Mine of Opportunities for Investors

retailj
By retailj May 5, 2018 14:40

Mine of Opportunities for Investors

When Fura Gems launched in March 2017, its founders were sure of just one thing — their vision for this new enterprise. They wanted to build an ethical multinational in a challenging sector and, in so doing, to show the $2 billion global coloured-gemstone industry the path to becoming organised.

Dev Shetty, President & CEO, Fura Gems

Dev Shetty, president and CEO of Fura Gems Inc., remembers a chance meeting he had with Stan Bharti in Colombia. Bharti is founder and chairman of Forbes&Manhattan, an innovative merchant bank managed from Dubai, UAE. He was in South America to acquire a mine as a part of F&M’s strategy to develop its coloured gemstone mining business. Although this acquisition never happened, Bharti spotted an opportunity to associate with Shetty. Out of their chance encounter came Fura Gems.

F&M has a record of backing companies that show high growth potential. Thanks to F&M, says Shetty, Fura has received investments of nearly CAD20 million (Canadian dollars). Fura is headquartered in Toronto, Canada, but like F&M is run from Dubai. Fura is listed on the TSX Venture Exchange under the ticker symbol “FURA”.

With such unimpeachable backing, Fura next acquired something more valuable than money: a top-quality leadership team. These experts have a collective experience of 75 years in building large mining facilities in Mozambique and Colombia, respectively the world’s key sources of rubies and emeralds.

Fura’s top management team comprises six members, including Dev Shetty, Ashim Roy, Rupak Sen, Ryan Ptolemy, Damien Lopez and Tarun Malkani. At the helm is Joe Carrabba, chairman, with years of international experience in mining. Carrabba has also served as president and chief operating officer of the Diavik diamond mine.

Passion and logic

Shetty confesses to a love of colour gemstones of all sorts. His company, however, focuses on two gems. “Emeralds and rubies became the launchpad,” he says, “as the team is passionate about this segment.”

That passion, combined with industry expertise, equips Fura with a potent dual engine for long-term success. Just one year into formal operations, its team has successfully built two operating assets, one for Colombian emeralds and the other for Mozambican rubies.

The watchword is: proven deposits. The company has a prudent policy of not getting involved in early exploration. “We don’t want to use investors’ money to look for gemstones where they currently don’t exist,” says Shetty.

Similar strategic thinking has determined Fura’s choice of location for its head office. Learning from the diamond industry, Shetty saw that the yawning gap between the price of rough (sold mostly in Europe) and of cut and polished stones (processed in India and other Asian countries) leads to a serious disconnect between miners and manufacturers, specifically those that do the cutting and polishing.

To maintain price parity along the pipeline, and to remain close to its clients, Fura set up office in Dubai. This is where its gemstones are graded, post-mining, and sold. Operating from Dubai removes the administrative cost and hassle of operating from a number of locations across the world.

The commitment is thorough and unsentimental. “The entire top-level team has moved, lock, stock and barrel, to Dubai,” says Shetty.

Targets, on target

Unlike administrative headquarters, gemstone deposits do not follow the logic of markets. How did Fura decide where it would acquire mines? “Colombia has 400 years of mining history and provides almost half of the world’s emerald supply, but no ethical player in mining dominates its market,” says Shetty. For Fura, this was its opportunity.

Until the 1970s, he explains, 95 per cent of the world market for emerald depended on Colombia, and even this large slice was dominated by gems from Coscuez. Today, Fura owns a 76 per cent beneficial interest in the fabled Coscuez Emerald Mine, covering a total of 46 hectares.

Under its bulk sampling programme, using existing tunnels, Fura is on target to collect an astonishing 30,000 tonnes of material from the mineralised body at Coscuez. The first phase of this programme runs up to 31 December 2018.

“Out of a total of 1,720 carats of emeralds mined in the initial bulk-sampling,” says Shetty, “826 carats were high-quality gems. We have not even scratched the surface and it’s fascinating.” With justification, he calls Coscuez a prized catch.

That initial target of 30,000 tonnes per year will be raised, from March 2019, to 100,000 tonnes per year, says Shetty. The company is in talks with expert consultants in Australia and Canada to help the company develop Coscuez as a long-term, sustainable underground mine with a productive life of at least 20 years.

Shetty turns to Fura’s interest in rubies. Until 2014, he says, 99 per cent of the world’s supply of rubies came from Myanmar (formerly Burma). Today Mozambique contributes 40 per cent in value terms and 60 per cent in volume terms.

In Mozambique, he says, Fura’s team is very familiar with geological and other factors. “We have entered into agreements to acquire four ruby licences in Mozambique. We have started with the exploration process and will soon be coming out with more details on that. Fura Gems owns 80 per cent effective interest in these ruby licences.” Ruby production is expected to begin in July 2018.

Regarding rubies as well as emeralds, the company aims to begin selling stones around March–June 2019. “This year-long lag will help us stockpile gems,” says Shetty, “so that Fura can meet its goal of constant delivery of quality gemstones that are graded.”

Shetty’s work, however, goes beyond gems and markets. “Mining per se is not very difficult,” he says, “but mining ethically, with employee welfare, environmental protection and sustainability at the heart of it, can make it hard.”

The company is proud of its all-inclusive labour plan. In Colombia and Mozambique, Fura is hiring 200 indigenous, local employees, and paying them salaries and benefits. The workers will receive facilities never dreamt of before by their families. These commitments make Fura the first-ever miner to offer salaries and welfare measures to workers in these regions.

The promise of India

Historically, India has been a leading market for colour gemstones. “India is one of the top three markets for us,” says Shetty. While Fura presses on with its mining exploration and production, it is not neglecting the other aspect of its business: chiefly, building awareness about the category among the trade.

This brings Shetty to the company’s India strategy. “India is the largest cutting and polishing centre for emeralds in terms of volume,” he says. “There is a growing demand for emeralds in the Indian market and we intend to capitalise on it by organising the market strategically, and by educating and training the trade about the category.”

Sales is not the whole story. “For our India operations,” says Shetty, “talks are going on with the Madhya Pradesh government as well as with the central government regarding the Bunder Diamond project.”

Discovered by Rio Tinto in 2004, the project was shelved because of a lack of approvals from the government. Fura is preparing to bid for the mine, when the government auctions the licences. At present, India imports all of its diamonds. If the Bunder mine comes into production under Fura, says Shetty, he is confident that his company can use its expertise to help India drastically to reduce its gemstone imports from the current 100 per cent.”

Rock-solid opportunity

What makes colour gemstone mining a lucrative business for investors? Until 2008, says Shetty, the sector was completely unorganised. It was dominated by individual families running artisanal operations. After 2008, when a large mining company stepped into the market, the share of organised business in the colour gemstone category increased to about 10 per cent.

In the decade after 2008, says Shetty, the sector has experienced the natural progression of a sector that begins to organise itself. More players have entered the space. Fura itself is the second entrant in the organised mining sector, after Gemfields.

Of a global rough gemstone sector worth $23 billion a year, emeralds, rubies and sapphires together represent a mere $2 billion. “There is a strong possibility that the overall market size of the industry will increase from $2 billion to $5 billion,” Shetty predicts. “In the next seven years we plan to capture 15 per cent of the total market pie.”

Clearly, for investors who seek high and sustained long-term returns, Fura has it all. It has hard data to show what the company can bring in the near future. It has a rock-solid business plan oriented to its specific and realistic goals. It has business readiness, top-notch management, a ready market, the early-mover advantage and, most of all, a strong and evocative narrative.

Courtesy: The Retail Jeweller News Service

retailj
By retailj May 5, 2018 14:40
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