Shefa Yamim - Initiation of Coverage
Gemstone mining project in the Holy Land with high margins on rare gemstones expected by adopting a Mine to Market strategy
Shefa Yamim (A.T.M.) Limited listed on the LSE in December 2017. After 19 years of exploration in greenfield terrain in Israel, the company has found commercial quantities of some exquisite and rare coloured gemstones which are destined to fetch fancy prices. So far, more than US$35 million has been invested in exploration. Drilling and bulk sampling has allowed the delineation of a 4.5km long deposit in Kishon Mid-Ranch Zone, with gravel layers of varying thickness up to 4.5m, where all the gemstones have been found. Significant exploration upside exists within the Mid-Reach, Proximal Reach and the longer term Distal-Reach.
Early cash flow expected with the start of commercial mining in 2020
Trial mining is scheduled to begin later on this year, with commercial mining of the Kishon Mid-Ranch Zone 1 in 2020. The granting of a mining licence will allow the company to sell the gemstones found in bulk sampling and other exploration work, which provides the prospect of early cash flow.
Capturing high margins with a Gemfields-style Mine to Market strategy
World renowned jeweller Yossi Harari is creating an exclusive collection using these gems. Shefa Yamim is pursuing a similar strategy to that successfully pursued by Gemfields, which was acquired for £200m+ in 2016.
Gemstone market growing fast with prices outperforming diamonds
Over the last five years, the coloured gemstone market has grown by 145% to US$6 billion and outperformed the price of diamonds by 37% since 2005.
Risked conservative NPV suggests upside of more than 600%
Our conservative valuation shows the potential. We initiate coverage of Shefa Yamim with a target price of 376p and Conviction Buy stance.
RISK WARNING & DISCLAIMER
Shefa Yamim (SEFA) is a research client of Align Research. Align Research holds an interest in the shares of SEFA. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Dec | 2017A | 2018A | 2019E | 2020E |
|---|---|---|---|---|
| Revenue (NIS'000) | - | - | - | 54,300 |
| Pre-tax (NIS'000) | (16,258) | 6,009 | (7,605) | 26,000 |
| EPS (NIS) | (1.703) | 0.422 | (0.446) | 1.220 |