19th Jul 2016 08:11
LONDON (Alliance News) - Gem Diamonds Ltd Tuesday said its main mine in Lesotho is currently producing at a rate that will allow the miner to hit the top end of its production guidance for the year, whilst prices have remained consistent.
The company's Letseng diamond mine is the main producing operation in the portfolio alongside the smaller Ghagoo mine in Botswana that was recently downsized in an attempt to lower costs.
A total of 57,380 carats were extracted from Letseng in the first half of 2016, nearly 15% higher than the 50,019 carats produced a year ago, partly boosted by an increase in grades to 1.72 carats per hundred tonnes of ore from 1.61 carats.
Gem Diamonds said prices for Letseng production has remained "consistent" on a like-for-like basis, but the average price was 16% lower year-on-year because lower value material was produced in the first half compared to last year.
"There has been a modest recovery in Letseng's rough diamond prices towards the end of the period on a like-for-like basis. The average dollar per carat value achieved in the period is a function of fewer plus-100 carat stones than usual being recovered as mining has worked through the lower value areas of the mine," said Chief Executive Clifford Elphick.
Sales from Letseng were up 19% year-on-year to 55,959 carats from 46,961 carats, and the average price in the first half was USD1,899 per carat, delivering a total value of USD106.3 million. The average price last year was USD2,264 per carat, and the total value, coincidentally, also was USD106.3 million.
However, Gem Diamonds said Letseng is still delivering some exceptional stones, recovering an undamaged Type II 160 carat and an 11.8 carat pink diamond in the first half. The pink diamond sold for USD187,000 per carat. An exceptional quality 104 carat Type II white diamond was recovered after the end of the period, being discovered this month.
If production at Letseng continues its current trend into the second half, the mine should produce toward the top end of the guidance range of recovering 107,000 to 109,000 carats over the course of 2016. The sales guidance has a slightly higher upper end range of 110,000 carats.
In 2015, Gem Diamonds produced a total of 108,579 carats from Letseng.
At the smaller Ghaghoo mine in Botswana, the miner said ore processing and grades both fell as expected in the first half, pushing production down. Less than half the amount of ore was treated in the first half than last year and the grades delivered were down 24% year-on-year.
That led production to fall 63% overall in the first half of 2016 to 20,876 carats from 56,217 carats a year before.
"At Ghaghoo, completion of mining in the first block and commencement of mining in the second block has meant that a large proportion of ore treated has been from diluted areas near the pipe extremities with lower recovered grades achieved. However grades have improved as mining in the second block has advanced towards the centre of the pipe. Development of Level 2 has commenced," said Elphick.
Looking at the miner's finances, Gem Diamonds reported a cash balance of USD66.4 million at the end of June, after the company paid out an annual dividend for last year worth a total of USD6.9 million and a special dividend totalling USD3.5 million.
By Joshua Warner; [email protected]; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.
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