Cash preservation ahead of December auctions

Gemfields Group 3 August 2020 Update
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Gemfields Group

Cash preservation ahead of December auctions

COVID-19 update

Metals & mining

3 August 2020

Price

ZAR1.31

Market cap

ZAR1,534m

ZAR16.51/US$

Net cash (US$m) at 30 June 2020

9.3

Shares in issue

1,171.1m

Free float

72%

Code

GML/GEM

Primary exchange

Johannesburg

Secondary exchange

AIM

Share price performance

%

1m

3m

12m

Abs

(17.6)

(22.0)

(18.1)

Rel (local)

(19.6)

(29.6)

(16.6)

52-week high/low

ZAR2.14

ZAR1.31

Business description

Gemfields is a world-leading supplier of responsibly sourced coloured gemstones. It owns 75% of Montepuez Ruby Mining in Mozambique, 75% of Kagem Mining in Zambia, the Fabergé jewellery business and an investment in Sedibelo Platinum.

Next events

H1 results

September 2020

Analyst

Alison Turner

+44 (0)20 3077 5700

Gemfields Group is a research client of Edison Investment Research Limited

Gemfields has provided an update on the impact of COVID-19 on its business. Mining remains suspended at both MRM and Kagem and will not resume before the end of September and October, respectively. The company hopes to hold its first auctions since February in December, but that remains subject to uncertainty given travel restrictions. Gemfields ended June with cash of US$53.6m and net cash of US$9.3m, which, together with cost-cutting measures, positions it well to continue to weather the storm until the planned December auctions.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

206.1

(22.5)

(2.6)

0.0

N/A

N/A

12/19

216.2

55.9

1.3

0.0

6.4

N/A

12/20e

62.1

(38.0)

(2.7)

0.0

N/A

N/A

12/21e

212.4

27.4

(0.0)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Auction sales now planned for December

In April, Gemfields guided that because of COVID-19 it would be unable to hold May emerald and June ruby auctions, and the next auction sales were planned for early Q4. That has now been further deferred, with Gemfields planning a high-quality emerald auction and a ruby auction in December, if possible. Only one auction took place in H1 and group revenue totalled US$15.0m (down 83% y-o-y).

Gemfields’ mines remain suspended until Q4

Mining operations at both Kagem emerald mine in Zambia and Montepuez Ruby Mining (MRM) in Mozambique remain suspended and will not resume until at least the end of September at MRM and the end of October at Kagem. At both Kagem and MRM there is already sufficient gemstone inventory to supply the planned December auction sales. Gemfields has significantly cut costs to preserve cash as far as possible during this period, with group cash costs reduced from an average of US$12m a month in FY19 to less than US$5m a month in June 2020.

We now forecast 2020 closing net debt of US$11m

Given the prolonged COVID-19 impact, our forecasts now move closer to our previous ‘slower recovery’ scenario rather than our previous ‘central case’, albeit with some additional cost savings. We now forecast an FY20 EBITDA loss of US$10m (previously an EBITDA profit of US$11m in our central case and a US$14m loss in our slower recovery scenario). We expect Gemfields to end 2020 with net debt of US$11m (previously net cash of US$4m in our central case but US$21m net debt in our slower recovery scenario).

Valuation: Sum-of-the-parts of US$349m or 23p/share

We value Gemfields using a discounted cash flow sum-of-the-parts model. Our updated valuation is US$349m (23p or ZAR4.93 per share), compared to a previous central case valuation of US$459m and slower recovery case valuation of US$339m.

COVID-19 update

Gemfields has provided an update on its operations and corporate position, focusing on the company’s response to COVID-19. Operations at Kagem and MRM have been suspended since March and April, respectively, and Gemfields has now extended the shutdown at MRM until 30 September and at Kagem until 31 October. Gemfields intends, if possible, to hold an emerald (higher quality) and a ruby (mixed quality) auction in December. The company ended June 2020 with cash of US$53.6m and net cash of US$9.3m. Gemfields is working to reduce costs and thus cash burn while operations are suspended; however, if auctions cannot be held in December as planned, Gemfields may need to look at options to secure additional funding.

Biggest COVID-19 risk is the inability to run gemstone auctions

Gemfields generates more than 90% of its revenues from emerald and ruby auctions usually comprising two high-quality (HQ) emerald auctions (May and November, usually in Singapore), two commercial-quality (CQ) emerald auctions (February and August, usually in Lusaka) and two mixed-quality (MQ) ruby auctions (June and December, usually in Singapore). The challenge from a practical perspective is that these auctions rely on customers travelling from multiple countries to carefully inspect the stones and determine the value of their bids. This process cannot take place remotely without providing the customers physical access to the stones. For Gemfields to hold auctions thus requires the lifting of worldwide travel restrictions to the extent required to allow movement of both stones and customers between countries.

As previously guided, Gemfields held just one gemstone auction in the first half of the year with no May/June auctions held and H1 group revenue totalled US$15.0m (down 83% y-o-y). However, where previously the intention was to hold both emerald and ruby auctions in October, the company now intends to hold an HQ emerald auction and an MQ ruby auction in December. MRM presently has sufficient inventory to support one MQ ruby auction and Kagem presently has sufficient inventory to support one HQ and one CQ emerald auction. As such the planned December auctions are not dependent on the resumption of production by the fourth quarter.

Rising COVID-19 case numbers in a number of countries globally have seen renewed border closures and/or quarantine requirements recently, and thus as yet there is uncertainty as to when auctions may be held. The biggest risk for Gemfields currently is that significant travel restrictions still remain in place in December preventing auctions from being held this year.

Holding auctions in December rather than earlier in the quarter would also have a negative impact on closing net cash, as it is normal for a portion of auction revenues to remain as receivables for 30–40 days.

Operational impact: Mines suspended until October/November

All but critical operations at MRM in Mozambique were suspended from 22 April 2020 and are now expected to remain suspended until at least 30 September. Employees not required for critical services have been placed on suspended contracts on reduced remuneration, as have MRM’s board of directors. This has reduced the overall MRM wage bill by 25%. In addition, other cost saving measures have been implemented, reducing cash operating costs from approximately US$2.6m per month in Q219 to circa US$1.8m per month in Q220. Additional cost saving measures recently implemented will further reduce cash burn at MRM. MRM has confirmed 10 cases of COVID-19 (the majority were asymptomatic), and quarantined the affected employees and their closer contacts.

Principal operations at Kagem Emerald Mine in Zambia were suspended from 30 March 2020. The sort house was partially reopened in June 2020 to clear a backlog of sorting, grading and referencing of emeralds. Mining is expected to remain suspended until at least 31 October 2020. Employees not involved in the ongoing delivery of critical services have been placed on reduced remuneration since May 2020, which has reduced the overall wage bill at Kagem by approximately 20%. In total Kagem’s cost saving measures have resulted in cash operating expenditure being reduced from US$3.4m per month in Q219 to US$1.3m per month in Q220. No cases of COVID-19 have been confirmed on site. However, the company is alert to the risk posed by the significant recent rise in COVID-19 cases in Zambia, and particularly in the Copperbelt region.

Fabergé’s direct retail operations at Harrods and in Houston were closed in March but have now reopened, as have the partner-operated monobrand stores in Dubai and Kiev. Most of Fabergé’s multibrand customers have also re-opened and Fabergé is starting to see signs of gradual market recovery. H1 revenues were down 34% y-o-y to US$2.5m. Fabergé has reduced operating costs to US$1.7m in the quarter to June 2020 (versus US$2.4m in Q219).

Strong balance sheet and cost cutting to preserve cash

Gemfields ended 2019 with cash of US$78.2m and net cash of US$25.4m and despite the precipitous fall in revenue in the first half, the company still had cash of US$53.6m and net cash of US$9.3m at the end of June 2020, and the company has a further US$15.6m in undrawn debt facilities. That strong balance sheet position means that Gemfields remains well placed to weather the COVID-19 storm over the remainder of this year. Gemfields has also responded rapidly to cut costs, both at its mines and Fabergé as described above, and also centrally with London employees moved to a four-day week since May. Overall, group monthly cash costs have been reduced from US$12.1m across 2019 to less than US$5m in June 2020 (average monthly cash costs were under US$7m in H120).

Nevertheless, as Gemfields notes in its announcement, if hosting gemstone auctions by the end of December 2020 is unviable, additional cash maintenance measures will be implemented and the company may need to consider its options to raise additional capital.

Forecasts move closer to our ‘slower recovery’ case

In our April note (Still good value under varied COVID-19 scenarios) we considered three possible scenarios for the potential impact of COVID-19 on Gemfields. Our ‘central case’ expected that travel restrictions would ease to the extent required to allow two full-sized emerald (one CQ and one HQ) and one MQ ruby auction in early Q4. While Gemfields still hopes to hold auctions in December, these are now likely to be more selective (smaller) sales. With the global economy still suffering significant disruption from COVID-19 even as we move into the latter part of the year, we also think it now more likely that there will be a longer-term impact on gemstone demand and thus pricing (in line with our previous slower recovery case, which had assumed a 15% reduction in 2020 pricing and a 10% longer-term drop relative to pre-COVID-19 prices). Taking these factors into account, we now forecast 2020 group revenue of US$62m (vs US$102m previously in our central case and US$53m in our slower recovery case).

However, the extended suspension of operations at MRM and Kagem, as well as cost-cutting measures, mean that costs have been reduced more than previously envisaged in either our central or slower recovery cases. Capex has been deferred and we now forecast capex of US$10m against US$16m previously. We now expect Gemfields to end 2020 with net debt of US$11m compared to a previous forecast of net cash of US$4m in the central case and US$21m net debt in our slower recovery scenario.

Our longer-term forecasts are broadly in line with our previous slower recovery scenario, other than minor changes to revenue to reflect a slightly slower start to 2021 and the impact of lower inventory starting balances.

Exhibit 1: Forecast key metrics in different COVID-19 scenarios

Key metrics

New forecast

Prev – central case**

Prev – slower recovery**

Kagem HQ emerald production 2020 (kct)

529

800

759

Kagem revenue 2020 (US$m)

28

41

26

Kagem revenue 2021 (US$m)

75

90

77

Kagem revenue 2022 (US$m)

90

98

90

MRM premium ruby production 2020 (kct)

54

98

91

MRM premium ruby production 2021 (kct)

103

114

109

MRM revenue 2020 (US$m)

27

52

19

MRM revenue 2021 (US$m)

128

136

129

MRM revenue 2022 (US$m)

138

154

138

Faberge revenue 2020 (US$m)

7

9

8

Faberge revenue 2021 (US$m)

10

15

12

Faberge revenue 2022 (US$m)

15

20

16

Group revenue 2020 (US$m)

62

102

53

Cash mining and production costs 2020* (US$m)

(48)

(62)

(58)

Royalties 2020 (US$m)

(4)

(8)

(3)

Selling general and admin (US$m)

(45)

(49)

(45)

Change in inventory 2020 (US$m)

26

28

39

Group EBITDA 2020 (US$m)

(10)

11

(14)

PBT 2020 (US$m)

(38)

(16)

(41)

EPS 2020 (c)

(3)

(1.4)

(3)

Closing net cash (debt) US$m

(11)

4

(21)

Group revenue 2021 (US$m)

212

241

218

Group EBITDA 2021 (US$m)

55

87

79

PBT 2021 (US$m)

27

58

49

EPS 2021 (c)

(0)

2.0

2

Closing net cash (debt) 2021 US$m

(1)

17

(15)

Group revenue 2022 (US$m)

243

273

244

Group EBITDA 2022 (US$m)

87

104

81

PBT 2022 (US$m)

60

76

54

EPS 2022 (c)

2.0

2.8

1

Closing net cash/(debt) 2022 – US$m

14

50

(3)

Source: Edison Investment Research. Note: *Cash mining and production costs plus Faberge COGS. **As described in 28 April 2020 note.


Valuation

As previously, we value Gemfields using a discounted cash flow sum-of-the-parts model (at a 10% discount rate):

Our updated sum-of-the-parts valuation totals US$349m or 23p per share (previously US$459m in our central case and US$339m in our slower recovery scenario).

The rand per share valuation (of interest mostly to South African investors) is negatively affected by the stronger rand (ZAR16.51/US$ vs ZAR18.95/US$ previously) used to translate our predominantly US dollar driven valuation of Gemfields to rand per share.

Exhibit 2: Sum of the parts valuation

New valuation

Previous – central case

Previous – slower recovery

Kagem (75%) – US$m

178

220

173

Montepuez (75%) – US$m

271

321

271

Fabergé – US$m

14

21

8

Sedibelo (6.54%) – US$m

40

40

40

Corporate overheads – US$m

(179)

(179)

(178)

Net cash – US$m (31 December 2019)

25

25

25

Sum of the parts valuation – US$m

349

459

339

Rand per share

4.93

7.44

5.50

Pence per share

23

31

23

Source: Edison Investment Research


Exhibit 3: Financial summary

$m

2016

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

0.0

81.7

206.1

216.2

62.1

212.4

242.6

Cost of Sales

0.0

(44.3)

(123.5)

(118.5)

(53.0)

(122.8)

(117.0)

Gross Profit

0.0

37.3

82.5

97.8

9.1

89.7

125.6

EBITDA

 

(5.9)

30.5

58.9

80.9

(10.2)

54.8

86.6

Operating Profit (before amort. and except.)

 

(5.9)

8.3

28.2

46.1

(36.1)

29.3

61.7

Fair value gains (losses)

50.4

49.5

(41.9)

14.3

0.0

0.0

0.0

Exceptionals

0.0

0.0

(22.6)

13.2

0.0

0.0

0.0

Share-based payments

0.0

(2.7)

(4.2)

(1.7)

(1.5)

(2.0)

(2.0)

Reported operating profit

44.5

55.1

(40.4)

71.9

(37.6)

27.3

59.7

Net Interest

0.0

(2.0)

(8.8)

(4.5)

(1.8)

(1.9)

(1.5)

Joint ventures & associates (post tax)

0.1

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

44.6

55.8

(22.5)

55.9

(38.0)

27.4

60.2

Profit Before Tax (reported)

 

44.6

53.1

(53.9)

67.4

(39.5)

25.4

58.2

Reported tax

(0.0)

(7.6)

(6.5)

(28.2)

4.1

(20.3)

(26.8)

Profit After Tax (norm)

44.6

48.2

(29.0)

27.6

(33.9)

7.1

33.4

Profit After Tax (reported)

44.6

45.5

(60.4)

39.1

(35.4)

5.1

31.4

Minority interests

0.0

(7.2)

(1.8)

(10.8)

2.5

(7.4)

(10.1)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

44.6

41.0

(30.8)

16.9

(31.4)

(0.3)

23.3

Net income (reported)

44.6

38.3

(62.2)

28.4

(32.9)

(2.3)

21.3

Average Shares Outstanding (m)

760

1,039

1,169

1,265

1,169

1,169

1,169

EPS - basic normalised (c)

 

586.1

3.9

(2.6)

1.3

(2.7)

(0.0)

2.0

EPS - normalised (c)

 

5.9

3.9

(2.6)

1.3

(2.7)

(0.0)

2.0

EPS - basic reported (c)

 

5.9

3.7

(5.3)

2.2

(2.8)

(0.2)

1.8

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Revenue growth (%)

NA!

NA

152.4

4.9

(-71.3)

242.3

14.2

Gross Margin (%)

NA!

45.7

40.1

45.2

14.7

42.2

51.8

EBITDA Margin (%)

NA

37.3

28.6

37.4

-16.4

25.8

35.7

Normalised Operating Margin

NA

10.2

13.7

21.3

-58.2

13.8

25.4

BALANCE SHEET

Fixed Assets

 

359.7

639.6

509.7

507.4

495.5

497.8

506.7

Intangible Assets

0.0

49.3

52.3

55.2

55.2

55.2

55.2

Tangible Assets

0.0

378.0

365.0

376.9

360.9

363.3

372.1

Investments & other

359.7

212.2

92.4

75.3

79.4

79.4

79.4

Current Assets

 

7.4

184.1

224.4

276.8

207.4

224.9

245.2

Stocks

0.0

118.8

99.2

110.7

138.1

127.1

126.9

Debtors

1.2

27.5

62.1

87.8

37.0

55.9

61.8

Cash & cash equivalents

1.2

37.8

63.0

78.2

32.3

41.9

56.5

Other

5.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

(0.2)

(37.0)

(60.6)

(75.2)

(28.0)

(45.2)

(48.4)

Creditors

(0.2)

(21.2)

(28.2)

(29.9)

(10.1)

(21.2)

(22.4)

Tax payable

0.0

(7.0)

(1.4)

(17.4)

0.0

(6.1)

(8.0)

Short term borrowings

0.0

(4.2)

(23.2)

(24.8)

(14.8)

(14.8)

(14.8)

Other

0.0

(4.6)

(7.9)

(3.1)

(3.1)

(3.1)

(3.1)

Long Term Liabilities

 

0.0

(169.6)

(123.4)

(130.1)

(130.1)

(130.1)

(130.1)

Long term borrowings

0.0

(59.3)

(30.0)

(28.0)

(28.0)

(28.0)

(28.0)

Other long term liabilities

0.0

(110.3)

(93.4)

(102.1)

(102.1)

(102.1)

(102.1)

Net Assets

 

366.9

617.1

550.1

578.9

544.8

547.5

573.5

Minority interests

0.0

(78.4)

(73.9)

(84.7)

(82.1)

(85.1)

(87.8)

Shareholders' equity

 

366.9

538.7

476.2

494.3

462.7

462.4

485.7

CASH FLOW

Op Cash Flow before WC and tax

(5.9)

30.5

58.9

80.9

(10.2)

54.8

86.6

Working capital

0.5

(9.7)

(29.7)

(25.7)

(13.7)

9.2

(2.5)

Exceptional & other

5.0

0.4

0.3

(8.8)

0.0

0.0

0.0

Tax

(0.0)

(7.6)

(24.4)

(9.7)

0.0

(20.3)

(26.8)

Net operating cash flow

 

(0.4)

13.6

5.1

36.7

(23.8)

43.7

57.3

Capex

0.0

(11.0)

(29.0)

(30.8)

(10.0)

(27.8)

(33.8)

Acquisitions/disposals

0.0

(17.9)

77.4

35.2

0.0

0.0

0.0

Net interest

0.0

(2.3)

(4.4)

(3.3)

(1.8)

(1.9)

(1.5)

Equity financing

0.0

(0.7)

(4.7)

(14.4)

(0.2)

0.0

0.0

Dividends

0.0

(5.0)

(5.9)

0.0

0.0

(4.4)

(7.4)

Other

0.0

(3.4)

(2.9)

(7.8)

0.0

0.0

0.0

Net Cash Flow

(0.4)

(26.6)

35.6

15.6

(35.9)

9.5

14.7

Opening net debt/(cash)

 

0.0

(1.2)

25.7

(9.8)

(25.4)

10.5

1.0

FX

0.0

(0.3)

(0.1)

0.0

0.0

0.0

0.0

Other non-cash movements

1.6

0.0

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

(1.2)

25.7

(9.8)

(25.4)

10.5

1.0

(13.7)

Source: Company, Edison Investment Research

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Gemfields and prepared and issued by Edison, in consideration of a fee payable by Gemfields. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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