Emerald and ruby miner Gemfields (LON:GEM) has been upgraded by JP Morgan, which says there is nothing in the price currently for the nascent sapphires business.
Results from its latest emerald auction have just been published and house broker JPM estimates next week’s interims will show revenues of US$101mln and underlying profits [EBITDA] of US$33mln.
Uncertainties are the profits drag from Faberge due to Ukraine and Russia and corporate expenses, while cash flow transparency remains another issue.
Faberge posted a US$16m operating loss last year and JPM expects the interims to explain more fully the strategy to exploit the brand.
Longer term, scope exists to boost emeralds’ earnings but larger gains are to be made in rubies where the target this year is 8Mcts ruby output from Montepuez in Mozambique. So far, rubies sold have come from bulk sampling.
The shares stand at a 31% discount to NPV of 69p, not including anything for sapphires said the broker.
Gemfields recently acquired 16 licences in Sri Lanka and wants to develop this business using the marketing strategy employed for emeralds and rubies.
‘Overweight’ from ‘neutral’ is its new stance with a revised target price of 69p (55p previously).
Shares rose 0.5p to 47.5p.