Diamond miner Gem Diamonds produced a sparkling set of 2011 results, with underlying profits shooting up on the back of record carat production at its Leteng mine in Lesotho.
Revenue in 2011 soared to $395.6m from $266.4m, primarily as a result of the sale of rough diamonds recovered at the group's Leteng and Ellendale mines.
Profit before tax surged to $155.7m from $54.5m the year before while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped to $179.8m from $82.0m in 2010. The group noted that EBITDA in the second half of the year was on a par with the first half, despite the downturn experienced in the global economy, which was reflected in a sharp fall in rough diamond prices. Prices across the sector dropped by around 30% to 35% in the second half of the year, though they did stabilise in the fourth quarter to end the year up by around 16%.
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Earnings per share from continuing operations more than tripled to 47 cents from 15 cents the preceding year.
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The group had $158.7m cash on hand at the period end, of which $141.8m is attributable to the company and $1.6m is restricted. None of that will be making its way to shareholders in the form of dividends, however,
Operationally, Leteng had a record year of production with carats recovered in 2011 up by 23.6% to 112,367 carats and with the recovered grade up by 35.0% to 1.622 from 2010.
At the Ellendale mine in Western Australia, production was made difficult in the first half of the year to a longer than usual rainy season, The last quarter of 2011 saw a major improvement in performance. As has been previously reported, Gem Diamonds continues to consider all of its options in relation to the Ellendale mine and has appointed advisors to assist in this regard.
The Ghaghoo mine in Botswana is currently being developed and Phase 1 construction of the underground mine is progressing well, the group said. It is anticipated that Phase 1 will be completed on time and on budget with the first production expected in 2013.
"Set against a backdrop of continued strong and growing diamond demand from the USA, China and India and constrained supply, particularly at the high quality end of the market in which the company operates, we believe Gem Diamonds is well-positioned for growth and I am confident that our strategy should deliver strong returns for shareholders over the coming years," said Roger Davis, non-executive Chairman of Gem.
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