Gemfields benefits from Zambia lifting a 15% export duty on gemstones, leading Panmure Liberum to raise its price target to 20p. The removal of this duty allows the company to resume exports and auctions, significantly enhancing revenue potential after operational disruptions.
Gemfields Group Limited (AIM:GEM) has received a boost in its prospects following the suspension of a 15% export duty on precious gemstones by Zambia. This duty, reintroduced in January, had previously disrupted exports from Gemfields’ Kagem mine, which is primarily engaged in emerald mining. The removal of this levy now allows for the resumption of exports and auctions, significantly improving the company’s revenue expectations.
Panmure Liberum has adjusted its price target for Gemfields from 16p to 20p and reaffirmed its “buy” recommendation based on this recent development. The brokerage had accounted for the export duty in its previous forecasts; however, with the duty’s removal, they anticipate a 10% increase in earnings, giving a more optimistic outlook for the company’s financial health.
The timing of this announcement is crucial, as mining operations at Kagem were halted for up to six months due to cost-cutting initiatives, with the focus placed on processing existing stockpiles. The elimination of this export barrier positions Zambia’s mining sector more competitively in the global gemstone industry, aligning it with other jurisdictions that do not impose similar taxes.
Investors reacted positively to the news, leading to an upturn in Gemfields’ share price. The brokerage views this as a pivotal moment for the company, which can now leverage its stockpiles for sales while addressing operational challenges ahead. A significant emerald auction scheduled for March is expected to be a key indicator of market demand following the past months of disruption.
As of now, shares are trading in a tight range at 6.30p, reflecting cautious optimism in the market. Maintaining a watchful eye on the upcoming auction will be essential, as it could signal a recovery trajectory for Gemfields and its operational activities.
In summary, the lifting of the 15% export duty by Zambia presents a significant opportunity for Gemfields, allowing for the resumption of exports and auctions. The positive market reaction and Panmure Liberum’s revised price target reflect a renewed confidence in the company’s financial future. The upcoming emerald auction in March will be critical for assessing market demand and the overall impact of these changes.
Original Source: www.proactiveinvestors.co.uk
