Precious gemstones miner Gemfields (LON: GEM) (JSE: GML) said on Monday it expected to swing to an interim net loss for the six months ended on June 30 as the company had only been able to hold one sale due to the covid-19 pandemic.
The company, which returned to the London Stock Exchange’s market for juniors in February, expects to report a net loss after tax of $56.7 million in the first half of 2020. The figure sharply contrasts with the $12.4 million profit reported during the same period last year.
Gemfields cancelled auctions originally scheduled for May, June and August due to global travel restrictions from the global pandemic.
Before that it was able to hold one sale, in February, which yielded $11.5 million.
The company noted it remained unable to provide reliable guidance about when it might next be able to host auctions, or generate meaningful revenue from gemstone sales. It attributed the uncertainty to travel, quarantine and congregating restrictions put in place to mitigate the spread of covid-19.
Gemfields also said it will write down its luxury Fabergé jewellery brand by $11.5 million, due to lower than expected sales and a general downturn in the market.
A review of the company’s shareholding in Sedibelo Platinum Mines also will also result in a write-down of between $12.5 million and $45 million, Gemfields said.
The effect of the novel coronavirus pandemic on the company’s upcoming auctions is not the only challenge Gemfields has had to face this year. In early February, 11 illegal miners died at its Montepuez mine in Mozambique, following a series of tunnel collapses over three days.
About 800 people had trespassed in previous days and, despite mine staff’s warnings, began undercutting the outer edge of the Maninge Nice 3 mining pit, which led to several ground collapse incidents.
Weeks later, attackers torched a vehicle and injured at least three workers and a security contractor.
Montepuez is the world’s richest known ruby mine, which generated revenue of almost $122 million in 2019.
The operation is located in the northern Cabo Delgado province, one of Mozambique’s poorest regions, home to many unemployed young people.
The mine has faced incursions in the past, and Gemfields last year chose to pay £5.8 million (about $7.6m) to community members residing near the Mozambican mine, in a “no admission of liability” move that settled a claim of human rights abuses brought against it by locals.
Gemfields also operates the Kagem emerald mine in Zambia.
The company has recently stepped up efforts to market its emeralds and rubies in China after a report highlighted the “huge potential” for ethically sourced gems in that market.