Results from Gemfields (LON:GEM) were hailed as “sparkling” by research boutique Edison Investment Research.
Analyst Julian Emery, who reckons the shares are worth 36 pence each, says that the results confirmed a successful year with massive improvements in production, grade and costs. This, he says, has fuelled a strong balance sheet and underpinning management plans to pursue growth, market share and build out resource.
“This was an outstanding year, and markets in the current year will be more unpredictable.
Nonetheless Gemfields reports that pricing and demand is holding up well.
“Although the current year will likely see lower carat production (after last year’s record level), as the company undertakes a major high wall push-back project at Kagem, this will, on completion, enhance open pit resource, add scope for underground development and augment production and quality.”
The analyst’s 36 pence valuation implies that the group’s shares could rise more than 76 per cent from the current market price of 21 pence.
Emery’s said his valuation is based on production and price projections from current operations and underpinned by a strong balance sheet, and beyond that he continues to see potential upside from exploration and operating initiatives.
Earlier this week, in Gemfields’ results statement, chief executive Ian Harebottle said: The past financial year has been an outstanding one for Gemfields.”
“We have doubled revenues, improved our profit eightfold and, following our record rough emerald auction in July, we have started the new financial year strongly.
“Production is up, costs are well contained and increasing demand from both the trade and consumer markets alike confirms the success of our various marketing and promotional efforts. We look forward to the prospect of continued growth and expansion throughout the coming year.”