Gemfields’ (LON:GEM) latest gemstones auction may have been small in scale, but JPMorgan believes the prices generated are a sign of the strength of the international market for emeralds.
The company achieved the highest average price per carat ($58) seen at any of its auctions in the event in Jaipur, which saw it rake in US$8.5mln in gross revenues.
This compares with an average price per carat of US$54 in the July auction that was moved from Singapore to Lusaka at the request of the Zambian government.
The Zambian government, which has a 25% stake in Gemfields’ Kagem mine, is insisting that all gems mined in the country be auctioned there.
However, Gemfields explained that the latest auction comprised emeralds obtained in the open market from various sources, and thus the company was not obliged to adhere to Zambia’s directive.
JPMorgan’s Alexander Mees reckons the higher prices highlight the potential opportunity for the company to achieve better overall returns if the restrictions are lifted.
“Should the Government of the Republic of Zambia modify its position, we see good long-term opportunities for Gemfields to conduct auctions in a single location (such as Singapore) offering multiple types of coloured gem: emeralds, rubies and ultimately sapphires,” Mees said in a note.
“This could allow Gemfields to address a larger target market.”
It comes as the company was awarded the prize of AIM transaction of the year at the AIM Awards in London on Thursday for its US$90mln acquisition of Fabergé in January.
Chief executive Ian Harebottle said: “The judging panel consists of some of AIM’s most experienced advisers and we are thrilled to see that they too have appreciated the significance of this transaction.
“The combination of Fabergé and Gemfields sets the stage for the creation of a globally recognised coloured gemstone champion.”
The shares rose 5% to 26.3p.