Gem Diamonds Limited has announced its half year results for the six months ending 30 June 2013 which showed revenues were lower than corresponding period blamed on difficult period especially for its Lesotho operations.
According to the company’s financial results, revenues of US$ 96.5 million were realised as opposed to US$ 122.6 million reported in the first half 2012. The underlying EBITDA of US$ 33.2 million was reported compared to US$ 46.0 million in H1 2012 and attributable net profit of US$ 8.6 million was realized, which was lower on US$ 14.3 million recorded in the prior year.
Gem Diamonds said cash on hand stands at US$ 61.4 million as at 30 June 2013 (US$ 54.5 million attributable to Gem Diamonds).
The Letšeng mine’s ore mined stood at 3.1 million tonnes and ore treated of 3.0 million tones and 3 diamonds greater than 100 carats were recovered. At the Ghaghoo mine, Gem Diamonds said, the sand portion of the access decline was completed and the open face tunnel shield successfully removed.
The tunnel development through competent basalt continues to progress well and the next 12 months will see a further 514 meters of basalt ramp development, followed by production development. First production is targeted for H2 2014. The company said US$ 59.8 million of the total capital budget of US$ 96.0 million has been spent to date.
Clifford Elphick, Chief Executive of Gem Diamonds said as indicated previously, the first half of 2013 was a difficult Period for the Letšeng mine.
“Mining focused on the lower grade, lower value Main pipe as planned. Cost control was paramount during this Period and it was pleasing that the mine was able to deliver a satisfactory EBITDA margin and bottom line profit. We look forward to moving steadily into higher grade parts of the ore body in the second half of the year,” said Elphick.
The company said during the Period four new cone crushers, which are aimed at reducing diamond damage, were installed at Letšeng’s 1 and 2 Plants on time and on budget. As mining for the second half of the year gradually includes more, higher value Satellite pipe ore, it is anticipated that this combined with the potential effect of reduced diamond damage will be positive on revenues.
Three diamonds greater than 100 carats recovered at Letšeng during the Period, and pleasingly a further two large diamonds were recovered in August – an exceptional 99 carat, type II white diamond and a lower value 146 carat diamond were recovered and importantly, are largely undamaged, providing an early indication of the positive impact of the new crushers.
“We continue to make good progress with additional initiatives assessing opportunities to target low capex, low risk options to expand production incrementally as well as enhance efficiencies and diamond recoveries through the introduction of new technology,” he said.
At Ghaghoo, the development of the access decline is progressing well and the first diamonds are expected to be mined in the second half of 2014. The operations team at Ghaghoo is to be complimented on completing the difficult and technically challenging sand portion of the decline and management has every confidence in the success of Ghaghoo as a strong contributor to Gem Diamonds’ bottom line in the coming years.
“In line with our focus on implementing rigorous cost control and cost reduction measures across the business as we work to adapt to a changing economic environment, it is important to note that with the rationalisation of the Company’s assets has come a reduction of staff and corporate expenses are already in line with targeted reductions,” added Elphick.
Gem Diamonds is a leading global diamond producer of high value diamonds. The company owns 70% of the Letšeng mine in Lesotho as well as 100% of the Ghaghoo mine, currently in development in Botswana. The Letšeng mine is famous for the production of large, exceptional white diamonds, making it the highest US dollar per carat kimberlite diamond mine in the world. Since Gem Diamonds’ acquisition of Letšeng in 2006, the mine has produced four of the twenty largest white gem quality diamonds ever recorded.
Gem Diamonds has a growth strategy based on maximising the value of the Letšeng mine and developing the Ghaghoo mine, while maintaining its strong balance sheet. The Company seeks to maximise revenue and margin from its rough diamond production by pursuing cutting, polishing and sales and marketing initiatives further along the diamond value chain. With favourable supply/demand dynamics expected to benefit the industry over the medium to long term, particularly at the high end of the market supplied by Gem Diamonds, this strategy positions the Company well to generate attractive returns for shareholders in the coming years.
