Gemfields looks to expand trading in precious stones

* Trading could contribute "sizeable chunk" of revenue - CEO

* CEO expects to obtain trading approval in Zambia

* First (Other OTC: FSTC - news) -half core earnings more than triple (Adds details, CEO comment, share price)

By Mamidipudi Soumithri

March 9 (Reuters) - Trading in precious stones could account for "a sizeable chunk" of Gemfields Plc (LSE: GEM.L - news) 's revenue within five to 10 years, the company's chief executive said on Monday.

Gemfields holds ambitions of creating a stable world market for coloured gemstones, polishing their image in the way that Anglo American Plc (LSE: AAL.L - news) 's De Beers has championed diamonds from London's Bond Street to China.

London-listed Gemfields gets about 90 percent of its revenue from the auction of emeralds, rubies and amethysts that it mines in southern Africa. It also owns the Faberge jewellery business.

Gemfields, which produces about a fifth of the world's rough emeralds, does not disclose its trading revenue separately. Analysts say trading currently accounts for only a small portion of its revenue.

Asked about the future contribution of Gemfields' trading business to revenue, CEO Ian Harebottle said his past experience in the business suggested gemstone trading had the potential to contribute close to 40 percent.

"It certainly has the potential to be a sizeable chunk," he told Reuters.

Gemfields expects shortly to win approval to trade precious stones in Zambia, home of its 75 percent-owned Kagem emerald mine. It already has approval to trade in Mozambique and Sri Lanka, where it mines rubies and sapphires respectively.

The company reported first-half core earnings of $61.7 million on Monday, more than triple the amount earned a year earlier, after selling more stones at auction.

Revenue for the six months ended Dec. 31 rose 57 percent to $103.4 million.

Gemfields' trading business involves the purchase of coloured stones at a premium from local miners. The stones are then sold at auction, Harebottle said.

As its trading business grows, the company has been entrusted with selling stones on behalf of local miners, earning "a small commission" in the process, he said.

Gemfields formed a joint venture in Sri Lanka last year with the aim of mining and trading sapphires.

Sri Lanka is a source of sapphires of all colours and is known in particular for the sought-after padparadscha sapphire, pinkish-orange in colour.

Gemfields' shares were down 1.5 percent at 50.075 pence at 1426 GMT in thin trading on the London Stock Exchange (Other OTC: LDNXF - news) . (Editing by Gopakumar Warrier, Anupama Dwivedi and Robin Paxton)