[miningmx.com] — TRADING update from Gem Diamonds for the first half of 2011 has confirmed prior reports of the strong recovery in the rough diamond business from Petra Diamonds and Firestone Diamonds.
According to Gem CEO Clifford Elphick , “the supply and demand fundamentals for rough diamonds look ever better.
“Increasing consumption of diamond jewellery in the United States, China and India; the lack of significant new mines coming on stream and very low stocks of rough and polished diamonds in the cutting centres is being reflected in strongly rising prices of both rough and polished diamonds.
“Prices are extremely strong for rare, large, high quality, good colour diamonds of which Gem Diamonds’ Letseng mine in Lesotho is the single largest producer.’
Letseng achieved a record average value of $3,052 in the first half of 2011 (first half 2010 – $1,728/carat) during which it increased production to 52,798 carats (44,748 carats).
Elphick said the prefeasibility study for the Letseng expansion is nearing completion and a detailed presentation will be made by Gem management in London in early September.
Production at the Ellendale mine in Australia dropped to 52,349 carats (81,501 carats) mainly because of severe weather conditions in the first four months of 2011.
Gem has revised production for the year from Ellendale down to between 127,000 and 137,000 carats, which has had a dramatic impact on costs and are now expected to be 25% higher in terms of operating cost per tonne of material treated.
Elphick also reported that the Gope project in Botswana has been renamed Ghaghoo, which is the name the local inhabitants have for the area as well as the name of a species of acacia tree which is abundant there.
According to Fairfax analyst John Meyer, “Gem is well placed to enjoy the supply/demand fundamentals driving the diamond market at present.’
He believed there were “further gains to be made in this market’ despite forecasts by some observors that diamond prices could dip in the second half when “diamond sales take a break through the summer months’.
Numis analyst Cailey Barker viewed the trading update as positive despite the issues at Ellendale.
He commented: “Ellendale was more mixed but the market will likely look through this and react well to the good performance at the core asset (Letseng) and the outlook for further diamond price increases.’
Gem Diamond shares traded largely unchanged in London on Monday at 238p, which compares with a 12-month high of 300p and an all-time high of over ₤12 ahead of the market crash of 2008/2009.
Gem will report its financial results for the six months to end-June on August 19.
