Clifford Elphick
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Gem sets upon $586m diamond hunt
Allan Seccombe
Posted: Wed, 14 Feb 2007

[miningmx.com] -- GEM Diamonds began its listing on the London Stock Exchange on Wednesday, after raising £285m ($586m) to give it a large war chest to make acquisitions and bring two more African mines into production, CEO Clifford Elphick said.

A third of the cash, some $200m, will go building mines and extending resources in the Central African Republic and the Democratic Republic of Congo and the remainder will be kept for other activities, Elphick told Miningmx in a telephonic interview.

Gem Diamonds has given itself 12 to 18 months to use its capital and the most likely activity would be acquisitions.
invest in mines and develop mines
“There are a large number of smaller companies that have a project or two and there can well be a case made that some of those companies don’t have the financial or technical strength to develop a mine. We have both those aspects in abundance,” Elphick said.

Gem is focussed on central and southern Africa from where it believes most of the diamond supply will come from over the next decade or two.

“Our shareholders don’t want us to sit on the capital and earn interest. They want us to invest in mines and develop mines,” he said. “I don’t think that’s ambitious otherwise I wouldn’t have put our reputations behind acquiring capital for the plan.”

By the end of this year, Gem will add up to 75,000 carats per quarter of production from an alluvial project in the DRC, and a further 20,000 carats per quarter from an alluvial project in the CAR. This will add to the 100,000 carats from its Letseng kimberlite project in Lesotho.

Letseng produced a 603-carat diamond that sold for $10m. It is the world’s 15th largest discovered diamond. The mine, which was once owned by De Beers, is known for high quality, large diamonds. De Beers ran it for five years up to 1982 when a slump in diamond prices caused its closure.

The supply side of the diamond looks “extremely good”, he said.

“We are bullish. We see an increasing gap in the supply and demand and that translates into rising prices. We have put a skilled team together to increase supply,” he said.

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His thoughts on the diamond market are similar to those of Gareth Penny, MD of De Beers, who said the diamond market is likely to slip into a major supply deficit within the next five years because of the lack of major new diamond field discoveries in recent years.

Demand is rising strongly in China and India, where initial indications are showing double digit increases for 2006. Demand from Russia and South American countries is also rising.

Gem’s offer to the market is said by market sources to be very well supported and thought to be five or six times oversubscribed.

While Elphick declined to confirm this, he said there had been good support for the offer. “It’s very encouraging to see that capital is out there to support strategies to build mines in Africa.”

A further 1.285 million shares were also placed in the market, with some 400,000 coming from JP Morgan to help fill the demand for shares.

The remaining 800,000 shares were sold by South Africa-based managers in Gem to meet tax payments to the South African Revenue Service.