The prices achieved by Gemfields (LON:GEM) at its most recent emerald auction suggests demand for the gems still remains strong, said broker JP Morgan Cazenove.
Gemfields generated sales of US$9 million at the latest auction in Jaipur, India, which JPM believes highlights how in favour the green gemstones remain.
The US broker recently visited the Kagem mine in Zambia and was also impressed by the “efficient and reliable supply” from the operation.
Current mining is concentrated on the Charma pit, on the Fwaya TMS belt, one of six known emerald-bearing deposits within the 43 km square Kagem licence area.
Gemfields is in the process of a high-wall pushback at the Charma pit and has so far pushed back 50 metres of its planned three-year 150 metre target.
Analyst Alexander Mees said the geological surveys highlighted during the visit suggested the resource could be worked beyond the term of the initial licence period (2010-2020).
Greater depths of emerald outcrops may also bring underground extraction into play.
“The Kagem mine is run, in our opinion, to a high level of efficiency and with due regard to safety, security and environmental responsibilities.
“The process of emerald extraction is labour-intensive, but where capital equipment is required, it appears well-maintained and fit for purpose.”
The broker, which estimates the firm will make a pre-tax profit of US$49 million in the 2012 financial year, has an ‘overweight’ rating on the stock and a price target of 44 pence.
The share price was down 1.7 per cent at 35 pence.