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Slow Market Dents Gem Diamonds Results

Aug 18, 2019 10:44 AM   By Rapaport News
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RAPAPORT... Revenue at Gem Diamonds fell in the first half of the year amid weakness in the market.

Sales of rough diamonds from the Letšeng mine in Lesotho plunged 44% to $94.5 million by value, and dropped 10% to 55,714 carats by volume, the miner reported last week. The average price declined to $1,697 per carat, compared with $2,742 per carat in the same period a year ago.

Total sales were slightly below investment bank Berenberg’s $95.5 million estimate, which forecast the average price at $1,728 per carat. However, the average price is likely to rise as mining moves to the higher-value portions of the deposit in the second half, Berenberg noted.

“[The first half] was difficult and has not been aided by a weak market, but Gem remains our preferred name in a challenging diamond sector,” the bank said.

Production at Letšeng fell 8% to 56,668 carats, as the miner retrieved ore from a lower-grade portion of the pipe. Gem Diamonds also treated lower volumes of ore, resulting in a smaller quantity of carats recovered, it explained.

The company found three diamonds larger than 100 carats in the January-to-June period, compared with 10 in that category during the same period a year ago. The highest per-carat price the company achieved for a white diamond during the first half was $48,225 for a 70.69-carat, D-color, type IIa stone, while a 13.32-carat pink garnered $656,934 per carat, its highest per-carat price for a Letšeng diamond. Some 15 diamonds fetched more than $1 million each during the period.

In the first six months of the year, Gem Diamonds finished construction of a pilot plant, which will help it identify diamonds within kimberlite and remove them without breakage. Commissioning and ramp-up of the new plant will take place in August.

The company also entered into an agreement to sell its Ghaghoo mine in Botswana for $5.4 million. It expects to complete the sale in the second half of the year.

Image: The Letšeng mine. (Gem Diamonds)
Tags: Berenberg, Gem Diamonds, Ghaghoo Mine, Letšeng, Letšeng mine, Rapaport News
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