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Virtually all of the rubies on offer at Gemfields’ (LON:GEM) latest auction in Jaipur were snapped up, generating US$16.1mln in revenue.
The third auction of rubies from Gemfields’ 75%-owned asset at Montepuez in Mozambique was predominantly of lower quality material.
The company said that 3.99mln of the 4.03mln of carats on offer were bought at an average value of US$4.03 a carat.
To put that into context, in its end-March quarterly production update, total ruby and corundum extracted from the Montepuez deposit since the commencement of bulk sampling worked out at a unit cost of around US$1.90 per carat.
The Jaipur auction was also used to offer traded rough emeralds from Zambia and Brazil sourced by Gemfields on the open market, as opposed to those extracted from its own mines. This material generated US$1.6 million of gross revenues over and above the auction revenues from ruby and corundum.
Gemfields' 21 auctions of rough gems produced at Kagem and Montepuez have now generated US$418 million in total revenues.
The next Gemfields auction will be of predominantly higher quality ruby and corundum from Montepuez and is presently expected to take place before 30 June 2015.
"This week's Jaipur auction has witnessed the next step in the evolution of the Montepuez ruby deposit's deep-seated and positive impact on the global ruby market,” said Ian Harebottle, the chief executive officer of Gemfields.
“Customer response in the Jaipur market, where this was the first ever offering of such a considerable volume of non-domestic rough ruby, has been overwhelming, as can be seen in the excellent auction results,” he added.
“We again extend our gratitude to Mwiriti, our 25% partners in the Montepuez deposit, and to the Mozambican government, with whom we continue to work to address the illegal ingress across Mozambique's borders of foreign citizens seeking to profit from the Montepuez deposit," Harebottle said.
“This is the first purely lower quality ruby auction from the Montepuez mine in Mozambique. The results show good take up in terms of volume and value although the latter is harder to judge in a market that does not have much transparency,” said mining-focused broker SP Angel.
“Gemfields are using the same marketing business model that they have successfully created with emeralds of grading the stones and enabling bidders to put in bids based on a better understanding of the lots on offer,” the broker added, before going on to wax lyrical about the progress made at both the Kagem emerald mine in Zambia and the Montepuez ruby mine in Mozambique.
The broker recently had analysts visit both mines and said the teams on the ground at both mines are professional and enthusiastic.
“At Montepuez which has a combination of secondary (alluvial and colluvial material) and hard rock, a maiden resource is being targeted. This will make it easier to generate a market value for Montepuez while at Kagem push backs at the mine are extending the mine life. Gemfields offers a unique opportunity in the coloured precious stones market which they are instrumental in developing,” the broker said.
Numis Securities said the auction was an important revenue boost for Gemfields, but it is still early stage for the rubies, with the company still testing and building understanding of the demand for different qualities and the downstream market.
“We look forward to June when Gemfields will hold its next auction for higher quality rubies which will give more information on the appetite for the higher value rubies, and the big potential profit driver for the business,” the broker said.
Shares in Gemfields were down 1.75p at 64p near the close of trading on Thursday.