GEM Diamonds lifts Letšeng’s cost guidance for 2022 owing to supply disruptions

Letseng Diamond Mine

GEM Diamonds said in a trading update for the first six months of its financial year ended June that it would meet the lower end of its production guidance for its 2022 financial year but costs would be higher than forecast.

The Lesotho miner warned that excessive rain at its Letšeng mine, power interruptions, and supply constraints of equipment parts had negatively affected production.

“The related cost impact of disruptions to the supply chain, combined with significant increases in fuel, explosives and other consumables prices were experienced in the period, exacerbated by the Russian invasion of Ukraine,” it said.

Operating costs would increase to between $330 to $350 per ton compared to a previous forecast of $275 to $285/t. Production was guided to between 112,000 and 116,000 carats for the year.

The diamond market was in good shape however.

“We continue to see a firm diamond market for the high quality Letšeng diamonds in 2022,” said Clifford Elphick, CEO of GEM Diamonds.

“We are managing the economic impact of global events which are contributing significantly to the slowing down of global economic growth and which are materially impacting energy and commodity prices and disrupting supply chains worldwide,” he said.

Sanctions on Russian diamond producer Alrosa had exacerbated a shortage of rough diamonds in the market, he said. This supported “continued strong demand and robust prices for Letšeng’s high-quality rough diamonds”.

Commenting on long-standing plans to sell its mothballed Ghaghoo prospect in Botswana, Elphick said the latest proposal had floundered after the buyer “did not meet the extended long stop date of 10 May 2022 resulting in the agreement lapsing on that date”.

Elphick said GEM Diamonds would look for other potential sales opportunities adding that it would also assess “other disposal or closure alternatives”.