Gemfields Group Limited (GML) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Gemfields Group's Annual Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Sean Gilbertson. Please go ahead, sir.

Thank you very much, Judith. Good morning to you, ladies and gentlemen, and welcome to this -- the results presentation of Gemfields Group Limited in respect of our 2019 financial results. You'd be pleased to know we're not going to be working through all 66 of the slides in this morning's deck, and we will be focusing very much on the actual financial results for 2019. If I could ask you, please, to move to Slide #4, which depicts the group structure diagram. I would just like to bring your attention to a few key changes in the structure diagram. Importantly, during 2019, the group bought back 10% of its own equity share capital. In addition, for those of you that are familiar with the slide and have looked at it previously, you may recall an approximate 7.5% circular shareholding, whereby Gemfields Group Limited held shares in itself. That circular shareholding is now resolved, with the effect that the respective shareholdings of the various key shareholders that you see there have increased by a relatively small percentage in each instance. In addition to that, we used to have on the bottom right of this diagram Jupiter Mines Limited, which, obviously, was disposed of by the group during 2019. And on the bottom left-hand side, we still own 6.5% in the public but unlisted Sedibelo Platinum Mines, which is an asset which is noncore for us and is, therefore, one that we are looking to sell. If you move on to Slide #5, for those of you who may not be familiar with Gemfields, the business is primarily focused around 3 segments shown here on Slide #5: the emeralds business in Zambia, the Kagem emerald mine; the ruby mining business, which is the Montepuez ruby mine in Northern Mozambique; and then, of course, Fabergé. At the bottom of the slide, you will see the word sapphires, followed by a question mark, for that is very much a portfolio asset that we would like to add. However, one cannot squeeze a fruit to ripeness and therefore, it will be a matter of time before we are able to find and secure the most appropriate sapphire asset, which we do sincerely hope will be in Africa in keeping with our African focus. Just bearing those 3 assets in mind for a moment, if we move on to Slide #6. What we are looking at here is the 12-month rolling total revenues from each one of those 3 underlying assets. In other words, each of the bars that we're looking at in this graph represents the revenue accreted during the preceding 12-month period. Unsurprisingly, the green is the emerald business, the red is the ruby business, and the black is the revenue from Fabergé. And as we can see from this graph, it's a pretty healthy trajectory, with 12-month rolling revenues to the end of February 2020, sitting at an all-time high. I clearly don't need to explain that COVID-19 is going to have a pretty negative impact on the trajectory of this graph, and we'll come back to COVID-19 a little later in the presentation. With that, I'm going to hand you over to my colleague and our CFO, David Lovett, who's going to speak with you briefly in respect of share price and also the financials and sales.

Thank you, Sean, and good morning, everyone. If we just have a quick look at some of the share price movements before we go into the financials, if we start on Slide 10 of the deck. On the right-hand side there, you will see the Gemfields Group Limited share price movement since 2015. What you can see here is right now, perhaps unsurprisingly, based on the global pandemic we're going through, we are an all-time low in terms of our U.S. dollar share price. If we move on to Slide 11. This gives you some comparison to where we are today as Gemfields Group Limited against where Gemfields plc was over its life. The 2 things to pull out of this graph here are, what you can see back in 2015 is that Gemfields plc was using the same assets as are currently in the Gemfields Group Limited portfolio, they were valued at around $570 million. We are now trading around $103 million of market cap. And even if you compare that to the price that Gemfields plc be listed at, you're still trading at around a 56% discount to that figure. So we certainly think there is, despite what's happening at the moment, some upside in where the share price and the market cap can go. And then on Slide 12, we just have some side-by-side comparisons in terms of the figures. And the number here that's interesting is, well, wonder, the net cash with debt position. Back in 2017, Gemfields plc was sitting on around $36 million of net debt. We are now, at the end of December, looking at around $43 million of net cash. And in terms of market cap, that is flipped around. So back in 2017, Gemfields plc was trading around $230 million in market cap, and as I said, we are now trading at around $103 million. So despite the short-term downturn in the last few weeks, we would still say that Gemfields has been trending at a much lower market cap than we think the business should be worth. The final slide to look at in terms of share price is just a quick comparison to some of our peers. So on Slide 13, we have Gemfields Group Limited share price rebased to 0 in April 2019 against some of our competitors in gemstones, but also in the diamond industry. And what you can see is while it's undoubted all of the companies have recently seen a dip in share price, the Gemfields share price does not see the same level of volatility as the diamond guys. And I think the point we are pushing and we will continue to push is that colored gemstones should not be considered in the same basket as diamonds. There are a number of reasons for that, but one is this, that the share price volatility isn't quite at the same level as the diamond guys. Now if we move on to the financials. Before I start going through the actual figures for the year 2019, it's worth noting that the audit report for 2019, while it's unqualified, does include a material uncertainty note in relation to going concern. The uncertainty is primarily related to the impact of COVID-19 and the impact of the global travel restrictions and how that will pass on to our ability to run auctions and therefore, generate revenue. As Sean said, we do expect revenues to be materially impacted in 2020, but through widespread cost-cutting measures alongside our pretty robust balance sheet, we should be in a position to come through this uncertainty and start selling our gemstones again when the markets open up. If we now move on to the actual financials. On Slide 16, this just gives some highlights. And I think it's worth noting, while right now we are in a tricky position globally, 2019 was an excellent year for the Gemfields Group. We had a number of record-breaking financial performances, starting with revenue. So 2019 saw $216 million of revenue across the group, and that is the highest we've ever had. And that breaks down from Kagem, $80 million, just -- that was across 4 auctions in the year. At Montepuez Ruby Mining, we had 2 auctions, bringing in $122 million, which meant that for 2019 for the first time, we had over $200 million of revenue from our gemstone auctions. You then have some revenue from Fabergé and also some smaller revenue streams such as our direct sales in India, which takes us to the $216 million total revenue figure for the year. That moves down to an EBITDA number of $80.9 million, which is around a 37% return on revenue. And then moving down from EBITDA, if you take out the change in inventory, which is a noncash item, the amount paid in tax, which is just under $10 million and the amount spent on CapEx, which was just under $31 million, you come to the $31.1 million of free cash flow. And that represents a 14% return on revenue, which is relatively healthy. But it's worth noting that there is upside on that figure because within EBITDA, we have the 15% export duty in Zambia, which has now been suspended. That equated to a $12 million hit to Kagem's cash generation. And therefore, if you added that back, that number could be significantly higher than the $31.1 million, assuming everything else remained equal. Obviously, that is not the case in 2020. But looking further forward, we would hope that there is upside to that free cash flow percentage number. Other things that is worth putting out, the normalized earnings give you a figure of $25.5 million. The things that are removed from that are: any P&L movements in relation to Sedibelo; realized sale of Jupiter; the Kagem impairment, which was written back in the period; the 15% export duty, as I mentioned, has been added back to get this figure; and then we have some inventory movements, which add -- come back to our $25.5 million. And then finally, on this slide, the net cash sits at a pretty healthy $25.4 million at the end of December. And on top of that, we have $57.7 million of auction receivables. As of today, over 96% of that $57 million has been received, and therefore, the group is in a pretty strong cash position today, with about $70 million of cash plus facilities open to us at the moment of $30 million. So we certainly think that the balance sheet is pretty strong. Moving down to the segmental analysis. I won't spend too much time on this, but we'll obviously invite questions at the end of the presentation. It's worth noting on the cash flow side of things, both Zambia and Mozambique, primarily Kagem and MRM are reasonably good cash flow generating assets. Kagem, if you add back the $12 million of export duty, which was effectively a one-off in 2019, you'd be looking at returns on both of those assets at a free cash flow level of 20% of revenue. The rest of the group is -- well, corporate is effectively cash losing. Fabergé has some cash positivity here, so that is before working capital movements, particularly investment in inventory. And then other, you have some sales going through the Indian operation, which helped balance that out. So across the group, we are looking at $31 million of free cash flow generation. And as I said, there is upside on that figure. In terms of the P&L on Slide 18, again, what you can see here is that the 2 mining assets in Zambia and Mozambique are where the business is really generating revenue and profit, PGMs and Steel Making Materials. So PGMs is our investment in Sedibelo. That $7 million unrealized fair gains relates to the market-based valuation of our investment there. And the Steel Making Materials is our investment in Jupiter. That has now been fully realized. And therefore, going forward, you won't see anything coming through there. And then finally, on the balance sheet, I think the only thing that's worth noting here on Slide 19 is that the Steel Making Materials, which is our investment in Jupiter, is no longer in the business. So going forward, that's one of the noncore assets we have managed to dispose of in the year. Next couple of slides just give you an idea of the cash and debt situation. So on Slide 20, you have the yellow line, which tracks net debt or net cash. And what is worth noting here is that, if the current situation globally had happened just 2 or 3 years ago, I think Gemfields would be really struggling to get through it. Hopefully, as of today, with our net cash position and a genuine cash holding of more than $70 million, we should be in a position to hopefully get through this with minimum impact other than cost-saving measures. And then finally, in terms of the financials, what you can see on Slide 21 is the gross debt profile. So this just tracks the debt in the group. What you can see is there are peaks. $30 million is Kagem's debt that sits in Zambia in the Kagem asset. The move up and down relates to MRM, so MRM has 2 revolving $15 million overdraft facilities. They are used in between auctions in order to balance cash flow, and that's why you see the line sort of going up in December and then dropping back down in January. Because as auction revenues come in, those facilities are repaid and then held off until we get to a period where we need some cash. Sean, I think that...

Thank you very much, David. Thank you very much. Ladies and gentlemen, if I can draw your attention briefly on Slide 25, please. You will find the 2 most recent Competent Person's Reports by SRK Consulting in respect of Kagem and Montepuez Ruby Mining. And the item that I want to draw your attention to is in the fourth line, being the NPVs post-tax and at a 10% discount rate that had been calculated by SRK in respect of these 2 assets. You will see that each is valued at approximately $600 million. If one adds those 2 together, SRK's view is that those 2 assets are worth approximately $1.2 billion. And that stands starkly in contrast to our prevailing market capitalization. Notwithstanding a positive net cash position, our market cap at the moment is just $103 million. Moving on then to take a quicker look at those 2 assets. On Slide 31, you will find the historic auction record of the Kagem emerald mine, that is each and every one of the auctions that we've conducted since we took control of the asset. And in green, you will see our high-quality auctions; in yellow, our commercial quality auctions. It's interesting to note that in the '16, '17, '18 period, you can note a market downward performance in the assorted auction figures with the market then recovering a little bit towards the back end of November and during 2019. In '16 and '17, what transpired was: firstly, Indian demonetization; secondly, the very large, Nirav Modi fraud -- banking fraud in India; and thirdly, our key customer base for emeralds hailed predominantly from Jaipur, and the real estate market, they also came down dramatically. That market has been recovering quite well, but of course, COVID-19 has rather put paid to those ambitions. If we then move on to Slide #32. What we're looking at on Slide 32 is the total last 12-month number of carats produced by Kagem. Typically, we don't push total carats as a performance metric for Gemfields, only by virtue of the fact that total carats reported is largely a meaningless value because of the differences in value between the best carats and the poorest carats. However, what's important in this chart is, if you look at the right-hand most side of the page, you will see that for the first time in our ownership of Kagem, the total number of carats has rather been smoothed out, and we are not seeing the fairly dramatic up and down cyclicality that has been a feature of past performance. One of the reasons for that is that we have now a increased number of production pits and we've also incorporated the Mbuva-Chibolele mine, which is based across the river from the Kagem emerald mine. The reason we don't look at total carats is depicted on Slide #33. And this demonstrates just how extreme the difference in pricing is for our bottom of the range product from Kagem through to the top of the range product at Kagem. In fact, the prices increase a staggering 2 million times. And what that means is that some 65% of our revenue at Kagem comes from just 4% of the top quality by weight. Therefore, if we zoom into what really matters, which is the premium production, and we have a quick look at Slide #34, what you will see depicted here is not the overall 40 million carats but just what's happening with the premium carats. And whilst the left-hand side of the chart looks pretty healthy, in fact, back in December of 2010, we made some changes to the way in which the grading works at Kagem. And therefore, once the old system comes out of these 12-month rolling figures, you have a much more stable and accurate base from which to look at the premium carat production. And towards the right-hand side of that graph, you can see that at the moment, the Kagem's performance is very strong from an operational perspective. Most upsetting that, at the moment, the market doesn't match the same level of appetite given the prevailing COVID-19 turbulence. Having a quick look at the OpEx and the rock handling at Kagem on Slide 37, you will see both the last 12-month operating costs and also the last 12-month rock handling figures depicted. And not surprisingly, the OpEx, obviously, increases as does rock handling, something we can see over the course of the last 10 years. Most recently, however, there has been an uptick in OpEx and a decline in the rock handling, meaning that the unit costs at the moment are trending up. There are 2 notable reasons for that. The first is the exceptionally rainy season that we've just been through in Zambia. Many of you will be aware that the Victoria Falls are running at record levels, and that obviously makes open pit mining conditions very challenging. And the second is the incorporation of the Mbuva-Chibolele pit. Those figures are incorporated from October '17 here. And obviously, taking a somewhat smaller operation, which had higher unit costs, and adding that into Kagem has a temporary impact as we start delivering the economies of scale. Final slide in respect of Kagem is on Slide 40. Just taking a quick look at the historic CapEx spend. Again, these are last 12-month bars, and we can see 2 fairly significant camel humps, as it were with the CapEx to the end of February 2020 in the preceding 12-month period, being some $4 million. Clearly, that is not a figure that is going to climb for the bulk of the remainder of 2020, given COVID-19 and our reduction in CapEx spend. David, I'll hand over to you for Montepuez Ruby Mining, please. David, I'm not sure you're there. You may well be still on mute.

Sorry, Sean. Back on now. So I'll now move to Montepuez and run through a similar set of slides, which Sean's run through for Kagem. The first one on Slide 46 gives our auction revenues by auction since June '14. So we've had 13 auctions at -- through Montepuez Ruby Mining, totaling a return of $584 million of revenue. The last 2 relate to the financial year we've just looked at, $121 million, split between $50 million in June and then $71.5 million in December. If we now move to Slide 47. This gives the production profile at Montepuez Ruby Mining. This, in the same way total carats are relatively meaningless for emeralds, the same thing is actually even stronger for rubies. The reason for that is, if we move on to the next slide, so we're now on Slide 48. You can see that 90% of revenue comes from the top 6% of weight. So you could almost throw away the rest of production, and you wouldn't have much, much value loss at all. The price change from the bottom value product to the top value product at MRM is 20 million times. So the -- a carat is not a carat, as Sean said. And on the ruby side, it's even stronger than it is on the emerald side. If we just look at premium production, which is the very top part of that graph, we can move to Slide 49. And that just brings that this is exactly where most of our value comes from. What you can see is undoubtedly, there has been a dip since the highs in -- at the end of 2017. And we are now trending around 80,000 carats per 12 months. But even at these levels, the operation is still hugely cash-generative and profitable. We are still pushing, as a management team, to move back to those 10,000 carats a month of premium production, and the team are, obviously, striving for that. If we now move to Slide 52. This, in the same way we've displayed for Kagem, gives you your 12-month operating costs and then your 12-month rock handling. What you can see, undoubtedly again, is that our operating costs have increased at Montepuez. And we have moved from around $25 million to where we are now at around $33 million. But on the flip side of that, you have a huge increase in rock handling. So the graph at the bottom of Slide 52 shows that our rock handling has increased from around 5 million tonnes on a 12-month period to over 7 million tonnes, so that there's roughly a 50% increase in the amount of rock we are handling at that operation. And therefore, an increase in OpEx is expected. Moving on to Slide 53, that just -- this effectively puts those 2 graphs together and gives you your rock handling costs based on U.S. dollar per tonne of rock mined. And as you can see that, that is moving downwards quite significantly. Obviously, the amount of waste in mine is -- isn't the most economic measure of the mine's performance. But you can see that our rock handling is definitely becoming cheaper. The final one for MRM is the CapEx. And while you saw 2 sort of small spikes in a relatively low sustaining CapEx figure for Kagem on the MRM side because we've effectively built this mine from the ground up over the last 5 or 6 years, there has been a relatively higher level of CapEx on a sustained period. While the end of December figure was running around $20 million, based on what's happening now, we are pushing back on some of our CapEx. We'll come back to that later. But I would expect that, that figure on a rolling 12-month basis to dip down in 2020. Sean, then I'll hand back to you.

Thank you very much, David. Ladies and gentlemen, if we move on to Slide #58, we're going to have a quick look at where Fabergé presently stands. On Slide 58 on the left-hand side, we're looking at the last 12 months total revenues for Fabergé. This goes all the way back to the start of the business of Fabergé Limited. And you will see that at the end of February 2020, Fabergé's revenue stood at just about $13 million per annum mark. And on the right-hand side of this page, you will see that Fabergé's operating costs have been brought to comfortably below USD 10 million. What's obviously critically important when looking at these 2 graphs and the Fabergé business is the extent of the cash flow on the business. But if I can draw your attention to Slide #59, what you'll see plotted here on the left-hand side is the total number of pieces, i.e. individual items sold by Fabergé, and on the right-hand side, the total number of sales transactions. And in both of those cases, you can see a pretty healthy growth trajectory. And the number of pieces sold is in part driven by the introduction of lower price point items by Fabergé, which are a little easier to move. The average pricing at Fabergé is still running in excess of $6,000 per item sold across both retail and wholesale, with an approximate 50-50 split between direct-to-consumer sales and 50% to wholesale partners or multi-brand retailers. The critical thing, however, is on Slide 60, which is the total cash dependency that Fabergé has on the group. And we can see here that back in December 2015, Fabergé's cash dependency was running at a rather staggering $23.6 million per annum. That has, however, with the gradual improvements made in the business being brought to the level of about USD 5 million at the end of February 2020. So gradual progress has been made. And I think the team has worked very hard to achieve that. Obviously, we're going to see some difficulties in respect to the Fabergé business as a result of COVID-19. David, I'll hand back to you just to cover the buyback to date, if you would.

Sure. Just a very quick one on the buyback. In 2019, we bought back 10% of the company for a weighted average price of ZAR 1.50. We then continued the buyback in 2020. So January until yesterday, the buyback was running. We put that, the relatively modest 2.5 million shares in that period. As of today, the buyback has been suspended. That is one of the measures that we take in order to preserve cash. And on that note, I'll hand you back to Sean just to run through the other things that are happening across the group.

Thank you, David. Finally, ladies and gentlemen, before we take any questions, we're just going to cover briefly the impact and actions, thus far, in respect of COVID-19, no doubt a hot topic in many of the other calls that you've been attending. And we'll start on Slide 64. As we have already told the market, there is no doubt that Gemfields is going to see a material adverse effect on its operations, the revenue and also the business. At the moment, the critical operations at Kagem are suspended and some 150 people out of our 1,000 strong team are all that remain on site. The security deployment has obviously enhanced whilst the site is largely devoid of operations, that's a 40 square kilometer license. Similarly, across in Mozambique, the Montepuez Ruby Mine has scaled down its operational personnel by 2/3, meaning that only 1/3 of people are left on the premises. We have, in fact, scaled up the security there, nonetheless, given that it's an approximately 400 square kilometer license area. And at this point in time, both our processing plant and the sort house are still operational but on very reduced staffing in order to optimize on the social distancing that's deployed in the fight against COVID-19. We do expect that as the situation develops in Mozambique, further suspensions of operations might occur there. Similarly, our exploration projects in Madagascar have been suspended until further notice. And Fabergé clearly is also very hard hit by the latest developments. The directly operated retail operations in Harrods and the Galleria Mall in Houston are closed. 80% of the multi-brand retailers that Fabergé sells to in its wholesale business are also presently closed. And the same also applies to approximately 80% of the workshops that supply Fabergé's items are presently closed. And the mono-brand boutiques that Fabergé operates by partners in Dubai Mall and Kiev are presently also closed. Fabergé.com sales, obviously, online are still running, although those are at a somewhat tempered pace at present. The Gemfields offices in London and Jaipur are closed. All personnel are working remotely. And the principal issue for us, obviously, at this juncture is that the travel restrictions and also the restrictions on movement mean that Gemfields is unable to host any gemstone auctions. It's not something we can do online. It is very important for our customers to inspect every one of the gemstones before placing their bids. And in 2019, some 93% of our revenue came from 6 auctions that we ran. The next 2 big auctions for Gemfields would have been a higher quality, another auction to be held in Singapore in May of this year and followed by the fairly traditional jewel auction of rubies, which historically has brought in somewhere between $50 million and $70 million of revenue. It is undoubtedly the case that neither one of those auctions is going to take place as scheduled. And it becomes a question of how long it's going to be before we're able to conduct those auctions. We do anticipate that once the travel restrictions are lifted to some extent, we will, obviously, not be able to run the auctions immediately. And it will take a little bit of time for our industry, our sector and our customers to recover. If we move on to Slide #65, as David has already pointed out, the share buyback program is now suspended because clearly, the name of the game is making our remaining cash last as long as we can possibly make it last. And at the 29th of February 2020, we had cash balances of about $73 million. Net cash was almost $44 million, and we had undrawn overdraft facilities in Mozambique of $30 million. So as David said, a fairly healthy balance sheet. And the name of the game now is trying to make sure that we protect that as much as possible because we do not know the extent of the delay that we're going to be facing before we can run our next gemstone auctions. With that, ladies and gentlemen, I think Judith, I'll hand back to you, and we'll take any questions to the extent that we have any.

[Operator Instructions] The first question comes from Alison Turner of Edison Investment Research.

Sorry, I've got a few questions so I hope you don't mind if I stack them up. Two are kind of backward-looking and then one that's more forward looking. So just in terms of the reserves from last year. I wondered if you could just maybe comment a little bit more on MRM on the premium ruby production. David, you noted that you were looking to, as a management team, striving to return to that 10,000 carat a month level. Perhaps, if you can just talk a little bit about what levers you would need to pull to get there. What is it that is really the key drivers there that you could try and increase that level? And I know it's somewhat a mood point because you can't sell them at the moment anyway, but nevertheless, just so we understand that a bit better. And the second is with respect to the auction receivables. So you noted at 29th of February, you've got $18.3 million in receivables. Clearly, those all can't all come from the February auction, which we would expect to sell it in receivables, but some of them might -- must still be from last year's auctions. Is that normal for some of those receivables to still be outstanding kind of 2 months later? So that's the second question. And then just a little bit of a forward-looking question. Clearly, you can't hold an ordinary auction as you would normally do. And we have seen people like Gem Diamonds looking at alternative selling mechanisms in this market, such that some revenue is still coming in. Now I don't know exactly how they're doing that, but presumably, it's a question of showing a select number of stones to a select group of people that they can get them to. And others may know better exactly what they're doing there, but certainly, they have looked at ways that they can still make some sales. Is that something that you're looking at? And indeed, is it something that your customers are saying, "Hey, we can't wait until October. Can we have something in the meantime?" So sorry, lots of questions, but if you can try all please.

Well, thank you very much, Alison. David, if it works for you, I'll take questions 1 and 3. And at the end, I'll come back to you in respect to Alison's question on receivables. And so Alison, your first question related to Montepuez Ruby Mining and how do we get the premium production from the 80,000 carats to 120,000, which is our desired position of 10,000 premium carats per month. In short, what we've been trying to do at MRM is because we have a number of different pits each with a different characteristic in terms of the quality and also the grade carats per tonne, we're trying to get ourselves into a situation where we have a portfolio of pits feeding the washing plant. And that means that we should not be focusing only on the best of the pits but we should be making sure that we get production from all of the different pits and also that we have the capacity to test the characteristic of some of the new pits that we're bringing online. In that process, it means that we're not focusing only on the higher-grade pits. And what's critical for MRM because it is a volume game, is to have the throughput capacity on the washing plant. And so to that end, and this would have made a very big difference to us by March 2021 in terms of hitting that target, would have been bringing on stream of a second washing plant parallel to the existing one, which would effectively double our capacity because the existing sort house was originally built with that target in mind. However, the total CapEx for the second washing plant over the course of about 2 years, including the acquisition of additional yellow goods for mining equipment is in the region of $24 million, $25 million, with about half of that originally planned to be spent by March or April of next year when the washing plant would originally been fired up. But given the present COVID-19 situation, obviously, we have suspended all of the key CapEx projects as well as our discretionary expenditure, uncommitted marketing expense and so forth. So that washing plant and bringing that onstream is simply going to have to wait until we have further clarity. But once that comes onstream, we are pretty confident that you will see the 120,000 carats per annum. Then in respect of Gem Diamonds and the approach to doing auctions a little bit differently. We do have a very small percentage of, from a revenue perspective, lower quality goods that we don't sell at auctions. Those we offered historically at the auctions, but there wasn't a great deal of customer interest in it. And therefore, we have taken in recent years to selling those via direct sales, particularly by our Jaipur office in India. And the reality is that doesn't make a very big difference to us from a revenue perspective. And moreover, at the moment, given the lack of flight and restrictions on movement, one actually can't move the product from Zambia, in the case of emeralds, into Jaipur. In respect of the big money, it is very difficult with colored gemstones to take a different approach whereby, for example, you might be able to do things online or give people, as you can in the diamond business, the key vital statistics on the diamond, and people will have a reasonable idea if it's been analyzed by one of the diamond analyzing machines on what the final product is going to be. That doesn't exist in our industry. No 2 colored gemstones are the same, and unfortunately, our clients just have to physically inspect each one of the gemstones and spend a lot of time doing that. With that, David, I'll hand over to you in respect of receivables.

Sure. So in terms of receivable number, as we said, Alison, at the end of February, we are looking at around $18 million of receivables. More than half of that does relate to the February emerald auction, and the rest is an outstanding balance between the November emerald auction and the December ruby auction. As of today, almost all of that has been received. We do have a small outstanding balance relating to the ruby auction, which we are working with the buyer on. But in the history of Gemfields, we haven't had an instance of nonpaying. I certainly hope that is not going to be the case, but there is a slightly more flexibility as of today just because of everything that's happening, but we are doing everything we can to bring that cash into the business as soon as possible.

The next question comes from William Marshall-Smith of Groundswell Holdings.

I've also got a few different questions. The -- in particular, the one, the asset that you carry on your balance sheet, Sedibelo. I just wondered what the ability and whether there'd be any process thought around potentially selling that given the requirement to strengthen the balance sheet. I also wanted to understand in supporting the value of Fabergé, the note on Page 20 of the condensed results mentioned that you'd had received business for it. It's obviously quite a significant number on the balance sheet, particularly relative to operating performance. And so I'd like a bit of color on that. There's quite a significant swing in your stock in Kagem that affects your results part of it. David, perhaps you can just explain that. I think it was $8 million this year the one direction and $8 million in the other direction. And then finally, if you can just -- obviously, with COVID, you're pulling back on CapEx, but it would be useful to know what the CapEx would have been and what we can expect sort of once we come out of this period over the next sort of 12 months.

All right. Thank you very much, William, for your question. And David, I guess I'll cover the Sedibelo and just also the business we received in respect of Fabergé. And then back to you for Kagem's stock, and then we can deal with COVID-19 subsequently. So William, in respect of Sedibelo, it remains an asset for sale for us, obviously, given that it is an unlisted but public company with the minority stake of 6.5%. It is not exactly the most liquid of assets for us to realize. You will clearly be aware that the platinum group metals business had a fall on to a different phase, a rather exuberant 2019. I understand that Sedibelo did relatively well as a result of that. That operation is, at the moment, also suspended. And clearly, it would be ideal if we were in a position to realize the asset and provide us with further bolstering of the balance sheet. However, we don't presently have any discussions ongoing that I would describe as likely to deliver a transaction for us, and we would obviously prefer to make sure that we get reasonable value for that asset rather than having to fill it with our backs against the wall. And so I'm afraid that's one where we're simply going to have to wait and see how the sector develops and to what transactions we may be able to deliver. In respect of the valuation of Fabergé and the historic bids that we've received, that is correct. We have, in the past, received probably somewhere between 5 and 7 different approaches from various parties, some of the more credible than others in respect of the potential acquisitions of Fabergé. And it has been the view of the Board in respect of those bids that they did not represent adequate value for Fabergé, and they were therefore declined. Now we are of the view that Fabergé holds significant value for our shareholders and that having come this far with the business and having made the progress that has been made to date, we should continue to complete the job and get the business to a point where it is not only profitable, but is contributing to the wider group. And that once that has been done, when compared with the loss-making business, that the potential values that might be realized from Fabergé would obviously be significantly enhanced. Then in relation to the COVID-19 CapEx, the 2 CapEx slides in this deck will indicate that the MRM CapEx had been running at approximately $20 million. That is a figure which we would have anticipated would continue for the next 18 to 24 months, especially given the bringing on stream of the second washing plant. However, given COVID-19, that is now deferred. And so we'll see a dip in MRM's CapEx for the remainder of 2020, but that will probably pick up again in 2021, depending on how this whole situation pans out. Similarly at Kagem, a figure of $6 million to $8 million is typically what we bear in mind depending on circumstances and expansion plans. And again, that's a figure which, for the balance of 2020, we would expect to see declining pretty dramatically. David, let me hand over to you in respect of Kagem's stock.

Yes. Thanks, Sean. So William, I'm sure you won't be surprised to say that you're not the first person who has asked about the change in inventory number. We have, over the years, tried to explain this. It's not the easiest thing to understand. At a simple level, effectively, what we do on a monthly basis is capitalize the direct mining costs into the value of production. So that is where the balance sheet valuation comes from, effectively. We push all the mining costs onto the balance sheet as a value on inventory. And then a weighted average is used to calculate cost of sales when things are sold. And therefore, in a year or in auction where you have a huge or a larger quantity of lower-value goods being sold, the cost of sales relating to that auction will be significantly higher than the goods that are sold at the top end where the weight is much less. We have looked at other ways for accounting for that. I think this is where we're going to be for at least the next year just because we haven't found any better solutions. But what I have discussed with the team is we will try and put together a -- like an example calculation, which we will then put on our website, which, hopefully, will help people understand the mechanics behind the calculation. But in this particular year, what you'll see is as that number is a positive or a credit on the P&L, effectively, our inventory has increased, which means we basically produced more than we've sold. In other years, it will be the other way around, and it will effectively be a debit on your P&L. But certainly, it's a valid question, and it's not something that is easy to explain it on a phone call. So what we will try and do is put together a sort of run-through calculation with some figures in there to try and make it simpler for people to understand.

Thanks. And then just to go back to the CapEx, Sean. You said $20 million for MRM and a kind of normalized next 18 months. But presumably, once you've hit that capacity, it wouldn't be that high because of the -- you expanding capacity with the wash plant. Is that correct?

Good question. You're absolutely correct, I should have been clear. Once that second wash plant is in line, we certainly wouldn't expect MRM's CapEx to remain at the circa $20 million levels. No, that will come down pretty nicely.

The next question comes from Wilhelm Hertzog of Rozendal Partners.

Just a question on Montepuez unit costs, specifically, I guess, per premium carats, which was quite elevated during 2019 compared to 2018 which I assume is due to that Leigh Day settlement. But the trend, certainly, even if you exclude that, seems to be upward, if I look at Slide 54. Can you maybe just expand a bit on that? Give some more color? Are there grade issues there? Is it a -- I mean, is it a function of integrating all the sources of ore from the various pits which is driving up costs? Or what is the situation in regards to that trend, if you don't mind?

Thank you, Wilhelm. No problem at all. And David, feel free to chip in. I think the 2 pertinent slides there, obviously, are Slide #54. And then we'll also have a quick look at the overall premium carats produced. There is definitely a cost increase and that can be seen on Slide #52. And generally at MRM, that is primarily because of a general scaling up of auctions and also the amount of rock handling that is being undertaken. What we are doing is expanding the number of pits that we're operating from, so that instead of focusing only on 1 or 2 pits that have given us historically the high-value gemstones, we're increasing that portfolio. And we're also taking production, which sometimes is lower grades, sometimes higher grades, but sometimes also have lower-quality gems from other pits. And what you can see on Slide 52 is a very marked increase in the overall rock handling from the sort of 5 million tonnes per annum level to what is now approaching 8 million tonnes per annum. So very dramatic increase in total rock handling. That obviously is going to have a knock-on effect on the U.S. dollar operating cost, which is depicted above that graph on Slide 52. Wilhelm, you mentioned the Leigh Day costs. You can see those kicking in and then again dropping out as of December 2019. So you get those 2 sort of digital steps towards the right-hand side of the graph and leaving MRM with OpEx at the moment, running at about $32 million or $33 million per annum. So what that should imply is that the unit rock-handling costs must be coming down if the efficiencies are increasing. And on Slide 53, we can see the unit rock-handling costs plotted. Again, you get the slightly digital effect of the Leigh Day settlement costs. Those then drop out in December '19, and the unit rock-handling costs, therefore, at the moment, are at an all-time low of just north of $4 per tonne. However because we are now sourcing ore from an increasing number of pits, that obviously means that we're not focusing only on 1 higher-grade area. And that has had a negative impact at this juncture on the total number of premium carats that we've produced, which you can see on Slide 54, when the unit costs are looked at. And whilst the total cost per premium carat has obviously come down to about $400, you can see historically that we have had spikes that have, in fact, exceeded $500 per carat. We do anticipate that, that graph will continue to come down a little bit. And when we get the second washing plant up and running, we expect to see a pretty significant improvement in that graph. The other one that might be worth just having a look at Wilhelm because obviously, we don't have grade consistency in color gemstone mining, so even from one pit, your grade can vary quite a bit. And I'm just trying to find -- okay, actually, it's on Slide 39, is probably worth having a quick look at. This plots the cost per premium carat at the Kagem emerald mine. And just to give you an understanding of the fact that sometimes you do go through periods or patches where the number of premium carats goes up or down in a given pit, let alone when you're operating from different pits. You can see the cost of premium carat from an emerald perspective at the top of Slide 39. They'll sometimes start looking pretty scary. In fact, at one point, we were paying almost $900 a carat per premium emerald carat. And that to now being a very healthy figure of about $150 per premium carat. So we do see that volatility, one of the features of color gemstone mining, and Wilhelm, that will hopefully be something that improves, hopefully dramatically, once that second washing plant is on stream.

[Operator Instructions] The next question comes from Razeen Dada of Glory Star.

Hello?

Yes, we can hear you. Go ahead.

Yes, okay. Perfect. Okay. No, I just wanted to congratulate you as well on being able to bring down the costs. And I think you're doing a much better job of -- than Ian Harebottle, I mean I met the guy, but -- we've held shares for about 10 years now. So the question I had is obviously regarding the dividends. And I mean I was -- after 10 years of holding the shares, I had a glimmer of hope last year of a share -- then suddenly, management just turned around, and it just -- like for the last 10 years, it seems like management has taken, I'd call it, a little bit of a selfish approach. I'm looking at the dividend, the share buyback and I look prior to that, then Brian Gilbertson is busy buying shares at $149. And then suddenly, the company is buying back their own shares. And then instead of worrying about minority shareholders, we were about to get a dividend, and I'm not sure if you ever think that sometimes shareholders also could use the cash if it's being announced. But what's your take on the dividends now? I mean will we ever see anything? Or is it always it's going to go into -- go to management? Or if management does a buyback of this -- of their own shares and then the company follows suit, will we ever get a dividend? That's it.

All right, Razeen. Thank you very much for your forthright question. It is very valid and much appreciated. And for those who may not be aware of the history, we had identified, a couple of years ago, a pot of funds, which we had deemed a distribution pool, which originally, the intention was to pay that out as a dividend. And the purpose of those funds were then retooled to either be paid out as a dividend or to be used as a share buyback. And the retooling of those funds came about only because the share price of the business remained so very low compared to the implied value. And when the Board sat down to discuss that and make a decision as to whether the fund should be returned to shareholders as a dividend or return to some shareholders who wanted to sell by way of a share buyback. The decision was made that it made more sense, given the very low pricing, to use the funds for a share buyback. And I'm sure that most shareholders would agree that the purchasing in 2019 at 10% of our issued share capital at just ZAR 1.50 has added excellent value to all of our remaining shareholders. Now talk is cheap, Razeen, and we have certainly, as a management team, been saying for the last 18 months that one of our most closely held ambitions is to get cash to flow the other way from this business. In other words, to start making dividend distributions. And we had certainly hoped that 2020 would have been the year in which we would have been able to declare that maiden dividend. And I can say to you that the -- it is very gutting to our entire team, including the guys on the ground who bust their chops to deliver a super 2019 and to give us a good balance sheet by December 2019. I think it's playing to everybody that had COVID-19 not come about, the business would have been well positioned to make such a maiden dividend. So it's very gutting to the team that despite that hard work, the cash pile that we have been able to set aside is effectively now becoming savings from which we have to continue to operate the business as best we can. So I repeat that talk is cheap. We have been clear that it's very much our ambition to pay a dividend. And hopefully, all things being equal, and the market coming back to being able to do that on an annual basis rather than simply as a one-off bonus as and when we have a good year, but the reality is that COVID-19 just has shattered that ambition.

Yes. No, no, of course. I mean just keep to your commitments and we'll take care of the share price. I'd love to buy more shares, just as long as management keeps to their commitments. It's just like if you say one thing, please try and stick to it to -- as best as you can, but at the other end, and I'll keep buying shares. I have had the shares for the last 10 years, and I'll buy more. Just keep to your commitments and look after the minority as well as the majority.

Thank you, appreciate your input. Thank you, Razeen.

The next question comes from Johan Le Roux of Rational Expectations.

It's commendable that the Board and the management doesn't want to give up on Fabergé, given the amount of effort and capital that has gone into it. Or I mean I can say, despite the amount of capital that has gone into it. But how much further time and/or funding did the Board give management to turn the business around? I mean surely it cannot be a blank check.

It definitely cannot be a blank check. Thank you, Johan. And I do hope that the progress that has made with the business, specifically in respect of its cash dependency on the Gemfields Group is testament to that ambition. Obviously, the operating cost has gone down fairly significantly. Obviously, they've also been cut to the marketing expenditure. Nonetheless, the revenue figures have remained relatively flat, so they've not come down as that market expenditure has been cut. It cannot be a blank check. And whilst it's very difficult to give forward-looking projections in this environment and climate because we don't know what the impact is going to be from COVID-19 and/or indeed, how long it's going to last, we had been working on the hope that within a period of 2 years, Fabergé would be contributing to the group. And at current cash dependency levels, which you've seen from our graph, are running at about $5 million per annum, if that continues to improve, that check, hopefully, would not exceed 2 years at $5 million, which is therefore, sub USD 10 million. So that's the sort of framing answer to your question and I hope that kind of gives you some scoping parameters. But I would like to reiterate that we should bear in mind that Fabergé is arguably one of the greatest brand names out there. It is one of the very few superlative names that sits outside of any one of the big luxury groups. And that it is our judgment that if we complete the job of the journey that we have been on for a long period of time and get the business to a point of profitability, it will represent significantly more value for our shareholders than it's presently marked.

Can I ask another Fabergé question?

Of course.

This is more specific. What is the current Fabergé inventory versus the annual sales as a ratio? And then what sort of ratio do you guys -- what are you targeting? What's the industry average?

Yes. David, do you want to just pick up where we currently are in terms of the modifications to Fabergé's inventory in December?

Sure.

And then I'll chip in after.

Sure. So we did have a proper look at the inventory valuation. We do it every year-end, but particularly at this year-end, with other things going on to see if there should be any NRV versus cost write-down. The output of that, based on expert valuation was around a $7 million movement on the balance sheet. So Fabergé's inventory is currently sitting at around $30 million of inventory compared to turnover of, let's say, an average of $12 million. That is pretty high. Sean can give you some more details of why that is the case. But certainly, we would be looking at a term closer to sort of $10 million to $15 million of inventory rather than the $30 million that's currently sitting on the balance sheet.

Thank you very much, David. And so, Johan, I mean, obviously, if you've got $30 million worth of inventory and you've got annualized sales of, call it, at the end of February, $13 million, you're sitting at 2.3x the annualized sales, which is very high for this industry. And we -- essentially, the background for that is that when Fabergé first got going and the business was restarted in September 2009, the first portfolio of inventory that was acquired and continued to be made with a Parisian jeweler called Frédéric Zaavy, very high price point items, on average price about $100,000 per item. The reality is that about 50% of those items remain in stock today. And that is the subject of the modification to the inventory number that David has just been through. But those items were originally acquired at a very high price, and that comprises -- David, I don't know what the modified figure is at the moment post the December write-downs for just Frédéric Zaavy. So I don't want to mislead you there, Johan, but originally, that portfolio of inventory comprised well north of $10 million worth of the overall inventory number. So it is slow moving. We do sell a couple of pieces a year, and we're going to continue that process. But as David has said, over time, we do expect the ratio of inventory to sales to improve from the current 2.3.

One last question, just to revert back to the impact of the lock -- the COVID-19 lockdown at Kagem. Are all miners and all mining-related staff and the head office staff, everybody is still being paid at full salaries during this period of nonproductivity? And what is the plan if the operations continue to be suspended?

Yes, another excellent question. At the moment, everybody has been sent home on effectively forced leave. That does mean that, obviously, they are currently being paid at their full salaries. That is also a message that we've communicated to our partners in the Kagem emerald mine, the Zambian government owns 25%. We have obviously made it clear that whilst we very much hope to restart the operation at the beginning of May, and things should return to normal, we clearly will have to look at what the best approach is in the event that the lockdown and the operating conditions make ongoing operations unsustainable into May and June. So I don't want to sort of give you a formulaic answer to say we're going to do A, B and C. We do obviously have partners in the Zambian government that we would need to have discussions with to the extent that we are in a position where we have to either reduce the number of people that are employed or indeed put people on reduced work schedules. Those mechanisms are available to us. But clearly, we'd have to have careful discussions with our government partners.

Okay. Good luck. Difficult couple of months coming up and I hope you guys keep a steady hand on the rudder there.

[Operator Instructions] The next question comes from Brian Wootton of [ Carnsville ].

Can you hear me?

Yes, Brian, we can hear you. Go ahead.

Okay. I've got 3 quick questions. One, in Mozambique, your CapEx spend there was $4.6 million for the resettlement plan. I just wanted to find out why that's capitalized and not seen as an expense. Secondly in Fabergé, the stock write-down of $6.2 million is shown as an impairment below the EBITDA line. I would have thought that that's a normal part of trading and would be in EBITDA. And then the last question is sort of around what Johan was asking on the stocking Fabergé. I noticed in the valuation note that says there's 23 -- approximately $23 million in showpiece jewelry, leaving only about $7 million required for the business. And I think that $23 million is after the write-downs. Is the $6 million reasonable write-down from that $3 million? Or are you expecting to have some more in the future?

Thank you very much, Brian. David, do you want to handle the resettlement cost, the $4.6 million in Mozambique? And then deter the impairment below the EBITDA line for Fabergé? And then I'll come back to the Fabergé stock level.

Sure. So the quick answer to those are they are following discussions with our auditors. In terms of the wrap village, it is a discussion we have had more than once, whether that should be capitalized or not. The decision was effectively made, but it should be, as it's part of setting up the mining operation, as in -- it was part of the agreement to set up MRM, and therefore, we have capitalized it. It will be depreciated. But you have a valid point that, that could have been expensed. We chose to run it over the life of the mine instead. So that was an accounting policy decision really. And in terms of the -- does that answer your question? Would you like to go any further on that one?

Yes, that's fine. Thanks.

Okay. And then -- sorry, I missed your second question slightly. Was it impairment of Fabergé below the line?

Yes, I would expect inventory write-downs to be an above-EBITDA line item, not an impairment below EBITDA.

Sure. And again, I think I can understand your position. Again, it's a financial policy or decision that we have taken. The impairments go below EBITDA. And one of the reasons for that is to try and make the sort of general running of the business more normalized. The Fabergé number is big this year. We have run the comparisons between NRV and cost on an annual basis. But it was felt that this year, we should maybe be more aggressive in terms of the realization value based on what's happening in the world right now. I wouldn't expect a huge amount further on that number. But obviously, we will look at that. And this year is an example where it's not business as usual, and it may be time to look at those figures again. The -- as Sean said, there is a large portion of the slower-moving stock, which relates to a French collection called the Frédéric Zaavy collection. Those pieces are generally artistic rather than if you broke them down to their constituent parts that there is less value there, as in his name and his artistry holds value in that collection. And therefore, if you looked at that on a sort of break up value of the component basis, there is no doubt that there is more value there than you could achieve by taking them apart. So if we really pushed it and we were doing ultra conservative, you could say that those pieces could be written down further. But we have taken a relatively aggressive position on them in terms of writing them down to where they currently are. And then the last question, Sean, I don't know if you want to cover that in terms of Fabergé?

Yes, by what means go ahead, I think that's basically related to the level of showpiece jewelry within the overall $30.7 million of inventory.

Yes. And that is correct. The phraseology, showpiece, may be slightly misleading. It's effectively pieces that are for sale. These are not pieces that are purely for marketing or holding within the business, they are for sale, but they are not part of the sort of general day-to-day running of the Fabergé business. They do have some value in terms of marketing. And they are used by people outside of Fabergé to bring in customed. And obviously, it's nice to see the higher-end stuff when you might be buying the sort of more commercial end of things. But that -- they are for sale. And yes, there is no dead stock in Fabergé.

And clearly, some of those include pieces that are not only artistic in nature but also contain higher-value gemstone. And generally, that stock, which is just much slower to move, sometimes it takes 2 or 3 years to move, they're very high-end gems.

Is there a guesstimate on that?

Sorry, I lost that one. Sean, I don't know if you heard it.

Sorry.

No, I didn't hear the question. I think you dropped out just at the key moment, Brian.

Yes, can you hear me?

Yes, we can.

Sorry, I just wanted to ask if you could guesstimate for me [indiscernible]. Just to run by...

We lost you again there, Brian . Sorry, Brian, all I got there was, if we could guesstimate for you and then you cut out. Why don't you try one more time? Let's see how we go. Hello? No. I think we've lost you, there, Brian.

Sorry, Brian, I think you might have moved and lost signal from where you were.

No, I haven't moved but...

Can we hear that again?

Let's try one more time, Brian.

Okay. Sorry, I was just trying to find out on those pieces, if [indiscernible] what the constituent percentage is of value? Is it stuck at 10%? Or is it stuck at 19%? Hello?

Brian, I think the question was if we could guesstimate what the constituent percentage of value is in those pieces. And I'm entirely sure I understand the question, but I might have misheard something, and David, feel free to chip in. But essentially, post the write-downs in December, obviously, all of that inventory is held at the lower of cost and net realizable value. In other words, we do believe that if those pieces need to be sold, they're going to deliver that inventory number for us.

[Operator Instructions] We have a question from [indiscernible] of Coronation.

A quick question for me. Just your cash burn at the moment. I mean you mentioned your strong cash balance, but how quickly do you -- does that cash balance reduce in this COVID-19 environment?

David, do you want to take that one?

Sure. So in a sort of business-as-usual case, that cash balance wouldn't get us through to the end of the year, this is the reality of the situation. This is not a business-as-usual position. As Sean noted, we have already implemented a number of cost-saving measures. We do have further to go on that, depending on how things look in the future. In terms of the going concern element, as I said earlier, the real part of uncertainty is how quickly we can get back to auctioning our gemstones. So that is the -- we have the ability to move costs relatively significantly and relatively quickly. But the -- if the auctions are effectively shut down for 12, 18, 24 months, then the cash burn does become a more significant issue. So my response will be short term, we certainly have the ability to keep the business running on the current cash balance for at least the next 12 months. Our going concern assessment is obviously 15 months in balance sheet date. And therefore, we are comfortable with that period despite the auditors putting their material uncertainty in. But if, I think the reality is, Sean, unless if you want to jump in, if this thing continues for -- towards the middle -- towards the end of next year, then we, as a group, we're going to have to take some pretty drastic steps in order to maintain cash and keep things going.

Yes, I think that's right. The other thing that's worth noting is, and obviously, we would like to get the operations back up and running as soon as we reasonably can. But in the event that this thing drags on for a longer period of time than we had originally anticipated, it's interesting to note that at Kagem, currently largely suspended with about 15% of the people remaining on site, the operating costs of that mine have come down by approximately 2/3 of what we spend every month. So whilst that obviously represents a cash saving and therefore, reduces the cash burn and would further do that in the event that it has to run into May and/or, heaven forbid, June and July, obviously, there's the opportunity loss in respect of the emeralds that we're not mining. But it certainly does make the actual cash out the door position better for us.

The next question comes from Diderik Otto of PSG. We're not getting a response from Diderik's line.

Sorry. Sean, David, can you hear me?

Yes. Go ahead, Diderik. We can -- yes, we can hear you now. Go ahead.

Yes. Sorry. I mean congrats on a nice set of results. The next 12 months, obviously, going to be a lot tougher for you. Do you have enough inventory out of the ground already for Q4 auctions?

Another good question for us. Thank you very much. The answer to that, in respect of Kagem, is an overwhelming yes in the sense that obviously, we were preparing to go into our next auction in May. And so we're pretty comfortable from a Kagem perspective and getting the auctions back up and running should be, depending on the market circumstances, a walk in the park. In respect of MRM, our next auction would have taken place in June. Realistically, that's going to be postponed by, we don't know how many months yet, but I imagine it will be somewhere between 3 and 5, depending on how the market develops. And we are comfortable that come June, we would have been able to put on a pretty good auction as we have done historically for the month of June. Obviously, the current scaling down of operations means that we probably wouldn't be able to run an auction of that magnitude in June in a business-as-usual case. But obviously, once we get the operations back up and running, being able to run an auction in, say, October, November, December, depending on how the market recovers, should not be a problem for us.

Yes. And then just the burn rate at Fabergé for the next sort of 12 months. I mean I've seen you written off $5.5 million, $6 million. But on this sort of shutdown scenario, what does that number look like, please?

Well, again, the difficulty there, obviously, how long things are going to remain in the current situation, I guess, from a first principles perspective, if we're looking at OpEx currently at about $9.5 million. If we assume that we get no revenues at all and current revenue take is pretty close to 0, say for the occasional online sales. If that were to continue for an entire year, worst case, we're looking at the OpEx, which obviously, we also have the ability to control to some extent if there is a protracted period of COVID-19 impact. So worst-case framing answer, you're looking at OpEx, which is principally about $9.5 million per annum. But clearly, in the extremely unlikely event that we'll still be in the fall of this 12 months out, we would have taken other steps well before then to reduce that OpEx figure.

Yes. And then last question from my side. And then the offers you mentioned for Fabergé that the Board didn't deem sufficient, are you able to give us any sort of guidance as to the valuation range of those offers that the Board didn't deem sufficient?

Would love to do that, fully understand the question, Diderik. We haven't put those figures out into the public domain thus far. And so under the agreements that we had in place with those bidders, I'm going to sit on those for now. But I understand the logic of your question.

Yes. Because I mean quite frankly, I'd rather float Fabergé and use the money to keep the mines going if this thing goes any longer. But that's just my childish view.

Thank you very much, and that's obviously fully understood. But I'm sure we all sincerely hope that it doesn't come to flesh asset sales to keep the group going.

[Operator Instructions] Gentlemen, we have no further questions on the lines. Please proceed with closing comments.

No further comments from my side. Judith, thank you very much. Ladies and gentlemen, thank you very much for your attention and your time this morning. Clearly, very challenging times for the global economy and so many businesses out there. And clearly, we take some comfort from the fact that Gemfields is on a pretty sound footing from a balance sheet perspective. And provided the turmoil surrounding COVID-19 is not too protracted, this should be something that we are well adapted to dealing with. So yes, thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.