Gemfields’ (LON:GEM) Montepuez ruby mine in Mozambique has enough reserves for more than twenty years of mining, according to its first independent assessment.
Maiden estimates by consultant SRK were that the mine had a JORC-compliant indicated and inferred mineral resource of 467mln carats of ruby and corundum at an in-situ grade of 62.3 carats per tonne (ct/t).
Probable reserves, which carry a higher degree of certainty, are 432mln carats of ruby and corundum at diluted ore grade of 15.7 ct/t.
That is enough for 21 years of mining, according to an independent technical report.
Gemfields has been trial mining at Montepuez for some months, but the technical report sees a major step up in scale over the next two years.
Production would rise to 5.6mln tonnes annually by July 2017 (from 3.3mln) with processing capacity to rise to 1.3mln tonnes per annum by July of next year.
Costs to bring Montepuez fully on line would be US$65mln in the first two years and US$305mln over its whole life, but that would generate a value of nearly US$1bn and cash of more than US$2.7bn.
Ian Harebottle, chief executive, said this first recorded mineral resource and ore reserve statement was a milestone event and provides further evidence to the continued growth, positive momentum and opportunity inherent within the coloured gemstone sector.
Broker Investec said the numbers were very impressive, adding it had never seen an internal rate of return on a mining project as high as 312%.
“We also believe that the tenement package held by Gemfields has considerable upside potential from here” and how marketing might help to lift ruby price over the longer term.
Shares rose 4% to 60.5p.