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Trading statements

Gem Diamonds hit by paucity of large special diamonds

06 February 2017 09:06

Gem Diamonds said the relative paucity of large special diamonds recovered at Letseng during 2016 had an adverse impact upon the company's revenues and cash flows during the year although full year operational guidance was achieved.

The group said that at Letseng waste mined totalled 7,861,775 tonnes in the fourth quarter (19% up from 6,626,385 in Q3 2016), taking full year waste mined to 29,776,058 tonnes.

Other highlights:

- Ore treated 1,697,070 tonnes (a 5% increase from 1,612,728 in Q3 2016), taking full year ore treated to 6,646,098 tonnes. - Recovered 26,438 carats during the fourth quarter (an 8% increase from 24,388 carats in Q3 2016) taking full year production to 108,206. - 7 diamonds sold for more than US$1.0 million in the period generating revenues of US$12.3m. - During the period US$109,677 per carat was achieved for a 12.31 carat pink diamond and US$53,451 per carat for a 56.48 carat white diamond. - During the period Letseng recovered fewer large special diamonds than expected, resulting in an average US dollar per carat of US$1,444, bringing the average for the year to US$1,695. Gem Diamonds said that at Ghaghoo the optimisation programme continued with the mill refurbishment completed on time and within budget with positive results.

It said 67,466 tonnes of ore were treated during the period (up 24% from 54,337 in Q3 2016).

Other highlights:

- 12,380 carats recovered during the period, an increase of 60% from previous quarter (7,720 carats in Q3 2016) with a positive presence of larger diamonds than typically recovered. - During the quarter, 16,989 carats were sold on open tender for a total value of US$ 2.4 million, achieving an average price of US$ 142 per carat. - Largely due to the weak prices achieved, the future of the operation remains under review, as previously announced.

Chief executive Clifford Elphick said:"The market for large special diamonds for which Letseng is renowned has remained firm to date, but the relative paucity of these diamonds recovered during 2016 has had an adverse impact upon the company's revenues and cash flows during the year. Operationally, all other production metrics were achieved and within guidance issued.

"At Ghaghoo, the fall in prices of its diamonds from US$210 per carat in early 2015 to US$142 per carat at its most recent sale in December 2016, emphasises the weak state of the diamond market for this category of diamonds.

"With the company's focus on profitable production, and as indicated previously, the future of the operation remains under review with a decision scheduled to be made during Q1 2017 with regards to its current financial viability."

At 9:06am: (LON:GEMD) Gem Diamonds Ltd share price was -7.5p at 116.25p

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