Gemfields PLC Announces Sri Lankan Sapphire Joint Venture

Gegemmfields (LSE: GEM) — supplier of responsibly sourced coloured gemstones and owner of the Fabergé brand — announced today that it has signed a joint venture agreement with Jersey-registered East West Gem Investments Limited (EWGI) to develop opportunities in the Sri Lankan sapphire and gemstone sector. Gemfields’ share price is currently down 0.7% in trading so far today.

Under the terms of the joint venture, three  Sri Lankan subsidiaries will be created, which will be 75% owned by Gemfields and 25% by EWGI. The agreement gives Gemfields a 75% operating interest in sixteen exploration licences, at a cost of $0.4m. Gemfields says it aims to apply the experience it has gained in Zambia and Mozambique to the Sri Lankan operations.

The two companies will also establish a gemstone trading company — Ratnapura Lanka Gemstones (Pvt) Ltd — which will focus on sourcing rough sapphires from the local Sri Lankan market. Gemfields says that it intended to apply its proprietary gemstone grading systems and marketing methodologies to offer the gems to international buyers via its proven rough gemstone auction platforms.

Commenting on the joint venture, Gemfield CEO Ian Harebottle said:

We are delighted to announce our entry into what we consider to be the third of the ‘big three’ coloured gemstones. With revenue-producing emerald and ruby operations in Zambia and Mozambique already in the Gemfields portfolio, the proposed development of sapphire operations in Sri Lanka will realise our stated red, blue and green ‘traffic light’ of coloured gemstones strategy.

“We are excited about the possibility of being able to offer a reliable supply of well-graded sapphires to customers attending our auctions, and to ensuring that all gemstone stakeholders in Sri Lanka – including its government and general population – benefit from the value-addition and transparency that the Gemfields approach has already delivered in Zambia and Mozambique“.

At 48.65p, Gemfield’s share price has risen 47% so far in 2014, versus an AIM All-Share index that’s fallen 9% in that period.  And over the past 5 years Gemfields has absolutely smashed the index, with a share price that’s increased 544%, compared to the AIM All-Share’s 24% gain.

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Jon Wallis has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.