Gemfields’ ray of sunshine in depressed resource sector – by Lawrence Williams ( – July 23, 2015)

Miner’s ruby deposit in Mozambique described as ‘potentially one of the most exciting discoveries in Africa in decades’.

LONDON – In the current resource investment climate it is reassuring to see an announcement from a gemstones miner, which would seem to offer great growth potential and whose stock price performance is bucking the general resource stocks trend. Indeed it might even be doing rather better if the sentiment for resource stocks in general wasn’t quite so depressed.

The miner is London AIM-listed Gemfields (GEM), effectively controlled by Brian Gilbertson’s Pallinghurst Resources Fund (named after a road in exclusive Johannesburg suburb Westcliff close to where Gilbertson used to have his home).

Gemfields’ assets include the 75%-owned Kagem emerald mine in Zambia and the Fabergé brand name, as well as a similar sized interest in the Montepuez ruby deposit located in the Montepuez district of Cabo Delgado province in northern Mozambique. The company has just announced what looks to be a highly positive resource and economic assessment of the latter.

The Montepuez assessment relates to initial work on only around 10% of the 340 km2 concession and is described by analysts at London broker/banker Investec as ‘truly impressive’ – and as ‘potentially one of the most exciting discoveries in Africa for decades.’ It has the potential to supply an estimated 40% of the global rough ruby market, while the economic assessment is based on ruby and corundum prices well below recently achieved levels in an auction of Montepuez stones.

The study was carried out by respected consultancy SRK and highlights include an Indicated and Inferred Mineral Resource of 467 million carats of ruby and corundum at an in-situ grade of 62.3 carats per tonne and Probable Ore Reserves of 432 million carats of ruby and corundum at a diluted ore grade of 15.7 carats per tonne. (These figures are JORC compliant.)

The economic model prepared by SRK suggests a projected 21-year mine life at a production level of 432 million carats with a projected real cash flow of US$2.76 billion over the assumed mine life.

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