Founded on the island of Guernsey, Gemfields Group (LON: GEM) is one of the world’s leading responsible miners and distributors of colored gemstones.
The company, which is also listed on the Johannesburg Stock Exchange (JSE:GML), is the operator and 75% owner of both the Kagem emerald mine in Zambia and the Montepuez ruby mine in Mozambique.
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It also holds controlling interests in various other gemstone mining and exploration licenses in Zambia, Mozambique, Ethiopia and Madagascar.
emerald or ruby
Emeralds and rubies are incredibly rare, which makes them enduring and retain their value.
Both colored gemstone sources are globally rare, and historic sources such as Colombia for emeralds and Myanmar for rubies are no longer the main sources of supply.
Kagem is believed to be the world’s largest single emerald-producing mine, and Montepuez is one of the most important recently discovered ruby deposits in the world.
Gemfields produces approximately 25% of the world’s supply of rough emeralds and approximately 50% of the world’s supply of rubies.
Last year, around 14 million tonnes of rock was processed to produce 31.3 kg of fine emeralds, with over 30% of Kagem’s revenue coming from fine emeralds.
In 2023, approximately 8 million tons of rock will be processed to produce 12.5 kg of premium ruby, and approximately 70% of Montepuez’s income will come from premium ruby.
group mission
Gemfields’ mission is to be the world leader in African emeralds, rubies and sapphires, promoting transparency, trust and responsible mining, while creating a positive impact in host communities and countries.
Gemfields also owns Fabergé
Gemfields has full ownership of Fabergé, an iconic and prestigious brand with an unparalleled heritage.
This will enable the Group to optimize the positioning, recognition and consumer perception of colored gemstones through Fabergé designs and advance the wider Group’s ‘mine and market’ vision.
Grading to auction
The company has developed a proprietary grading system and pioneering auction platform to provide a steady supply of colored gemstones to downstream markets. This is a key element of the company’s business model, which has played a key role in the growth of the global colored gemstone sector.
Yesterday, the group announced the results of its latest ruby auction, reporting a new record for ruby realized prices.
Adrian Banks, MD of Product and Sales, said:
“This auction marks the 10th anniversary of Gemfields’ first auction of rubies from the Montepuez ruby mine in Mozambique in June 2014.
We are pleased to announce another strong result demonstrating the trust our loyal customers have in our product offering and auction platform.
Although auction results should not be compared directly, our team is proud to have surpassed the $300 average sales price per carat milestone with this auction.
While the industry is currently facing some headwinds, including from the slowdown in the Chinese economy, we hope these results will be of some comfort to other players in the sector. ”
Management’s statement regarding forward-looking statements
Outgoing Chairman Martin Tolcher said:
“Looking to the coming months and years, the Board is confident that the Group’s good work will continue and drive positive growth for all stakeholders.
As we work with natural products, there is variation in both the quality and quantity of colored gemstones we produce and the prices paid for the rough stones.
Although the significant investments the Group has made and will continue to make are expected to result in lower cash flows in next year’s financial results, the Board is confident that these investments will deliver significant returns and support the growth of the business over the coming years. I am confident that we will be positioned for this. Please come. ”
capital
The number of outstanding shares is approximately 1,166,695,130 shares.
Larger holders include Assore International Holdings (29.2%), Rational Expectations (13.4%), Ophorst Van Marwijk Kooy Vermogensbehor (9.8%), Oasis (7.8%), Fidelity International (6.0%), Van Lanschot Kempen (5.2 %), and Diacolor International (3.5%).
Analyst view
Analysts Ben Davis, Tom Price and Yuen Lo of AtBroker’s Liberum Capital rate the stock a “buy” and expect it to rise to 24p over time.
They estimate that sales for the current period to the end of December could be £279m (about £261m) and pre-tax profits could quadruple to £70.8m (about £16.6m). are.
In 2025, sales are estimated at £366m and profits at £109.2m.
my view
“Gemfields is a unique investment proposition that provides investors with exposure to a global leader in a niche sector with supportive and growing market trends.” I agree.
At this time last year, the stock was trading at 16.95p, but has since fallen to just 11p.
Ahead of next Tuesday morning’s 2023 general meeting, we think the £152m group’s share price looks attractive at just 12.50p. We would like to see the price recover to a trading range of 14p to 16p, perhaps before interim results are announced. September.
