Shefa Gems (LSE:SEFA) is currently moving towards trial mining and revenue generation at its Kishon Mid-Reach project in the Mount Carmel region of Northern Israel. Alongside regulatory and operational efforts to reach production, the firm is developing a clear marketing strategy – notably launching a jewellery collection alongside an internationally acclaimed designer.
Investor Andy Morrison visited Shefa’s project to discuss, among other areas, the firm’s marketing efforts and its progress towards securing a mining licence. Here, he updates us on what he learned from the precious stones business.
To recap, Shefa – formerly known as Shefa Yamim – is a multi-commodity explorer of precious stones that operates in Israel. The Kishon Mid-Reach, Shefa’s primary asset, contains a 4.5km-long and 150m-wide strike with gravel layers of variable thickness. The organisation has delineated this area into three zones, each at different stages of exploration and development.
The most advanced of these is currently Zone 1, where enough geological and sampling work has been completed to allow progress to trial mining. Following a successful sampling campaign last year, Shefa completed an independent technical economic evaluation on Zone 1 in February 2019. This is the basis of the company’s trial mining programme. The work found that the first mine in the zone should be able to process 1.5Mts of gravel over 11 years. This processing capacity can potentially be doubled, halving unit operating costs to $10.15/t and life of mine to four years.
More recently, Shefa completed a bulk sampling programme from target gravel horizons at Zone 2, with early analysis showing strong prospectivity. The samples are currently undergoing treatment and examination at the firm’s operational site. Once this has completed, Shefa plans to apply for a prospecting licence at Zone 2, effectively bringing it to the same development level as Zone 1.
Speaking to MiningMaven, Morrison says he was impressed by the progress Shefa is making at both of the zones in development at the Kishon Mid-Reach during his recent trip.
‘We went into the exploration areas where Shefa has been doing bulk sampling, and we could see that it is an efficient project. All that needs to be done, generally speaking, is the removal, sifting, and sorting of gravel so that gems can be extracted. The gravel can then be returned. This can be done without any chemicals and with the equipment that is currently on-site, so the Kishon Mid-Reach is very environmentally sound,’ he said. ‘This is the first gemstone project in Israel, and there is a lot of exciting opportunity to be had here. As it stands, there is every indication to suggest that Shefa will be able to make the most of this opportunity. Indeed, we visited the processing plant, where the incidence of gems is concentrated into smaller quantities and picked through. The business believes that it will be able to recover 90pc of the gems through this process.’
Alongside its mining efforts, Shefa’s time – and part of the proceeds of a £1m placing completed in May – are being focused towards its marketing efforts. In March, the firm received an independent valuation of its ‘Gem Box’ from Dr Gavrielov Gila, a gemmologist with decades of expertise in the appraisal and purchase of precious stones for use in jewellery. The full results of this work, which included valuations of $10,000 and $7,000 per carat for Moissanite and Carmel Sapphire respectively, can be seen in the table below.
With this in mind, the company is working to increase the global reach of its brand by promoting jewellery collections made up of stones from its ‘Gem Box’ worldwide. Collections will be marketed online, through franchises with large marketing chains, and local showrooms with a licenced brand name of gemstones from the soil of the Holy Land. Ultimately, Shefa intends to create a fully-integrated ‘Mine to Market’ model, which will see it control every aspect of the jewellery development chain. This will ensure that the full value of its gems is captured.
The business’s efforts in this area took a significant step forward in February when it announced the launch of its ‘Heaven on Earth’ jewellery collection alongside world-renowned designer Yossi Harari. The collection, which features 31 pieces in total – ranging in value from $4,000 to $85,000 – incorporates a wide range of Shefa’s ‘Gem Box’ including Moissanite and Carmel Sapphire. Morrison tells us that the firm is now looking to accelerate these marketing efforts by building several new workstreams:
‘With stones already acquired, the company are looking at accelerating the marketing process sooner rather than later. Getting people to buy gemstones in quantities is not something that happens overnight, so it wants to create awareness and market for its products before it begins mining.’
Finally, an upcoming critical milestone for Shefa to pass is being awarded a mining licence for Kishon Mid-Reach Zone 1. This will enable the company to begin trial mining next year and, critically, start generating revenues, subject to funding. In its recent H1 results, Shefa said it was making ‘good progress’ towards the completion of a mine planning, engineering, and environmental report, supported by the proceeds of a recent £1m fundraise. The statement forms part of its mining licence submission to the Ministry of Energy Natural Resources Administration Israel for Zone 1.
Shefa received another critical vote of confidence in its licencing arena in August when its prospecting licence was renewed for Zone 1. As well as demonstrating the Israeli government’s confidence in Shefa’s operations, the development allows the firm to apply for a ‘Certificate of Discovery’ in the area. If granted, this would give it exclusive rights over a mining licence.
Following his recent visit, Morrison said regulatory progress is continuing apace:
‘We were able to discuss plans with management and have a conversation with the consultant company leading the permitting and licencing efforts. Being granted the mining licences will be an important step for Shefa. But, before this happens, there needs to be a certificate of discovery. Alongside all of the environmental processes, management believes this is imminent, and all of the work towards being granted this certificate has been completed. Importantly, this regulatory milestone could provide a trigger point for investors to join us.’
Indeed, if Shefa can obtain its mining licence and advance towards production while continuing to develop its marketing efforts, then the company will likely enter a busy period for newsflow. If this can trigger an increase in trading volumes, then it will be interesting to monitor where Shefa’s share price goes from its current 5.6p.