Fans of Gemfields (LON:GEM) will be keeping a close eye on the coloured gemstone group’s first ruby auction due in June.
The AIM-listed company recently started developing its next producing asset, the 75%-owned Montepuez ruby mine in Mozambique, following the success of its Kagem emerald mine in Zambia.
City firm Canaccord Genuity thinks the auction will be a good yardstick for ruby pricing and will shed more light on the project’s value.
“We do not think this auction will represent the true demand and pricing, but it should provide clarity on general pricing scales and allow us to better model the operation,” said analyst Dmitry Kalachev.
He thinks Montepuez will be the near-term catalyst for investors. The analyst, who currently has a 40p target price, expects to be able to include the mine in his valuation once pricing and the development plan become clearer.
He has an early-stage valuation of 16p a share for the ruby project.
Kalachev lifts his valuation on Kagem by 19% to 32p a share (unrisked) on the assumption of a longer mine life (following the decision to push back the pit wall), as well as higher pricing.
His valuation of Fabergé however falls 30% to 10p a share due to lower sales growth forecasts.
The shares are currently trading at 36p.