| |
Gem Diamonds places discounted shares
Reuters
Posted: Wed, 01 Apr 2009
[miningmx.com] -- Gem Diamonds Ltd swung to an annual pretax loss after taking a massive impairement charge for lower diamond prices and restructuring and plans to raise £75m ($107.4m) in a share placing.
The company moved to a pretax loss of $576.7 million, after impairments to assets of $546.5 million, from a profit of $68.4 million in 2007.
It does not expect to take a further impairment charge this year if diamond prices remain at current levels, chief executive Clifford Elphick told Reuters on Wednesday.
"Anything that is not profitable has been impaired completely," said Elphick. "It's probably too aggressive but from my point of view there is no harm in doing that and our shareholders have supported us."
The impairement charge relates to lower diamond prices, restructuring and closure costs.
At 1057 GMT, the shares were down 14 percent at 128
pence. Earlier they fell to 123.25 pence, the lowest since the company listed in February 2007.
The company plans to raise gross proceeds of £75m ($107 million) via a share placing at 100 pence per share. The placing is priced at a 33 percent discount to the company's share price of 149 pence at the close on March 31.
It has firmly placed 84 percent of the new shares and is confident of placing the full amount.
The group, which ended the year with about $61 million in cash, will use the funds to pay off $40 million of debt and expects to be left with about $80 million that would allow it to weather a possible further drop in diamond prices for about two years.
Elphick said the company is reviewing its business plan in Australia where it has the Ellendale mine and may shut down the E9 pipe, the only pipe producing at the mine, if supply talks fail. He said the E9 pipe is breaking even.
The E9 pipe and the Letseng mine in Lesotho are
the only producing operations after a drop in diamond prices forced the company, and many of its rivals, to put a number of mines on care and maintenance and to mothball future projects.
It has laid off about 1,600 people or 60 percent of its staff.
The Letseng mine, in which it has a 70 percent interest, is still running at full production and is making a profit, he said.
"I think it's the only diamond mine that is running today that is profitable," he said.
Elphick said rough diamond prices, which dropped about 50 percent last year, have risen about 10 percent from November/December.
"It's too soon to call a trend but it is certainly looking better. Not only are prices up a little bit, but there is much greater volume and there is quite a lot of demand," he said.
In February, it warned that its full-year results will be significantly lower than its expectations at the time of its interim results published in August
2008.
| |
