Gem Diamonds reviews Capex plans for Lesotho

Lesotho
Lesotho.jpg
With global economic uncertainty continuing, junior diamond mining company Gem Diamonds has started reviewing its capital investment programme saying the review will focus on potentially extending the period over which capital is to be expended on Project Kholo at Lesotho’s Letšeng mine and the Ghaghoo mine development in Botswana.
 “The review will aim to ensure that there is sufficient flexibility to allow for these projects to be accelerated should market conditions improve significantly,” Clifford Elphick, CEO of the London-listed company, says in a six-month trading update.
Gem Diamonds, which aims to double production at Letšeng, says the review will be completed by the time it publishes its half-yearly report on August 21.
“The first half of this year has been marked by strong operating performance by Gem Diamonds in light of a challenging backdrop for the diamond industry. Our flagship mine, Letšeng continued to produce some of the world’s finest high quality diamonds, reporting an increase in both carats recovered and recovered grade compared to the same period in 2011 and cash costs were held in line with management estimates.  The global macroeconomic climate and in particular the ongoing financial crisis in the Eurozone, continue to weigh on rough and polished diamond prices. This, together with the comparatively lower quality production from Letšeng in the Period when compared to H1 2011, which saw six exceptional diamonds recovered, is reflected in the company’s revenue generated during the period.” 
Elphick says Gem Diamonds has a strong balance sheet and, with US$ 139 million of cash, no debt and strong operating cash flow, is well positioned to weather the current downturn in the market.
“However, in light of continued economic uncertainty, the directors have initiated a review of the Company’s capital investment plans. The review will focus on potentially extending the period over which capital is expended on its two development projects, Project Kholo at Letšeng and the Ghaghoo mine development, in order to protect the company’s strong balance sheet in the event of further deterioration in market conditions. The review will also aim to ensure that there is sufficient flexibility to allow for these projects to be accelerated should market conditions improve significantly. The Company remains committed to doubling production at Letšeng and to the development of the Ghaghoo mine and expects to provide further information on its development programme in the Half-yearly Report which will be released on 21 August 2012, once the review is complete.” 
“Our view on the long term outlook for the diamond market remains positive, with supply forecast to remain tight and growing demand in key markets expected to put upward pressure on diamond prices.”
Performance at the company’s Letšeng mine, which it co-owns with the Lesotho government, continued to be strong for the first half of the year, with 57 116 ct recovered during the period, up 7% from the first half of 2011.
The recovered grade at the mine was 1.68 carats per hundred tons for the period under review, marking an 8% increase compared with the corresponding period last year.
However, the five exports during the first quarter achieved an average value per carat of $2 133, which was down from $3 052/ct in the first half of 2011.
Gem Diamonds said 23 rough diamonds achieved an average value in excess of $1-million each during the reporting period.
Letšeng produced 82 rough diamonds that achieved prices greater than $20 000/ct and equated to 59% of the mine’s revenue for the period.
Further, a total of 361 rough diamonds greater than 10.8 ct in size were produced during the first half of the year, up from 295 in the 2011 corresponding year.
At Gem Diamonds’ Ellendale project, in Australia, ore mined during the period was up 234% from the same time last year. This followed the commissioning of the primary feed section of the processing plant. 
Total carats recovered at Ellendale during the first six months of the year were 78 881 ct, 51% more than in the first half of last year.
The mine achieved an overall average price of $771/ct, with its fancy yellow diamonds sold to Tiffany & Co. achieving an average of $4 315/ct, up from $4 045/ct last year.
A revised resource statement for Ellendale decreased the resource carats by 15% and increased their value by 16%.
In Botswana, construction of the decline tunnel through the sand overburden at Gem Diamonds’ Ghaghoo mine has continued as the company progressed with Phase 1 of the underground mine project.
Following the fatalities of two workers and implementation of corrective-action recommendations, the advancement of the decline tunnel was expected to recommence in mid-August.
A revised resource statement for Ghaghoo left the resource carats unchanged but increased their value by 16%.
http://www.gemdiamonds.com/gem/en/media/press-releases/?ref=220
comments powered by Disqus

RW1

This edition

Issue 42
Current


Archive