GEM Diamonds was unlikely to bid for Petra Diamonds or any of its assets, according to the firm’s CEO, Clifford Elphick, today.
Asked for his view on potential consolidation in the diamond sector, Elphick said: “There is nothing that is too overwhelming that would cause us to put our best foot forward”.
Petra announced in June it was looking for a buyer, or to sell some of its assets, in order to repay about $650m in debt.
“Petra is in a process there’s no secret about that,” said Elphick. “We had a look at it because we were approached. They are lovely assets but there is a massive debt pile and everyone looks at this in the same way … We’re near the end of all this.”
It was difficult to understand ‘value’ in the diamond market owing to a number of shocks that had kept it in flux, he said. “The problem is that the price of diamonds has bedevilled consolidation. There is no clarity on pricing.”
Elphick was commenting during questions following publication of the firm’s interim results ended June 30 which showed signs of strain following Covid-19 shutdowns.
The company reported a $1.7m attributable loss for the year compared to a $4.2m profit in the six months to June 2019. Earnings before tax, interest, depreciation and amortisation (EBITDA) were $11.3m (2019: $25.3m).
GEM has adjusted its full year production guidance to 96,000 to 100,000 carats from its Letseng mine in Lesotho from a previous estimate of 118,000 to 122,000 carats. Sales is now expected to come in at 92,000 to 96,000 carats from 115,000 to 119,000 carats.
Elphick said, however, he had detected an upwards shift in market sentiment. “In the last 10 days there has been a bit of buoyancy and life. We are looking forward to our tender in September,” he said.
GEM had been able to get its ‘smalls’ and some of its large diamonds away in March and April notwithstanding Covid-19 lockdowns. In the case of the tender for large stones, GEM Diamonds was able to estimate a see-through polished price on uncut gems that its buyers were willing to accept.
Lucara Diamonds, a Toronto-listed diamond rival which, like GEM Diamonds, tends to sell goods in the higher range on average, had agreed to supply the balance of this year’s large diamond production through a single diamantaire. Elphick said this would create opportunity: “Customers might pursue our goods with a bit more aggression,” he said.
De Beers sold $300m in rough diamonds last week and Alrosa, the Russian producer, another $200m worth of goods in a sign that the market was reviving. Diamond tenders require in-person inspection which has been all but prevented by border closures.