GEM Diamonds’ efforts to sell its mothballed Botswana mine Ghaghoo have resulted in frustration again after Vast Resources called off its participation in the proposed $4m deal.
Vast and Botswana Diamonds (BOD) had combined forces in a joint venture company called Okwa to buy Ghaghoo. According to a Gem Diamonds trading statement today “… Vast has however informed Gem Diamonds and BOD that it does not intend to continue with the transaction”.
The Ghaghoo mine – previously called Gope – has long been a hugely troubled operation which Gem Diamonds bought from De Beers in 2007. Gem then spent some $85m developing the mine which came into operation in 2015 but was shut down in February 2017 after the recovery of less than 150,000 carats of diamonds. The reasons given were poor diamond market conditions at that time and “operational issues”.
Gem thought it had sold the mine in 2019 to local company, Pro Civil for $5.4m but that transaction didn’t pan out either.
This time around, however, the transaction is not dead, said Gem. “BOD confirmed its commitment to conclude the transaction as originally envisaged as soon as possible and has informed Gem Diamonds that it has identified an alternative financing partner,” it said.
The longstop date for deal completion has been extended to the end of March from January 31 to allow “… BOD to secure an alternative financing partner and to obtain any approvals that are required”, said Gem.
Gem said in its trading statement that it ended the 12 months to December 31 with cash of $20.9m compared to $11.7m in net debt. The improvement was a result of a higher average price of $2,018 per carat compared to an average of $1,589 per carat for the third quarter of the financial year. Total revenue generated for the quarter was $50m.
Gem recovers diamonds from Letšeng, a mine in Lesotho famed for its high quality gems.
“During the quarter, prices achieved for the Letšeng goods, averaging over $2,000 per carat, were strong, reflecting the continued good demand for Letšeng’s production – especially for the larger higher quality diamonds.,” said Clifford Elphick, CEO of Gem.
In addition to completing its four year $100m business improvement strategy, Gem also bolstered liquidity adding a third lender to pool in which its revolving credit facilities were increased to $77m from $61.3m previously.
A total of 109,697 carats were sold for the 12 months – an 11% increase over the 99,172 carats sold in Gem’s 2020 financial year. They averaged $1,835 per carat in price, less than the $1,908 per carat in the previous financial year.
Elphick said, however, demand for the high quality diamonds produced by Letšeng was increasing. Some $40,130 per carat was fetched for the 101.16 carat white diamond recovered from Letšeng.
