Gemfields Launches $30M Rights Issue to Bridge Funding Gap

Johannesburg- and London-listed Gemfields has announced plans to raise approximately $30-million through a fully committed and underwritten rights issue, subject to shareholder approval.

The company intends to issue 556.2-million new shares, marking a crucial step to strengthen its short-term financial position amid challenging market conditions.

CEO Sean Gilbertson explained that Gemfields had explored external financing options for its wholly owned luxury jewellery brand Fabergé to mitigate an anticipated working capital shortfall.

However, these efforts failed to secure timely funding. As a result, the board has recommended proceeding with the rights issue, pending shareholder and regulatory approvals.

The rights issue will be fully underwritten by the company’s two largest shareholders: Assore International Holdings (AIH) and Rational Expectations. If approved at an upcoming extraordinary general meeting (EGM), the issue will proceed at:

• UK price: 4.22 pence per share
• South African price: R1.07 per share
• Ratio: Ten new shares for every 21 existing shares

In addition, AIH and Rational have entered into pre-funding agreements with Gemfields, committing to provide immediate loans equivalent to their respective pro rata entitlements:

• AIH: $8.74-million
• Rational: $4.65-million

These loans will offer an immediate injection of working capital ahead of the rights issue’s completion.

For the year ended December 31, 2024, Gemfields reported revenue of $213-million, a decline from $262-million in 2023. This drop was attributed to:

• A weakened emerald market in the second half of 2024
• Lower premium ruby production at its Montepuez Ruby Mining (MRM) operation in Mozambique

Despite this, Gemfields confirmed that construction of a second processing plant at MRM is progressing on schedule and within budget, with completion anticipated by the end of H1 2025.

At the Kagem emerald mine in Zambia, mining remains suspended. Emerald production continues through processing of pre-mined stockpiles, though with a lower yield of premium-grade emeralds.

Operating costs were reduced to $172-million, with further cost savings expected in 2025. However, the company recorded significant impairment charges, particularly at Kagem, due to market weakness and halted operations.

Gemfields posted an adjusted headline loss of $0.018 per share, compared to earnings of $0.015 per share in 2023.

Gilbertson described 2024 as more challenging than anticipated. Key market disruptions included:

• Oversupply of Zambian emeralds at discounted prices by a competing producer
• Clashing auction dates, further weakening the emerald market outlook for H1 2025
• Lower-than-expected ruby output at MRM
• A global downturn in the luxury and gemstone markets, driven by economic pressures in China and geopolitical instability

Gemfields also faced operational setbacks from civil unrest in Mozambique, following the country’s October 2024 general election, which led to temporary mining suspensions at MRM for security reasons.

Gilbertson acknowledged that the group’s increased risk profile had contributed to a sharp decline in Gemfields’ share price. Nevertheless, he emphasized that the company views current challenges as temporary.

Cost-cutting measures were implemented across the group in late 2024, including the suspension of mining at Kagem, to help preserve capital.

Despite short-term difficulties, Gilbertson remains optimistic:

“Gemfields’ mining operations are world-class assets, and our strategic objectives remain intact. The second processing plant at MRM is expected to triple processing capacity, substantially boosting ruby output and revenues.

“While our funding strategy originally did not include shareholder contributions, the scale of concurrent challenges necessitated a shift.

With support from our shareholders and committed teams, I am confident that Gemfields is well positioned to enter a new phase of growth once we navigate this near-term funding gap.”

The proposed rights issue, if approved, is set to play a pivotal role in stabilising Gemfields’ financial position and supporting its long-term growth ambitions in the coloured gemstone sector.

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