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UPDATE - Gemfields sparkles as first-half EBITDA more than triples

Last updated: 22:10 09 Mar 2015 AEDT, First published: 23:10 09 Mar 2015 AEDT

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Gemfields’ (LON:GEM) mine-to-market strategy for coloured gemstones appears to be delivering significant financial rewards judging from its interim results.

The company, which majority-owns the Kagem emerald mine in Zambia and the Montepuez ruby operation in Mozambique, weighed in with a significant lift to revenues and profits for the six months ended last December.

The former grew 57% to US$103.4mln, while the earnings before interest, tax, depreciation and amortisation (EBITDA) more than tripled to US$61.7mln. Net profits grew to US$23.3mln from US$1.4mln previously.

The production of emeralds grew to 12.1mln carats in the period from 10.4mln a year earlier, while ruby output grew to 6.3mln carats from 5.1mln.

Gemfields chief executive Ian Harebottled described the results as ‘exceptional’.

He added: “This solid performance comes at a time when the mining sector has faced various challenges, but I am pleased to report that demand for Gemfields' responsibly sourced coloured gemstones and the opportunity for sustained growth remains significant.”

Success was the result of a lean and efficient mining operation and followed a series of successful auctions.

Gemfields says it plans the sale of predominantly lower quality rough rubies later this month or next month in the Indian city of Jaipur.

The higher quality red stones are scheduled to go under the hammer in June in Singapore.

As foreshadowed in an earlier trading statement, the Fabergé jewellery business was buffeted by the problems in Russia and the Ukraine.

The shares, up 42% in the past year, marked time in early afternoon trade at just a smidge over 50p. At that level the company is worth £274mln, or more than US$400mln.

The broker Peel Hunt reckons Gemfields has net asset value of 69p a share. Analyst Michael Stoner told investors: “We would not expect the second-half to be quite as strong as the first, without material advances in rough stone pricing; this is due to the timing of auctions with a high quality emerald auction falling into H1 but not H2.

“That said, with two ruby auctions (one high and one low quality) expected in the second-half and the pricing environment for rough gemstones remaining robust we reiterate our buy.”

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