Gem Diamond’s Revenue Down 34%, Profit Slashed 73%

Ghaghoo, Botswana

Gem’s net profit dropped 72.6 percent from $62 million in 2011 to just $17 million for full-year 2012.

Despite this, the company said the Letšeng mine showed a second successive record carat production of 114,350 carats, an increase of 2 percent from the record production of 2011.

Grade at the mine was also up, with the recovery of 1.75 carats per hundred tons, up from 1.65 carats per hundred tons in 2011.

Some 134 diamonds from Letšeng were sold or valued at more than $20,000 per carat (p/c). These diamonds, which comprise 3 percent of the carats exported, averaged $35,400 per carat and included an 11-carat blue diamond sold in September 2012 for $2.17 million ($186,943 p/c).

Altogether, 647 rough diamonds greater than 10.8 carats were recovered in 2012.

“Although 2012 was a challenging year for the diamond mining industry and for Gem Diamonds, it is pleasing to see that 2012 was a strong operational year for the Group, with a second successive record carat production at Letšeng, our flagship asset,” said CEO Clifford Elphick.

“Moreover, the disposal of underperforming assets will result in a more focused management team, confident on improving returns to shareholders in the coming years.”

In its outlook, the company said it is focused on enhancing cash flows in 2013 through the streamlined implementation of Project Kholo, effective cost management and improved margins in a rising rough market. The miner also intends to continue to progress Ghaghoo Phase One, targeting first ore in H2 2014

“Long term outlook for the diamond industry remains robust with growth forecast expected to continue in the Asian markets accompanied with expected improvements in the U.S. market. Long-term supply constraints anticipated to exert further upward pressure on diamond prices.”