23rd Apr 2008 07:05
Gem Diamonds Limited23 April 2008 GEM DIAMONDS LIMITED ("Gem Diamonds" or "the Company") INTERIM MANAGEMENT STATEMENT FOR THE FIRST QUARTER ENDED 31 MARCH 2008 This Interim Management Statement is Gem Diamonds' first and reflects theCompany's performance in the first quarter of the 2008 financial year. After a year of solid progress in 2007, Q108 has seen continued remarkablediamond prices achieved across all its producing mines. Highlights - Strong rough diamond sales across all three mines with record prices achieved- Q108 carats sold of 156 438- Q108 diamond sales revenue of US$56.1 million- Beneficiation trials successful with significant additional margin capture - average price per carat of US$74 000 achieved- Letseng second plant final commissioning commenced and first ore processed and diamonds recovered- Encouraging grades from new sample area in the CAR 1 Lesotho Gem Diamonds holds a 70% shareholding in Letseng Diamonds (Pty) Ltd ('Letseng')in partnership with the Government of the Kingdom of Lesotho which owns theremaining 30%. 1.1 Production Hard rock mining commenced in the Main Pipe in December 2007. Accordingly inQ108 ore was available from three sources - Main and Satellite Pipes as well asMain Pipe stockpile. To ensure optimal production levels, ore from all threesources was blended and treated in Q108. Q108 Q107 % ChangeOre mined and processed - Letseng Diamonds 699 456 677 208 3%Carats produced - Letseng Diamonds 13 268 15 956 -17%Ore mined and processed - Alluvial Ventures 506 503 208 527 143%Carats produced - Alluvial Ventures 5 603 2 152 160% 1.2 Diamond Sales Q108 Q107 % % % Change Change Change Cts Total Achieved Cts Total Achieved Cts Total Achieved sold tender US$/ct sold tender US$/ct sold tender US$/ct value value value US$ US$ US$ millions millions millions Letseng 8 190 20.50 2 502.71 16 841 39.0 2 315 -51% -47% 8%Diamonds Alluvial 2 731 2.56 936 947 0.4 472 188% 540% 98%Ventures Total 10 921 23.05 2 111 17 788 39.4 2 217 -39% -41% -5% In Q108 two tenders took place, versus three in the comparative period. Pricesachieved for goods sold from the Main Pipe, Satellite Pipe and Main Pipestockpile are significantly ahead of forecast for run of mine production. 1.3 Beneficiation Between July and November 2007, seven D colour diamonds were extracted fromproduction for polishing in Antwerp by Matrix Diamond Technology using theirproprietary diamond technology. Six of these diamonds totalling 137 carats werepolished into 45.7 carats, of which 41.6 carats were sold for US$3.1 million atan average price of US$74 000 per carat. The seventh highly complex roughdiamond, weighing 129 carats has been polished into 34.5 carats and the polishedstones will be sold in Q208. 1.4 Expansion and Development Final commissioning of the second plant began in late March with 700 tonnes ofore treated and 12.8 carats recovered. The project is on track to achieve fullproduction by the end of the Q208. 1.5 Power Supply Letseng Diamonds is supplied with power by the Lesotho Electricity Corporation('LEC') who in turn source some of this power from the South African parastatalESKOM. Letseng Diamonds has received permission to draw more power in order torun the second plant. The line that will feed this increased demand has been,and will continue to be, subjected to ESKOM load shedding. To date there has been minimal impact to production caused by the load sheddingdue to: - the short periods of load shedding;- the mine having managed to re-schedule maintenance periods to coincide with the load shedding; and- the second plant not yet running at full capacity. To minimise the possible impact of load shedding, Letseng is making arrangementsto install standby generating capacity sufficient to run the whole mine. Letseng will develop plans in conjunction with the LEC to upgrade an alternateline from the LEC's hydro-electricity plant to secure an uninterrupted supply atthe increased demand level. 2 Australia Gem Diamonds completed the compulsory acquisition process of all shares andoptions in Kimberley Diamond Company ('Kimberley Diamonds') during Q108. Thenew Managing Director, Alistair Croll, took up his appointment at the end ofFebruary and at the first Kimberley Diamonds Board meeting, held at the end ofMarch 2008, the Board was reconstituted accordingly. 2.1 Production Mining into the wet season (three months from mid December through mid March)continued in Q108 notwithstanding past practices of only processing orestockpiled during the year. The tonnage throughputs for Q108 are reflected in the table below and show(allowing for wet season vagaries) that the good progress achieved in late 2007has continued in 2008. High processing rates achieved in December and Januarycombined with limited waste stripping in the months leading up to Gem Diamondsacquisition, has resulted in lower stockpile volumes and reduced strippedreserves. The combined impact is that with the lack of flexibility to mine toaverage grade, lower average grades have been achieved. 2007 2008 Oct Nov Dec Jan Feb Mar Ore mined and 0.58 0.65 0.65 0.69 0.44 0.53processed (mt) Cts Produced 46 500 50 400 42 700 45 700 22 400 30 600 Grade cpht 8.0 7.7 6.5 6.6 5.1 5.8 2.2 Diamond Sales Q108 Q107 % % % Change Change Change Cts Total Achieved Cts Total tender Achieved Cts Total Achieved sold tender US$/ct sold value US$/ct sold tender US$/ct value value US$ US$ millions US$ millions millions 130 476 28.1 216 158 600 20.2 127 -18% 39% 70% 2.3 Expansion and Development On acquisition, Ellendale had a processing capacity of 8mtpa but were mining at60% of this capacity. This processing capacity has subsequently been increasedto 8.5mtpa and will be further enhanced to 10.5mtpa. Tonnes mined and processedin 2008 and 2009 will increase accordingly. Extended maintenance work was undertaken on the E4 South plant in February toenable improved throughput volumes planned for the drier months. Capital workon the two main plants at E4 and E9 continued as part of the throughputimprovement programmes. A third mining fleet has been commissioned to facilitate higher waste strippingrates and maintain ore generating capacity at the required grade. 3 Indonesia BDI Mining owns 80% of the Cempaka alluvial diamond mine in South Kalimantan,Indonesia in partnership with the Government of Indonesia which owns theremaining 20%. 3.1 Production Mining in Q108 was predominantly in the Cempaka channel as opposed to the DanauSeran channel in the comparative period. Production for Q108 was as follows: Q108 Q107 % Change Gravel mined and treated (mt) 0.54 0.13 315%Overburden stripped (mt) 1.82 0.74 146%Strip ratio 3.35 5.88 -Carats recovered 6 004 4 845 24%Grade (cpht) 1.10 3.83 -71%Au/Pt conc produced (kg) 4.5 3.1 45% The build up of gravel treated continued in the first two months of Q108culminating in the achievement for the first time of the targeted 216 000 tonnesin February 2008. The recovered grade was lower than expected but improvedgrades are anticipated in the areas being mined for the balance of 2008. Rainfall led to widespread flooding and adversely affected production in March2008. The mining block in Danau Seran channel was flooded and will take severalweeks to dewater. The mining face in the Cempaka channel was less severelyaffected and will be available earlier than the Danau Seran block. 3.2 Sales Q108 Q107 % % % Change Change Change Cts Total Achieved Cts Total Achieved Cts Total Achieved sold tender US$/ct sold tender US$/ct sold tender US$/ct value value value US$ US$ US$ millions millions millions 15 041 5.0 331 7 661 1.7 225 96% 194% 47% 3.3 Expansion and Development A DMS plant has been procured for Cempaka and will be delivered in Q208. Thiswill enhance the mine's recovery process. The delivery of the mining fleet for the expanded production and conversion fromcontactor to owner mining is largely complete. 4 Botswana Subsequent to the submission of a Mining License Application in H207, theRetention License was extended to the end of August 2008 to allow for theFeasibility Study and the Social and Environmental Impact Assessment ('SEIA') tobe completed. The SEIA continued with the holding of numerous Public Participation meetingswith interested and affected communities. The meetings were positive with allcommunities consulted indicating their support for the mine. These studiesresulted in the Scoping Report being submitted to the Government in February.The SEIA process is on target and the approval is expected in H208. Thereafter the Section 51 negotiations with the Government of Botswana, whichwill determine the awarding and key terms of a mining license, are expected tocommence. 5 DRC Gem Diamonds has interests in three projects in the Democratic Republic of theCongo ('DRC') at Mbelenge, Lubembe and Longatshimo. These interests are heldvia a number of companies in which Gem Diamonds has between an 80% and 100%shareholding. 5.1 Mbelenge With the low grades returned in the latter part of 2007 from the terracegravels, sample trenches transverse to the old river flow direction wereexcavated to refine the geological model. These transverse trenches have beensampled and confirm the overall low grades in this area. A programme has been designed to sample the gravel deposits of the modern riversystem and dredges were transferred from Lubembe for this purpose. 5.1.1 Production and Sampling Production and sampling results for Q108 were as follows: River terraces ActualOverburden stripped m3 278 048Gravel mined : m3 48 630Gravel treated : m3 49 328Carats recovered 6 208Grade : cts/ m3 0.13 River Dredging ActualGravel mined : tonnes 19.79Gravel treated : tonnes 19.79Carats recovered 64.35Grade : cts/ tonne 3.25 5.1.2 Diamond Sales Two parcels of Mbelenge diamonds totalling 10 699 carats were sold in Antwerpfor an average price of US$86 per carat in Q108. 5.1.3 Expansion and Development Further sampling by way of dredging will continue into the dry season and willprovide an indication of river grades. The construction and sampling of paddocksin the Kasai River will provide additional information and sampling of theterraces in the north of the project area is also planned. The further development of Mbelenge will be reviewed on receipt of the samplinginformation. 5.2 Lubembe Sampling at Lubembe in Q108 continued with the remaining dredges and waspredominantly resource development focused. 5.2.1 Sampling Resource development through bathymetric mapping and sampling was undertakenwith 2 255 carats recovered at a grade of 13.43 cts/tonne recorded. Seasonalflood conditions delayed the treatment of other samples taken, which have beenstockpiled for treatment in early Q208. ActualGravel mined : (tonnes) 242.43Gravel treated : (tonnes) 167.95Carats recovered 2 255.25Grade : (cpt) 13.43 5.2.2 Diamond Sales In January 2008 a parcel of 4 608 carats was sold in Antwerp for US$82 percarat, in line with expectations. 5.2.3 Expansion and development 5.2.3.1 Alluvial Sporadic high grade gravel pockets were encountered at Lubembe and diamonds havebeen successfully recovered. Accordingly, an appropriate mining technique toexploit this resource is being evaluated. In the interim the dredging programmeat Lubembe will be suspended to allow the dredge units to be deployed atMbelenge. 5.2.3.2 Kimberlite No kimberlite drilling took place in Q108. The portable drilling rig is beingtested after which the remaining 22 anomalies will be drilled. 5.3 Longatshimo Sampling results during the latter part of 2007 were less encouraging than theinitial programme. Plans for trial mining are under review. Resource definition of river terraces and floodplain settings is ongoing in theLongatshimo area through systematic field mapping, reconnaissance pitting andlimited sampling. The geophysical anomalies that were generated by the helimag survey that wasconducted recently in the Longatshimo area are being investigated. A furtherfour anomalies were drilled in Q108, with no kimberlites intersected. Furthersurveying has identified four anomalies, bringing the total outstandinganomalies at Longatshimo to 14. 6 CAR Gem Diamonds holds a 75% interest in Gem Diamonds Centrafrique SA, inpartnership with the Government of the CAR which holds the remaining 25%. GemDiamond Centrafrique holds exclusive exploration and mining rights to the 800km2Mambere Concession. 6.1 South Mambere: Sample Results Bulk sampling of terrace gravels in the le Buckle area was completed in December2007 and from January 2008 sampling and exploration work was in the modern dayMambere River. Grades of more than 70 cpht have been recovered from the bottom gravels.However, the 'run of mine' recovered grades in February and March was 20 cpht.The diamonds are estimated to be worth US$140 per carat. Work to determine the extent of the resource will continue throughout 2008. 6.2 North Mambere: Exploration Strong historical production and grades of 15 to 30 cpht are recorded from thenorthern part of the concession from the Mambere River tributary gravels.Quickbird satellite imagery will be used to direct the geological explorationprogramme in this area during Q208. Past and present mining activity in the area, undertaken by local artisans, isbeing evaluated in terms of overburden thickness, grade, volume and stone size. 7 Angola A Cooperation Agreement was signed in January 2007 between Gem Diamonds andAvantis Angola Inc ('Avantis') with respect to a feasibility study to beconducted on the known Chiri kimberlite in the Lunda Sul Province of Angola inwhich Avantis have a 25% interest. An Option Agreement whereby Gem Diamonds canacquire an effective 11.25% interest in Chiri from Avantis was signed at thesame time. Negotiations surrounding the Cooperation Agreement continued through most of2007 with an addendum to the Cooperation Agreement being signed in Decemberproviding for an acceleration of activities with defined milestones forparticular activities and an effective start date of January 2008. A camp has been established and technical personnel are on site. Finalprocurement of equipment was completed in Q108. The 10tph DMS sampling plantand large diameter drilling are in transit to site and expected in Q208.Contracts have been signed for the site preparation, civil engineering works anderection of the sampling plant, management of field operations and for lease ofthe earthmoving equipment for the bulk sampling programme. For further information: Gem Diamonds Limited Pelham PRClifford Elphick Candice SgroiTel: +44 203 043 0280 Tel: +44 789 446 2114 James HendersonGem Diamond Technical Services Tel : +44 207 743 6673Angela ParrTel: +27 83 578 3885 About Gem Diamonds: Gem Diamonds Limited (LSE: GEMD) is a global diamond producer that is pursuingan accelerated growth strategy through targeted acquisitions and the developmentof existing assets. Gem Diamonds portfolio comprises producing kimberlite,lamproite and alluvial mines, development projects and exploration assets.Operations are situated in Angola, Australia, Botswana, the Central AfricanRepublic (CAR), the Democratic Republic of Congo (DRC), Lesotho and Indonesia.Gem Diamonds produces some of the world's most remarkable white diamonds fromits Letseng Mine and rare fancy yellow diamonds from its Ellendale Mine and anarray of coloured diamonds from its Cempaka Mine. Established in July 2005, Gem Diamonds listed on the main board of the LondonStock Exchange in February 2007 raising US$636 million. Gem Diamonds issues this statement as an unaudited trading update for the threemonths ended 31 March 2008. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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