LONDON/JOHANNESBURG — Gemfields Group Ltd., the emerald and ruby miner listed in both Johannesburg and London, will seek shareholder approval to raise $30 million through a fully underwritten rights issue as it wrestles with a severe downturn in gemstone markets and operational setbacks across its mining operations.
The company plans to issue approximately 556.2 million new shares, priced at 4.22 pence in the UK and R1.07 in South Africa, on the basis of 10 new shares for every 21 held. The move comes as Gemfields contends with a projected near-term working capital shortfall, a steep drop in revenues, and heightened political risk in key operating regions.
“Management views the present challenges as transient,” CEO Sean Gilbertson said in a statement. “But the scope and scale of the difficulties we have encountered has necessitated a change in approach.”
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Backstopped by Largest Shareholders
The proposed rights issue is fully underwritten by Gemfields’ two largest shareholders—Assore International Holdings (AIH) and Rational Expectations—who have also pre-funded their pro rata entitlements. AIH and Rational are extending bridge loans of $8.74 million and $4.65 million, respectively, providing Gemfields with immediate liquidity pending shareholder approval and the formal launch of the rights issue.
An extraordinary general meeting will be convened to seek shareholder consent.
Fabergé Options Fall Short
Gilbertson said the company had explored alternative funding options, including potential monetization of Fabergé, its wholly owned luxury jewelry brand. But those discussions failed to yield timely or sufficient capital. “The certainty of funds required simply wasn’t there,” Gilbertson acknowledged.
Revenue Falls, Losses Mount
In its 2024 annual report, Gemfields reported a 20% drop in revenue to $213 million, down from $262 million in the prior year. The sharp decline was driven by:
- An oversupplied Zambian emerald market, with rival producers offloading inventory at steep discounts
- Lower-than-expected output of high-quality rubies from Montepuez Ruby Mining (MRM) in Mozambique
- A generally weaker global luxury goods environment, impacted by China’s economic slowdown and rising geopolitical tensions
The company reported an adjusted headline loss of $0.018 per share, reversing adjusted headline earnings of $0.015 per share in 2023.
Operating costs fell to $172 million, and further reductions are forecast for 2025, thanks to a company-wide cost-cutting initiative.
Operational Disruptions and Civil Unrest
Production challenges were compounded by external events. Mining at the Kagem emerald mine in Zambia remains paused, with current emerald output limited to pre-mined stockpile processing. Meanwhile, political unrest in Mozambique—following a contested general election in October 2024—forced a temporary suspension of operations at MRM after an attempted incursion into its residential zone.
“Our increased risk profile was reflected in a significant reduction in our share price,” said Gilbertson.
Despite the turmoil, construction of MRM’s second processing plant remains on schedule, with completion expected by mid-2025. Once operational, the facility is expected to triple processing capacity, significantly boosting ruby output and future revenues.
Strategic Outlook: A Market on Pause, Not Collapse
Gilbertson remains bullish on the long-term fundamentals of the colored gemstone market, describing Gemfields’ core mining assets as “world-class.” He acknowledged that 2024’s market conditions were “more challenging than the company could have anticipated,” but stressed that demand fundamentals are expected to recover.
“I am confident that there is an exciting growth phase for Gemfields on the other side of this near-term funding shortfall,” he said.
Conclusion: Shareholders Back a Transitional Moment
With a committed rights issue and strategic investors stepping up, Gemfields appears poised to ride out a turbulent period marked by market dislocations and regional instability. Investors are betting that the company’s long-term play on ruby and emerald demand—backed by processing expansion and leaner operations—will ultimately deliver.
Still, the road ahead remains uneven. Execution on the Mozambique plant, stability in Zambia, and a rebound in gemstone pricing will be key to restoring earnings momentum—and investor confidence.
