[miningmx.com] – GEM Diamonds, a UK-listed company that operates Lesotho’s Letseng diamond mine, is considering paying a maiden dividend at the end of its current (2014) financial year, said CEO Clifford Elphick.
The decision to approve a payout was based on the company’s strong balance sheet and the expectation that Gem Diamonds’ $96m Ghaghoo diamond prospect in Botswana would begin production in the second half of the 2014 financial year, he said.
The diamond market was also forecast to “… remain relatively stable” during the current financial year. There was potential for pricing increases owing to
 a firmer US market and continued growth in China, Elphick said.
The prospect of a dividend payment will come as relief to shareholders who have endured a difficult time at Gem Diamonds. Share earnings for the 2013 financial year came in at 15.2c – a far cry from the 72.9c per share loss in 2012.
The 2012 financial year was also a period of asset write-downs and disposals. The loss from discontinued operations in its 2012 financial year was $119m.
Consequently, shares in Gem Diamonds, which traded as high as £3/share in May 2012, sank to an all-time low of £1.07 in July 2013. It has since recovered to £1.73/share and shows a 12 month return of just under 5%.
Gem Diamonds responded by cutting corporate overheads by $2m to $12m and putting the brakes on long-term capital projects at its single operating asset, Letseng. The company installed new crushers at Letseng to minimise breakage of large stones and had since recovered 25 diamonds in excess of 50 carats.
However, the pull-back in capital saw Letseng produced 95,053 carats in the firm’s 2013 financial year against 114,350 carats a year earlier. In total, Gem sold 97,294 carats at an average price of $2,043 per carat compared to sales of 107,617 carats in the 2012 financial year at an average price of $1,932 per carat.
The balance sheet was also shored up. The company recently raised $25m with Nedbank Capital which is enough to fully-fund the first stage of Ghaghoo which is forecast to have steady-state production of 200 000 to 220 000 carats a year.
In addition to existing debt, it has about $100m in firepower none of which had been accessed as of January 31, the company said in a February presentation.
“The emphasis for 2014 and beyond remains on positioning the group to leverage its strengths and invest responsibly in future value creation,” said Elphick.
“We are focused on bringing Ghaghoo into production, as well as concentrating on the continued development and expansion of our Letseng operation. We remain confident in our ability to deliver returns to our shareholders,” he said.
