Gem Diamonds’ revenues drop 18% in H1

Gem Diamonds Limited announced an update of its operational and sales performance for the six months ending 30 June 2015. The company recorded a drop of 18 percent in sales of its rough diamonds which valued $106.3 million ($129.0 million in H2 2014). The average price realised dropped 3 percent $2,264 per carat from ($2,338 in H2 2014). The company sold 46,961 carats of diamonds in the said six months, indicating a 15 percent drop from 55,164 carats sold in H2 2014.

Also, the company adopted a strategic revision to the number, composition and timing of the Letšeng tenders, with eight tenders now being held during the year (instead of 10). During the six months this year, Letšeng held four tenders, achieving an average price of US$ 2,264 per carat (compared to US$ 2,338 per carat in H2 2014). This brings the 12 month rolling average to US$ 2,304 per carat. Amongst the diamonds that sold from the Letseng mine, 13 rough diamonds achieved a value of greater than US$ 1.0 million each. In addition to a 314 carat Type IIa white diamond, a 357 carat Type IIa white diamond was recovered and is expected to be sold in Q3 2015. Four diamonds of over 100 carats each were sold including a top quality 108 carat Type IIa rough diamond which sold for US$ 65 226 per carat. The Plant 2 Phase 1 upgrade and the Coarse Recovery Plant construction were successfully completed on time and within budget. On the first day of its operation, the new XRT unit recovered a high quality 52 carat Type IIa diamond.

The company also noted that In H1 2015 the overall diamond market experienced high inventory levels and continued liquidity concerns, global macro-economic uncertainties, which all together placed pressure on both rough and polished diamond prices.

Although, Letšeng’s high value large production has remained resilient through the six months, however, the current market conditions negatively impacted the pricing achieved for the more commercial Ghaghoo production. At Ghaghoo the recovery grade in latter part of H1 2015 was above reserve grade, with recovery of larger diamonds beginning to fill gaps in size frequency distribution model. The recovered grade fluctuated between 28 and 30 cpht in the last two months of H1 2015 (compared to the reserve grade of 27.8 cpht). Also, small size blue and pink coloured diamonds were recovered, confirming the presence of these valuable diamonds in the ore body. A 48 carat diamond was recovered in July 2015 with an increasing number of diamonds in the 10 to 30 carat size range being recovered, albeit still below modelled frequencies. A second parcel of 29, 891 carats of commissioning phase production sold for US$ 4.9 million in July 2015 (US$ 165 per carat) in a difficult market. The company paid a maiden annual dividend of 5 US cents per share (US$ 6.9 million) on 9 June 2015.

Gem Diamonds’ CEO, Clifford Elphick stated, “The recovery of large high quality diamonds continues to define the Letšeng mine and it is pleasing to see that prices for these goods have remained firm despite the current difficult diamond market conditions. The development of the Ghaghoo mine is progressing slower than planned due to difficult ground conditions which have hampered slot development in the first five production tunnels and constrained production ramp-up.”