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RAPAPORT... Gem Diamonds reported that revenue jumped 27 percent year on year to $270.9 million during the fiscal year that ended on December 31. Cost of sales rose 26 percent to $129.6 million. Profit improved 57 percent to $33.2 million or 24 cents per share. In addition, the board approved a first dividend for shareholders of 5 cents per share for a total of $6.9 million, payable on June 9.
The mining company's revenue was primarily derived from operations at its Letšeng mine in Lesotho and from its rough diamond manufacturing operations in Antwerp. Rough diamond sales included a 12 percent increase in the volume of goods sold from Letšeng to 108,963 carats and a 24 percent increase in the value per carat to $2,540. Sales from mining operations at Ghaghoo in Botswana were not included since full commercial production was not achieved during the fiscal year.
Clifford Elphick, Gem Diamonds' CEO, said, "2014 was a solid year both financially and operationally for Gem Diamonds. We successfully delivered on a number of key growth objectives, including bringing Ghaghoo into production, significantly enhancing operational efficiencies at Letšeng and delivering a maiden dividend. With a continued focus on cost control, the company is in a very strong position financially with cash balance of $111 million, supported by the high average price per carat of $2,540 achieved for the year. As we expand from a single producing mine to two producing mines, with the ramp-up of production at Ghaghoo, we will start to see a significant shift in production figures. "While there have been a number of challenges in the diamond market recently, the medium to long term fundamentals look positive. This, combined with the resilience of Letšeng diamonds to pricing constraints, leaves Gem Diamonds well placed to take advantage of the favorable supply/demand dynamics in the market in order to continue its growth in 2015 and beyond," Elphick said.
Roger Davis, the company's non-executive chairman, told shareholders that despite a weakening of rough prices in the fourth quarter of 2014, due to concerns over bank lending and liquidity, Gem Diamonds expects some firming in the rough market as banks in Dubai and elsewhere take steps to fill the funding gap with manufacturers. The medium to long-term outlook for diamond demand is expected to remain favorable, with diamond prices beginning to trend upward in the second half of 2015. The strategic focus at Gem Diamonds this year will be to continue creating value by focusing on mining and selling diamonds efficiently and responsibly. "We remain confident in our ability to continue delivering returns to our shareholders through this focused execution of strategy as is demonstrated by the group's dividend policy," he said.
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