Having been suspended in March 2020, operations at Kagem Mining Limited saw a phased resumption from March 2021, with operations reaching normal capacity by the end of May 2021. Kagem’s remarkable production run of premium emeralds has continued where it left off before the pandemic struck.
Production in the premium emerald category was 73,200 carats (six months to 30 June 2020: 133,900 carats), an average of more than 20,000 premium carats per month during the reduced months of operation in 2021.
Overall production for the period amounted to 10.3 million carats (six months to 30 June 2020: 9.4 million carats). Total capital expenditure for the period was USD0.6 million, spent primarily on equipment and infrastructure improvements in order to attain Covid-19 compliance.
Kagem’s achieved production in 2018 (35.5 million carats) and 2019 (36.3 million carats) was above expectation and unprecedented, especially with respect to premium emerald production. The premium emerald production in 2018 and 2019 was 224,415 carats and 204,630 carats, respectively.
The fundamental impact of Covid-19 however meant that this trend did not continue through 2020. Since mining operations recommenced in April 2021, production has been 10.3 million carats at grade of 190 carats per tonne, including 73,200 carats of premium emerald.
This is a positive sign for the remainder of the year, with production exceeding the 9.4 million carats produced in the first half of 2020. Premium production of 73,200 carats is below the 133,900 carats produced in 2020 reflecting the dynamics of the ore body and the sections mined.
Operations in the first half of 2021 were geared towards expediting the more fruitful sections of the Chama pit, whilst opening other contacts for mining later in the year, mainly to replenish inventory levels. Activities focussed on controlled blasting in ore zone using small diameter drill holes, chiseling the in-situ ground and manual picking the run of mine at contact points, which has enabled the preservation of gemstone size, resulting in production of a significantly good quality.
Of the total production, Chama pit contributed 9.4 million carats, with contribution from Chibolele of 0.9 million carats. Kagem’s key operational parameters for the period ended 30 June 2021 are summarised in the table below.
Following the relaxation of Covid-19 restrictions, the wash plant operations recommenced on 17 March 2021, with work being done to improve the overall efficiency of the plant. These projects included the installation and commissioning of a magnetic separator that will improve the efficiency of the feeders and jaw crushers, and the construction of shelters to allow easier access for maintenance work. Despite a Covid-19 induced two-week shut down and shift reduction at the wash plant in June 2021, 49,627 tonnes at 47 tonnes per hour (“tph”) was processed during the period, compared to 40,794 in 2020 and 82,435 in 2019.
The total operating costs for the six months to 30 June 2021 were USD21.3 million compared to USD21.5 million for the comparative period, giving a unit operating cost of USD7.00 per tonne for the period. Cash rock handling unit costs (defined as total cash operating costs divided by total rock handled) were USD3.69 per tonne for the period compared to USD6.19 per tonne in the previous period, with total cash costs of USD11.2 million compared to USD14.5 million in the previous period.
Total operating costs include mining and production cost, mineral royalties, marketing, management and auction fees, selling, general and administrative expenses, and depreciation and amortisation, but exclude the change in inventory (see Note 3 to the condensed consolidated financial statements). Cash operating costs include mining and production costs and selling, general and administrative expenses, but exclude intercompany marketing, management and auction fees, depreciation and amortisation and mineral royalties.
During the period, Kagem spent USD0.6 million primarily on replacement mining and ancillary equipment and infrastructure improvements to staff accommodation to adhere to Covid-19 protocols. The planned capital investment has been curtailed considering the Covid-19 impact; however it is likely that, given the success of the recent auctions, the second half of the year will see an increase in capital spend at Kagem (albeit to moderate levels in comparison to previous years)