Edison Investment Research today restated its 43 pence a share price target for Gemfields (LON:GEM) in response to last week’s solid production update.
The stock closed at 33.42 pence, down almost 6 per cent on the day, but has risen an incredible 77 per cent in the past 12 months.
“Increased resource definition, confirmation of positive market trends from the next auction and development of new production sites, together with the ruby project, should further raise our valuation and enhance Gemfields’ market ratings,” said Edison analyst Julian Emery in a research note.
Last week the miner said output from the Kagem emerald mine in Zambia grew strongly in the three months to June 30 to 7.3 million carats from 4.9 million in the previous quarter.
And while the grade fell to 181 carats per tonne from 236 carats, so did unit production costs – to 57 cents per carat from 85 cents. Rock handling costs were also down, hitting US$3.5 a tonne versus US$3.7 previously. Unit ore production costs were reduced by 48 per cent to US$104 per tonne.
In June it announced another bumper auction of stones in Jaipur in India, which netted US$9 million, taking the company’s cash balances to US$36.7 million.
Separately, it said the Montepuez ruby mine in Mozambique is on track to commence bulk sampling in the coming quarter.
Chief executive Ian Harebottle said: "On the back of solid demand for Gemfields' products, pleasing stock levels and healthy cash balances, our decision to focus primarily on mine development and waste mining during the past year is, I believe, well justified.
“Despite some early minor delays and slightly lower than anticipated full year production volumes, the past few quarters have continued to deliver improving production volumes, a trend that is likely to continue in the near term.
“This, together with the progress that has been achieve at our Mozambican ruby mine, provides management with the confidence that the coming year will continue to underpin Gemfields' ambitious growth plans."