Gemfields (previously Pallinghurst) has endured a torrid 5 years with the share price down 59%. The share is down 35% over the past 12 months but recently newsflow suggests that there might be catalysts for a change of fortune.
Gold Exploration:
With the gold price finding renewed momentum and flirting with the $1400/ounce level, the announcement that the company is moving into gold exploration is worth noting.
Gemfields announced that it has agreed to establish a joint venture company with Mwiriti Limitada, a Mozambican registered company, in order to explore and progress opportunities arising from 12 greenfield licences presently held by Mwiriti. Gemfields will hold 75% of the joint venture and will contribute exploration and skills to the venture.
CEO Sean Gilbertson said: ‘We have enjoyed a sound and successful partnership with Mwiriti at the Montepuez ruby mine and we look forward to furthering our joint understanding of these new licences. While the opportunities are early stage, secondary gold mineralisation has been observed and recovered in small quantities from several areas within the licence portfolio and these will therefore constitute our key focus in the year ahead.”
Share buy-back
Gemfields reports a net asset value of R5.19/share but presently trades at around R1.60/share.
The company has indicated it will undertake a share buyback up to 10% of the issued share capital.
Over the past 10 days, the share has traded an average of 257877 shares per day.
The team from Edison released a report in April 2019 with a Sum of The Parts (SOTP) valuation of R5.01/share
The company says:
“We have valued Gemfields’ interest in Kagem, MRM and Fabergé on the basis of discounted cash flow (DCF) valuations at a 10% real cost of capital. We adjust for the value of the group’s investment in Sedibelo (based on resource multiples) and Jupiter (at the current share price of A$0.34/share), corporate overheads (US$197m) and net cash (US$10m), which gives us a total valuation of US$466m (ZAR5.01/share). MRM is the biggest contributor to the SOTP value at US$366m (ZAR3.94/share). Kagem also contributes significant value of US$153m (ZAR1.65/share), despite the recent introduction of a 15% export tax on gemstones in Zambia (subject to ongoing negotiations). Fabergé contributes US$59m (ZAR0.64) to our SOTP valuation.”
You can read the full report here.
