Coloured gemstone specialist Gemfields (LON:GEM) more than doubled underlying profits last year as sales of emeralds at its quarterly auctions hit record levels.
Profits before exceptional items rose 140% to US$47.8 mln in the year to June on revenues 108% higher at US$83.7mln.
Gemfields keeps about a year’s worth of stock and the figures reflected an exceptional year previously combined with the strong demand at the last four auctions, said chief executive Ian Harebottle.
Emerald production was lower in the year to June just ended as Gemfields removed large amounts of waste at its Kagem emerald mine in Zambia to open up new areas of ore.
That pushed average costs up to US$1.34 mln per month from US$1.07 mln, while grades dropped to 205 carats per tonne from 478.
Net income soared to US$161 mln as the company wrote back most of an impairment charge taken in 2009.
A new JORC compliant resource estimate for Kagem earlier this month indicated over 1 billion carats of emeralds and beryl, pointing to 20 years production and prompted the write-back.
Gemfields also recently commissioned a feasibility study to look at the viability of mining underground at Kagem and which which gave the project a net present value of US$372 mln.
The company had cash of US$36 mln at the year end, plus a further US$27 mln of inventory and how that is used will depend on how aggressive Gemfields wants to be said Harebottle.
“We can grow the business out of cash, but we also want to bring onstream two other mines and an additional pit at Kagem.”
“At same time we have a massive ruby deposit, so if we want just to grow the mining side we can do it but we are a marketing company as well.
“We could be slow and cautious but shareholders may want us to be aggressive and take the marketing to another level.”
That could involve bringing in a Hollywood A-list movie actress, which Harebottle admits would be expensive but to have an instantly recognisable person representing its products would be a major move forward, he added.
The company is also being presented with plenty of acquisition opportunities, he says, but the challenge here is making the right choice in terms of products and timing.
Harebottle added that at some point he also wants to take Gemfields from AIM to the main market.
"If it could be next year that would be perfect," he said.