Gemfields fetches almost US$69M at ruby auction

Coloured gemstones miner Gemfields (LSE: GEM; JSE: GML) said on Wednesday it sold almost US$69 million of mixed-quality rubies at its June auction, with 97% of the offering gone.

The auction marked the 10th anniversary of Gemfields’ first sale of rubies from the Montepuez mine in Mozambique, the world’s richest known deposit of the precious red stones. The operation is 75%-owned by Gemfields and 25% by its local partner, Mwiriti.

“While auction results should not be directly compared, our team is proud to have crossed the milestone of an average selling price of US$300 per carat at this auction.,” Adrian Banks, Gemfields’ managing director of product and sales, said in the statement.

The company, which also produces emeralds at the Kagem mine in Zambia, acknowledged the precious gemstones industry, particularly the diamond sector, continues to face headwinds.

The diamond industry faced substantial challenges last year, with a global decline in demand for roughs gemstones that affected prices. 

Economic challenges in key markets including China and the U.S., coupled with increased supply of lab-made diamonds, prompted jewelry retailers to adopt a cautious approach. This impacted diamond and coloured gemstones sales, contributing to the overall profit decline of top producers.

Gemfields’ pre-tax profit nose-dived 86% last year, due partly to the cancellation of an emerald auction in November, a lower number of carats sold overall and a write-down in its platinum group metals investments.

Customer confidence

The company, which has just appointed former De Beers CEO Bruce Cleaver as chair and independent non-executive director, remains optimistic about the market direction.

“We’ve announced another strong result demonstrating the confidence that loyal customers have in our product offering and auction platform,” Banks said. “We hope this result provides good comfort to other stakeholders in our sector.”

Gemfields believes the coloured gemstone market is relatively safe from the emergence of lab-grown alternatives, since  man-made rubies and emeralds have existed for more than 120 years and haven’t taken market share away from the mined gemstones segment.

Shares in the precious stones miner jumped more than 5% on the news and were trading at 13p in London mid-afternoon. The stock closed 4.9% higher in Johannesburg, leaving Gemfields with a market capitalization of 3.49 billion South Africa rand (about US$195 million).