Our opinion on the current state of GEMFIELDS(GML)The Gemfields Group (GML), previously known as the Palinghurst Group, is a mining company primarily focused on two major projects: (1) Kagem, the world’s largest producer of emeralds, located in Zambia, and (2) Montepuez in Mozambique, one of the world’s largest ruby mines. Additionally, the company once had a stake in Jupiter Mines, a South African manganese producer. Under the leadership of Brian Gilbertson, the former CEO of BHP Billiton, Gemfields has focused on consolidating and professionally managing the under-developed semi-precious stones market. In 2018, Gemfields listed Jupiter Mines on the Australian Stock Exchange (ASX) and divested 60% of its stake in line with its decision to focus on gemstones.
Gemfields' share is fairly liquid, with approximately R500,000 worth of shares trading daily. However, as with all commodity stocks, it is subject to risks associated with fluctuating international prices of emeralds and rubies, as well as the operational risks tied to mining in third-world countries. Despite this, the company appears to have carved out a niche in the gemstones market with limited competition and could benefit from a global economic recovery.
Following an insurgent attack near the Montepuez ruby mine (MRM) in October 2022, Gemfields resumed operations shortly after. On 7th August 2023, the company announced plans to construct a new processing plant, which would triple output from the Montepuez mine.
In its results for the six months ending 30th June 2024, Gemfields reported revenue of $128 million, down from $153.6 million in the previous period. Headline earnings per share (HEPS) dropped by 25%. The company highlighted the challenge of managing cash availability while making significant investments at the Kagem emerald mine, the Montepuez ruby mine, and other development assets.
Technically, the share had risen off an island formation and entered a strong upward trend until July 2023, when the trendline broke. We recommend waiting until the downward trendline is broken before considering further investment.
On 11th June 2024, Gemfields appointed Bruce Cleaver as Chairman. In a report released on 19th June 2024, the company announced that it had sold $68.7 million worth of rubies at an average price of $316.95 per carat during its June auctions.
The share tends to be volatile, largely due to the nature of the gemstone market and the risks inherent in mining operations in developing countries. While Gemfields has potential, particularly with its unique positioning in the gemstone sector, its performance remains tied to external factors such as market demand and geopolitical risks.
