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Gemfields’ flagship ruby operation in Mozambique has reached a point where it cannot generate enough cash to cover the management and auction fees it owes to the wider group, the London-listed gemstone miner confirmed during its interim results presentation on Wednesday. Asked directly whether Montepuez Ruby Mining, known within the industry simply as MRM, could currently pay its way, interim chief executive David Lovett gave a blunt answer: in short, no.
The admission capped a difficult set of first-half results for Gemfields, which reported a net loss after tax of $98.5 million for the six months ended June 30, 2026, a sharp widening from the $24.6 million loss the company posted over the same period a year earlier. The bulk of that loss traces back to a $125.2 million non-cash impairment charge against Montepuez, driven by weaker-than-expected recovery of premium-grade rubies at the mine despite a significant jump in overall ore production.
Mozambique Operation Faces $125 Million Impairment in H1 2026 Results
That disconnect between rising output and falling quality sits at the heart of Montepuez’s current troubles. Ore production at the mine climbed 133 percent during the first half compared with the prior year, a substantial increase driven largely by the commissioning of PP2, the mine’s second processing plant, which Gemfields built specifically to triple MRM’s rough ruby processing capacity. Despite that investment, premium ruby production actually fell 13 percent year over year, with the mine recovering 30,408 carats of top-grade stones compared with 34,823 carats in the same period last year. In effect, Gemfields is now processing considerably more rock through a far larger plant, but pulling out proportionally fewer of the high-value rubies that actually drive the mine’s profitability.
PP2’s own startup did not go smoothly either, adding another layer of complication to the mine’s underperformance. The plant struggled through a difficult opening stretch, running at between 300 and 390 tons per hour against a stated target of 400 tons per hour. Performance has since improved considerably, with the plant operating consistently between 410 and 450 tons per hour since mid-June, comfortably above its original target. Lovett confirmed the plant is now running consistently above that 400 tons per hour benchmark, but as the company’s own results make clear, solving the throughput problem has not solved Montepuez’s deeper issue around the quality and grade of the rubies actually being recovered.
Gemfields pointed to a combination of factors behind the weaker grades, including an unusually wet rainy season that limited access to higher-grade sections of the mine, forcing operations to concentrate on lower-grade areas for an extended stretch. The company also disclosed that it had identified inconsistencies in Montepuez’s life-of-mine report, a discovery that prompted Gemfields to revise its 2025 impairment figure upward from an initially reported $35 million to $65 million, on top of the fresh $125.2 million impairment taken against the operation in the current reporting period. Together, those two writedowns suggest the company’s earlier assumptions about Montepuez’s long-term ruby recovery potential had been meaningfully too optimistic.
Despite the mine’s inability to currently cover its own management and auction fees, Gemfields said it still expects MRM to meet its scheduled debt repayments, and the company is in early discussions with banks about potential refinancing options for the operation. That combination, continuing to service debt while simultaneously exploring refinancing and acknowledging the mine cannot cover its internal fee obligations, illustrates the narrow financial tightrope Gemfields is currently walking with its most significant asset.
The broader group has been taking deliberate steps to preserve cash and shore up its balance sheet throughout the year. Gemfields cut group operating costs by 17 percent, completed a $30 million rights offer, and sold its luxury jewelry brand Fabergé for $50 million, moves management has explicitly framed as prioritizing debt reduction and financial flexibility across the business as a whole. Group net debt stood at $44.2 million as of June 30, up from $39.3 million at the end of 2025, a relatively modest increase given the scale of the impairment charge, suggesting the cost-cutting and asset sales have at least partially offset the cash pressure coming from Montepuez’s underperformance.
There was a brighter side to the results as well. Group revenue rose sharply to $106 million, up from $64.2 million in the prior comparable period, boosted by deferred ruby auctions and solid emerald sales from Gemfields’ Kagem mine in Zambia, which the company holds a 75 percent stake in alongside its 75 percent ownership of Montepuez. That revenue growth, even amid the ruby mine’s grade struggles, reflects how the company’s auction-driven sales model can smooth out some of the volatility tied to any single operation’s production performance in a given period.
Montepuez’s challenges have not been limited to geology and processing equipment either. The mine, located in Mozambique’s Cabo Delgado province, sits on one of the most significant ruby deposits discovered in recent decades, a resource that has also attracted persistent illegal mining activity and smuggling syndicates drawn to the area’s rich deposits. The operation has previously faced security incidents tied to that illegal activity, including a temporary suspension of mining following an invasion at the site, underscoring that Montepuez’s difficulties extend beyond the purely technical and financial pressures now weighing on the group’s results.
Looking ahead, Lovett framed Gemfields’ priority for the remainder of 2026 around proving that the recent improvement in ruby recoveries at Montepuez can be sustained over time, while the company continues to maintain financial discipline and flexibility across its broader portfolio. Whether that recovery holds will likely determine not just Montepuez’s ability to eventually cover its own fees again, but also how much further financial maneuvering, including the refinancing talks already underway with banks, Gemfields needs to pursue to stabilize its most important operating asset. Continuing coverage of how mining operations are navigating commodity and operational challenges across Africa is available on Business Tech. Additional detail on the interim results is available through MINING.COM’s coverage of the announcement, and further background on Gemfields’ operations can be found through the company’s official site.
