City heavyweight JP Morgan Cazenove has raised its price target for Gemfields (LON:GEM) following the better-than-expected returns from the company’s recent emerald auction.
Repeating its ‘overweight’ recommendation, the broker bumped its valuation up to 44 pence a share from 38 pence previously.
At 11.15 am the stock was changing hands at 35.56 pence, down 0.31 pence. However in the past year it has more than doubled in value.
In a note to clients analyst Alexander Mees said: “Gemfields is consolidating its position as the leading supplier of rough emeralds to the global luxury goods market.
“As demand intensifies for the gemstone, complemented by increased marketing, we believe the company will deliver significantly enhanced returns.”
Gemfields raised US$26.2 million in the rough emerald auction it held last week in Singapore, bringing the cumulative total for the financial year so far (which runs to June 30) to US$68.9 million.
Of the 32 companies attending the auction of predominantly medium to higher quality rough emeralds, 29 placed bids.
It sold 690,000 carats of the 770,000 placed on offer at an average of US$38 per carat.
“Gemfields’ recent auction achieved considerably higher returns than we had expected and reinforces our confidence in the long to medium-term sustainability of sales prices above $20 per carat for higher quality gems,” JP Morgan Cazenove’s Mees.
The company's principal asset is the 75 per cent-owned Kagem emerald mine in Zambia, the world's largest emerald mine.
In addition to the Kagem emerald mine, Gemfields has a 50 per cent interest in the Kariba amethyst mine in Zambia.
It also owns controlling stakes in a highly prospective ruby deposit in Mozambique and licences in Madagascar including ruby, emerald and sapphires deposits.