Gem Diamonds Limited said its full year results have been affected by the lower realised diamond prices in 2012. However, the company was able to demonstrate strong operational performance with record carat production and increased recovered grade at Letšeng as the company strives towards realising maximum value from its portfolio of assets.
According to the results for period ending 31 December 2012, revenues were lower at US$202 million compared to US$306 million in 2011. Underlying EBITDA stands at US$66 million as opposed to US$167 million in the corresponding period.
Gem Diamonds said 134 diamonds were sold or valued at greater than US$20 000 per carat.
“These diamonds, which comprise 3% of the carats exported, averaged US$35 400 per carat and included an 11 carat blue diamond sold in September 2012 for US$2.17 million (US$186 943 per carat) highlighting the quality of Letšeng as a producer of exceptional high value diamonds,” the company said.
Letšeng mine in Lesotho registered a second successive record carat production of 114 350 carats, an increase of 2% from the record production of 2011 and the operation recovered grade of 1.75 carats per hundred tonnes, up from 1.65 carats per hundred tonnes in 2011.
The company has revealed that the development of Phase 1 of Ghaghoo continues as planned with the surface infrastructure complete and with the processing plant substantially complete.
Clifford Elphick, Chief Executive Officer of Gem Diamonds, said 2012 was a tough year for the company and industry as a whole. “Although 2012 was a challenging year for the diamond mining industry and for Gem Diamonds, it is pleasing to see that 2012 was a strong operational year for the Group, with a second successive record carat production at Letšeng, our flagship asset,” Elphick said. “Moreover, the disposal of underperforming assets will result in a more focused management team, confident on improving returns to shareholders in the coming years.”
During the year under review, the company disposed the Ellendale mine to Goodrich Resources for US$15.4 million and Gem Diamonds made a formal exit from the company’s participation in the Chiri project in Angola. Gem Diamonds said it will be focusing on enhancing cash flows in 2013 through the streamlined implementation of Project Kholo, effective cost management and improved margins in a rising rough market.
It added that it is beginning to realise initial value and benefits from Project Kholo during 2013 through the implementation of key work-streams.
The company will also continue to progress Ghaghoo Phase One, targeting first ore in H2 2014 while it is bullish on diamond prices as ‘2013 started positively with strong improvements in rough prices as demand increased on fears of short term rough supply shortages.’
“Long term outlook for the diamond industry remains robust with growth forecast expected to continue in the Asian markets accompanied with expected improvements in the US market. Long term supply constraints anticipated to exert further upward pressure on diamond prices,” Gem Diamonds said.