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Coloured gemstone specialist Gemfields (LON:GEM) has broadened its portfolio to include sapphires from Sri Lanka.
Gemfields, which already mines and markets emeralds and rubies, has set up a joint venture with East West Gem Investments that will see it acquire 75% of sixteen exploration licences in Sri Lanka for US$400,000.
Gemfields said it wants to apply in Sri Lanka the exploration and mining knowledge gleaned from its operations Zambia (emeralds) and Mozambique (rubies).
The joint venture partners will also set up a gemstone trading company, Ratnapura Lanka Gemstones, which will source rough sapphires in the local market and where Gemfields will apply its proprietary gemstone grading systems and marketing nous.
Ian Harebottle, Gemfields' chief executive, said: “We are delighted to announce our entry into what we consider to be the third of the 'big three' coloured gemstones.
“Sri Lanka is already known as a key source of sapphires of all colours, and of the highly sought-after padparadscha sapphire.
“We are excited about the possibility of being able to offer a reliable supply of well-graded sapphires to customers attending our auctions.”
The shares, up 47% in the year to date, marked time 48.65p. Broker finnCap reckons Gemfields is worth 60p.
Numis, meanwhile, is impressed with the low-cost entre to the sapphire market.
In a note to clients, it added: “Gemfields can leverage its experience with emeralds and rubies to sapphires based on its mine to market model.
“[It] has established a proprietary grading system for emeralds and rubies, which provides consistency and transparency and helps consumers build confidence in Gemfields and the quality of the stones sold in auctions.
“For emeralds, Gemfields' staple, this has quickly translated into higher prices.
“Thus we expect Gemfields to quickly establish an ethical and sustainable sapphire business along the same lines with the aim of replicating this success.
“There's not really anyone else doing this, so Gemfields is in pole position to consolidate the coloured gemstone space. Not much detail on the Sri Lankan assets yet but we expect that will come with time.
“US$400,000 seems like a low-cost entry into sapphires. One to look at as coloured stone pricing is outpacing diamond."