Gem Diamonds Could Face Full Year 2008 Loss
November 17, 08
Just days after Gem Diamonds revealed that Laurence Graff had purchased a 4.5 percent stake in the company; the London Stock Exchange-listed diamond miner announced that if economic conditions continue unabated, it could end the year with losses.
According to an operational update, Gem Diamonds has already experienced a significant reduction in revenue generated from diamond sales during the fourth quarter of the year.
"Given the weakening diamond prices and the uncertainty [about prices], Gem Diamond’s performance for 2008 will be significantly lower than our expectations in August, at the time of our interim results, and could result in a loss for the full year 2008," the company said.
The announcement follows a management review to re-evaluate and agree short term objectives and priorities. The review concluded that the company should concentrate on maintaining and improving long term profitability, focusing on optimizing returns from existing production sources and exploring new revenue streams.
Gem Diamonds also said it is evaluating the way its tenders are run and that it may not hold the final tender of the year. The decision comes after falling tender prices in 2008.
In the October and November sales, the average dollar per carat (p/c) price in the large diamond category – which represents 80 percent of the revenue generated by the Letseng mine in
The year-to-date average after the November tender is $1,916 p/c and the average price for the fourth quarter $1,382 p/c. This is compared to an average of $2,512 p/c in the first half of the year and an average of $2,116 p/c at the end of the third quarter.
Regarding its outlook for the future, the company concluded that if diamond prices remain at fourth quarter 2008 levels during 2009, it should be in a position to deliver an improved performance in 2009.
Gem Diamonds operates the Letseng mine in