London - Gemfields said an independent report confirmed that its 75-percent-owned Montepuez ruby mine in Mozambique has enough reserves to last more than two decades.
The Competent Persons Report (CPR), which gives an official estimate of what is considered the largest deposit of rubies in the world, projects production of 432 million carats over 21 years.
Hollywood actress Mila Kunis is brand ambassador for Gemfields, which has been trying to create a stable market for coloured gemstones, much like what Anglo American’s De Beers did for diamonds.
Gemfields, the world's largest rough emerald producer, expects trading in gemstones to account for a “sizeable chunk” of its revenue over the next five to 10 years.
The CPR split the Montepuez mine's probable reserves into primary ore reserves of 253 million carats at a 114.9 carats per ton and secondary reserves of 179 million carats at a lower grade of 7.07 carats per ton.
It estimated indicated and inferred mineral resources at 467 million carats of ruby and corundum.
Gemfields, which also owns the famed Faberge jewellery business, plans to increase Montepuez's capacity to 5.6 million tons from 3.3 million tons and expects about $64 million in capital spending over the next two years.
“An impressive sized resource and good to see an economic model with very good returns from relatively modest capital,” Sanlam Securities analyst Charles Long said in a note.
Analysts, however, cautioned against the lack of clarity on the size of the ruby market and pricing of the gemstones, which are sold via auctions.
“Some investment risk does remain as ruby auctions completed so far have not demonstrated a consistent price and take-up of the goods by the market,” finnCap analyst Martin Potts said in a note.
Gemfields shares were up 3.9 percent at 60.75 pence at 09h08 GMT on the London Stock Exchange.
Reuters