Good morning, and welcome to Gemfields' 2026 interim results shareholder and investor webcast. David Lovett, Interim CEO and CFO, and Becki Tate, Head of Finance, will present Gemfields' financial results. At the end of the presentation, we will go into Q&A. If you would like to ask a question, please write it via the webcast page by clicking the Ask a Question button. Before we start, please take note of the important information in our disclaimer on slide two. With that, I will pass you on to David.
Thank you, Heinrich, and good morning, everybody. Thank you for joining us for Gemfields interim results for the six months ending 30th of June 2026. I am David Lovett, Gemfields Interim CEO and CFO, and I am joined by Becki Tate, our Head of Finance, who has been with Gemfields, excuse me, for five years and brings a strong understanding of our financial reporting and Zambian operations. We will take you through the key developments from the first half of the year and then open the call for questions. It is fair to say that the first half was difficult, and the reported loss is clearly disappointing, principally due to the challenges at MRM. Premium ruby recoveries remained below expectations, and the operating environment remained testing. Those factors are reflected in the MRM impairment, which Becki will cover shortly.
There are, however, reasons for measured optimism. PP2 is now largely operational and has shown that it can run at and, at times, above the 400 tons per hour target. Ruby recoveries have also improved recently. At Kagem, production was strong, supported by good premium emerald recoveries and a positive higher-quality emerald auction. Looking forward, our priorities are clear. We need to stabilize operations at MRM, sustain Kagem's strong performance, preserve cash, and rebuild balance sheet resilience. That means staying focused on safe operations, reliable production, tight cost control, and disciplined capital allocation. With that, I will hand you over to Becki to take you through the first half numbers.
Thanks, David, and good morning, everyone. Starting on slide five as David has just set out, the first half of 2026 has continued to be challenging for the group. However, these challenges are not fully reflected in the headline figures shown on the slides, primarily due to the deferral of the December 2025 ruby auction to February 2026, which meant MRM had two auctions in the first half, where traditionally it has just had one. As shown on the slide, the group generated $106 million of revenue in the period, of which 50% or $53 million was contributed by the February 2026 auction held by MRM . MRM also conducted its first Trade Select auction in June 2026, which provided an additional $23 million to MRM's total revenue for the first half.
These newly introduced Trade Select auctions are aimed at offering a broader mix of ruby qualities as well as the newly introduced sapphire categories to the market. Kagem contributed just under $27 million to revenues in the first half from one higher quality auction held in May. Overall, auction results for the first half of 2026 were promising and showed the continued strong underlying demand for high-quality colored gemstones. On the right of the slide, EBITDA. EBITDA showed positive movements in the first half with $40.7 million achieved in the period. This good performance reflects the strong auction results in the year- to- date. Moving on to slide six. Adjusted earnings per share saw a gain of $0.006 per share when taking into account depreciation, interest costs and taxes, but excluding the non-cash impairment charge against MRM, which we will come back to later.
Turning to cash, the first half saw a $17.4 million free cash inflow, again, primarily due to the auction timings in the first half of the year. Moving to net debt on slide seven. The graph on the slide shows the evolution of Gemfields' net cash or debt position going back to 2010. The gray line depicts net cash or debt, with the yellow line depicting net cash or debt with the auction receivables balance included. What can clearly be seen here is the cyclical nature of our business. As shown on the far left, we remained in a net debt position at the 30th of June, closing the period with net debt of $44 million, which is more or less in line with where we were at the end of 2025. Taking auction receivables into consideration improves the net debt to $10.6 million, our lowest position since June 2024.
Although we still have some way to go to get back to a net cash position, we have made some encouraging progress during the first half of 2026. Looking forward to December, we have already secured revenues of almost $30 million from the September commercial quality emerald auction, with a high-quality emerald auction and two ruby auctions still to come before the end of the year. We remain optimistic, therefore, that this positive trajectory will continue as we progress towards year-end. Next to slide eight, which shows OpEx across the key segments in the period.
For Kagem, on the top left of the slide, mining and production costs were up compared to the second half of 2025 reflecting the inflationary pressures of diesel prices in the period in line with global trends, and the dual impact of the implementation of the currency directives introduced in Zambia, combined with an appreciating kwacha, which has put upward pressure on Kagem's cost base. As a reminder for Kagem, we had paused mining in the first half of 2025, therefore, the OpEx presented for that comparative period is artificially low. Cost increases at MRM also reflect the increase in diesel prices alongside the increase in the period in mining and processing activity as PP2, MRM's second processing plant, has ramped up towards its full operating capacity.
We have made good progress on stabilizing PP2 over the last few months, which David will be expanding on in his operational review shortly. Development project costs in the chart on the top right have remained low as we continue winding down activities at the sites, whilst corporate costs remain in line with the second half of 2025. Cost control will remain a key focus as we move through the second half of 2026. Moving to a quick look at capital expenditure on slide nine. These graphs show CapEx at Kagem on the left and at MRM on the right. Kagem has seen very little CapEx in 2026 to date. However, this was largely due to the implementation of Statutory Instrument No. 68 of 2025 in Zambia from the start of the year, which has meant expenditure was delayed whilst the team ensured vendors were compliant with the new legislation.
A catch-up is therefore expected across the second half of the year, and we expect Kagem to end the year in line with 2025's total spend. MRM's significant investment in its new plant can clearly be seen in the graph on the right. However, capital spend is now tapering as the project nears completion. The final payment of circa $4 million to Consulmet is expected to be made by the end of the year, with all non-critical spend paused as we navigate the current operational challenges. Which brings me finally onto MRM and the non-cash impairment of $125.2 million made in the period on slide 10. As we have previously announced to the market, MRM has continued to experience a number of operational challenges during 2026.
Which include one of the wettest rainy seasons recorded since we began operations, which limited access to certain production areas and forced mining to be concentrated in lower grade areas. The commissioning and ramp-up period for PP2 proving more challenging and prolonged than initially anticipated, and the continued low recoveries of premium rubies, which have been significantly below operational targets. The combination of these factors has meant that overall, premium ruby production for the period was a shortfall of 13% against the first half of 2025, despite a 133% increase in the ore produced over the same period. The decline in premium grade that has been observed caused us to reassess the key judgments used in MRM's Life of Mine model. As a result, we have adopted more conservative grade assumptions that place greater weight on recent operational results, future mine scheduling plans, and bulk sampling data.
This downward revision in forecast grades in the Life of Mine model, particularly in premium ruby recoveries, was the main contributing factor to the $125.2 million impairment recorded as at the 30th of June 2026. Following the impairment recorded, the carrying value of MRM was written down to $80.3 million. In addition to the current period impairment, we have also restated the impairment recorded in the 2025 annual report by $30 million, increasing the impairment charge that was recognized as at the 31st of December 2025 from $35 million to $65 million. The restatement arose following the identification of some inconsistencies while reviewing the 30th of June 2026 Life of Mine model that were also found to exist in the 31st of December 2025 model upon review. All errors identified have been corrected with the Life of Mine model that supports the 30th of June impairment review.
I will now hand you back across to David, who will take you through the operational review and provide more detail on recent progress at MRM.
Thank you, Becki. Let's have a look at gemstone production at both mines, starting with the premium categories. These charts show cumulative carats by month against the previous four years. Starting with emeralds on the left-hand side, Kagem's premium emerald production to August was approximately 125,000 carats, ahead of the comparable points in most prior years. As we've said, from a production perspective, Kagem is performing very well. On the right-hand side at MRM, premium ruby production to August was approximately 46,000 carats, broadly in line with the prior year trajectory. However, with the additional processing capacity from PP2, we should be comfortably ahead of the comparative periods. July, August, and September have been healthier months, which is encouraging.
One point on comparability before we move on, the secondary sapphires have been removed from premium ruby, and prior periods have not been restated, so the underlying comparison is tighter than the chart suggests. Moving one step down the quality pyramid, this slide covers the higher volume categories. We define these as emerald from Kagem and tumbled ruby from MRM. On the left-hand side, Kagem produced approximately 7.8 million carats of emeralds to August, ahead of the equivalent point in every prior year shown. Again, production at Kagem is in a good place. On the right-hand side at MRM, tumbled ruby production was approximately 268,000 carats, within the range seen in prior years. That brings me to our priorities for the rest of 2026. We've split these out into three key areas, the first one being operational stability. That means reliable production and consistent supply.
Greater production predictability will support the auction calendar and reduce uncertainties around grade throughput and unit costs. Number two, financial discipline. Tight cost control and selective CapEx. We are prioritizing spend, not simply cutting it. That means funding what protects production and deferring what can wait. Finally on this slide, balance sheet resilience. We need to increase our headroom, which will in turn give us greater control over the timing of our auctions and our capital allocation decisions. The next few slides show what that means in practice, first at the assets, and then for the group. At MRM, the focus is on bulk sampling, directing production towards proven grade areas, planning for seasonal pit constraints, and stabilizing PP2 through improved availability and utilization. We are also deferring non-essential CapEx.
At Kagem, the priorities are forward mine planning, maintaining multiple productive mining areas, and keeping tight control of operating and capital costs. VAT recovery also remains important for cash flow at both operations. Looking at PP2 in more detail, we have a couple of slides looking at performance. The plant generally ran below target in the first part of the year, so the green line here is the target 400 tons per hour. The red bars are the daily performance of the plant. In the first part of the year, it typically ran between 300 and 390 tons per hour, with considerable day-to-day volatility. Since mid-June, performance has improved materially, with the plant running more consistently between 410 and 450 tons per hour, which is clearly above the 400 tons per hour target.
The second graph looking at PP2 shows the increase in ore processed across both plants, so this includes PP1. Total throughput has approximately tripled from around 100,000 tons to around 300,000 tons. As expected, the total carat production has approximately doubled. This is total production rather than premium production, but it illustrates the opportunity we have with the new plant. If we can stabilize grade, the additional throughput should translate into materially higher recoveries. It is worth noting that the plant is not yet fully commissioned. A replacement secondary scrubber is in transit and several other material adjustments must be completed before final commissioning. We expect to complete this work during Q4 this year. If we finish with the outlook, we have split this into three parts. First, the auctions. We have three more auctions planned for 2026, and we expect them to be broadly consistent with recent trends.
At the mines, at MRM, PP2 and the wider operational improvements should support greater stability and reduce production volatility. At Kagem, forward mine planning is supporting more stable emerald production. Better planning at both mines gives us greater visibility on grade and feed, which should support a more consistent supply to auction. In terms of our priorities to repeat, they remain operational stability, financial discipline through cost control, and balance sheet resilience. In short, we are focusing on operational stability at both assets while keeping a firm grip on costs and cash flow.
Thank you, David. As a reminder, if you would like to ask a question, please write it in via the webcast's Ask a Question function. The first question received is as follows: With regards to the impairment of PP2, what is the dollar impact of this, and what was the basis for the calculation?
Heinrich . The impairment was initially allocated to the fair value mining assets held at the group level that had arisen on the acquisition of Gemfields Limited by the group in July 2017. The remaining fair value of this asset was $55 million at the 30th of June 2026, and we have now written it down to nil balance. The remaining impairment charge of $70.5 million was then allocated against the property, plant, and equipment held by the MRM CGU on a pro rata basis that included PP2, as is prescribed under the International Financial Reporting Standards.
Thank you, Becki. Next question is, how have Mugloto vs Maninge Naice grades performed?
They are our two types or areas of production. They do follow slightly different characteristics. On the Mugloto side, which is the higher quality ruby that we have mined for many years. We are stabilizing at broadly a range of 0.025 premium carats per ton. Maninge Naice does generally run at a higher grade, and that is currently sitting at around 0.04 premium carats per ton. But it is worth noting that, in general, prices achieved for the Maninge Naice product is around 20% lower on a per carat basis than Mugloto.
Thank you, David. Understood. The next question is: Why are you still allocating the old version of estimating Maninge Naice premium? There was a previous discussion about normalizing Maninge Naice to Mugloto.
In summary, we are no longer using the previous approach without adjustment. Following a review of the Maninge Naice classification, secondary sapphires have been excluded from the premium ruby characterization in that product. This does provide a more conservative and representative measure of current output. Just worth noting, we have not restated historical data, because there is quite frankly not sufficient detail to recalculate those categories reliably.
Thank you, David. Next question. What cost and CapEx containment measures are going to be put or have been put in place at MRM in response to the margin pressures?
We are looking in detail at both operating costs and CapEx at MRM on an ongoing basis, and clearly there is a focus on preserving cash. The majority of CapEx currently relates to critical near-term projects, particularly PP2. If market conditions continue and performance continues in a more positive manner, we will assess opportunities to defer, reduce, or reprioritize discretionary spend where appropriate.
Thank you, David. Next question. What is the annualized PP2 operating rate at the moment, or in the recent three months?
PP2 is running consistently above 400 tons per hour at present, which is where we expect it to sit in the long term. Together with PP1, this equates to an annualized processing rate of approximately 3 million tons- 3.2 million tons.
Thank you, David. Next question. For how long can you process 3.6 million tons per annum at MRM with the current and imported fleet?
How long we can maintain that really does depend on the rate at which the existing stockpiles are depleted. Based on current planning, it is going to reduce materially before the end of 2026, and at that point, fresh ore does need to be mined to feed the plant. We are looking at a range of options to ensure sufficient ore feed and mining capacity, including the potential use of contract mining. No decisions have been taken, but it is likely that additional investment in mining fleet and other yellow goods will be required to support the higher processing rate as we move forward.
Thank you, David. Moving on to VAT. Could we have an update on VAT, please?
Yes. Taking Kagem first. At Kagem, we've seen good progress during the year- to- date, with refunds received from the ZRA in eight of the nine months of 2026 so far, which total around $5.4 million, which is almost double what our VAT requests have been for the year. At MRM, however, progress has been slower, but we did receive a cash refund of $0.9 million post-period end in August 2026 from the MRA. This is the first refund we've had since October 2024. Whilst we remain cautiously positive about this progress, we continue to engage with the MRA and Ministry of Economy and Finance on this matter with a current plan for senior management to meet with the minister in Mozambique before the end of the year.
Thank you, Becki. Returning to MRM, can you expand on the MRM performance and the operational changes that have been made? How should we consider these changes in the short to medium term?
Sure. We've seen in some of the graphs that MRM's recent performance has improved from a processing stability point of view, and we have implemented a more systematic approach to mine management over the last few months. In the short term, the focus is on stabilizing PP2 further, improving mine planning, and directing our production towards areas with better understood grades. In parallel with that, looking at the more medium to long-term view, we are looking to expand our bulk sampling significantly, and we're using a different way of looking at the geological analysis to build a data set to improve our understanding of grade distributions and ruby recoveries. These changes won't remove the geological variability, but certainly we hope that over the medium to long term, they improve the predictability, reduce the volatility we've seen, and support more consistent production and therefore auction management.
Thank you, David. Understood. Returning to VAT. VAT receivables keep growing. What realistically can management do about this?
That is true. VAT receivables will keep growing. Most of our suppliers in both countries attract VAT, and recent legislation in Mozambique has meant that has actually increased. Local suppliers now charge VAT, whereas we were exempt for the last few years. In terms of what management can do, we continue to engage with the government. We continue to engage with the local and national tax authorities. We have made various applications and presentations, and we have recently had some relatively positive news, which is a large chunk of our VAT receivable balance has now been approved by the VAT authority in Mozambique, so we are making small steps forward. As Becki said, we have had one cash refund. We hope to have at least a couple more before the year end.
But quite frankly, all we can do is keep on banging the drum and push government to help us out where it can. But it is fair to say that Mozambique's cash position is tricky, so expectations should be tempered in terms of getting back the bulk of that recovery.
Thank you, David. Cash at the center is now only $34 million. What level is the minimum given the covenant issues?
We use a minimum cash requirement in our going concern assessment and our cash forecast of $5 million.
Thank you, Becki. Understood. When will you make a decision on contract mining?
We are currently in the budget process for the Gemfields Group. Contract mining will be a key part or a key decision that relates to MRM going into 2027 and beyond. Therefore, by the end of this year, we will have made a theoretical decision, although it is unlikely we will have instructed any contractor at that point.
Thank you. Understood. Is MRM in a position to pay the management and auction fees yet?
In short, no.
Understood. What is the forecast grade you refer to that is needed to escape the material uncertainty issue?
This is an accounting or an audit type question. There is no hard grade or target to get out of the material uncertainty. The material uncertainty is also linked to our overdraft facilities and banking facilities in Mozambique. If we could get the grade up above 0.03, that would certainly be a much more positive financial model, which would help in terms of our going concern.
Thank you, David. Do you expect MRM to be in a position to pay the debt repayment installments next year? Or will you have to renegotiate?
We do expect MRM to be able to pay the debt. We are speaking to the banks at a group level as well as at a local level to see if there are interesting ways of refinancing our current debt position. But those conversations are very early stage. We will continue along those routes, and if anything interesting comes, we'll report that to the market.
Thank you, David. What has and will management do to secure MRM's future with regards to CapEx and ongoing costs?
MRM needs to hold its own, clearly. The OpEx, I think there is room to improve that or bring it down. On the CapEx side, there are certainly options to push things out and delay and things like contract the mining do have a direct impact on your future CapEx. Quite frankly, it's a production issue rather than a spending issue. We need the production to improve, we need to bring more stability, we need to see the deposit in a slightly different way, and then we can really push forward with proper mine planning, proper cost control, and CapEx plans.
Thank you, David. Our next question is a two-part question. First, how is the Nairoto sale process going? Next, what was the reason for the previous CEO's departure?
Okay. In terms of Nairoto, that sale process continues. It's fair to say there are no concrete sale options available to us, although there are a number of interested parties, and we will continue pushing that. In terms of Sean's departure, that was a mutual decision between Sean and the Board, and I can't really add much more detail than that.
Thank you, David. Next question: what efforts are being made to combat illegal mining at MRM?
This is one of the major challenges we have alongside production in Mozambique. There is no doubt that the illegal mining activity on our license has increased, which is a problem. The way we deal with that is currently we look to the government through the police and through the army to help protect the asset and also protect the people because these illegal miners often get injured themselves. It is a very tricky situation. It does require many different parties to be involved. We have been working with the government for years on the matter, and we are looking at sort of outside the box, thinking on different ways we could potentially manage this going forward. But there are no easy solutions to the problem.
This is an ongoing issue, and we will continue to do what we can to protect our people, protect our assets, and bring the best returns to Mozambique that we can.
Thank you, David. On a similar theme, can you comment on political risk scenario in Cabo Delgado?
I don't think the Cabo Delgado has a specific political risk outside of Mozambique as a country. It is a difficult place to operate, and it has been for a long time. We do have reasonably good relationships with the government, and we do see intent to try and improve things there. We are looking at it from both a national and a local level. But again, it's a long-term project for us to try and improve the way we interact with the political side in Mozambique.
Thank you, David. Returning back to MRM, when do you expect to update the mineral resource estimate/mine of life at MRM and what potential do you see there?
We expect to update that next year. Work is being done by SRK, who have done the reports over the last few years. Quite frankly, we need the bulk sampling results to come in before we can really push that forward. We do expect that to happen relatively soon. We don't have a hard date in mind at this point, but I would hope in 2027 we're able to update that resource statement along with some more significant bulk sampling work.
Thank you, David. Next question: Can you comment on world market volume changes for rubies and emeralds? Who are your main competitors?
On the emerald side, we have a competitor in Zambia itself, one of our neighbors, who does sell in a similar pattern to us, via auction, and they do seem to produce similar volumes of emeralds to we have. They do seem to be slowing down a little bit compared to where they were in 2025. You also have emeralds coming out of Brazil, coming out of Colombia, and the auction market has certainly seen a significant uptick in activity over the last few years. On the ruby side, we do not see the same level of competition. There are no big players coming out of Mozambique at present. We do have a couple of neighboring assets, which have been in and out of production over the last few years. But certainly on the ruby side, MRM is still by far the biggest player.
Other parts of the world do not seem to be producing rubies in any significant volume at this point.
Thank you, David. Understood. With that, we have no further questions. We would like to thank you all for joining us this morning. If you have any further questions or would like to speak one-to-one, please reach out to us at the ir@gemfields.com email address, and enjoy the rest of your day. Thank you. We will close the call now.