GEM Diamonds is the latest diamond miner to announce restructuring plans owing to a prolonged trough in prices for the luxury product.
The UK-listed miner said in a trading update for the first six months of its financial year on Wednesday that it would reduce costs by $1.4m to $1.6m per month.
“Considering the prolonged weakness in global diamond prices, compounded by a weak US dollar and ongoing US tariff uncertainties, Gem Diamonds has implemented decisive measures to conserve cash and protect shareholder value,” said Clifford Elphick, CEO of Gem Diamonds in the update.
“While the company has met its production targets, it has not been immune to the sustained pressure on rough diamond prices and adverse exchange rate movements,” he said.
Shares in Gem Diamonds plummeted 20.5% in early London trade.
As part of the restructuring, the company will cut about a fifth of its staff at Letšeng mine in Lesotho, equal to about 250 employees.
It also announced plans to slash waste mining at the open pit for an initial 12 months which it said would not negatively affect the long term life of mine plan. Waste stripping in the period under review fell 46%.
Gem recorded 46% less in diamond sales in the six months falling to $44.7m year-on-year. This wasn’t assisted by a 22% decline in carats sold to 44,360.
Swingeing cost cuts would also extend to Gem Diamonds’ executive, Elphick said. There would be “temporary salary reductions” for the company’s board, executives and management personnel, he said. Gem is also considering issuing shares to “partially compensate” executives and management for loss of salary.
Gem Diamonds at least removed one monkey from its back. The company said on Tuesday it had finally given back the Ghaghoo diamond mine to Botswana.
Gem Diamonds bought Ghagoo – then called Gope – from De Beers in 2007 and spent some $85m developing the mine which came into operation in 2015. Ghagoo was shut down in February 2017 with the reasons being poor diamond market conditions and operational problems.
The depressed state of the diamond market has had effects in the industry far and wide. Petra Diamonds is struggling to stay afloat as it faces redemption or refinancing of a $273m bond that matures in March next year.
Some $3.5bn in impairments has been booked at Anglo American’s 85% owned De Beers over the last two years amid plans by the parent firm to sell the company. De Beers is running a stockpile though to total about $2bn and has resorted to private auctions of its diamonds in order to capitalise on sales opportunities.
In May, Lucapa Diamond succumbed to years of poor diamond prices announcing that administrators had been appointed to save the company.
David Kellie, CEO of Natural Diamond Council told the Financial Times earlier this week that a fundamental mismatch between supply and demand was the cause of the diamond sector’s current difficulties. “The industry has a history of going through peaks and troughs,” Kellie told the newspaper. “We had a very high peak, and now we are having a deeper trough than we have had in a number of years.”
