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Coloured gemstones miner and marketer Gemfields (LON:GEM) won plaudits in the City for a resource upgrade at emerald mine Kagem.
The total amount at the mine in Zambia, 75% owned by Gemfields, is now estimated at 1.8bn carats (ct) worth of emeralds and beryl.
Within that, there are proven reserves of 276mln carats at a grade of 300 ct per tonne and probable reserves of 840mln carats.
According to independent consultant SRK that is sufficient for a 25 year mine life producing just shy of 45mln carats annually compared to 30mln last year.
Investec said it was a reminder of the “considerable upside potential at Kagem”, which may have been overshadowed by the big resource numbers for the fledgling ruby mine at Montepuez published in July.
Expansion will reinforce Gemfield’s position as the world’s largest emerald miner and with Montepuez and earlier stage potential in Colombia, the miner is clearly in a growth phase.
Shore Capital was impressed with the technical report that accompanied the upgrade.
According to that, production at 44.7mln per year would generate cash flows of US$1.6bn over the 25 years and a net value of US$520mln at prices of US$61.5/ct for high quality stones and $0.88/ct for low quality and beryl.
Capacity would double from the 90,000 tonnes per annum currently being processed to 180,000 by July 2018 at a cost of US$84mln over the first four years and US$516mln over the mine’s projected life.
Shore said Gemfields’ share of Kagem’s NPV (75% of US$520m), translates into £254mln.
Add in an attributable share of £487mln for Montepuez and these two alone equate to £741mln versus a market cap of £326mln.
Finncap pointed to the significant exploration upside around Kagem highlighted in the report as it kept its target price at 81p.
Ian Harebottle, Gemfield’s chief executive, said the new resource statement highlighted the long term opportunity that exists at Kagem.
“As the first recorded Measured Mineral Resource and Proven Ore Reserve Statement for Kagem, and possibly the first of its kind across the entire global coloured gemstone sector,” it was a milestone event, he said.
It also was “further evidence to the continued growth potential, positive momentum and considerable opportunity inherent within the open pit mine plan.“
Shares rose 0.25p to 60.3p.