GEM Diamonds nearly halved net debt as of end-June as a result of cash preservation and deferment efforts and after fetching a higher average price for its diamonds.
The company, which operates the Letšeng diamond mine in Lesotho, sold 16 diamonds for more than $10m each, generating $29.4m in the first half of its 2020 financial year (2019: $26.6m). The average price for the period was $1,707 per carat ($1,576/carat).
It subsequently ended the period on June 30 with $17.5m in cash of which $13.8m is attributable to GEM Diamonds. Utilised debt totalled $23m resulting in net debt of $5.5m compared to net debt as of December 31 of $10.1m.
The company imposed operating and cost reduction measures in order to contain the economic effects of the Covid-19 pandemic. Letšeng was shut from March 28 until April 26 in line with the Lesotho government’s lockdown regulations. The cash preservation efforts included management salary reductions which remain in place.
In addition, $65m of a $100m incremental revenue and productivity improvement drive had been delivered by the company. GEM Diamonds said interruptions related to Covid-19 may delay the delivery of the balance of the programme which is targeted for 2021.
Some 74 employees identified during the period with suspected Covid-19 disease were quarantined. Whilst there were no suspected positive cases on mine site, two employees died whilst in quarantine, although these have yet to be confirmed as Covid-19 deaths.
“The positive sales results during the period demonstrate the continued demand for Letšeng’s high quality diamonds with an average price of $1,707 per carat, despite the challenging global conditions,” said Clifford Elphick CEO of GEM Diamonds.
“This, together with the pro-active cost control and cash preservation measures implemented across the Group, has resulted in positive cash flow generation during the period,” he said.