3rd Feb 2016 10:00
LONDON (Alliance News) - Gem Diamonds Ltd Wednesday said it made a strong end to 2015 despite its main asset in Lesotho reporting flat year-on-year production and a fall in sales, both of which are set to remain flat this year whilst production will fall from its other mine in Botswana.
The diamond miner said the Letseng mine in Lesotho produced 108,579 carats during 2015, flat from last year as it treated more ore to offset a fall in grades, whilst sales fell 6% year-on-year to 102,778 carats from 108,963 carats.
Gem Diamonds also saw the value of its sales in 2015 drop during the year as the average price declined 9% to USD2,299 per carat compared to USD2,540 per carat in 2014.
The total value of the full year sales from Letseng came in at USD236.3 million compared to USD276.8 million in 2014, representing a 15% drop thanks to that fall in sales and lower prices.
Although production didn't grow in the year and prices fell, Gem Diamonds said production exceeded its full year guidance and said prices "remain robust".
Gem Diamonds said it aims to produce between 107,000 to 109,000 carats from Letseng during 2016 and is predicting sales of 107,000 to 110,000 carats - meaning production and sales look set to remain broadly flat this year.
The company's other asset, the Ghaghoo mine in Botswana, produced 91,499 carats in 2015. The mine was being commissioned in 2014, producing a total of 10,167 carats during that time.
Production from Ghaghoo still seems to be increasing as production rose to 31,923 carats in the last quarter of 2015 compared to 24,294 carats in the previous quarter after it treated more ore and saw an improvement in grades.
Gem Diamonds said the mine will experience a production slowdown to reduce cash outflow in response to current market conditions, and said it will treat 300,000 tonnes of ore in 2016 compared to the 326,922 tonnes treated in 2015.
The value of the carats from Ghaghoo are considerably lower than that of Letseng, achieving an average price of USD162 per carat over the course of 2015. However, prices were particularly low in the most recent auction held in December, averaging only USD150 per carat.
"The fall in prices achieved has impacted the planned pace of the ramp up at Ghaghoo. Ghaghoo remains an important future option for the group, however in the short term it is considered prudent to downsize the operation to minimise cash consumed by the development of this asset. Options are being assessed to expand the operation in order to achieve acceptable financial returns, as and when the diamond prices improve," said Chief Executive Clifford Elphick.
Cash at the end of the year stood at USD85.7 million and net cash stood at USD55.3 million.
"The Company has again continued to demonstrate it's ability to generate cash flows at Group level even in difficult market conditions. The company paid a maiden dividend during 2015, and is on track to recommend payment of a dividend for the 2015 financial year," said Elphick.
Gem Diamond shares were trading down 0.2% to 116.31 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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