Gemfields Group – Ahead of this week’s AGM, this well-funded group’s shares, now at 4.5p, look ready to run upwards – brokers TP 14p

23.06.2025

This coming Wednesday, 25th June, will see Gemfields Group (LON:GEM) holding its AGM to approve its 2024 Report & Accounts.

I do not expect the company to make any announcement, such as a Trading Update or even the number of votes for and against.

However, between that day and the end of July, when the company should be declaring its First-Half Operational Update, I do expect to see some upward movement in the group’s share price.

Gemfields produces around 25% of the world's emerald supply and around 50% of the world's ruby supply.

Its Strategic Objective is to be the Standard for African emeralds, rubies and sapphires.

The Business

The group, which is also listed on the Johannesburg Stock Exchange, describes itself as a world-leading responsible miner and marketer of coloured gemstones.

The Gemfields Group (LON:GEM), together with its subsidiaries, operates as a mining company.

It operates through seven segments: Zambia, Mozambique, Platinum Group Metals (PGMs), Steel Making Materials, Corporate, Faberge, and Other.

The company is involved in the emerald, beryl, ruby, and corundum mining activities; wholesale and retail of jewellery and watches through directly operated boutiques.

It is the operator and 75% owner of both the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world).

Additionally, the group also holds controlling interests in various other gemstone mining and prospecting licences in Zambia, Mozambique, Ethiopia and Madagascar.

The company has developed a proprietary grading system and a pioneering auction platform to provide a consistent supply of coloured gemstones to downstream markets, which is a key component of its business model that has played an important role in the growth of the global coloured gemstone sector.

The group has outright ownership of Fabergé – which is an iconic and prestigious brand of exceptional heritage.

That ownership enables the company to optimise positioning, perception and consumer awareness of coloured gemstones through Fabergé designs, advancing the wider group's ‘mine and market’ vision.

Recent Rights Issue

In early April, the group announced that it was looking to raise $30m by way a Rights Issue for 556,203,396 new shares @ 4.22p each.

The successfully raised funds will address a near-term working capital shortfall as a result of the cumulative impact of a number of challenges the company encountered in the second half of 2024 and the first quarter of 2025, all of which are considered by the Directors to be transient in nature, coinciding with a period of significant planned investment.

The Equity

There are now some 1,724m shares in issue.

After the Rights Issue the larger holders include Assore International Holdings (32.85%) and Rational Expectations Pty (15.58%).

Broker’s View

Analysts Duncan Hay and Tom Price, at Panmure Liberum, have a Buy rating out on the group’s shares, with a Target Price of 14p a share.

For the current year they look for group sales to have eased slightly to $195m ($213m) but with a solid bounce back into profits of $26.1m (loss $103.6m), lifting earnings to 0.1c (loss 0.7c) per share.

The analysts do not anticipate a dividend this year, but next year they see 0.45p per share being paid out, on the back of $404m sales, profits more than quadrupling to $120.2m, and the generating of 4c per share in earnings.

My View

The success in getting the $30m rights issue out of the way, will possibly be the base from which we will see the group recover.

In the group’s own words from its ‘Investment Case’ -

“Gemfields is a unique investment proposition that offers investors exposure to a global leader in a niche field.

Committed to transparency, Gemfields is providing investors with the information to make informed decisions in a previously opaque industry.

There are no other freely investable coloured gemstone companies of our scale.”

Its shares, which were up to 13p this time last year, are now trading at just 4.50p each.

They represent an excellent gamble on the broker’s estimates of current year and prospective profitability being achieved.

I now set a Target Price of 5.75p being easily beaten in the next year.

(Profile 23.06.25 @ 4.50p set a Target Price of 5.75p)