While Gemfields (previously Pallinghurst) has been a serial under-performer on the JSE, it is worth noting that the rebound in precious metals prices in recent weeks and above average volume that went through recently.
Precious metals prices
In recent weeks, the platinum price has climbed back toward the $850/ounce mark while gold has consolidated above the $1400 level.
Gemfields has exposure to the platinum sector through its 6% stake in Sedibelo Platinum mine. Importantly Gemfields has the opportunity to benefit through its application and partial ownership of the Kell Technologyprocess.
Kell Technology developer Keith Liddell is a non-executive director of Sedibelo and the technology allows for cheaper extraction of base and precious metals. Apart from the Sedibelo site in South Africa, the Kell Technology is looking at opportunities in a variety of jurisdictions including Zimbabwe and Australia.
Gold is not a commodity naturally associated with Gemfields but the company recently announcedit was undertaking an exploration exercise for gold alongside its ruby mining operations in Mozambique.
Volume increase
Gemfields is a hugely illiquid stock and volumes in small and mid-cap shares in South Africa have been disappointing.
With Gemfields trading at nearly one third of its reported Net Asset Value (NAV) and the share dropping 35% in 2019, the company announced it was going to undertake a share buyback.
Despite being in the market with the buy-back, trade volumes have remained relatively muted with the 30-day average traded being around 315 000 shares.
On the 11thof July, 749 003 shares changed hands and on the 16thof July a further 873415 shares were traded. Presumably these deals were part of the buy-back and the shares will ultimately be de-listed, providing a further increase in the NAV (currently R5.31/share).
Summary
Gemfields (and its predecessor Pallinghurst) have regularly touted the discount to NAV as a sign of deep value in the stock. The share was hit by underperformance in some key business units and the decline in PGM prices.
It now remains to be seen whether improved commodity prices ultimately serve as a catalyst for the stock.