Company Information for Gemfields Resources Plc

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AIM; GEM

Company Statement

Gemfields Resources is a leading international coloured gemstone producer, with producing and exploration assets in Zambia and Madagascar. The company seeks to become the leading source of high-quality coloured gemstones through consolidation and vertical integration on an international scale.

Gemfields has a 75% interest in Kagem, which holds the licence for the producing Kagem emerald and beryl mine located in the Fwaya-Fwaya belt, Zambia and adjoining the company's other emerald mining and exploration operations.

The company also holds an option to acquire a worldwide exclusive 15 year licence to use the Fabergé brand name for coloured gemstones (excluding diamonds) and an option to acquire Oriental Mining, which is the holder of, and applicant for, 15 licences for gemstone exploration in Madagascar.

Gemfields has an immediate cash generating business through its interest in the Kagem mine, significant exploration upside and the opportunity to optimise the value of the company's best gemstones through the use of the Fabergé brand name.

Gemfields trades on the AIM Exchange of the LSE and on PLUS Markets under the symbol “GEM”.

Current Operations

Kagem Emerald Mine (75% Owned)

The Kagem emerald mine covers an area of almost 43 square kilometres in the centre of the NRERA, close to Kitwe, Zambia. There are several known TMS belts (emerald hosting structures) within the Kagem gemstone licence, the main area of emerald extraction being the Fwaya-Fwaya belt in which the TMS has a drill-established strike length of 2.1 km.

Kagem Emerald and Beryl Mine

The mine has been a consistent producer of some of the finest Zambian emeralds since 1984. Prior to its acquisition by the Company in June 2008, Kagem sold 11.4, 13.7 and 14.9 million carats of emerald and beryl generating revenues of US$6.4, US$9.5 and US$12.6 million in 2005, 2006 and 2007 respectively.

Exploratory drilling is in progress in the area with the objective of demonstrating the eastward continuity and thickness of the TMS belt as well as an expansion plan for achieving a run rate of in excess of 1.4 million tonnes of TMS per annum by July 2009 from the present level of 200,000 to 300,000 tonnes per ann

Kamakanga Emerald Mine (100% Owned)
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This mine is located 5-6 km west-south west along the regional strike from the Mbuva-Chibolele mine and Kagem emerald mine. Exploratory trenching carried out at the Kamakanga emerald mine has indicated the TMS bands to be discontinuous and patchy. Exploration continues to assess the potential of the area to support large scale mining.

Mbuva-Chibolele Emerald Mine (100% Owned)

This mine is located on the opposite side of the Kafubu River to Kagem, in a belt of favourable TMS intruded by pegmatites which continues westward and also hosts Gemfields’ Kamakanga emerald mine. A 1000m strike length of TMS cut by pegmatites suitable for the occurrence of emeralds exists. The mine is currently on care and maintenance while the Company focuses on Kagem.

Loading ... please wait. Kariba Amethyst Mine (50% Owned)

An expansion plan has been devised for this mine which will be initiated if and when a privatisation agreement to purchase a further 26 per cent of Kariba Minerals Limited (the company which holds the mining licence to the Kariba amethyst mine) is signed.

NRERA Prospecting Licences

The company has a further eight prospecting licences in the NRERA, Zambia totalling 405 sq km and accounting for approximately 58% of the total known prospective area. These prospecting licences provide Gemfields with significant control over the NRERA, limiting the possibility that competitors could establish material operations in the area.

A high-resolution airborne magnetic and radiometric survey has been carried out in an 863 sq km area over the prospecting licences in the NRERA leading to the identification of anomalies pointing at possible TMS belts and pegmatitic zones. The company intends to carry out exploratory pitting and geochemical sampling in 2008/9.

Madagascar

Gemfields has an option to acquire Oriental Mining which is the holder of 15 licences in the Antananarivo, Fianarantsoa and Toliara provinces of Madagascar covering rubies, sapphires, emeralds, garnets and tourmalines.

The Gemstone Market

The worldwide gemstone industry is comprised of two distinct segments: the diamond market and the coloured gemstone market. According to Gemworld International Inc, the growth potential for the coloured stone sector is tremendous. The success of the DeBeers model in managing the production and distribution of diamonds is self evident in the dominant position that diamonds enjoy in the market today, although competition at the retail level of the market and the alteration of once clearly defined boundaries between wholesale and retail have resulted in a sharp decline in the profit margins for diamonds sold to consumers. This is one reason that the traditional retail jewellery store model is evolving by dedicating greater retail space and resources to the promotion of coloured stone related products.

In addition to strong demand, prices for fine gemstones have continued to rise. One factor is the value of the dollar, which remains weak compared to its pre 2001 levels. Another factor is that top-end gemstones are more difficult to find and the competition for them is fierce. Some gem varieties have clearly benefited more than others from the current trends. A 2006 study showed that in terms of individual gemstones, emeralds saw the biggest jump in value. While the import total only increased 12.4 per cent from 2004 to 2005 the price per carat was up nearly 70 per cent.

In respect of emeralds, Colombia, Zambia and Brazil are the primary producers in the international gem trade. Colombia has been the principal producer of fine quality emeralds for centuries but, following controversy over treatments used for emerald enhancement in the late 1990s, there has been a market appreciation of Zambian emeralds based on their quality. Zambian emeralds tend to be of a higher clarity than that of the other two main sources (Colombia and Brazil). Many dealers prize Zambian emeralds for their transparency, with many stones exhibiting a clear ‘‘crystal’’ transparency that gives them an attractive appearance. Zambian emeralds are also prized for their rich bluish green colour, a colour which is generally considered unique to this area. As a result the need for treatment of Zambian emeralds is less than that of any other known active emerald source. This has proven increasingly important to treatment weary consumers.

Gemstone Mining in Zambia

Zambia is an important source of gemstones for the world’s jewellery market. In 1995, Zambia enacted investor friendly mineral and mining legislation (which has recently been revised) and dozens of international mining companies have since established mining and/or exploration activities in the country. In addition, over US$750 million has been earmarked by mining companies for investment in the Zambian copper mining industry in the foreseeable future. In November 2007, Zambia won the Mining Journal’s Country Award for its expanding mineral production, transparent mining law, excellent infrastructure and improved corporate governance. Loading ... please wait.

Politically, Zambia has maintained amicable relations with its neighbouring countries, resulting in continued stability. It is a member of the Southern African Development Community and has had four different consecutive democratically elected governments over the past 16 years. No government has been overthrown by a coup d’etat and the risk of armed conflict is low. In terms of infrastructure, Zambia’s exports are sent to ports in neighbouring countries via railway.

Investment in Zambia’s road network has been scaled up since the launch of a 10 year US$1 billion investment program in 1998. Zambia’s main source of power is its hydroelectricity resources and the Zambia Electricity Supply Corporation is addressing a rising demand by upgrading the existing infrastructure through construction of new hydroelectric projects.

Geographical Spread

The quality of Zambian emeralds (facet grade, fine colour) is almost on a par with Colombian emeralds. In Zambia, deep green and valuable emeralds are currently sourced only from the Zambian Ndola Rural Emerald Restricted Area ("NRERA"). The fields at NRERA are believed to potentially represent the single largest source of easily mined, high quality emeralds in the world and are known to have produced up to US$100 million worth of emeralds annually.

Board of Directors and Key Management

Graham Mascall	Non-Executive Chairman
Rajiv Gupta	Executive Vice Chairman
Sean Gilbertson	Chief Executive Officer
Alok Sood	Chief Operating Officer
Richard James	Chief Financial Officer
Clive Newall	Non-Executive Director
Finn Behnken	Non-Executive Director

Company Address

214, MWB Business Exchange 1 Berkeley Street
London, United Kingdom W1J 8DJ


Telephone:	+44 (0) 20 7016 9416
Facsimile:	44 (0) 20 7016 9713
Email:	info[at]gemfields.co.uk
Website:	http://www.gemfields.co.uk

Capital

Current issued shares: 309,152,740

Annual General Meeting

TBA

Year End

30th June

Nominated Brokers

Canaccord Capital (Europe) Limited

Nominated Advisors

Canaccord Capital (Europe) Limited
JP Morgan Cazenove

Major Shareholders

Rox Ltd 56.35%

Deutsche Bank AG 5.44%

Matterhorn Investment Mgmt LLP 4.86%

Capital Research & Mgmt Co. 3.28%

Most Recent Statement

04/12/08 - Tanzanite One Limited - Requisition of SGM
03/12/08 - Response to Amari Resources announcement on T1
21/10/08 - Tender Offer
25/09/08 - Open Letter to the Board of Tanzanite One
12/09/08 - Proposed Offer For Tanzanite One Limited
08/09/08 - Gemfields Exercises Option to Acquire Oriental Mining

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