GEMFIELDS' inaugural ruby auction in June. Photo: the GIA

GEMFIELDS' inaugural ruby auction in June. Photo: the GIA

Gemstones on Jermyn Street: White is a Colour

Issue 104, October 2014

Continued from Page 1 ➤

...Stock Exchange.

“This is partly attributed to the long-standing success of De Beers in promoting diamonds as the gemstone of choice. Yet recent auctions held by Sotheby’s Holdings and Christie’s International indicate that per carat prices for emeralds, rubies and sapphires can exceed the per carat prices achieved for diamonds.”

“Gemfields intends to become the leading producer and supplier of coloured gemstones by pursuing consolidation,” the filing went on, “on an international scale.” Advertising, ethical sourcing and increased supply would “further enhance the market appeal” of an overlooked niche, it concluded.

Emeralds & Rubies

The filing is remarkable because 6 years later, the company has achieved: all of that.

Gilbertson hired Harebottle and his team, who had been devising a radical new grading system for coloured gemstones in Tanzania. The lossmaking Kagem emerald mine in Zambia was pumped into a London listing, production was increased, a grading and sales system was introduced based on colour, clarity, size and yield and prices at Gemfields' auctions in Singapore and Jaipur quickly began to rise.

In 2009, the company also bought a majority share in the Montepuez ruby deposit in Mozambique and is now the largest producer of both emeralds and rubies globally.

Margins & Returns

As Gilbertson predicted, margins are roomy.

In emeralds in the last 12 months, cash operating costs of $1.33 per carat compare to average realised prices of $59.31 for high quality emeralds (up 14-fold since 2009) and $3.32 for lower grades (up 11-fold since '09). Over the year, operating costs at Kagem totalled $27m, versus sales of $84m.

At a mine level, the return on capital is equally generous: Gemfields paid $2.5m for a majority share in Montepuez and has spent $15m in capital at the mine and $17m in operating costs over two years. Its inaugural ruby auction in June meanwhile yielded $33m, recouping all capital sunk to date.

Banks is planning 3 or 4 ruby auctions each year, the next due in Singapore in November. He expects average realised prices of $18.43 to move to “the next level”, but even if they flatline (thought to be “very unlikely”), Montepuez looks set to add $100m to $135m to group sales of $160m last year.

Continue 

“Mila had her baby last night.”

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