Gemfields forms JV to hunt for sapphires in Sri Lanka

(Adds analyst comment, background, share price)

By Karen Rebelo

Sept 15 (Reuters) - Precious stones miner Gemfields Plc (Other OTC: GFLDF - news) has formed a joint venture to mine sapphires in Sri Lanka as part of its long-held ambition to become the De Beers of the global coloured stones market.

Gemfields already mines emeralds in Zambia and rubies in Mozambique, and this venture will allow it to complete what Chief Executive Ian Harebottle calls the "traffic light of coloured stones" - emerald, rubies and sapphires: red, green and blue.

The miner, which owns luxury jewellery brand Faberge, said on Monday it would hold a 75 percent stake in the joint venture with East West Gem Investments Ltd (EWGI), a company registered in Jersey, the Channel Islands.

The London-listed company, which produces about a fifth of the world's rough emeralds, said it paid $400,000 to acquire 75 percent operating interests in 16 exploration licences, covering diverse minerals.

"A relatively small consideration for Gemfields, but a positive development exposing the company to a greater diversity of precious stones to market," Investec Securities analyst Marc Elliot said.

The joint venture will also include creating a gemstone trading company, called Ratnapura Lanka Gemstones Pvt Ltd, that will focus on sourcing rough sapphires from the local market.

Sri Lanka is a key source of sapphires of all colours is known for the highly sought-after padparadscha sapphire.

Gemfields aspires to create a stable market for coloured stones and polish their image in the same way that Anglo American Plc's De Beers unit has long championed diamonds from London's Bond Street to China.

Gemfields's shares were up 2 percent at 48.66 pence on the London Stock Exchange (Other OTC: LDNXF - news) at 1030 GMT on Monday. (Reporting by Karen Rebelo in Bangalore; Editing by Gopakumar Warrier and Savio D'Souza)