6th Feb 2017 09:25
LONDON (Alliance News) - Gem Diamonds Ltd on Monday said full year production from the flagship Letseng mine remained broadly flat from the previous year, while output from the Ghaghoo mine more than halved.
The diamond miner said the Letseng mine in Lesotho produced 108,206 carats in 2016, in line with guidance and a touch below the 108,579 carats recovered in 2015, with the average grade not moving year-on-year at 1.63 grammes of gold per tonne.
Over 2016, 1.0% less ore was treated compared to 2015 but the amount of waste mined soared 24% year-on-year.
The mine delivered seven diamonds that sold for "more than USD1 million" over the year. The miner said the operation recovered "fewer large special diamonds than expected. The average price per carat in the year was USD1,695.
"Following a detailed review of the resource and operational processes, it was considered that this paucity of large exceptional stones is due to the normal statistical short term variability of the resource, as was experienced during 2012," said Gem Diamonds.
The miner said it expects this to "revert to normal recovery levels" in the "near future", and said it is also assessing options to further enhance recovery and reduce damage to larger diamonds through a "large-diamond specific recovery plant".
"A review of the Let?eng mine plan is currently being undertaken to further optimise the waste mining profile which in turn will improve cashflow. This review will be completed during the first quarter of 2017 and is likely to lead to reduced waste tonnes mined," said Gem Diamonds.
Total sales from Letseng in 2016 rose 6%, but the average price was 26% lower year-on-year, taking the full value of all sales to USD184.6 million from USD236.3 million in 2015.
Gem Diamonds said this was "largely the consequence of a continued paucity of high quality large diamonds seen in 2016, rather than any notable decrease in demand or weakening of the prices for these diamonds."
The lower-than-expected amount of larger diamonds compared to 2015 meant revenue from special stones dropped to just USD12.2 million in 2016 from USD65.4 million in 2015.
In terms of costs, Letseng "managed to maintain its costs within expected targets" in 2016.
Guidance for 2017 will be published in March, when the new mine plan for Letseng will be published.
At Ghaghoo, which typically produces lower-value stones, reported a 55% production drop in 2016 to 40,976 carats from 91,499 carats, with grade dropping by one-third to 18.9 carats per hundred tonnes from 28 carats.
"Planned operational improvements progressed well. Mill modifications yielded positive results with increased and improved diamond liberation. These modifications however are not sufficient to sustain the operation given current weak prices achieved for the Ghaghoo diamonds," said the miner.
Gem Diamonds only reported sales figures for Ghaghoo covering December, when 16,989 carats were sold for a total of USD2.4 million, at an average price of USD142 per carat.
"The overall mood of the diamond market continues to remain cautious. Demand for, and prices of, Letseng's large high quality white diamonds have remained firm throughout the period. The smaller commercial goods mined at Ghaghoo remain under pressure," said Gem Diamonds.
Gem Diamonds shares were down 6.7% to 115.42 pence per share on Monday.
By Joshua Warner; [email protected]; @JoshAlliance
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