Slow Market Dents Gem Diamonds Results

RAPAPORT… Revenue at Gem Diamonds fell in the first half of the year
amid weakness in the market.



Sales of rough diamonds from the Letšeng mine in Lesotho plunged 44% to $94.5 million by value, and dropped
10% to 55,714 carats by volume, the miner reported last week. The average price declined to $1,697 per
carat, compared with $2,742 per carat in the same period a year ago.



Total sales were slightly below investment bank Berenberg’s $95.5 million
estimate, which forecast the average price at $1,728 per carat. However, the average price is likely to rise as mining moves to the higher-value portions of the deposit in the second half, Berenberg noted.


“[The first half] was difficult and has not been aided by a
weak market, but Gem remains our preferred name in a challenging diamond
sector,” the bank said.


Production at Letšeng fell 8% to 56,668 carats, as the miner
retrieved ore from a lower-grade portion of the pipe. Gem Diamonds also treated
lower volumes of ore, resulting in a smaller quantity of carats recovered, it
explained.


The company found three diamonds larger than 100 carats in
the January-to-June period, compared with 10 in that category during the same
period a year ago. The highest per-carat price the company achieved for a white
diamond during the first half was $48,225 for a 70.69-carat, D-color, type IIa
stone, while a 13.32-carat pink garnered $656,934 per carat, its highest per-carat
price for a Letšeng diamond. Some 15 diamonds fetched more than $1 million each
during the period.


In the first six months of the year, Gem Diamonds finished
construction of a pilot plant, which will help it identify diamonds within
kimberlite and remove them without breakage. Commissioning and ramp-up of the
new plant will take place in August.


The company also entered into an agreement to sell its
Ghaghoo mine in Botswana for $5.4 million. It expects to complete the sale in
the second half of the year.


Image: The Letšeng mine. (Gem Diamonds)