Gem Diamonds, the London listed diamond miner said impairments against its Botswana operations dented its half year results ended August 2016. The Ghaghoo mine, which is located in the tough terrains of the Central Kalahari Game Reserve (CKGR), is currently being downsized as the company looks to cut costs.
Gem said it recorded revenues of US$109.1 million—which was less than US$118.0 million reported in H1 2015 while attributable loss of loss of US$26.6 million was recorded after the exceptional item of a US$40.0 million non-cash impairment to the Ghaghoo asset. The company was however pleased with its careful cost management and capital discipline as underlying EBITDA stood at US$43.5 million.
Chief Executive of Gem Diamonds, Clifford Elphick said they continue to make good progress at Ghaghoo to downsize the operation and reduce costs in line with the group’s strategic objectives. He said targeted production rates and cost levels are anticipated to be achieved in H2 2016.
“The ongoing weak market for Ghaghoo type diamonds has resulted in a non-cash impairment of US$40.0 million being made against the carrying value of this asset,” Elphick said.
Gem Diamonds recently completed the development of production Block 2 on Level 1 while the development of Level 2 production level has commenced. The slot tunnel has been completed on Level 1 and sub-level cave is progressing according to plan.
Ore treated at Ghaghoo stood at 95 569 tonnes (132 125 in H1 2015) with 20 876 carats recovered, which was less than 35 283 in H1 2015. Gem said undiluted material achieved an average of 27.6 cpht at Ghaghoo when compared to the reserve grade of 27.8 cpht with total sales achieving US$4.8 million, at an average of US$157 per carat.
“At Ghaghoo we continue to make good progress to downsize the operation and reduce costs in line with the Group’s strategic objectives. Targeted production rates and cost levels are anticipated to be achieved in H2 2016,” noted Elphick.
Elphick added that it is also encouraging to see that the capital projects implemented at the Lesotho operations are bearing fruit, with a notable increase in tonnes treated and carats recovered compared to prior periods.
The first half of 2016 saw a decline in the number of +100 carat diamonds recovered at Letšeng compared to 2015, reflecting the areas in which mining had taken place, which impacted the US$ per carat achieved in the period. However, in June the company paid an ordinary dividend of 5 US cents per share and a special dividend of 3.5 US cents per share resulting in a total dividend of US$11.8 million.