Broker JPMorgan Cazenove said it sees significant long-term potential at Gemfields’ (LON:GEM) Kagem emerald mine in Zambia.
This comes after the company unveiled an updated JORC resource statement yesterday that points to the huge potential of Kagem as well as outlining the robust economics of an underground operation there.
JPMorgan analyst Alexander Mees, who ups his target price to 50 pence from 44 pence, says the report estimates an indicated resource of more than 1 billion carats of emeralds and beryl.
“In our opinion, this suggests there is significant potential at Kagem for long-term mineral extraction,” he said.
“At the expected average medium-term production of 34 million carats per annum, the statement implies there are well over 20 years of resources available.”
Furthermore, the move to underground mining may drive a reduction in stripping ratios and cash operating costs, the analyst added.
Gemfields said it is to commence accelerated underground construction and development in the financial year 2014-15.
Chief executive Ian Harebottle called it a “key milestone” in the continual development the company.
“The study shows that extending the current open pit mine at Kagem to a large-scale underground operation will be economically enhancing to the company and to our shareholders,” he added.