Our opinion on the current state of GEMFIELDS(GML)The Gemfields Group (GML), previously known as the Palinghurst Group, is a mining company focused on gemstone production. The group has two major projects:
1. Kagem – The world's largest producer of emeralds, located in Zambia.
2. Montepuez – A major ruby mine in Mozambique.
Additionally, the company was previously involved in Jupiter Mines, a South African manganese producer. However, in line with its strategic focus on gemstones, Gemfields disposed of 60% of its stake in Jupiter Mines when it listed on the Australian Stock Exchange (ASX) in April 2018.
The company is led by Brian Gilbertson, a former CEO of BHP Billiton, who identified the semi-precious stones market as an underdeveloped industry with potential for professional management and consolidation. Gemfields has carved out a niche for itself in this specialized sector, where competition remains relatively limited. Like all commodity shares, however, it carries risks, with its success tied to the fluctuating prices of emeralds and rubies in international markets, as well as geopolitical and operational risks associated with mining in third-world countries.
On 24th October 2022, Gemfields announced that operations at Montepuez had resumed after an insurgent attack on a mine 12km away on 20th October 2022. Security concerns remain a factor in the region. On 7th August 2023, the company announced plans to construct a new processing plant that would triple ruby output from the Montepuez mine.
In its results for the six months to 30th June 2024, Gemfields reported revenue of $128 million, down from $153.6 million in the previous period. Headline earnings per share (HEPS) fell by 25%. The company commented, *"Gemfields is working through a complex year, balancing the availability of cash with the considerable investments we're making at the Kagem emerald mine in Zambia, the Montepuez ruby mine in Mozambique, and our development assets."*
In an operational update for the full year ending 31st December 2024, Gemfields reported total revenue of $196 million and net debt of $80.5 million. The company stated, "Emerald exports are, since 1 January 2025, paused while Zambia's reintroduced 15% export duty remains in place. Kagem anticipates that the duty may be revoked and allow a commercial-quality emerald auction to go ahead in Q1 2025."
A strategic update on 23rd December 2024 cited lower revenue from recent auctions due to:
1. Oversupply of Zambian emeralds by a competitor.
2. Lower production of premium rubies at Montepuez.
3. Weaker luxury and gemstone market conditions.
This share tends to be volatile, largely due to fluctuations in the luxury goods market and the nature of the gemstones it sells. Technically, Gemfields' share price rose strongly from an island formation, entering a solid upward trend until July 2023 when the trendline was broken.
At present, the share remains in a downward trend, and we recommend waiting for a break above the new downward trendline before considering entry. While the company has long-term potential, it remains subject to both market-driven and operational risks.
