Clifford Elphick
Send this article to a friend
Print this page

» We want to play in the same league as BHP/ Rio Tinto - Clifford Elphick, CEO, GEM
» We've been extremely fortunate. It's a fantastic jewel - Clifford Elphick, GEM
» We'll double Letseng's throughput - Clifford Elphick, CEO of Gem Diamonds


Gem Diamonds plans new mine in Botswana
Brendan Ryan
Posted: Wed, 23 Apr 2008

[miningmx.com] -- UK-listed Gem Diamonds (Gem) intends developing its Gope kimberlite project in Botswana into a mine producing one million carats annually at a cost of US$450m.

That’s assuming the company is granted the mining licence over Gope for which it applied in July last year.

According to the company’s annual results statement for the year to end-December, “Section 51 negotiations with the Government of Botswana will commence shortly. These negotiations will determine the key terms of the mining licence.”

Gem bought Gope from De Beers in May last year for $34,1m. De Beers had stalled development for nearly a decade because of the political furore surrounding the project which became caught up in a conflict between the Botswana government and the country’s indigenous San – or Bushman – people.

Gope is situated in the Central Kalahari Game Reserve from which the Botswana government had removed the San who subsequently won a court order allowing them to return.

Accusations made by various non-government organisations (NGO’s) backing the San were that the Botswana government’s actions were linked to De Beers plans to develop the diamond mine.

De Beers repeatedly denied those accusations pointing out the development of the mine had nothing to do with the political and social dispute underway.

That is also the opinion of Gem CEO Clifford Elphick who commented,” whilst disputes surrounding the Central Kalahari Game Reserve were the subject of a court action and had attracted negative publicity for some time, the company was of the view these disputes were mainly a matter between the State and its citizens and did not pertain to the development of a mine at Gope.

“In all discussions held between Gope Exploration, its independent advisors tasked to complete the social and environmental impact assessment (SEIA) and the relevant communities, indications have been that local communities are strongly in favour of a mine being developed at Gope. “

Elphick added that the SEIA was being carried out as part of a full Environmental Impact Assessment (EIA) study which will revise the original EIA completed in 1998.

Gope was one of several acquisitions made last year by Gem which spent $390,6m out of $636m raised through its IPO on buying projects in Australia, Indonesia and the Democratic Republic of Congo as well as Botswana.

Gem made a profit of $40,5m for the year during which it sold diamonds worth $151,9m from its Letseng mine in Lesotho with a further $14,2m in sales from Indonesia and South Africa.

Despite turning a maiden profit in its first year of listing – an excellent result given the way many other junior miners have battled in their initial phase – the Gem share price has not sparkled on the London Stock Exchange.

The IPO in February 2007 was pitched at 950p a share and Gem shares currently sit at 961p.

Click Here to subscribe to our daily newsletter
Reasons are the current negative investor sentiment towards junior miners generally while the market has yet to experience the looming global shortage of diamonds that has been widely predicted over the past two years.

Elphick commented the market for top quality diamonds has performed far better than the “bottom end” of the business. He pointed out Gem was predominantly a producer of top quality diamonds and these sell at “multiples” of the world average diamond price.

He commented; “with an estimated 45% of all diamond consumption occurring in the US, a weakening US economy represents a significant risk to the overall industry. However, it is misleading to view diamonds as a single commodity.

“Through 2007 and subsequently in 2008 the bottom end of the rough and polished diamond market experienced some difficulties and this situation is expected to continue.

“According to WWW International Diamond Consultants (WWW), prices in the very top quality rough diamonds increased by 50% to 100% - depending on size – in 2007……..in January 2008 alone a further increase of more than 10% for top quality rough diamonds occurred.”

Elphick said one of the driving forces for this surge has been, “the realisation in the diamond trading markets that the liquidation of the De Beers stockpile is now complete and a shortage of these rare gems is developing.

“There is no known significant new source of diamonds coming into production in the foreseeable future that is likely to ease this shortage. In fact, WWW predicts the real shortage for rough diamonds will only really begin to take effect in 2011.”

Elphick concluded that, “there is no reason to expect anything more severe than a levelling-off of recent very high prices in these key areas of Gem Diamonds production profile despite the broader current economic circumstances.”