“For all the diversions of the acquisition of Fabergé and potential restrictions on its emerald sales activity, Gemfieldscontinues to deliver on its core business of mining gemstones,” JPM said, adding that fiscal third quarter production was in line with the preceding quarter’s output, and up 33% year-on-year.
“Positive traction continues to be made in grade and unit costs,” the broker added.
Despite that, JPM has trimmed its price target to 35p from 38p, but this is due to cash adjustments.
“From the point of view of an investor in Gemfields, there continues to be uncertainty in the future ability of the company to conduct emerald sales auctions outside of Zambia. Its next higher quality auction is scheduled to take place in Singapore in June.
“Before then, the company will hold a ‘summit’ in Zambia to discuss the future of the country’s emerald industry. The position of the government after this summit will be of considerable interest,” JPM notes.
Because of the uncertainty, JPM sticks with its neutral stance on the company.