Weaker prices take lustre off Gem Diamonds

A disappointing pricing environment has continued to slow the progress of Gem Diamonds in the second half of 2012, although there were signs in October of the market perking up.

A disappointing pricing environment has continued to slow the progress of Gem Diamonds in the second half of 2012, although there were signs in October of the market perking up.

Rough and polished market indices are beginning to reflect a more encouraging overall trend, the company noted, but the rough trade is expected to be quieter in November as the Indian market celebrates Diwali.

The imminent arrival of the gift-giving season in the major US market should provide some stimulus to prices in the short term, but the supply strategy of the major producers in an illiquid and fully supplied market, as well as the aftermath of Hurricane Sandy in the US may have an impact, the company added.

Production at the company's Lesotho operations have been hampered by severe winter snow conditions, with the amount of ore mined in the third quarter down 13% on a year earlier, while ore treated was down 8% and carats recovered were down 9%.

Carats from Lesotho sold during the third quarter were down 10% on a year earlier, leading to a 38% decline in the value of sales to $34.4m from $55.2m the year before.

The Ellendale operations achieved an overall average price of $618 per carat in the third quarter, down from $1,015 per carat in the corresponding quarter of 2011. Carat production at Ellendale was up 28% over the corresponding period in 2011.

The group has $94.0m cash as at October 31st, of which $79.0m is attributable to Gem Diamonds.

"Project Kholo continues and certain of the work streams have been prioritised with a view to the accelerated enhancement of revenue. In this regard new secondary crushers with improved liner profiles will be installed in the current plants in [the first half of] 2013 with the object of reducing large stone damage - thus implementing one of the key strategic objectives of Project Kholo earlier than originally planned. This has the advantage of potentially achieving revenue improvement through relatively light capital expenditure," commented Clifford Elphick, Chief Executive Officer of Gem Diamonds.

"It is pleasing to see good progress at Ghaghoo with the erection of the plant and mill progressing well and with the tunnel construction resumed and progressing - albeit at a slower rate than expected due to the adverse ground conditions encountered," Elphick added.

JH

Recommended

The top funds to invest in
Funds

The top funds to invest in

As market volatility and recessionary fears continue, here are the most popular funds, stocks and trusts investors are putting their money into accord…
2 Feb 2023
The ten highest dividend yields in the FTSE 100
Income investing

The ten highest dividend yields in the FTSE 100

Rupert Hargreaves takes a look at the companies with the highest dividend yields in the UK’s blue-chip index
23 Jan 2023
The top ten dividend stocks in the FTSE 250
Share tips

The top ten dividend stocks in the FTSE 250

The average FTSE 250 dividend yield is around 4%, but many stocks yield much more. Rupert Hargreaves picks the best FTSE 250 stocks for income investo…
17 Jan 2023
Investing trends to watch out for in 2023: what analysts say
Investment strategy

Investing trends to watch out for in 2023: what analysts say

What are sensible strategies for high inflationary times? We ask analysts to find out.
22 Dec 2022

Most Popular

Best savings accounts – February 2023
Savings

Best savings accounts – February 2023

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
3 Feb 2023
The best one-year fixed savings accounts - February 2023
Savings

The best one-year fixed savings accounts - February 2023

Earn almost 5% on one-year fixed savings accounts.
3 Feb 2023
After slumping 42% last year, what's next for Scottish Mortgage?
Investment trusts

After slumping 42% last year, what's next for Scottish Mortgage?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust fell by 42% last year. We take a look at the trust's performance and dis…
3 Feb 2023