Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Gemfields hails momentous quarter as ruby auctions start

Second auction planned for end of year while latest emerald auction concludes tomorrow.
Gemfields hails momentous quarter as ruby auctions start

--adds broker comments--

Coloured gemstones miner Gemfields (LON:GEM) hailed a momentous last quarter that saw the first ever auction of rubies from its Montepuez mine in Mozambique.

Ian Harebottle, Gemfields’ chief executive, said that the auction represented “a profound shift” in the ruby industry.

The June auction generated revenues of US$33.5mln at an average realised price of US$18.4 per carat. 

One more ruby auction is scheduled for this calendar year.

Montepuez produced 0.2mln carats of ruby and corundum in the three months to June, compared to 1.1mln carats in the same period a year ago thoughGemfields said the quality extracted this quarter was significantly higher. 

Total cash operating costs were US$3.1 mln (US$2.4mln). 

For the year to June, Montepuez produced 6.5mln carats.

Gemfields’ emerald mine at Kagem in Zambia saw production in the latest quarter fall to 6.3mln carats from 8.9mln, but output was higher than the previous two quarters. 

Emerald grade was 271 carats per tonne compared to 322 this time last year, while costs rose to US$1.33 per carat from US$1.01.

For the year Kagem produced 20.2mln carats (30mln carats).

An emerald auction in May raised US$13.5mln. The next auction is currently underway in Lusaka and concludes tomorrow.

Luxury brand Faberge saw lower revenues but higher unit sales and robust margins.

Harebottle added: “Our marketing efforts continue to underscore our vision and we look forward to the results of this week's auction of rough emeralds and beryl (of predominantly lower quality) in Lusaka, Zambia."

Broker Investec added that the production report, although weaker year on year, gave no major cause for concern since the nature of the asset base typically delivers considerable volatility. 

The key value driver is the prices that can be achieved for the sale of emeralds and rubies. 

The broker has a target price of 55.6p, adding Gemfields remains in good financial shape with cash of US$36.7mln and debt of US$16.7mln at end-June. 

SP Angel added that Kagem saw a  dramatic recovery in grade and production in the quarter  after the two previous had seen significantly lower production as the mine pushed back to enter into new higher-grade areas.  

“The great news is that the higher grade of 271ct/t vs 198ct/t in the previous quarter is also accompanied by a 58% increase in the value realised at the company’s emerald auction in May vs September last year. “

Shares were 48.5p today.


View full GEM profile View Profile

Gemfields PLC Timeline

Related Articles

Bag of diamonds
July 06 2018
In a production update, the AIM-listed diamond miner said production in the first half of the year was up 81% year-on-year at 73,028 tonnes
Richland
April 03 2018
The strategic review aims to assess how the company can best leverage its position as the owner of one of the world's largest sapphire mines.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use