Good morning, and welcome to Gemfields' 2025 Full-year Results Shareholder and Investor Webcast. Sean Gilbertson, Chief Executive Officer, and David Lovett, Chief Financial Officer, will present Gemfields' financial results. At the end of the presentation, we will go into a Q&A. If you'd like to ask a question, please write it in via the webcast page by clicking the Ask a Question button. Before we start, please take a note of the important information in our disclaimer on slide two, with a full disclaimer in the appendix. With that, I'll now pass you on to Sean.
Thank you very much, Heinrich. Good morning and welcome. Thank you for your time and interest in what was an extremely difficult year for Gemfields. Ignoring the COVID year of 2020, 2025 saw us deliver our weakest annual auction revenues since 2013, more than a decade, and only 41% of the peak auction revenues which we achieved in 2022, which was the height of the post-COVID so-called revenge spending boom for us. I think it's worth recapping on what transpired in getting us to this situation. First, buoyed by the post-COVID boom, we paid out $80 million in dividends to shareholders between May 2022 and May 2024, and we also did a $10 million share buyback.
We then went on to initiate a growth strategy, which included the largest CapEx project Gemfields has ever undertaken, being our second processing plant at MRM in Mozambique at a cost of $70 million. In the second half of 2024, we saw the deterioration of the Chinese economy and a market decline in China's share of luxury goods consumption. That was followed by the contested general election in Mozambique in October 2024, giving rise to civil unrest in many parts of the country and a direct attack on MRM on the 24th of December 2024, leading in turn to significant illegal mining incursions during the first quarter of 2025, and multiple disruptions. We also experienced decreased premium ruby production from our Mogloto area at MRM.
In the third quarter of 2024, one of our emerald competitors started selling considerable quantities of emeralds at low prices, damaging the emerald market. In January 2025, of course, we saw the Zambian government's surprise introduction of a 15% export duty on gemstones and resulting in our suspending Kagem's exports entirely until the issue was nimbly remedied by the government just a couple of months later in March 2025. All of those prevailing circumstances led us to suspend mining at Kagem altogether from January through May of 2025, and at the same time, we were experiencing significant logistics and work permit delays in Mozambique, affecting particularly the specialist electrical installations that were required for MRM's second processing plant.
April 2025 infamously saw President Trump's tariff shocks and their considerable jolts to the luxury and jewelry sectors, and we suffered in 2025 from being unable to recover meaningful proportions of the VAT owed to us by the governments of Zambia and Mozambique, and which reached circa $45 million at peak. Finally, we had the impact of widespread geopolitical instability arising from Israel, Gaza, Syria, Ukraine, and now, of course, Iran. Despite that long list of excuses, and save of course for the potential impact of the latest round of Trump-induced turbulence, our overall position as Gemfields is, of course, markedly better than where we were just 12 months ago.
In addition, MRM, our ruby mine, has so far in the first quarter of this year already exceeded by a modest $3 million the whole of 2025's meager $50 million of ruby revenue. With that scene now set, I'll pass you on to David to lay out the bare facts.
Thank you, Sean, and good morning, everybody. I won't repeat the overview of 2025 that Sean has just given, but the financial results you'll see over the next few slides certainly show how tricky a period it has been for Gemfields. Both revenue and cash generation came in significantly below expectations, largely due to the delayed year-end ruby auction. The actions taken in 2025, both operationally and strategically, have materially strengthened the group's footing heading into 2026. I will now take each of the key financial metrics in turn on the next slide. Starting at the top left, we have revenues. Group revenue came in $135 million, which is down sharply from the strong levels seen in 2022 and 2023 and from the $199 million we achieved in 2024.
This was driven primarily by weaker ruby production throughout the year, and the postponement of the planned December ruby auction. On the cost side, operating expenses were down by approximately 17% to $129 million, reflecting cost discipline and the pause in operations at Kagem in the first half of the year. This then resulted in an EBITDA of $6.25 million, a significant reduction year-on-year, and adjusted earnings per share of -$0.013 and a free cash outflow of $29 million, driven primarily by the reduction in revenue and the CapEx spending at MRM. Finally, on this slide, we had net debt, which closed the year at $39 million. If you include the auction receivables, this falls to $19 million.
There's no doubt that this is a weaker position than we would have liked, but the heavy investment in PP2 is now behind us, and as PP2 stabilizes, we should see our cash position improve. Looking at revenues in more detail, here we have our rolling twelve-month auction profile. This highlights the decline since the post-COVID peak we saw in 2022 and the core challenge we're facing at MRM. On the next slide, we split out Kagem and MRM separately. On the left, you see Kagem's auction track record. We generated $78 million in 2025, which is in line with 2024, despite the pause in mining activity in the first half of 2025. Our next Kagem auction is expected in May this year. On the right-hand side, MRM tells quite a different story.
Revenues were significantly lower than the previous year at $50 million. The reduced recovery of premium quality rubies had a clear impact through the postponement of the year-end auction and the reduced revenues seen earlier in the year. This graph is a clear example of why PP2 and general improvements in operational stability at MRM are key for both MRM and Gemfields. It's worth noting that MRM's auction in February generated $53 million, and we expect the next ruby auction to take place in Q3 of this year. Moving on to CapEx. This slide shows rolling 12-month CapEx at both Kagem and MRM on an actual cash cost basis. At Kagem, on the left-hand side, CapEx remained controlled, reflecting the focus on disciplined capital allocation at that operation. On the right-hand side, MRM CapEx has been elevated because of the new plant.
As we move into 2026, CapEx spending is tapering as the project moves towards completion. It should be noted that there is still some mining fleet purchases to come in 2026. Looking at operating costs, here we have the cash cost operating for Kagem, MRM, the U.K. corporate, and the development assets. At Kagem, we made material reductions in the year, but that is largely due to the pause in mining operations in the first half. The bars will start to move back up as mining activity starts to normalize. At MRM, operating costs have reduced somewhat, but security concerns and increased operations to feed the new plant will see these costs tick up in 2026. Corporate costs, again, made some progress, but it should be noted that they were impacted by one-off costs relating to the capital raise in the year.
Finally, on development project costs, they continue to fall as we wind down activity in almost all of those projects. Cost control remains a key focus as we move through 2026. Finally, from my side, we'll have a look at the net debt position. At the year-end, we reported gross cash of $64 million and gross debt of $103 million, which gives us a net debt position of $39 million. As we said earlier, if you include the auction receivables of $20 million, that net debt reduces to $18.7 million. Still plenty of work to do here, but we're certainly in a stronger position than we were at the end of 2024. I'll hand back to you now, Sean.
Thank you very much, David. On slide 12, while competitive behavior, the 15% export duty, and the ensuing suspension of mining at Kagem from January through April of 2025 were serious issues, the mine actually had a pretty solid year. With auction revenues of nearly $80 million, at $78 million, Kagem yielded almost $40 million after deducting operating costs and CapEx. Of course, that's due to the great team we have at Kagem, but it was also greatly aided by good production and an improved market for emeralds in the second half of 2025. MRM's woes are well documented, and combined with everything else we were facing, the group completed a $30 million rights issue in June of 2025, and we sold Fabergé for $50 million in August of 2025.
Keen observers and those with eagle eyes will note that the amount from the rights issue, together with the proceeds from the sale of Fabergé, equal precisely the amount of cash that we paid out as dividends to shareholders between May 2022 and May 2024. Turning to slide 13, gemstones in the premium category are what matter in our business. With only its processing plant running from January through April of 2025, it's clear to see that Kagem got off to a slow start. As shown on the left-hand graph, the second half of the year was super. Across the way at MRM, shown on the right-hand side, headline premium ruby production actually looked pretty good from a headline perspective. However, these included fewer rubies from our long-standing Mogloto area, which underproduced, and more rubies from the newer Maninge Nice area.
While there are some really super gems from Maninge Nice, including the third most expensive ruby we've ever sold, the overall value per gram or per carat of Maninge Nice's rubies is lower than what we have achieved historically from Mogloto. Ruby prices do vary enormously based on slight variations in color, saturation, tone, and of course, internal imperfections. On slide 14, in the next broad quality category down, simply called Emerald at Kagem and Tumble at MRM, both mines produced in line with recent years. Slide 15 shows a very interesting comparison of rubies from the older Mogloto area on the left and rubies from the newer Maninge Nice area on the right-hand side. This image is taken on a blue backlight and shows the same effect as one would see under ultraviolet light.
While all rubies fluoresce, some do fluoresce a great deal more than others, as can clearly be seen in the photograph. While Mogloto produces a tiny proportion of more fluorescent material, Maninge Nice produces a very considerable amount of fluorescent material. For interest, the famed Burmese rubies are very well regarded and renowned for exhibiting high fluorescence. While we are still garnering price information, given the material from the newer Maninge Nice area, and it's only been offered at two of our regular mixed quality auctions, we have seen this fluorescent material command a premium in some size fractions and a discount in others. Our customers are very familiar with the long-standing Mogloto material, which we have auctioned for more than a decade, but are, very much like us, still learning about how Maninge Nice material cuts and sells.
On slide 16, the final commissioning of our second processing plant at MRM, or PP2 as we call it, is significantly behind schedule. When the project was first announced, we expected final commissioning by the end of June 2025. Encouragingly, PP2 has demonstrated its ability to attain and even exceed the 400 tons per hour design throughput rate in the wet circuit, and that can be seen in the graph on the left-hand side, which charts the weekly data since PP2 started operating. However, while I want to stress that there are no known fatal flaws, we have experienced a number of teething and commissioning issues, which mean that the second processing plant is not yet attaining the target number of operating hours each day, which is 20 hours. As a result, all processing and ruby production is materially constrained.
Those issues, exacerbated by the wet season, include but aren't limited to choking and blinding, which require chute, liner and screen reconfigurations, and also the presence of organic and inorganic material reaching downstream pumps and screens. PP2 was built on a fixed price contract by Consulmet of South Africa, who are still very much on site, working very closely with our own team in remedying these issues. While we anticipate considerable improvements with the arrival of the dry season from May this year, we now expect final commissioning of PP2 only in Q3 of 2026. On slide 18, our priorities are to stabilize the business after all the turbulence we've been through, particularly, of course, ironing out the final commissioning issues with PP2, and then to rebuild our auction revenues, particularly in rubies, followed by profitability, and then, of course, deleveraging our balance sheet.
On slide 19, and touching on auctions, we presently have a higher quality emerald auction scheduled for May of this year in Bangkok. As David indicated, probably in the third quarter for rubies. While the emerald market looks satisfactory, it's too early to tell what the fallout from the war in the Middle East will be. Our ruby demand has been a little bit more muted, especially in the lower quality segments, but the best gems consistently do well. As we assess what's happening in Iran, we'll balance production with market considerations and maintain a flexible approach to the number and size of the auctions that we run during the course of the second half of this year.
We will obviously work hard to keep a lid on costs, but clearly the Iran war may have a significant impact, including on fuel, where we are already seeing prices of diesel increase in our operations. From past experience, that clearly then has a knock-on impact onto everything delivered at mining operations, including, for example, food and beverage. With that, I'll pass you back to Heinrich to run the question and answer session.
Thank you, Sean. If you'd like to ask a question, please write it in via the webcast's Ask a Question function. First question received is as follows. In terms of Nairoto and Sedibelo, what are your optionality in terms of commercializing those assets?
Thank you for the question, Heinrich. We took the decision during the course of the 2024 and 2025 issues and cash constraints to shut down Nairoto. We have removed all personnel and equipment, and the reality is Nairoto therefore is not a project that we're going to bring back into business. It is, of course, a gold project and doesn't fit with our core business of emeralds and rubies. Insofar as Sedibelo is concerned, that clearly has seen a shot of life in the form of the increases in precious metals prices. We have obviously historically written that down to zero, and if there are any interesting inquiries, we will obviously progress them. The reality is that's also been written down to zero.
Thank you, Sean. That's very clear. Just to remind everyone, if you'd like to ask a question, please click the Ask a Question button in the web link. On to the next question. Please advise what the fuel supply is looking like in the countries which you operate. How dependent is Gemfields' business continuity on stable fuel supply, and what contingency measures are you pursuing?
Very topical question. We are obviously critically dependent on the ongoing supply of fuel, particularly diesel. We have circa 300,000 L of storage capacity at MRM and approximately twice that across the way in Zambia at Kagem. The reality is we are already seeing some increases in the price of fuel, and there have been a couple of warning signs in Zambia as to a lack of the ability to guarantee ongoing fuel supplies post-April. We are particularly dependent on diesel generators in Mozambique, where the second processing plant eats up a huge amount of power, and we do have a pretty good relationship with our supplier there after something of a reset about 18 months ago. The reality is it's very difficult to ascertain precisely what's going to happen with supply at this stage.
Our team is obviously working on some mitigations, and that might go so far as to literally have additional tanks set up and store some fuel. It's a tricky pinch point if this market gets worse.
Thank you very much, Sean. That's understood. With that, we have no further questions. We'd like to thank you all for joining us this morning. If you have any further questions or would like to speak one-on-one, please reach out to us at ir@gemfields.com. Enjoy the rest of your day. We will close the call now. Thank you very much.