Gemfields (LON:GEM) offers the investor unique exposure to the growing demand for coloured gemstones and to the luxury jewel market, says broker Canaccord, which has lifted its target price on the shares.
The company is the largest listed coloured gemstone producer, highlights analyst Dmitry Kalachev.
It operates the Kagem mine in Zambia, which accounts for around 20% of emerald supply globally, and in January this year acquired luxury global brand Fabergé. The firm also boasts actress Mila Kunis as its brand ambassador.
"In recent years Gemfields has evolved into a leading supplier of rough gemstones," notes Kalachev.
"We believe the key to its success is its consistent supply and well thought out marketing campaigns.
"The acquisition of Fabergé added a world recognised brand name to the company’s portfolio, which helps improve market recognition of coloured gemstones and, in the longer term, should expand margins as the luxury jewellery market grows.
"The robust pricing at the recent auctions shows the company’s 'Mining and Market' strategy is bearing fruit even though Kagem gemstones are currently only sold in Zambia.
"Gemfields plans to leverage on the success of the Kagem emerald mine and add ruby and sapphire production to its supply range in the near term."
As revealed earlier this month, the firm has now completed three successful gemstone auctions in Zambia in the last eight months.
In the latest sale, held from November 11 to 15, the firm posted a record auction revenue figure for lower grade auctions.
Canaccord highlights that Gemfields' balance sheet continues to strengthen, with net cash of US$8.3mln at the end of the first quarter of fiscal 2014 (September 30) compared to US$0.4mln at the fiscal year-end.
It notes that operating cash flow should fund the company's Kagem underground project as well as exploration spend.
The broker has repeated its 'buy' stance on the shares and lifted the price target to 40p from 39p - a near 16% increase on the current share price of 34.5p.