Gemfields Group Earnings Call Highlights Struggle and Hope

Gemfields Group ((PLLHF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Gemfields Group’s latest earnings call painted a mixed picture, with isolated operational bright spots overshadowed by a steep revenue drop and mounting external headwinds. Management stressed stabilization, deleveraging, and getting key projects back on track, but acknowledged that negative earnings, cash outflows, and persistent disruptions are weighing heavily on the near‑term outlook.

Kagem Shines as Operational Anchor

Kagem remained the group’s standout asset, generating $78 million of auction revenue in 2025, broadly matching 2024 and delivering almost $40 million after operating costs and CapEx. Strong production and an improved emerald market in the second half underpinned the performance, with the next auction in May expected to further test demand resilience.

PP2 Throughput Proves Long-Term Potential

Management highlighted progress at Montepuez Ruby Mining’s second processing plant (PP2), which has demonstrated and even exceeded its design throughput of 400 tonnes per hour in the wet circuit. With the roughly $70 million project now substantially complete and CapEx tapering, PP2 remains central to future growth in ruby processing capacity once fully stabilized.

Early 2026 Ruby Auctions Signal Recovery

The February 2026 ruby auction provided a rare bright spot, generating $53 million and surpassing the whole of 2025’s ruby revenue by about $3 million. This early sign of improving market reception for rubies suggests that pricing and buyer appetite could be turning a corner after a difficult trading period.

Balance Sheet Bolstered by Capital Moves

Gemfields has taken decisive capital measures, completing a $30 million rights issue in June 2025 and selling Fabergé for $50 million in August. These actions lifted gross cash to $64 million at year‑end and, including auction receivables, reduced net debt from $39 million to around $18.7 million, giving the group more breathing room.

Cost Discipline and Controlled CapEx at Kagem

Operating expenses fell about 17% to $129 million year‑on‑year, helped by strict cost control and a temporary suspension of Kagem operations in the first half of 2025. Management also emphasized disciplined capital allocation, keeping CapEx at Kagem contained while preserving the mine’s ability to capitalize on market recovery.

Revenues Slide to Lowest Level in a Decade

Group revenue fell to $135 million in 2025 from $199 million a year earlier, a roughly 32% decline, making it the weakest auction year since 2013. With 2025 auction receipts only 41% of the 2022 peak, the earnings call underlined how far the business has retreated from its recent high‑water mark.

Margins Squeezed and Cash Flow Turns Negative

Profitability came under heavy pressure, with EBITDA down to $6.25 million and adjusted EPS slipping into the red at minus $0.013. The group also posted a free cash outflow of $29 million, mainly driven by the fall in revenues and ongoing investment in MRM, underscoring the funding strain despite cost cuts.

PP2 Delays Curtail Ruby Production

Despite throughput success in tests, PP2’s final commissioning is now delayed from June 2025 to the third quarter of 2026, reflecting significant operational issues. The plant is not yet achieving the 20 operating hours per day target, with choking, blinding, and contamination problems constraining ore processing and limiting ruby output.

External Shocks Batter Demand and Operations

Management detailed an unusually severe mix of external disruptions, including weaker Chinese luxury demand, tariff shocks in April 2025, and competitor dumping of emeralds at low prices. Geopolitical conflicts, a direct attack on MRM and subsequent illegal mining, logistics bottlenecks in Mozambique, and Zambia’s surprise 15% export duty—which forced a temporary Kagem shutdown—further disrupted operations.

VAT Blockages Tighten Working Capital

Gemfields continues to struggle to recover VAT from Zambia and Mozambique, with receivables peaking at about $45 million. The inability to unlock this cash has intensified working capital pressure and reduced financial flexibility at a time when the group is already dealing with lower revenues and project delays.

Fuel Dependence Raises Cost and Supply Risks

The company flagged growing risks from its heavy reliance on diesel generation, with storage of around 300,000 liters at MRM and roughly twice that at Kagem. Early signs of rising diesel prices and potential supply issues in Zambia are expected to push operating costs higher, adding yet another layer of margin pressure.

Guidance Focuses on Stabilization and Deleveraging

Looking ahead, management’s guidance centers on stabilizing operations, completing PP2 commissioning by the third quarter of 2026, and rebuilding auction revenue and profitability. With CapEx expected to taper aside from some fleet purchases, upcoming emerald and ruby auctions—starting with a higher‑quality emerald sale in Bangkok in May—will be crucial to strengthening cash generation and continuing deleveraging.

Gemfields’ earnings call showed a company in transition, balancing isolated operational gains against a challenging market and project setbacks. While Kagem’s resilience, emerging ruby recovery, and a stronger balance sheet offer reasons for cautious optimism, investors will be watching closely to see if management can convert this foundation into sustained revenue growth and restored profitability.