Miner Gemfields (LON:GEM) has had its target price upgraded 20% by broker Investec, which expects it to do for rubies what it has done for emeralds.
The broker says that by bringing order to emerald marketing Gemfields has managed to push prices up seven-fold in the past five years.
Small scale production has now started at Gemfields’ Montepuez ruby mine with the first two auctions of rubies generating US$77mln.
By applying the same categorisation and sales methods it used for emeralds, Investec sees ruby revenues rising to just shy of US$100mln in 2015.
Underpinning rubies is the Kagem emerald mine in Zambia and longer term the broker hopes the two stones will be marketed together to give buyers a greater range of product.
Investec adds that earnings may remain uneven due to the periodic nature of auctions, while Montepuez still remains at an early stage but eventually it believes that the ruby mine will prove to be one of the best discoveries in Africa in decades.
The target price rises to 75.5p from 63p, while the rating remains ‘buy’.