www.gemfields.co.uk
Gemfields is one of the world´s leading coloured gemstone companies. With a strong focus on Zambian emeralds, Gemfields mines, processes and markets both rough and polished gemstones internationally. Gemfields prides itself on its unique ability to bring ethically produced, conflict-free gemstones of certified provenance directly from mine to market on an integrated basis.
In order to support and influence the entire channel from mine to market, Gemfields is in the process of setting up state-of-the-art Cutting and Polishing facilities with cutting-edge technologies and will offer consumers vast quantities of emeralds in calibrated sizes, high precision and special cuts and large collections of Suites, Pairs, matching earring sets. We will also venture into co-branding projects with large, reputed retailers, most notably the company has acquired a worldwide exclusive 15 year licence to use the Fabergé brand name for coloured Gemstones
Sparkling maiden profit sets Gemfields shares soaring
Shares in Gemfields (LON:GEM) shot up 37 per cent after the group posted a maiden profit and revealed that production at the Kagem mine in Zambia hit record levels in the first month of the new financial year.
The emerald producer posted a maiden annual profit of US2.6 million for the 12 months to June 30.
This is a marked contrast to the US$201.4 million loss of the same time last year, although that figure was distorted by the write-down of the value of the Kagem Mine in Zambia.
The group is on a sound financial footing with US$2.8 million in the bank, while the value of its stock of stones is US$16.5 million.
Sales in the 12 months to June 30 were US$19.9 million, up sharply from US$815,456 previously.
Giving an upbeat assessment of prospects, Gemfields said July was a bumper month with the company’s Kagem Mine producing 3.9 million carats in July – which was a record month.
The momentum has carried through to August and Septmeber.
The price of rough emeralds and beryl increased to 96 cents, while Kagem yielded the 6,225 carat `Insofu' stone.
Chief executive Ian Harebottle said: “Considering the extent of the challenges that we have faced over the past year, the vast number of new projects and the strategic changes that we have implemented across all divisions within the group, I am rather pleased with our results and what has been achieved.
“We are now well on our way to positioning Gemfields as a market leader within the premium coloured gemstone sector.
"This is attested to by the recognition and respect that we have received from our colleagues within our industry and the number of exciting opportunities that we are now faced with.
“I look forward to embracing the year ahead supported by my team and in conjunction with our industry partners."
The results were followed by a very positive assessment of Gemfields’ prospects by the company’s broker Canaccord Genuity.
Analyst Tyler Broda has placed a 10p a price target on the stock, which he rates a “speculative buy”.
At 1.00pm the shares were trading 7.2p, up 1.95p.
“We recently visited Gemfields’ Kagem emerald mining operations in Zambia and have reviewed our forecasts and assumptions,” he said.
“Following today’s financial results, and encouraging results from recent tenders, the company has moved back to profitability, and possesses a business model that we believe is on the cusp of growing significantly in the coloured gemstone space.”
The group has a unique strategy that sees it mine and market emeralds under the Kagem name – a variation on the model used by De Beers to dominate the diamond market.
However the maiden profit reflects the efforts of the company’s management in a different sphere – that of cost cutting.
This strategy has moved Gemfields back to a positive cash-flow position in a strong emerald market.
Canaccord forecasts the Kagem mine will produce US$9.5 million in EBITDA in 2011 “ providing the basis for a compelling valuation argument for this small-cap story,” Broda said.
“We see potential for multiple-fold upside to our target price based on strategic potential,” he added.
The strategy has changed since Gemfields was re-admitted to AIM in June 2008.
Its original plan was to expand by scaling up the then recently acquired Kagem emerald mine in Zambia, while pursuing an aggressive downstream cutting and polishing strategy in India.
In September 2008 it launched an unsuccessful tilt at rival Tanzanite One as it looked to expand its base and possibly dominate the market for coloured stones.
The company appointed Harebottle from Tanzanite One in early 2009.
Majority owned by Brian Gilbertson’s Pallinghurst, Gemfields acquired the right to market its stones under the Fabergé brand, which is also owned by the investment vehicle of the former BHP boss.
However its efforts currently focus on promoting Kagem emeralds as a brand – and their ethical credentials.
“Apart from our core focus on rough emeralds, Gemfields is also in the process of repositioning itself as a leader in the mining and marketing of ethically-produced premium coloured gemstones; gemstones that can be traced directly from mine to market,” Harebottle said.
“These rebranding efforts include demonstrated successes in terms of the level of exposure achieved for the Group's products in leading trade and consumer magazines, the development of trade and consumer brochures, corporate and consumer DVDs and a comprehensive emerald training program made available to our distribution partners and retailers.”
