The investment climate in Mozambique, particularly Cabo Delgado – which holds a lot of promise from an investment perspective, in terms of growth opportunities, and is key to job creation – is rapidly declining because of the insurgent attacks in the region which began in 2016, with prevailing indicators that such attacks are unlikely to stop in the near future.

“Multinational integrated oil and gas company Total has pulled out of its gas projects, citing force majeure, owing to the insurgent activity in the area. We understand the company has also appointed contractors to remove its infrastructure,” cites Gilbertson.

Dual-listed Gemfields Group owns the Montepuez ruby mine (MRM), located in the Montepuez district of the northern Cabo Delgado province, a joint venture with Mozambique-registered company Mwiriti.

The current mining environment is challenging, as the team operating in Mozambique has to navigate a complex situation, he says.

In addition to the insurgent attacks, the Covid-19 pandemic and the subsequent lockdowns significantly impacted on the mining industry.

Operations at MRM were suspended from April 2020 to March 2021, which resulted in the mine generating zero revenue in 2020, compared with 2019, when it generated $122-million in ruby auction revenue.

Gemfields’ emerald operation, the Kagem mine, in Zambia, had to deal with a similar scenario, resulting in Gemfields’ groupwide gemstone auction revenues dropping almost 89% to $22.4-million, from 2019’s record high of $201-million.

“The widespread quarantine, travel and congregating restrictions arising because of the pandemic have had a serious impact on Gemfields’ ability to host gemstones auctions in the regular format,” says Gilbertson.

Consequently, logistical hurdles have been a significant challenge for Gemfields’ sales team. A few schedules of emeralds sold at the company’s regular auction in Lusaka in February 2020, prior to the lockdown, could only be successfully delivered to clients in India in October 2020.

Revenue Recovery

To continue with auctions in 2021, despite the continuing challenges of the pandemic, Gemfields has deployed a new online bidding platform, which enables the company to hold multicity mini auctions.

The Adapted Auction Model incorporates a series of sequential mini auctions. It involves bids placed online after multicity, in-person viewings of the gems. The platform has proven to be successful, provides flexibility and serves as a backup to traditional auctions.

The gems are viewed in multiple selected cities, which allows for easier access to viewing the gems, despite travel restrictions. The viewings are spread over several weeks, consequently allowing for physical distancing measures to be implemented.

“The April 2021 ruby auction – the first since December 2019 – comprised seven sequential mini auctions and yielded the third-highest revenue figure of the 14 auctions MRM has held since June 2014,” says Gemfields product and sales MD Adrian Banks.

When the ruby auction results of $58.9-million are combined with the emerald auction results of $31.4 -million, Gemfields’ aggregate auction revenue for 2021 to date is $90.3-million – “a very satisfactory position from which to approach the rest of the year”, he adds.

The strong buying appetite from clients, as well as the prices realised, has been encouraging for Gemfields, which has welcomed the healthy position restored to its balance sheet, notes Banks.

He expects that, as no new rubies were produced by MRM in 2020, this will contribute to a healthy supply and demand situation in 2021.

“Despite the ongoing challenges, the team at MRM remains committed to delivering strong production and successful auctions in the 2021 financial year, maintaining employment for the workforce and delivering financial contributions back to Mozambique,” says Gilbertson.

Meanwhile, MRM retained its workforce during the lockdown with pay levels being reduced during the suspension period of principal operations. Full pay has been restored since operations resumed. The mine has been operating at full scale since the end of last month.

“We are grateful to the Gemfields team worldwide for its ongoing dedication and the sacrifices made. We are equally grateful to our stakeholders, partners and shareholders for their support and patience as we navigate the uncertainty and everchanging conditions. We believe that the decisions taken in 2020 best position the group, and our sales of emeralds and rubies, for an optimal recovery in 2021,” concludes Gilbertson.