A DIAMOND market recovery first identified in the fourth quarter of 2019 had been maintained this year, said Clifford Elphick, CEO of GEM Diamonds.
Commenting in a trading statement for the firm’s fourth quarter – in which the company published solid production, cost and price indicators – Elphick said that the average price of carats sold was 21% higher than in the third quarter.
“This improvement continued into 2020 with the first tender achieving $1,753 per carat,” said Elphick in notes to the trading statement. The improvement was down to a re-stocking in the mid-stream which is the diamond polisher and manufacturer sector.
De Beers reported improved sale of $545m for the first cycle of 2020 which compares to $426m in the previous sales cycle – the last of 2019 – and the $500m achieved in the first cycle of 2019. “Demand for rough diamonds increased during the first sight of 2020 following the end of year selling season and subsequent inventory restocking,” said Bruce Cleaver, CEO of De Beers on January 29.
GEM, which operates the Letšeng mine in Lesotho, reported a strong operational performance for the fourth quarter. Carats sold were 17% higher than in the third quarter which coupled with cost savings in terms of its business transformation strategy, contributed to free cash flow of $1.5m.
The cash reduced GEM’s net debt position to $10.1m from $11.6m previously. GEM ended the fourth quarter with cash on hand of $11.5m of which $9.2m was attributable. It also entered into a $7.2m working capital facility improving facilities to $69.9m.
The business transformation plan is to achieve $100m in incremental revenue, productivity improvements and cost savings over the four-year period. The programme, due to end in 2021, was on track with $52m delivered as at the end of 2019, the company said.
GEM said it had met its operational guidance metrics for the 2019 full year while operating costs per ton were the lowest for the last three years.
It had recovered four diamonds greater than 100 carats during the fourth quarter bringing the total to eleven diamonds greater than 100 carats for 2019.
“There have now been 100 diamonds of greater than 100 carats each recovered at the Letšeng mine since Gem Diamonds began operating the mine in 2006,” it said.
It sold diamonds for more than $1m each, generating revenue of $15.6m. In total, 27 diamonds were sold for more than $1.0m each in 2019, generating revenue of $68.2m.
Shares in the company have been on the march since the beginning of the year gaining about a third, and some 7% since the beginning of the week (February 10). They still have some way to go, however: the stock is 37% lower on a 12-month basis.