Weak Prices Send Gem Diamonds’ Profit Plunging

Gem Diamonds’ profit fell 92% for the full fiscal year of 2023 amid a weak market, economic challenges and a sharp drop in the average price of its rough.

Profit from its Letšeng deposit in Lesotho came to $1.6 million for the 12 months, it said Thursday. That compared with a profit of $20.2 million in 2022.

“2023 was a challenging year globally with surging inflation and interest-rate increases in major economies, two international conflicts and a subdued overall global economic outlook which had a significant negative impact on the diamond industry,” said Gem Diamonds CEO Clifford Elphick.

Revenue plunged 26% to $140.3 million, primarily due to lower prices achieved for its rough as a result of the downturn in the diamond market, the company explained. Sales volume slipped 3% to 104,520 carats, while the average price dropped 24% to $1,334 per carat. The miner derived $139.4 million of total revenue from rough-diamond sales, while it generated $900,000 through offtake agreements with two diamond manufacturers, whereby the company earns a portion of the polished proceeds. Output grew 2.8% to 109,656 carats.

In December, Gem Diamonds paid $22.7 million to acquire employees, mining fleet and support operations from Matekane Mining Investment Company, which has provided it with mining services since 2005. The miner terminated its contract with the service provider 11 months early due to the election of its owner Sam Matekane as prime minister of Lesotho.

In 2023, Gem Diamonds unearthed five stones exceeding 100 carats, compared to four in 2022. The miner sold a 7-carat, pink diamond for $282,889 per carat, the third-highest per-carat price achieved for any diamond from Letšeng. It also sold three large high-quality, type IIa diamonds, each weighing 58 carats, for $36,399, $34,441, and $34,252 per carat.

The miner expects sales to improve this year, but slowly, it noted. “Pressure on the diamond market has persisted into 2024, although there have been some signs of price recovery at the top and bottom end,” Elphick added. “We are cautiously optimistic that prices will stabilize and that there will be some growth towards the end of 2024. Global economic growth outlooks for major economies and important diamond consumer markets such as the US and China remain uncertain. It is worth noting that almost half of the global population is expected to participate in national elections during 2024, which will likely cause further economic and geopolitical uncertainty.”

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Main image: The Letšeng mine. (Gem Diamonds)