Photo: the GIA

Photo: the GIA

Gemstones on Jermyn Street: White is a Colour

Issue 104, October 2014

Continued from Page 3 ➤

...Harebottle says less investment has gone into the country's mines than the houses and lifestyles of its emerald tsars, constraining production and creating an opportunity for Gemfields to modernise the sector.

The country's annual output has dropped 70 per cent in 10 years to 2.6m carats, according to emerald federation Fedesmeraldas, versus a staggering 20m carats produced by Kagem last year.

Enviable

The figures highlight a bizarre market dynamic: by allowing manufacturers to plot production runs around emeralds, rubies and soon sapphires, higher production by Gemfields has elevated buying, feeding higher prices.

Political risk may be diversified, but is likely to remain a feature of the company, potentially denying it the premium of other so-called luxury goods brands, such as Tiffany or Hermes. Shares have nonetheless risen more than 7-fold in the last 5 years, valuing the company at $420m. Stripping out net cash of $20m and inventory valued at cost at $86m and the valuation equals 19 times earnings.

This is sign in itself that Harebottle is successfully creating a “razzmatazz” around coloured gemstones, not replicated by Anglo American in its ownership of De Beers. Anglo's diamond sales totalled $6.4bn last year, 20 per cent of revenue for the group, which Harebottle describes as an iron ore business.

“There is clearly, and sadly, no leader within the diamond sector at the moment," Harebottle tells his team, "and one day we may have to make the decision of whether we want to acquire De Beers or not."

An expansion into diamonds however may come sooner than any deal with the industry's giant. To revitalise the jewellery and gemstone marketplace, Harebottle says, “somebody needs to take up the challenge and join with Gemfields.”

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