including emerald and sapphire,
and has been in compliance with all statutory and regulatory obligations. GGL is planning to commence preliminary investigation on
several permits in the next financial year.
FABERGE
Faberge is one of the world's most recognised luxury brand names, underscored by a well-documented and globally respected heritage. As a
wholly owned subsidiary of GGL, Faberge provides access to the end-consumer of coloured gemstones through directly operated boutiques,
its own e-commerce platform https://protect-za.mimecast.com/s/8Gj7CGZAvQSYKPoqHkn6Py, international wholesale partners and its direct client relationship management programme.
Faberge boosts the international presence and perception of coloured gemstones through its consumerfocussed marketing campaigns.
The following operational review represents the six-month period from 1 January 2018 to 30 June 2018 covering the period post acquisition
of Gemfields Ltd, and its subsidiaries, by the Company. Please note that any comparative figures quoted below are based on the
pre-acquisition, unaudited figures for the 12 months to 30 June 2017.
Points of sale
Faberge directly operates two mono-brand boutiques - in Grafton Street, Mayfair, London and within the Galleria Mall, Houston, Texas. In
addition, Faberge operates a concession within the prestigious Harrods department store in London.
Faberge also boasts a further two partner-operated monobrand boutiques in Kiev, Ukraine and the Dubai Mall, UAE. In addition to these
points of sale, Faberge's products are also showcased and available for purchase at a further 57 partner-operated retail boutiques across
Abu Dhabi, Australia, Andorra, Azerbaijan, Bahrain, Canada, Czech Republic, France, Germany, Hong Kong, Italy, Ireland, Jordan, Japan,
Kuwait, Malta, Macau Qatar, Romania, Saudi Arabia, South Africa, Switzerland, Thailand, U.K., Ukraine and the USA.
Financial performance
Faberge recorded revenues of US$7.1 million for the period which is an all-time high against historic, like-for-like periods. Operating
sales margin for the period also improved to 39%.
Operating costs were US$5.2 million for the period as Faberge took the decision to pull out of the Baselworld trade fair and focus remained
on controlling expenditure.
During the same period, Faberge recorded an operating loss of US$3.2 million which represents significant improvement over the same period
in 2017.
Marketing and communications
As an important part of the GGL Group, Faberge continues to strive towards being the market leader in precious coloured gemstones,
promoting its vibrant gem-set pendants and rings within its Imperial, Emotion and Three Colours of Love collections.
Another key product focus incorporates Faberge's best-selling and most iconic pieces, collectively labelled Faberge Favourites, which is an
offering of modern-day interpretations of the renowned Imperial Easter Eggs, boasting features which are distinctive to Faberge, such as
guilloche enamel and the element of surprise.
Following the industry success of the Lady Compliquee and Visionnaire collections and with two Grand Prix d'Horlogerie awards and a new
revolutionary chronograph movement, Faberge continues to focus on the strong story-telling opportunities of its High Complication
timepieces.
INTERIM FINANCIAL STATEMENTS AND ADMINISTRATION
CONDENSED CONSOLIDATED INCOME STATEMENT for the six months ended 30 June 2018
1 January 2018 to 1 January 2017 to
30 June 2018 30 June 2017
US$'000 US$'000
Notes (reviewed) (reviewed)
Revenue 2 102,131 -
Cost of sales 3 (60,210) -
Gross profit 41,921 -
Unrealised fair value gains/(losses) 10 3,955 (79,378)
Other gains 4 12,065 5,559
Selling, general and administrative expenses 6 (25,464) (7,379)
Profit/(loss) from operations 32,477 (81,198)
Finance income 7 373 21
Finance costs 7 (6,242) (5)
Net finance (costs)/income (5,869) 16
Profit/(loss) before taxation 26,608 (81,182)
Taxation 8 (10,618) (3)
NET PROFIT/(LOSS) AFTER TAXATION 15,990 (81,185)
Profit/(loss) for the year attributable to:
Owners of the parent 12,443 (81,185)
Non-controlling interest 3,647 -
15,990 (81,185)
Earnings/(losses) per share attibutable to the parent: 14
Basic - US$ 0.01 (0.11)
Diluted - US$ 0.01 (0.11)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2018
1 January 2018 to 1 January 2017 to
30 June 2018 30 June 2017
US$'000 US$'000
(reviewed) (reviewed)
Profit/(loss) after taxation 15,990 (81,185)
Other comprehensive loss:
Items that have been/may be reclassified subsequently to profit or loss:
Exchange loss arising on translation of foreign operations (1,083) -
Total other comprehensive loss (1,083) -
TOTAL COMPREHENSIVE INCOME/(LOSS) 14,907 (81,185)
Total comprehensive income/(loss) attributable to:
Owners of the parent 11,260 (81,185)
Non-controlling interest 3,647 -
14,907 (81,185)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2018
30 June 2018 31 December 2017 30 June 2017
US$'000 US$'000 US$'000
Notes (reviewed) (audited) (reviewed)
ASSETS
Non-current assets
Property, plant and equipment 386,864 378,021 -
Intangible assets 51,306 49,312 -
Unlisted equity investments 10 98,064 196,164 173,675
Listed equity investments 10 41,611 - 179,390
Other investments 1,473 1,319 1,267
Deferred tax assets 8 3,502 6,775 -
Other non-current assets 6,392 8,025 -
Total non-current assets 589,212 639,616 354,332
Current assets
Inventory 11 104,868 118,813 -
Other investments 3 6 14
Trade and other receivables 12 46,818 27,498 1,253
Cash and cash equivalents 80,880 37,784 12,935
Total current assets 232,489 184,101 14,202
Total assets 821,701 823,717 368,534
LIABILITIES
Non-current liabilities
Deferred tax liabilities 8 95,948 102,347 -
Borrowings 13 35,000 59,292 -
Provisions 3,691 7,958 -
Total non-current liabilities 134,639 169,597 -
Current liabilities
Provisions 9,221 4,619 -
Current tax payable 11,078 7,041 -
Borrowings 13 14,226 4,178 -
Trade and other payables 26,251 21,171 5,470
Total current liabilities 60,776 37,009 5,470
Total liabilities 195,415 206,606 5,470
Net assets 626,286 617,111 363,064
EQUITY
Share capital 14 14 12
Share premium 531,607 531,607 475,896
Treasury shares (5,345) (654) -
Reserve for own shares (23,319) (23,319) (23,319)
Cumulative translation reserve (2,252) (1,169) -
Option reserve 4,151 2,692 -
Retained earnings/(losses) 41,895 29,552 (89,525)
Attributable to equity holders of the parent 546,751 538,723 363,064
Non-controlling interest 79,535 78,388 -
Total equity 626,286 617,111 363,064
The Financial Statements were approved and authorised for issue by the Directors on 27 September 2018 and were signed on their
behalf by:
David Lovett Sean Gilbertson
Director Director
27 September 2018 27 September 2018
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the six months ended 30 June 2018
1 January 2018 to 1 January 2017 to
30 June 2018 30 June 2017
US$'000 US$'000
Notes (reviewed) (reviewed)
Cash flow from operating activities
Profit/(loss) before taxation 26,608 (81,182)
Adjustments for:
Loan interest income - (222)
Unrealised fair value (gains)/losses 10 (3,995) 79,378
Unrealised fair value gains 4 (11,679) (5,337)
Depreciation and amortisation 3 13,795 -
Share-based payments 6 1,459 -
Other 1 (4)
Finance income 7 (373) (21)
Finance expense 7 6,242 5
Increase in trade and other receivables (18,238) (78)
Decrease in inventory 5,763 -
(Decrease)/increase in trade and other payables (1,552) 4,035
Cash generated from/(utilised in) operations 18,071 (3,426)
Tax paid (9,788) -
Net cash (including withholding tax)
generated from/(utilised in) operating activities 8,283 (3,426)
Cash flows from investing activities
Purchase of intangible assets (2,209) -
Purchase of property, plant and equipment (8,563) -
Loans repaid by investments - 5,000
Interest received 172 188
Proceeds from Jupiter Initial Public Offering 64,397 -
Proceeds from disposal of Jupiter shares 7,726 10,105
Investments acquired (101) -
Net cash generated from investing activities 61,422 15,293
Cash flows from financing activities
Dividends paid to non-controlling interest in Montepuez
Ruby Mining (4,000) -
Cash paid for treasury shares (4,691) -
Transaction costs - (147)
Proceeds from borrowings 14,165 -
Repayment of borrowings (29,959) -
Interest paid (3,251) (5)
Release of previously restricted cash 1,027 -
Net cash utilised in financing activities (26,709) (152)
NET INCREASE IN CASH AND CASH EQUIVALENTS 42,996 11,715
Cash and cash equivalents at the beginning of the period 37,784 1,218
Net foreign exchange gain on cash 20 2
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 80,800 12,935
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2018
Total
attributable
Cumulative Retained to equity Non-
Share Share Reserve for Treasury translation Option earnings/ holders of controlling Total
capital premium own shares shares reserve reserve (losses) the parent interest equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2018
(audited) 14 531,607 (23,319) (654) (1,169) 2,692 29,552 538,723 78,388 617,111
Profit for the year - - - - - - 12,343 12,343 3,647 15,990
Other comprehensive
loss - - - - (1,083) - - (1,083) - (1,083)
Total comprehensive
income - - - - (1,083) - 12,343 (11,260) 3,647 14,907
Shares bought back
during the year, net
of transaction costs - - - (4,691) - - - (4,691) - (4,691)
Share options recognised
during the year - - - - - 2,539 - 2,539 - 2,539
Share options forfeited
during the year - - - - - (1,080) - (1,080) - (1,080)
Dividends declared
to non–controlling
interest of Montepuez
Ruby Mining - - - - - - - - (2,500) (2,500)
Balance at 30 June 2018
(reviewed) 14 531,607 (23,319) (5,345) (2,252) 4,151 41,895 546,751 79,535 626,286
Balance at 1 January 2017
(audited) 8 375,227 - - - - (8,340) 366,895 - 366,895
Loss for the year - - - - - - (81,185) (81,185) - (81,185)
Other comprehensive loss - - - - - - - - - -
Total comprehensive loss - - - - - - (81,185) (81,185) - (81,185)
Gemfields Acquisition -
shares issued in exchange
for Gemfields shares 4 102,042 - - - - - 102,046 - 102,046
Gemfields Acquisition -
share issue costs - (1,373) - - - - - (1,373) - (1,373)
Gemfields Acquisition
- own shares acquired - - (23,319) - - - - (23,319) - (23,319)
Balance at 30 June 2017
(reviewed) 12 475,896 (23,319) - - - (89,525) 363,064 - 363,064
NOTES TO THE FINANCIAL STATEMENTS for the six months ended 30 June 2018
1. ACCOUNTING POLICIES
The consolidated financial statements within the Interim Report are for the period from 1 January 2018 to 30 June 2018 (the "Interim
Financial Statements"). The financial information for the year ended 31 December 2017 that has been included in these Interim Financial
Statements does not constitute full statutory financial statements as defined in the Companies (Guernsey) Law, 2008.
The information included in this document for the comparative year was derived from the Annual Report and Financial Statements for the year
ended 31 December 2017 (the "Annual Financial Statements"), a copy of which has been delivered to the Guernsey Financial Services
Commission, the Johannesburg Stock Exchange ("JSE") and the Bermuda Stock Exchange ("BSX"). The auditor's report on the Annual Financial
Statementswas unqualified and stated that the Annual Financial Statements gave a true and fair view, were in accordance with International
Financial Reporting Standards ("IFRS") and complied with the Companies (Guernsey) Law, 2008.
The Company is incorporated in Guernsey under the Companies (Guernsey) Law, 2008. The Company's registered office address changed effective
28 August 2018 to PO Box 186 Royal Chambers, St. Julian's Avenue, St. Peter Port, Guernsey, GY1 4HP. The Company's address was previously
11 New Street, St Peter Port, Guernsey, GY1 2PF, Channel Islands.
The Company's accounting policies are the same as those of the Group. Company-only financial information has been omitted from these
Financial Statements, as permitted by the Companies (Guernsey) Law, 2008, section 244, and sections 8.62(a) and 8.62(d) of the JSE Listings
Requirements.
Statement of Compliance
These Interim Financial Statements have been prepared in accordance with IAS34 Interim Financial Reporting ("IAS34") and applicable legal
requirements of the Companies (Guernsey) Law, 2008. They do not include all of the information required for full financial statements and
are to be read in conjunction with the Annual Financial Statements. The Annual Financial Statements were prepared under IFRS as issued by
the International Accounting Standards Board ("IASB"), the financial reporting guides issued by the Accounting Practices Committee of the
South African Institute of Chartered Accountants (the "SAICA Reporting Guides") and the financial reporting pronouncements issued by the
Financial Reporting Standards Council of South Africa (the "FRSC Pronouncements"). The Annual Financial Statements also comply with the JSE
Listings Requirements and the BSX Listing Regulations.
New and amended standards which are effective for these Interim Financial Statements
A number of new and amended standards became mandatory and are effective for annual periods beginning on or after 1 January 2018.
Below is a list of the new standards which impacted the Group; where appropriate these new standards have been incorporated into the
Interim Financial Statements:
IFRS9 Financial Instruments ("IFRS9")
IFRS9 replaced IAS39 Financial Instruments: Recognition and Measurement and addresses the following three key areas for accounting
periods beginning on 1 January 2018:
- Classification and measurement establishes a single, principles-based approach for the classification of financial assets, which is
driven by cash flow characteristics and the business model in which an asset is held.
- Impairment introduces a new "expected loss" impairment model, requiring expected credit losses to be recognised from when financial
instruments are first recognised.
- Hedge accounting aligns the accounting treatment with risk management practices of an entity.
On 1 January 2018, the Group adopted IFRS 9; the new standard has been applied retrospectively but did not result in a restatement of prior
period financial assets and liabilities. The standard also outlines a new 'expected credit loss' model, used to estimate the risk to the
Group's financial assets measured at amortised cost. The impairment provision on financial assets measured at amortised cost (such as trade
and other receivables) have been calculated in accordance with IFRS 9's expected credit loss model, which differs from the incurred loss
model previously required by IAS 39. This has not resulted in a change to the impairment provision at 1 January 2018, but may impact the
reported numbers going forward.
IFRS15 Revenue from contracts with customers ("IFRS15")
IFRS15 introduced a single framework for revenue recognition and clarify principles of revenue recognition. This standard modifies the
determination of when to recognise revenue and how much revenue to recognise. The new standard is mandatory for annual reporting periods
beginning on or after 1 January 2018.
On 1 January 2018, the Group adopted IFRS 15; the new standard has been applied retrospectively but did not result in a change to the
Group's accounting policies or a restatement of prior period financial assets and liabilities.
New and amended standards which are not yet effective for these Interim Financial Statements
There are a number of new standards, amendments to standards and interpretations that are not mandatory for 30 June 2018 reporting periods
and have not been early-adopted by the Group. These will be adopted in the period that they become mandatory, unless otherwise indicated.
Information on the new standards which could impact the Group is presented below:
IFRS16 Leases ("IFRS16")
The new standard was issued in January 2016, replacing the previous leases standard, IAS17 Leases, and related interpretations. IFRS16
establishes the principles for the recognition, measurement, presentation and disclosure of leases for the customer ("lessee") and the
supplier ("lessor"). IFRS16 eliminates the classification of leases as either operating or finance as is required by IAS17 and, instead,
introduces a single lessee accounting model requiring a lessee to recognise assets and liabilities for all leases unless the underlying
asset has a low value, or the lease term is 12 months or less. This new standard applies to annual reporting periods beginning on or after
1 January 2019 and does not apply to leases for the exploration or use of natural resources. The Group is assessing the full impact of the
standard on its financial position and reporting of performance.
There are no other standards that are not yet effective and that would be expected to have a material impact on the Group in the current or
future reporting periods and on foreseeable future transactions.
Basis of preparation
The consolidated Interim Financial Statements are presented in United States dollars ("US$") its functional currency, which means that they
can be compared with those of other similar companies. Amounts have been rounded to the nearest thousand (or million), as appropriate, for
ease of presentation.
Basis of consolidation
The consolidated Interim Financial Statements incorporate the financial statements of the Company and entities controlled by the Group as
at and for the six months ended 30 June 2018. The results of subsidiaries acquired or disposed during the period are included in profit and
loss from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with
those used by other Group entities.
All significant inter-company transactions and balances between Group entities are eliminated on consolidation.
Basis of accounting
The principal accounting policies applied are consistent with those adopted and disclosed in the Annual Financial Statements, except for
those that relate to new standards and interpretations effective for the first time for periods beginning on (or after) 1 January 2018. New
standards impacting the Group which have given rise to changes in the Group's accounting policies are:
- IFRS9 Financial Instruments
Details of the impact of this standard have been given above. Other new and amended standards and Interpretations issued by the IASB
that will apply for the first time in the next annual financial statements are not expected to impact the Group as they are either not
relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.
The Interim Financial Statements have been prepared on the historical cost basis, except for the valuation of certain investments which
have been measured at fair value, not historical cost. Historical cost is generally based on the fair value of the consideration given in
exchange for goods and services. Other than information contained within the Consolidated Statement of Cash Flows, the Interim Financial
Statements have been prepared on the accruals basis.
The Company was an investment entity for the period 1 January to 31 July 2017
Prior to the acquisition of Gemfields Ltd (formerly Gemfields plc), the Company met the definition of an investment entity under IFRS10
Consolidated Financial Statements the Directors accounted for investments in joint ventures, associates and certain controlled entities at
fair value through profit or loss.
The Directors have determined that the Company met the following criteria which define an investment entity for the period until the
acquisition of Gemfields Ltd:
- The Company invests solely to provide returns from capital appreciation, investment income or both.
- The Company obtains funds from a large number of shareholders and invests through the advice of the Investment Manager.
- The Company measures the performance of substantially all its investments on a fair value basis.
- The Company does not plan to hold its investments indefinitely and has an exit strategy for each investment.
In consequence, it has been necessary to assess the nature of the Company's holdings in subsidiaries to determine the impact of adoption of
the Investment Entities Amendments. The Group previously did not hold any subsidiaries which formed part of the Investment Portfolio. While
the Company was an investment entity, it held investments in certain subsidiaries which provided investment-related services; the
accounting treatment did not change for these entities, which were consolidated in line with the previous accounting treatment.
As an investment entity, the Group held certain investments in associates that were investment holding entities and did not form part of
the Investment Portfolio. These investments in associates were accounted for at fair value.
Critical accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and liabilities, and income and expenses. The estimates and associated
assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. In the
future, actual experience may differ from these estimates and assumptions.
The estimates and underlying assumptions applied are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
New standards impacting the Group which have resulted in additional accounting judgements are:
- IFRS 15 Revenue from contracts with customers
As a result of this new standard, additional judgement has been applied in identifying the performance obligations arising on contracts
with customers:
(i) Gemstones - revenue from the sale of gemstones is recognised when the performance obligation(s) are met. For rough gemstones sold at
auction, which are considered as bill-and-hold arrangements, the performance obligation is to supply/make a distinct good or distinct
bundle of goods available to the customer and is determined to have been satisfied at the point of invoicing. For cut and polished
gemstones, the performance obligation is the supply of goods (and transfer of ownership of said goods) to the customer and is determined to
have been satisfied at the point of delivery.
(ii) Retail, wholesale and web sales - the performance obligation is the supply of goods (and transfer of ownership of said goods) to the
customer and is determined to have been satisfied at the point of delivery.
In preparing these condensed consolidated interim financial statements, all other significant judgements made by the Directors in applying
the Group's accounting policies and the key sources of estimation uncertainty used were consistent, in all material respects, as those
applied to the Group's consolidated financial statements for the year ended 31 December 2017.
2. SEGMENTAL REPORTING
With effect from 1 August 2017, the Chief Operating Decision Maker ("CODM") is the Executive Management, who measure the performance of
each operating segment on a regular basis in order to allocate resources.
The Group's segmental reporting was previously based around its three Investment Platforms: PGMs, Steel-Making Materials, and Coloured
Gemstones, each of which was categorised as an operating segment. Each investment was assessed on this basis, and, as such, each of the
Group's operating segments may have included multiple mines and other assets. Mr Brian Gilbertson, Non-Executive Chairman (as of 1 January
2018), undertook the role of CODM up to 31 July 2017.
Subsequent to the 100% acquisition of Gemfields Ltd in July 2017, the Group has revised its operating segments to reflect the new business
focus. The Group has been organised into geographic units and business units based on the products and services and has five reportable
segments as follows:
- Zambia (emerald and beryl mining activities);
- Mozambique (ruby and corundum mining activities);
- Platinum Group Metals ("PGMs", the Group's investment in Sedibelo Platinum Mines Limited)
- Steel-Making Materials (the Group's investment in Jupiter Mines Limited)
- Corporate (sales of cut and polished gemstones, marketing, technical and administrative services, including the previously reported
investment platforms);
- Faberge (wholesale and retail sales of jewellery and watches); and
- Other (new projects, traded auctions, sales and marketing offices).
The reporting on these investments to management focuses on revenue, operating costs and key balance sheet lines comprising non-current and
total assets and liabilities. These figures are presented after intercompany adjustments have been accounted for.
Steel-Making
1 January 2018 to Zambia Mozambique PGMs Materials Corporate Faberge Other Total
30 June 2018 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenues 21,097 71,834 - - 785 7,039 1,376 102,131
Other income 84 11 - 11,680 174 1 115 12,065
Unrealised fair value gains/
(losses) - - - 3,955 - - - 3,955
Depreciation and amortisation (6,119) (6,752) - - (162) (722) (40) (13,795)
Operating profit/(loss) (14,879) 50,882 - 15,635 (14,747) (3,184) (1,230) 32,477
Finance income - 211 - - 161 - 1 373
Finance expenses (1,556) (664) - - (357) (3,427) (238) (6,242)
Profit/(loss) after tax (10,970) 36,005 - 15,635 (17,551) (6,596) (533) 15,990
30 June 2018
Total non-current assets 173,535 216,408 98,064 41,611 7,941 41,964 9,689 589,212
Total non-current liabilities 78,337 55,800 - - - 376 126 134,639
Total assets 223,002 281,220 98,064 41,611 64,067 80,407 33,330 821,701
Total liabilities 85,653 98,732 - - 5,620 3,020 3,020 195,415
The CODM, in addition to the above, also monitors Free Cash Flow, which shows the amount of cash available from the operations and is
calculated as cashflows from operations less corporation tax paid less capital expenditure. In the 6 months to 30 June 2018, the Group's
Free Cash Flow was a negative US$1.7 million (2017: negative US$3.4 million).
The segmental information provided to the CODM for the period 1 January 2017 to 30 June 2017 is as follows:
Steel Making Coloured
PGMs(1) Materials Gemstones Unallocated Total
1 January 2017 to 30 June 2017 US$'000 US$'000 US$'000 US$'000 US$'000
Income statement
Unrealised fair value gains - 918 - - 918
Unrealised fair value losses (16,344) - (63,952) - (80,296)
Realised gains - 5,337 - - 5,337
Loan interest income - - 222 - 222
Net segmental (expense)/income (16,344) 6,255 (63,730) - (73,819)
Other income - - - - -
Net losses on investments
and income from operations (73,819)
Expenses, net finance income, fair value
gain/(loss) of associates and taxation - - - (7,366) (7,366)
Net segmental (loss)/profit (16,344) 6,255 (63,730) (7,366) (81,185)
Balance Sheet
Net Asset Value 98,064 75,611 179,390 9,999 363,064
3.COST OF SALES
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Mining and production costs
Labour and related costs 10,280 -
Mineral royalties and production taxes 8,432 -
Fuel costs 5,099 -
Repairs and maintenance costs 4,311 -
Security costs 2,813 -
Camp costs 1,522 -
Blasting costs 891 -
Other mining and processing costs 3,103 -
Total mining and production costs 36,451 -
Change in inventory and purchases 9,964 -
Depreciation and amortisation 13,795 -
60,210 -
4. OTHER GAINS
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Realised fair value gain on Jupiter share buy-backs 2,026 5,337
Realised fair value gain on Jupiter IPO 9,653 -
Other income 386 222
12,065 5,559
See Note 5 for more detail on the Jupiter share buy-back and IPO.
5. REALISED GAINS ON SHARE BUY-BACKS AND JUPITER'S RELISTING ON THE ASX
March 2018 Jupiter buy-back
On 22 January 2018, Jupiter announced the details of an off-market equal access share buy-back to return up to US$42 million to its
shareholders. All Jupiter shareholders were made an equal offer to buy back 5.81% of their shares in Jupiter, at a set price of US$0.35
per share.
The Group, as an 18.40% shareholder in Jupiter, had the right to have 5.81% of its 379,948,385 Jupiter shares bought back. The Group
accepted the buy-back by Jupiter, resulting in the sale of 22,075,001 shares in Jupiter for US$0.35 per share. The transaction was
completed on 19 March 2018, with the Group receiving US$7.7 million. At 19 March 2018, the Directors' most recent estimate of the fair
value of the Jupiter shares was US$0.26 per share, being the valuation as at 31 December 2017.
The buy-back price per share was underpinned by Jupiter's long-term manganese price assumptions, which are higher than the long-term
manganese price of US$3.60 used by the Directors in the valuation of Jupiter at 31 December 2017. The realised gain on the March 2018
Jupiter buy-back was as follows:
Number of Price per
shares share US$ US$'000
March 2018 Jupiter buy-back
Fair value of Jupiter shares at date of receipt (19 March 2018) 22,075,001 0.26 (5,700)
Buy-back price of the 5.81% of Jupiter shares (19 March 2018) 22,075,001 0.35 7,726
2,026
April 2018 Jupiter IPO/Relisting on the ASX
On March 2018, Jupiter announced its intention to relist on the Australian Securities Exchange ("ASX") in order to provide liquidity for
its shareholders. This was expected to be achieved via a placing of up to 600 million existing Jupiter shares with new investors at
AUD 0.40 per share, thereby raising up to AUD 240 million and putting a value on Jupiter of approximately AUD 780 million.
On 12 April 2018, Jupiter announced the full allocation of the IPO shares, yielding AUD 240 million. The Group had previously committed to
making available for sale up to 212,028,012 of its Jupiter shares at the placing price of AUD 0.40 per share (equivalent to US$0.31 per
share on the date of receipt, 18 April 2018).
On 18 April 2018, Jupiter was successfully relisted on the ASX. The Group received, net of associated sale costs, AUD 83.1 million from the
Jupiter IPO process.
The realised gain on the April 2018 IPO was as follows:
Number of Price per
shares share US$ US$'000
April 2018 Jupiter IPO/Relisting on the ASX
Fair value of Jupiter shares at date of receipt (18 April 2018) 212,028,012 0.26 (54,744)
IPO price per share sold by GGL (18 April 2018) 212,028,012 0.31 64,397
9,653
GGL's remaining holding of Jupiter shares is 145,845,372 shares.
6. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Labour and related costs 8,753 96
Selling, marking and advertising 5,699 -
Professional and other services 3,201 4,401
Rent and rates 2,380 -
Share-based payments 1,459 -
Travel and accommodation 918 -
Administration costs 369 189
Amounts paid to Auditor 75 26
Investment Manager's benefit - 2,442
Other selling, general and administrative expenses 2,610 225
25,464 7,379
7. FINANCE INCOME AND COSTS
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Interest received 172 21
Foreign exchange gains 201 -
Finance income 373 21
Interest on bank loans, finance charges and bank charges (5,542) (5)
Foreign exchange losses (700) -
Finance costs (6,242) (5)
Net finance (costs)/income (5,869) 16
8. TAXATION
The Group's tax expense is as follows:
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Current tax
Taxation charge for the year 13,743 3
Deferred tax
Origination and reversal of temporary differences (4,372) -
Underprovision for the year 1,247 3
The reasons for the difference between the actual taxation charge for the year and the standard rate of corporation tax in Guernsey
applied to profits for the year are as follows:
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Profit on ordinary activities before taxation 26,608 (81,182)
Taxation on ordinary activities at the standard rate of corporation tax in Guernsey of 0% (2017: 0%) - -
Effects of:
Expenses not deductible for tax purposes 512 -
Withholding tax on dividends 600
Under-provision in prior year 1,247
Tax losses not recognised as deferred tax asset 1,839
Different tax rates applied in overseas jurisdictions 6,420 -
Total taxation charge 10,618 3
In Guernsey, the main rate of corporation tax for the year was 0%.
"Expenses not deductible for tax purposes" include camp costs incurred by Kagem and legal fees expensed by Gemfields Ltd.
"Different tax rates applied in overseas jurisdictions" reflects the different tax rates applicable in the various jurisdictions in which
the Group operates. The main rates of corporation tax in Zambia, Mozambique and the United Kingdom for the year were 30%, 32% and 19%
respectively.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realised
or the liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax
Details of the deferred tax liabilities and assets, amounts recognised in the Consolidated Income Statement and amounts recognised in
other comprehensive income are as follows:
30 June 2018 31 December 2017 30 June 2017
US$'000 US$'000 US$'000
Recognised deffered tax assets
Other temporary differences 2,054 1,761 -
Tax losses 8,881 6,771 -
Property, plant and equipment 922 538 -
Total deferred tax assets 11,857 9,070 -
Deferred tax assets netted against
deferred tax liabilities (8,355) (2,295) -
Total deferred tax assets 3,502 6,775 -
30 June 2018 31 December 2017 30 June 2017
US$'000 US$'000 US$'000
Recognised deferred tax liabilities
Evaluated mining property - Kagem and Montepuez (98,748) (98,453) -
Inventory valuation - Kagem and Montepuez (4,740) (5,811) -
Intangibles - Faberge (350) (378) -
Other (465) - -
Total deferred tax liabilities (104,303) (104,642) -
Deferred tax assets netted against
deferred tax liabilities 8,355 2,295 -
Total deferred tax liabilities (95,948) (102,347) -
The movement on the deferred tax account is provided below:
2018 2017
US$'000 US$'000
At 1 January (audited) (95,572) -
Property, plant and equipment 32 -
Other temporary differences 180 -
Evaluated mining property - Kagem and Montepuez (295) -
Inventory valuation - Kagem and Montepuez 1,071 -
Intangibles - Faberge 28 -
Tax losses 2,110 -
Recognised in the Consolidated Income Statement 3,126 -
At 30 June (92,446) -
Deferred tax assets are only recognised in relation to tax losses and other temporary differences which would give rise to deferred tax
assets where it is considered probable that the losses will be utilised in the foreseeable future, and therefore the asset is recoverable.
Therefore, as there is uncertainty over the above, no deferred tax has been recognised in relation to unused tax losses in the amount of
US$98.4 million (31 December 2017: US$89.0 million), of which US$82.7 million was acquired through business combinations during the year
ended 31 December 2017.
9. ACQUISITION OF THE GEMFIELDS GROUP OF COMPANIES
For the purposes of this note, Gemfields Group Limited has been referred to as either the "Company" or "PRL", being the abbreviated name
of the bidding Company at the time of the acquisition. The Company's name changed from Pallinghurst Resources Limited to Gemfields Group
Limited effective 26 June 2018. Gemfields Ltd (previously Gemfields plc) has been referred to as "Gemfields", being the name of the
target company at the time of the acquisition.
Gemfields is a leading supplier of coloured gemstones and owns emerald assets in Zambia and Ethiopia, ruby assets in Mozambique and
amethyst assets in Zambia. In 2008, the Company and the Pallinghurst Co-Investors became the majority shareholders of Gemfields by
contributing the Kagem emerald mine to Gemfields, its core operating asset, for shares. Subsequently, in 2013, the Company and the
Pallinghurst Co-Investors contributed Faberge Ltd to Gemfields. The Gemfields investment formed a core component of the Company's value
proposition and therefore unlocking Gemfields' full value potential is of paramount importance to the Company.
Despite many positive developments, the share price of Gemfields did not reflect its inherent value. Accordingly, on 19 May 2017, the
Company announced the terms of an offer to acquire the entire issued and to be issued share capital of Gemfields, other than the Gemfields
shares already held by the Company (the "Offer").
On 28 July 2017, Gemfields delisted from AIM and the non-PRL related board members of Gemfields resigned and were replaced with PRL
nominees, and therefore this is the date on which PRL took board and management control. The key component of being an investment entity
which changed as a result of the Gemfields acquisition is the fair value condition. PRL could only influence Gemfields' operational
performance upon taking board control of Gemfields, which occurred on 28 July 2017. PRL was only able to measure Gemfields' performance
prior to this date on the fair value basis i.e. its listed share price. Upon taking board control of Gemfields, PRL's performance
measurement of Gemfields changed to operational metrics. Accordingly, 28 July 2017, is the effective date that PRL ceased to be an
investment entity. The deemed acquisition date of Gemfields upon PRL ceasing to be an investment entity is the start of the subsequent
month, 1 August 2017.
During the period 26 June 2017 to 19 September 2017, the Company acquired 301,024,558 additional Gemfields shares (in return for 1.91 PRL
shares for each Gemfields share) for total consideration of US$135 million (between ZAR2.64–ZAR3.18 per PRL share). At the acquisition date
the Company had acquired 282,171,346 additional Gemfields shares for total consideration of US$127 million. The acquisition cost of these
additional Gemfields shares is based on the PRL share price (on the day of each tranche of acceptances) converted at the 1.91 Offer ratio
and the daily US$/ZAR exchange rate.
PRL valued its 96.63% interest in Gemfields as at 31 July 2017 (the day preceding the acquisition date) at the Gemfields share price on the
date that Gemfields delisted from AIM (28 July 2017). IFRS13 Fair Value Measurement ("IFRS13") required that PRL derecognised its interest
in Gemfields at this price as there was a Level 1 (IFRS13 fair value hierarchy) listed share price available in an active market at the
delisting date, a few days before the acquisition date. PRL's 96.63% interest in Gemfields is valued at the 28 July 2017 closing price of
GBP0.3200 per share, translated at the closing rate on 31 July 2017 of US$1/GBP0.7604. PRL's interest of 96.63% in Gemfields was valued at
US$228 million on 31 July 2017.
On 1 August 2017, the Company's total shareholding had reached 96.99% of the entire issued share capital of Gemfields. As the level of
Gemfields share acceptances surpassed 90% of the shares to which the Offer related, the Company commenced the compulsory acquisition
process of the remaining Gemfields shares under Sections 979-982 of the Companies Act 2006.
A bargain purchase of US$96.4 million was recognised at the acquisition date, as the fair value of Gemfields' net assets acquired exceeded
the fair value of the total consideration at the acquisition date. On 20 June 2017, Chinese conglomerate firm, Fosun Gold Holdings Limited
('Fosun') made a firm intention, by way of a Rule 2.7 Announcement, to acquire the entire issued and to be issued ordinary share capital of
Gemfields at GBP0.4500 per share, which converted at the closing rate on 31 July 2017 of S$$1/GBP0.7604 implied a valuation of Gemfields
(on a 100% basis) of US$331 million. The Fosun offer was a cash-based offer. Fosun stated that the consideration to be made payable by
Fosun as part of the intended offer would have been funded from their existing cash reserves, which had been fully confirmed in accordance
with the requirements of the Takeover Code. An assessment was made of the fair values of the acquired assets and liabilities on the date of
acquisition. The assessment resulted in a valuation of the total net assets acquired being equivalent to the value of the Fosun offer. The
fair values of the assets and liabilities are inherently judgemental but the Fosun offer is believed to be representative of the 'price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date' as required by IFRS13 despite the offer not being accepted due to the Offer becoming wholly unconditional (due to the number of
acceptances received, as well as PRL shareholders voting in favour of the Offer on 26 June 2017).
Details of the initial and provisional fair value of identifiable assets and liabilities acquired, purchase consideration and resulting
bargain purchase, included in the Annual Report for the year ended 31 December 2018, are as follows:
Carrying value Adjustment Provisional fair value(1)
US$'000 US$'000 US$'000
Property, plant and equipment 225,753 164,710 390,463
Faberge trademark 40,474 - 40,474
Other intangible assets 7,236 - 7,236
Deferred tax assets 5,372 - 5,372
Other non-current assets 8,075 - 8,075
Inventories 90,551 18,581 109,132
Trade and other receivables 29,540 - 29,540
Cash and cash equivalents 33,367 - 33,367
Total assets 440,368 183,291 623,659
Trade and other payables (25,678) - (25,678)
Borrowings (66,023) - (66,023)
Other liabilities (17,265) - (17,265)
Deferred tax liability (48,307) (58,797) (107,104)
Total liabilities (157,273) (58,797) (216,070)
Total net assets 283,095 124,494 407,589
Non-controlling interest (83,480)
Bargain purchase (96,406)
Total consideration at 1 August 2017 227,703
Non-controlling interest acquired(2) 7,254
Total consideration at 19 September 2017 234,957
(1) There have been no changes to the provisional fair values since the year end.
(2) Non-controlling interest was calculated on the fair value of the identifiable assets and liabilities acquired.
10. INVESTMENTS
Information on each of the Group's investments has been provided below. This disclosure is intended to ensure that users of the financial
statements understand how each investment has been valued and the risks associated with each investment valuation. In addition, the
disclosure meets certain requirements related to the Group's JSE listing.
The reconciliation of the Investment valuations from 1 January 2018 to 30 June 2018 is as follows:
Balance at Transfer from Unrealised fair Unrealised fair Realised Transfer Balance at 30
1 January 2018 unlisted value gains value losses gains Disposals to listed June 2018
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Listed equity
investments
Jupiter (1) - 37,656 3,955 - - - - 41,611
- 37,656 3,955 - - - - 41,611
Unlisted equity
investments
Jupiter (1) 98,100 - - - 11,680 (72,124) (37,656) -
Sedibelo Platinum Mines 98,064 - - - - - - -
196,164 - - - 11,680 (72,124) (37,656) 98,064
Total 196,164 37,656 3,955 - 11,680 (72,124) (37,656) 139,675
(1) The unrealised fair value gain on Jupiter of US$3.955 million includes an unrealised foreign exchange loss of US$1.912 million. The
realised gain on Jupiter of US$11.680 million does not include any foreign exchange, as the cash receipts were denominated in US$. The cash
receipt from the Jupiter IPO of AUD 83.1 million, net of associated selling costs, was converted to US$ on the same day resulting in no
foreign exchange gain/(losses) being realised. The Company disposed of 5.81% of its shares to Jupiter at US$0.35 per share in the March
2018 Jupiter buyback,with the company receiving US$7.7 million. The Company disposed of 212,028,012 of its shares to Jupiter at a price of
AUD 0.40 per share or US$0.31 per share converted at the foreign exchange rate on 18 April 2018, the date the Jupiter IPO completed, with
the Company receiving US$64.4 million. See Note 6 for more detail on the Jupiter share buy-back and IPO.
The reconciliation of the Investment valuations from 1 January 2017 to 30 June 2017 is as follows:
Balance at Unrealised fair Unrealised fair Realised Balance at 30
1 January 2017 value gains value losses gains Additions Disposals June 2017
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Listed equity investments
Gemfields Ltd(1) 164,615 - (63,952) - 78,727 - 179,390
164,615 - (63,952) - 78,727 - 179,390
Unlisted equity investments
Jupiter(2) 79,461 918 - 5,337 - (10,105) 75,611
Sedibelo Platinum Mines(3) 114,408 - (16,344) - - - 98,064
193,869 918 (16,344) 5,337 - (10,105) 173,675
Total 358,484 918 (80,296) 5,337 78,727 (10,105) 353,065
(1) The unrealised fair value loss on Gemfields Ltd of US$63.952 million includes an unrealised foreign exchange loss of US$10.297 million.
The Group acquired an additional US$78.727 million interest in Gemfields Ltd as part of the Gemfields Acquisition during June 2017. The
additional interest acquired was valued at the GGL share price (on the day of each tranche of acceptances) converted at the 1.91 Offer
ratio and the daily US$/ZAR exchange rate.
(2) The unrealised fair value gain on Jupiter of US$0.918 million does not include any foreign exchange as the valuation is denominated in
US$. The realised gain on Jupiter of US$5.337 million does not include any foreign exchange as the cash receipt was denominated in US$.
The Company disposed of 6% of its shares to Jupiter at a price of US$0.40 per share. The transaction completed on 13 March 2017 with the
Company receiving US$10.1 million.
(3) The unrealised fair value loss on SPM of US$16.344 million does not include any foreign exchange as the valuation is denominated in US$.
Jupiter Mines Limited ("Jupiter") - equity
Nature of investment: The Group holds an equity interest in Jupiter. Jupiter is based in Perth, Western Australia, and its main asset is a
49.9% interest in the Tshipi manganese joint venture in South Africa.
Date of valuation: 30 June 2018.
Fair value methodology: Market Approach - Listed Share Price.
The Group's interest in Jupiter is valued at the 30 June 2018 mid-price of AUD 0.385 per share, translated at the closing rate of
US$1/AUD 1.350.
No secondary valuation methodologies have been considered for the Company's investment in Jupiter as it is a listed equity in an active
market.
Sedibelo Platinum Mines Limited ("Sedibelo Platinum Mines" or "Sedibelo" or "SPM") - equity
Nature of investment: The Group holds an equity interest in SPM, a producer of Platinum Group Metals ("PGMs") with interests in the
Bushveld Complex in South Africa.
Date of valuation: 30 June 2018.
Fair value methodology:
Income Approach - Discounted Cash Flow applying Directors' estimate.
The Directors have estimated that the value of SPM is US$1.5 billion; the Group's indirect 6.54% interest has therefore been valued at
US$98 million.
The Directors have considered a range of sources in determining the valuation of SPM. The primary source used by the Directors in their
valuation is a valuation report prepared by an independent third party as at 31 December 2017 (the "Valuation Report"). The Valuation
Report is an update of the valuation section of a competent person's report (the "CPR") prepared by the same independent third party. The
CPR has an effective date of 31 December 2016. The Valuation Report is the latest available report used by the Directors in their valuation
of SPM at 30 June 2018.
The purpose of the Valuation Report was to update key inputs of the CPR's discounted cash flow ("DCF") model, which was used to value SPM's
key assets. The key updates to the DCF analysis include changes to the life-of-mine model, adjustments to the start dates of development
projects, an update to the mineral ounces outside of the mine plan, as well as an update to the certain key variables, PGM price
assumptions, forecasted exchange rates and the Weighted Average Cost of Capital ("WACC").
The preferred valuation of SPM given by the Valuation Report is US$2.4 billion; the Group's indirect 6.54% interest on this basis would be
valued at US$155 million. The DCF analysis is based on a number of predictions and uncertainties, including forecast PGM prices, production
levels, costs, exchange rates and the consolidated mine plan. Changing any of these assumptions may materially affect the implied valuation.
The Directors note that the valuation of SPM is sensitive to various key inputs, in particular the platinum price, the palladium price, the
discount rate and the long-term exchange rate.
The Directors note that the higher political risk associated with South Africa including the release of the revised Mining Charter III
during the period. The release of the revised draft of the Mining Charter III contributed to credit rating agencies downgrading South
Africa's credit rating during 2017. This implies that a higher WACC should be used in the DCF model, which further implies a reduction in
the valuation given by the Valuation Report. The post-tax USD real WACC used in the Valuation Report for the DCF valuations of SPM's key
assets is 8.10%. Given the political uncertainty, the Directors believe that a higher USD WACC could be justified and have applied a WACC
of 9%.
The Directors further note that the long-term US$/ZAR exchange rate used in the DCF model of US$1/ZAR14.50 differs from the Directors'
long-term view of US$1/ZAR13.25. Whilst the sensitivity tables in the Valuation Report do not include these exact values, the independent
third party has confirmed (via an executive at SPM) that using these assumptions (i.e. a long-term exchange rate of US$1/ZAR13.25 and a
post-tax USD real WACC of 9%) in the model that underpins the Valuation Report, results in a value of approximately US$1.7 billion; the
Group's indirect 6.54% interest on this basis would be valued at US$111 million.
The Valuation Report used information from a range of sources to forecast PGM prices. The platinum price was forecast to be within a range
of US$1,000 to US$1,350 and the palladium price was forecast to be within a range of US$973 to US$1,030 over SPM's life-of-mine. Using a
range of broker forecasts at 30 June 2018, the platinum price is forecast to be within a range of US$974 to US$1,144 and the palladium
price is now forecast to be within a range of US$1,006 to US$1,034 over SPM's life-of-mine. Platinum, the key PGM produced by SPM, has
traded below its forecast price for the first six months of 2018 and long-term forecasts for platinum and palladium are approximately 16%
and 1% lower respectively than those used in the Valuation Report. The Directors note that a discount to the valuation given by the
Valuation Report is implied, with a decrease to the long-term platinum and palladium price and are comfortable that applying a discount of
approximately 13% (to the US$1.7 billion valuation) to reach the US$1.5 billion is not unreasonable.
All these factors imply that a significant discount could be applied to the Valuation Report's preferred valuation of US$2.4 billion.
Accordingly, whilst the Directors note that any adjustment made to the Valuation Report is subjective, they have valued SPM at US$1.5
billion, approximately a 37% discount to the Valuation Report's preferred valuation.
The Group's valuation of SPM has been determined taking into account a consensus of recent analyst reports for forecast PGM prices for 2018
and beyond. For the purposes of the disclosures required by IFRS13 Fair Value Measurement ("IFRS13"), and using sensitivity analysis
included within the Valuation Report, if the forecasted PGM prices were 10% lower than the current consensus for forecast PGM prices,
presuming all other indicators and evidence were unchanged, the valuation of SPM included in the balance sheet would decrease from US$98
million to US$79 million. The related fair value decrease of US$19 million would be recognised in profit and loss. The Directors consider
this movement in PGM prices to not be unreasonable.
If the forecasted long-term exchange rate was 9% lower than the Directors' long-term view of US$1/ZAR13.25, presuming all other indicators
and evidence were unchanged, the valuation of SPM included in the balance sheet would decrease from US$98 million to approximately US$90
million. The related fair value decrease of US$8 million would be recognised in profit and loss. The Directors consider this to be a
realistic potential movement in the long-term exchange rate. Alternatively, if the post-tax real USD WACC used in the CPR was 10% compared
with the Directors' estimated post-tax real USD WACC of 9% (i.e. 11% higher), presuming all other indicators and evidence were unchanged,
the valuation of SPM included in the balance sheet would decrease from US$98 million to approximately US$86 million. The related fair value
decrease of US$12 million would be recognised in profit and loss. The Directors consider this to be a realistic potential movement in the
WACC in the current environment. Production is also an important factor in determining the valuations. An adjustment to production levels
would also have consequent effects on variable costs, thereby reducing the impact on fair value versus the pricing analysis. The CPR does
not provide such sensitivity analysis for changes in production.
Other considerations:
Directors have also considered a market comparable analysis comparing the Enterprise Values of SPM's peer group with their total mineral
reserves and resources base. The implied valuation given by SPM's mineral reserves and resources (price per 4E ounce) data supports the
Directors' valuation of US$1.5 billion.
11. INVENTORY
30 June 2018 31 December 2017 30 June 2017
US$'000 US$'000 US$'000
Rough and cut and polished gemstones 64,445 78,622 -
Faberge inventory 34,778 35,482 -
Fuel and consumables 5,645 4,709 -
104,868 118,813 -
The total provision made against inventory as at 30 June 2018 is US$3.2 million (31 December 2017: US$3.3 million, 30 June 2017: US$Nil).
12. TRADE AND OTHER RECEIVABLES
30 June 2018 31 December 2017 30 June 2017
US$'000 US$'000 US$'000
Trade receivables 27,964 5,948 -
VAT receivable 12,593 11,227 -
Other receivables 6,261 10,323 1,253
46,818 27,498 1,253
Trade receivables of US$27.9 million at 30 June 2018 (31 December 2017: US$5.9 million, 30 June 2017: US$Nil) primarily relate to auction
receivables from the MRM auction held in June 2018.
13. BORROWINGS
30 June 2018 31 December 2017 30 June 2017
Interest rate Maturity US$'000 US$'000 US$'000
Non-current interest-bearing
loans and borrowings
Barclays Zambia US$20 million revolving
credit facility US$ LIBOR + 5.50% 2020 20,000 20,000 -
Barclays Mauritius US$15 million revolving
credit facility US$ LIBOR + 5.50% 2020 15,000 15,000 -
Gordon Brothers US$20 million loan
facility US$ LIBOR + 6.10% 2020 - 17,127 -
BCI(1) US$15 million finance
leasing facility US$ LIBOR + 3.75% 2019 - 7,165 -
Total non-current borrowings 35,000 59,292 -
30 June 2018 31 December 2017 30 June 2017
Interest rate Maturity US$'000 US$'000 US$'000
Current interest-bearing
loans and borrowings
BCI(1) US$15 million overdraft
facility US$ LIBOR + 3.75% 2019 14,226 - -
BCI(1) US$15 million finance
leasin facility US$ LIBOR + 3.75% 2018 - 3,328 -
Gordon Brothers US$20 million loan
facility US$ LIBOR + 6.10% 2020 - 850 -
Total current borrowings 14,226 4,178 -
(1) BCI - Banco Comercial E De Investimentos, S.A.
Barclays Zambia
In August 2014, Kagem Mining Limited entered into a US$20 million revolving credit facility with Barclays Bank Zambia plc. The facility
bears interest at a rate of three-month US LIBOR plus 4.50%. The facility is due for repayment 36 months after the date of the first
drawdown of facility. In February 2017, the facility was renewed for a further three years, expiring in 2020, with an interest rate of
three months US$ LIBOR plus 5.50% per annum. The revolving facility has no required monthly repayments but is repayable in full at the end
of 36 months from the first drawdown date. As at 30 June 2018, US$20 million was fully drawn.
The loan facility was subject to four financial covenants, which were tested half yearly. As at 30 June 2018, Barclays Bank Zambia has
waived the covenant testing period as discussions over the re-financing of these facilities were ongoing.
Barclays Mauritius
In February 2017, Kagem Mining Limited entered into a US$15 million facility with Barclays Bank Mauritius Limited. The facility attracts
interest at US$ LIBOR plus 5.50% and is repayable in full at the end of 36 months from the first drawdown date. As at 30 June 2018,
US$15 million was fully drawn.
The loan facility was subject to four financial covenants, which were tested half yearly. As at 30 June 2018, Barclays Bank Mauritius has
waived the covenant testing period as discussions over the re-financing of these facilities were ongoing.
Security for the facilities comprises a fixed and floating charge over all of Kagem's net assets, equivalent to the total amount
outstanding under the facility and a corporate guarantee from Gemfields Ltd.
BCI
(i) In June 2016, Montepuez entered into a US$15 million unsecured overdraft facility, with Banco Comercial E De Investimentos, S.A. This
is a rolling facility which renews annually provided that terms and conditions are met, attracting interest of three-month US$ LIBOR plus
3.75% per annum. At 30 June 2018, US$14.2 million was outstanding. The facility is secured by a blank promissory note undertaken by
Montepuez and a corporate guarantee by Gemfields Mauritius Limited, a 100% subsidiary of the Group.
(ii) In June 2016, Montepuez entered into a US$15 million financing leasing facility, with BCI. This is a renewable facility with a
drawdown period of 18 months and the amounts drawn down were repayable over a maximum period of 48 months. The facility had an interest
rate of three-month US$ LIBOR plus 3.75% per annum. During the period the loan was repaid in full, and at 30 June 2018, US$Nil million was
outstanding.
Barclays Mozambique
In April 2016, Montepuez entered into a US$15 million unsecured overdraft facility, with Barclays Bank Mozambique S.A. The facility has an
interest rate of three-month US LIBOR plus 4% per annum. The outstanding balance as at 30 June 2018 was US$Nil. Gemfields Ltd issued a
corporate guarantee for the facility. The full facility was available at 30 June 2018.
The proceeds of the facilities from Barclays Bank Mozambique S.A. and BCI will enable Montepuez to finance its capital expenditure
requirements for the Montepuez ruby deposit in Mozambique and provide additional working capital.
Gordon Brothers
In May 2017, Faberge UK Limited entered into a US$25 million loan facility with Gordon Brothers Finance Company and GB Europe Management
Services Limited jointly. During the year to 31 December 2017, Faberge UK Limited made the decision to lower the facility to US$20 million.
The facility attracted interest at a rate of three-month US$ LIBOR plus 6.1%, with a LIBOR floor of 1.25%, and was secured against the
value of the Faberge brand and intellectual property as well as gemstones, jewellery, and watch inventory. During the period, the loan was
fully repaid.
14. PER SHARE INFORMATION
NAV per share and Earnings/(Loss) Per Share ("EPS" or "LPS") are key performance measures for the Group. NAV per share is based on net
assets divided by the number of ordinary shares in issue at 30 June 2018. EPS/(LPS) is based on profit/(loss) for the year divided by the
weighted average number of ordinary shares in issue during the year.
Headline Earnings/(Loss) Per Share ("HEPS" or "HLPS") is similar to EPS/(LPS), except that attributable profit specifically excludes
certain items, as set out in Circular 4/2018 "Headline earnings" ("Circular 4/2018") issued by the South African Institute of Chartered
Accountants("SAICA") during the period. For the six months ending 30 June 2018 and the comparative period HEPS is the same as EPS, so has
not been disclosed separately.
Earnings per share
The Group's EPS/(LPS) is as follows:
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Profit for the year attributable to owners of the parent - US$'000 12,343 (81,185)
Weighted average number of shares in issue(1) 1,318,856,096 768,936,425
Earnings per share - US$ 0.01 (0.11)
(1) At 30 June 2018 the Company had a see-through interest in itself of 117,342,899 shares or 8.20%. These shares have been removed in the
calculation of weighted average number of shares in issue.
Diluted earnings per share
The Group's Diluted EPS is as follows:
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Profit for the year attributable to owners of the parent - US$'000 12,343 (81,185)
Diluted weighted average number of shares in issue 1,318,856,096 768,936,425
Earnings per share - US$ 0.01 (0.11)
There are no dilutive shares, as the average share price during the period was below the strike price of all exercisable share options.
Therefore EPS is equal to Diluted EPS.
NAV per share
The Group's US$ NAV per share is as follows:
1 January 2018 1 January 2017
to 30 June 2018 to 30 June 2017
US$'000 US$'000
Net assets - US$'000 626,286 363,064
Number of shares in issue (1) 1,314,342,654 1,086,000,929
NAV per share - US$ 0.48 0.33
(1) At 30 June 2018 the Company had a see-through interest in itself of 117,342,899 shares or 8.20%. These shares have been removed in
the calculation of shares in issue.
15. COMMITMENTS AND CONTINGENCIES
Potential legal liability
In April 2018, Gemfields Ltd was served with a claim coordinated by a UK-based law firm (the 'Firm') in the English High Court alleging
human rights abuses at MRM and seizure of land without due process. The Firm represents 112 claimants from the vicinity of MRM's mining
concession near Montepuez, northern Mozambique. Gemfields Ltd is working with its advisers in England and Mozambique to ensure the claim
is fully investigated, and such investigations are now at an advanced stage. Gemfields Ltd and the Firm have agreed a stay of the
proceedings until 17th December 2018, after which Gemfields Ltd will be required to serve its defence to the claim. At this stage,
Gemfields Ltd intends to robustly to defend itself against the claim.
16. EVENTS OCCURING AFTER THE END OF THE PERIOD
Emerald Auction held in Lusaka, Zambia from 30 July to 2 August 2018
Post the period end, a predominantly commercial quality auction was held in Lusaka in July 2018. Revenues of US$10.9 million were achieved
which went further to evidence the continuing demand for emeralds. The auction takes Kagem's total auction revenue since July 2009 to
US$527 million.
Granting of share options
On 20 July 2018, 44,790,0001 share options were granted to employees across the Group under the Share Option Plan approved by shareholders
on 26 June 2017. The share options were awarded at a ZAR2.30 strike price, being the 1 day-Volume Weighted Average Price on 19 July 2018.
One-fifth of the options granted vested immediately and the balance vest annually on 20 July over the following four years, during which
the grantee has to remain in employment.
(1) Out of the 44,790,000 options granted, 7,000,000 options have been granted to Mr David Lovett. The options granted to David Lovett have
not yet been accepted.
Jupiter dividend
On 17 September 2018, Jupiter announced the details of an interim dividend to return approximately AUD98 million to its shareholders. All
Jupiter shareholders are entitled to an 'unfranked' dividend of AUD0.05 per share.
The Group, as an 7.44% shareholder in Jupiter, has the right to a dividend of AUD7.3 million or US$5.3 million, translated at the
US$/AUD 1.3835 exchange rate on 27 September 2018. The Group accepted its right to the dividend and is due payment on 10 October 2018.
Resignation and appointment of new Company Secretary
Vistra Fund Services (Guernsey) Limited resigned as the Company Secretary and Administrator of GGL effective 28 August 2018. Mourant
Governance Services (Guernsey) Limited have been engaged by the Company to provide Guernsey corporate administration services from 28 August
2018 and Mr Toby Hewitt has been appointed as Company Secretary from 27 September 2018.
Change in Registered Office
The registered office of GGL changed effective 28 August 2018 to PO Box 186, Royal Chambers, St. Julian's Avenue, St.
Peter Port, Guernsey, GY1 4HP.
Approval of Interim Conslidated Financial Statements
The Interim Consolidated Financial Statements were approved by the Directors and authorised for issue on 27 September 2018.
INDEPENDENT REVIEW REPORT
Introduction
We have been engaged by the Group to review the condensed set of financial statements in the half-yearly financial report for the six
months ended 30 June 2018 which comprises the condensed consolidated income statement and the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in
equity, the condensed consolidated statement of cash flows and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the rules of the Johannesburg Stock Exchange. As disclosed in note 1, the
annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board ("IASB"), the financial reporting guides issued by the Accounting Practices Committee of the
South African Institute of Chartered Accountants (the "SAICA Reporting Guides") and the financial reporting pronouncements issued by the
Financial Reporting Standards Council of South Africa (the "FRSC Pronouncements"). The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial
Reporting", as issued by the IASB, and the Johannesburg Stock Exchange Listings Requirements.
Our responsibility
Our responsibility is to express to the Group a conclusion on the condensed set of financial statements in the half-yearly financial report
based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the Group in meeting its responsibilities in respect
of half-yearly financial reporting in accordance with International Accounting Standard 34, as issued by the IASB, and the Johannesburg
Stock Exchange Listings Requirements and for no other purpose. No person is entitled to rely on this report unless such a person is a
person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity", issued by the International Auditing and Assurance Standards Board. A review of
interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with
International Accounting Standard 34, as issued by the IASB, and the Johannesburg Stock Exchange Listings Requirements.
BDO LLP
Chartered Accountants
55 Baker Street
London W1U 7EU
United Kingdom
27 September 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
 
GEMFIELDS GROUP LIMITED (formerly Pallinghurst Resources Limited) | (Incorporated in Guernsey) | (Guernsey registration number: 47656) |
(South African external company registration number 2009/012636/10) | Share code on the JSE: GML | Share code on the BSX: GML/BH |
ISIN: GG00BG0KTL52 | ("Gemfields" or the "Company") EXECUTIVE DIRECTORS: Sean Gilbertson(1), David Lovett(2) | NON-EXECUTIVE DIRECTORS:
Brian Gilbertson(3), Dr Christo Wiese, Martin Tolcher, Lumkile Mondi, Kwape Mmela, Erich Clarke | The following people were Directors
during the period: Arne H. Frandsen(4), Andrew Willis(4) | REGISTERED OFFICE(5) Gemfields Group Limited, PO Box 186, Royal Chambers,
St. Julian's Avenue, St Peter Port, Guernsey GY1 4HP, Channel Islands|LEGAL ADVISOR (Guernsey) Mourant Ozannes, 1 Le Marchant Street,
St Peter Port, Guernsey GY1 4HP, Channel Islands | LEGAL ADVISOR (Bermuda) Appleby Global, Canon's Court, 22 Victoria Street, PO Box
HM 1179, Hamilton HM EX Bermuda | JSE SPONSOR: Investec Bank Limited, 100 Grayston Drive, Sandown, Sandton, 2196, South Africa | SOUTH
AFRICAN TRANSFER SECRETARY: Computershare Investor Services (Pty) Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196, South
Africa | AUDITOR: BDO LLP2, 55 Baker Street, London, W1U 7EU JSE | COMPANY SECRETARY(6) Mr Toby Hewitt, 4th Floor, 1 New Burlington Place
London W1S 2HR, United Kingdom | LONDON OFFICE, Gemfields Services Limited(7), 4th Floor, 1 New Burlington Place London W1S 2HR, United
Kingdom | LEGAL ADVISOR (South Africa) ENSafrica, 150 West Street, Sandton, 2196, South Africa | BSX SPONSOR Clarien Investments Limited,
25 Reid Street, 4th Floor, Hamilton HM 11, Bermuda | REGISTRAR AND BERMUDA TRANSFER SECRETARY Computershare Investor Services (Guernsey)
Limited, 1st Floor, Tudor House, Le Bordage, St Peter Port, Guernsey GY1 1DB| | ADMINISTRATION SERVICES (Guernsey)(8) Mourant Governance
Services (Guernsey) Limited, PO Box 186, Royal Chambers, St. Julian's Avenue, St Peter Port, Guernsey GY1 4HP
(1) Sean Gilbertson became Chief Executive Office effective 31 March 2018.
(2) David Lovett appointed Chief Financial Officer effective 31 March 2018.
(3) Brian Gilbertson became Non-Executive Chairman effective 1 January 2018.
(4) Resigned 31 March 2018.
(5) Changed effective 28 August 2018.
(6) Previously Vistra Fund Services (Guernsey) Limited.
(7) Previously Pallinghurst Resources UK Limited.
(8) Previously Vistra Fund Services (Guernsey) Limited.
Date: 28/09/2018 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
