13th Mar 2019 12:08
LONDON (Alliance News) - Gem Diamonds Ltd on Wednesday said its profit more than doubled in 2018 with the miner recovering significant numbers of large, high-quality diamonds and the implementation of its business transformation plan.
Shares in Gem were down 6.2% at 90.10 pence on Wednesday.
The company's annual pretax profit was USD73.0 million, more than twice its USD30.3 million profit in 2017. Revenue totalled USD267.3 million, up 25% from USD214.3 million.
The company recovered 15 diamonds of more than 100 carats, and was the highest recovery of diamonds of more than 20 carats for the company, with 80% of revenue coming from diamonds of more than 10 carats.
The Letseng mine in Lesotho averaged USD2,131 per carat in 2018 versus USD1,930 per carat in 2017 as a result of an improvement in the frequency of recovery of large white diamonds of high quality. This included the 910 carat Lesotho Legend diamond, which sold for USD40.0 million.
Moreover, the implementation of a number of business transformation initiatives contributed USD19.4 million, net of fees and costs, to the group's results in 2018.
Gem Chief Executive Clifford Elphick said: "The mine plan for Letseng was revised during 2018, with the aim of further reducing the waste stripping through the steepening of inter-ramp slope angles. Mining in accordance with this plan has commenced and is expected to significantly increase the net present value of the mine.
"The business transformation process has progressed well and remains on-track to achieve the target of USD100 million in cost savings and efficiencies by 2021. By December 2019, the initiatives already implemented are expected to deliver USD64 million to the end of 2021."
Gem has not proposed a dividend as it is currently in the process of strengthening its balance sheet.
Gem is currently in the process of renewing its Letseng mining lease, the Prime Minister of Lesotho has announced the government's intention to renew this lease. In 2017 the company placed its Ghaghoo mine in Botswana on care and maintenance due to a weak diamond market for the category of diamonds within Ghaghoo.
In 2018, a formal sale process for Ghaghoo began and updates are to be provided "in due course".
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