Christmas came early for Gemfields (LON:GEM), the coloured stones specialist, as it passed a very special milestone.
For, on December 20, it saw Kagem, its 75%-owned emerald mine in Zambia, declare its first ever dividend.
The US$8mln cash distribution is thought to be the first ever in the project’s 29-year history and also represents the first time the Zambian government, which owns the other 25%, has received cash from the operation.
Having battled to get the group to where it is today, and it has been quite some fight, it is understandable that chief executive Harebottle called the achievement “truly remarkable”.
Not that Harebottle and the team are sitting now back saying ‘job done’; that is not the Gemfields way.
It plans to be more than just a one mine company. Investors can expect the first auction of rubies later this year, while the group has set its stall out to be a mine-to-market business.
That means all its stones are completely traceable, so their ethical and green credentials can be verified.
The group stages and controls its own auctions, both in the Zambian capital Lusaka and outside the country in the major markets for gemstones such as Jaipur.
And it owns Faberge, the iconic luxury brand, which sits snugly into Harebottle’s vision of a vertically integrated business.
The latest update earlier this week revealed Faberge’s sales were up 89% year-on-year in December, and a better than expected 26% for the quarter as a whole.
Meanwhile, the company’s marketing reflects the boss’s eye for stunning gems with actress Mila Kunis the face of Gemfields.
Not only is she A-list Hollywood box office, but she scores well with the next generation of potential customers as the voice Family Guy’s Meg Griffin.
It seems nothing is left to chance. The only thing Harebottle and his team don’t seem to be able to control is the grade that emanates from Kagem, as the latest update reveals.
Even so, the analyst community, now familiar with the ebb and flow of mining for emeralds, is sanguine.
“This predominantly highlights the variability in grade in precious stone mining, which we understand,” said Investec.
“We look forward to the results of the forthcoming auctions, particularly the high quality emerald sale which we expect to reinforce the market demand for Gemfields’ attractive product.”
The move into rubies is progressing with bulk sampling taking place at its 75%-owned Montepuez mine. So far, some 7mln carats have been extracted and the company is fine-tuning the 'first-of-a-kind' comprehensive grading and sorting framework for rough rubies.
The first auction of these precious red stones, meanwhile, is expected before the end of June.
Looking at the financials, the City broker Canaccord Genuity is expecting 2014 revenues to be around US$124mln - up from US$48.5mln – giving underlying earnings (EBITDA) of US$52.2mln.
Canaccord’s valuation is 40p a share, and while the stock is within spitting distance of this target after a 37% rise in the last six months, there is further scope to build on that valuation.
However, the better than expected results from Faberge combined with first proceeds from the ruby auctions could act as further propellants, analysts said.
Meanwhile, the market has assigned little or no value to Gemfields’ Madagascar assets and Kariba amethyst mine in Zambia, they also point out.