Panmure Liberum has raised its price target for Gemfields Group Limited (AIM:GEM) to 20p from 16p, maintaining its "buy" recommendation after Zambia suspended a controversial 15% export duty on precious gemstones.
The levy, reintroduced in January, had halted exports from Gemfields’ 75%-owned Kagem mine, creating uncertainty for the company's revenue stream.
Now, with the duty scrapped, exports and auctions can resume, providing a much-needed boost to earnings.
Panmure Liberum had previously factored in the additional tax burden in its forecasts, but with its removal, the broker has revised its estimates upwards, expecting a 10% earnings uplift.
The timing is critical for Gemfields. Mining at Kagem had already been paused for up to six months as part of a cost-cutting exercise, with stockpiles being processed instead.
With the export barrier lifted, the market is now looking ahead to an expected commercial-quality emerald auction in March.
The reversal of the tax brings Zambia’s mining sector back in line with other jurisdictions, making the country a more competitive player in the global gemstone market.
Investors responded positively to the news, with shares climbing as sentiment around Gemfields improved.
Panmure Liberum sees this as a turning point for the company, allowing it to capitalise on its existing stockpiles and resume steady sales. The broker notes that earnings will benefit significantly from the policy reversal, supporting its higher price target.
Looking forward, Gemfields will need to navigate operational challenges, but with a clearer path to exports, the outlook has become considerably brighter. The March auction will be a key event, with the market watching closely to see how demand shapes up after months of disruption.
The shares were rangebound at 6.30p in afternoon trading on Thursday.