Our opinion on the current state of GEMFIELDS(GML)The Gemfields Group (GML) (previously Palinghurst Group) is a mining group that has two major projects: (1) Kagem, the world's largest producer of emeralds (in Zambia) and rubies (at Montepuez in Mozambique); (2) Jupiter Mines, a South African producer of manganese. The group is led by Brian Gilbertson, previously the CEO of BHP Billiton. Gilbertson identified that the semi-precious stones market was under-developed and offered an opportunity for consolidation and professional management—hence the Gemfields operation. Jupiter was listed on the Australian Stock Exchange (ASX) in April of 2018 and in the process, Gemfields disposed of 60% of that company in line with its decision to cease being a diversified mining company and to focus purely on gemstones.
The share is fairly well-traded with approximately R5m worth of shares changing hands on average every day. Like all commodity shares, it is risky, and its fortunes depend on the prices of emeralds and rubies on the international market—as well as the risks associated with mining in third-world countries. It appears to have found a niche for itself where there is very limited competition, and it should do well as the world economy recovers.
On 24th October 2022, the company announced that operations have resumed at MRM and key personnel had returned following an insurgent attack on a mine about 12km away on 20th October 2022. On 7th August 2023, the company announced that it would construct a new processing plant that would triple its output from the Montepuez ruby mine.
In its results for the six months to 30th June 2024, the company reported revenue of $128m, down from $153,6m in the previous period. Headline earnings per share (HEPS) fell 25%. The company said, "Gemfields is working through a complex year, balancing the availability of cash with the considerable investments we're making at the Kagem emerald mine ("Kagem") in Zambia, the Montepuez ruby mine ("MRM") in Mozambique and our development assets."
Technically, the share rose off an island formation and entered a strong new upward trend which lasted until July 2023 when the trendline was broken. We recommend waiting until the new downward trendline is broken—which has not yet happened. On 11th June 2024, the company announced the appointment of Bruce Cleaver as Chairman. In a report on 19th June 2024, the company said that in June 2024 auctions, it had sold $68,7m worth of rubies at an average price of $316,95 per carat.
In a strategic update on 23rd December 2024, the company said that lower revenue from recent auctions was due to (1) oversupply of Zambian emeralds by a competitor (2) lower production of premium rubies at Montepuez and (3) weaker luxury and gemstone market. This share tends to be volatile for a variety of reasons, but mostly because of the volatile nature of the product which it sells.
