19th Aug 2015 07:38
LONDON (Alliance News) - Gem Diamonds Ltd Wednesday posted a fall in pretax profit for its first half, as challenging conditions in the diamond market resulted in lower revenue.
The company owns 70% of the Let?eng mine in Lesotho and 100% of the Ghaghoo mine in Botswana.
For the half year to end-June, the company posted a pretax profit of USD40.7 million, down from USD56.2 million a year before, as revenue declined to USD118.0 million from USD148.9 million.
The company said it had seen a "solid start" in the first half, with Let?eng on track to meet previous guidance. Development of the Ghaghoo mine continued to progress with production being ramped up, although slower than planned due to difficult ground conditions.
During the first half of the year, the rough diamond market continued to experience high inventory levels and liquidity concerns, which contributed to pressure on both rough and polished diamond prices. Whilst demand and prices for Let?eng's high-quality diamonds remained resilient, these conditions have hit the prices achieved for Ghaghoo's more commercial-quality production.
Gem sold its first parcel of commissioning diamonds from Ghaghoo in February for USD2.1 million, and in July sold a second parcel for USD4.9 million. As Ghaghoo had not reached commercial production for accounting purposes during the half year, all revenue achieved and costs incurred were capitalised to the carrying value of the asset.
In the second half, Gem expects prices for Let?eng's high-quality diamonds will remain firm, whilst prices for Ghaghoo's production should stabilise.
Shares in Gem Diamonds were down 0.4% at 128.00 pence Wednesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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