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Gem Diamonds Limited has announced the discovery of an exceptional 183-carat white Type IIa diamond from the Letseng mine in Lesotho on February 3.
The miner also announced that it also recovered two different high quality diamonds, one of 89 carats and the other of 70 carats, from the mine.
The Letseng mine is the highest dollar per carat kimberlite diamond mine in the world.
Diamond miners are feeling the pressure after a funding crunch in the world’s polishing hub dented sales of rough gemstones.
Since celebrity jeweller Nirav Modi fled India in 2018 accused of having defrauded a state bank of nearly $2bn, banks have sharply cut back lending to diamantaires, who cut, polish and trade the world’s diamonds.
“Bankers have blacklisted the jewellers industry,” said Shantibhai Patel, president of the Indian Bullion and Jewellers Association in Gujarat, the country’s diamond-cutting centre.
The squeeze has forced diamantaires to buy less from diamond producers such as De Beers, Rio Tinto and Gem Diamonds — which have seen sales and margins suffer as a result.
De Beers is on course to report its worst annual sales in at least four years. In response, the world’s largest producer reduced prices for its rough diamonds by 5 per cent last month at its November sale, the biggest discount in years, Bloomberg reported. De Beers declined to comment on its pricing.
Across the sector, rough diamond prices have fallen 15 per cent since last November, according to Polished Prices. Industry experts say a further 10-15 per cent drop would push some smaller producers to file for bankruptcy.
“It’s a liquidity crisis that’s affecting the middle of the pipeline,” said Edward Sterck, an analyst at BMO Capital Markets. “Diamond manufacturers can’t afford to pay rough diamond prices . . . It’s a function of necessity that prices have come down.”
Diamantaires — 90 per cent of which are based in India — buy rough diamonds from producers such as De Beers that they then cut with lasers and polish for use in jewellery.
The flight of Mr Modi, whose clients included actress Kate Winslet, prompted banks to tighten up lending terms for manufacturers. Bank credit to the diamond industry, of which Indian companies receive about four-fifths, fell 20 per cent to $8bn this year, according to WWW International Diamond Consultants.
As a result, diamond cutters are working through existing stocks rather than buying on the global market. According to India’s Gem and Jewellery Export Promotion Council, imports of rough diamonds into the country fell 22 per cent year over year to $7.3bn between April and October.
This has struck diamond mining companies hard. Stuart Brown, chief executive at Toronto-based Mountain Province Diamonds, said the rough stone market was “challenging” in its third-quarter results.
Mid-sized producers including Canada’s Lucara Diamond and the UK’s Petra Diamonds all reported lower prices for their diamonds in the latest quarter. Lucara reported a selling price of $390 a carat, a 13 per cent drop from last year and a steep fall from 2014, when gems sold for $644 a carat. Dire market conditions drove Quebec-based Stornoway Diamond into bankruptcy in September.
The diamond industry differs from other commodities given the large influence of the two largest producers on pricing, and the fact that diamonds vary in size, quality and colour. De Beers is a “price setter” that offers uncut stones to traders for fixed prices and quantities at sales, known as “sights”.
Production cuts and concessions, including discounts and flexibility to return stones, have provided some relief to De Beers and its customers. Sales rose last month but were still below $400m — the lowest in a November sight on record.
Mr Patel welcomed the Anglo American-owned company’s price cut, but expected little uplift in the foreseeable future. “There’s no work,” he said. “For one year, one and a half years, we’re not expecting any bullish trends.”
But Colin Shah, managing director of manufacturer Kama Schachter, is hopeful that the worst was over for diamantaires. He said that manufacturers were adjusting to the tougher norms in place after the Modi scandal, which could get liquidity flowing again.
“There’s much more [scrutiny] than there used to be,” he said, referring to banks’ lending practices. “Inventories have come down, everyone has made their business models leaner . . . I think the second half of 2020 will be better.”
Industry executives point to tightening supply over the next few years that will help restore diamonds’ key feature: rarity. Rio Tinto’s Argyle mine, which outputs 90 per cent of the world’s valuable pink diamonds, is set to close next year.
Meanwhile, retail demand for diamonds has been robust, particularly in the US where spending on diamond jewellery grew 4.5 per cent to $36bn last year. French luxury group LVMH’s $16.6bn acquisition of Tiffany, agreed last week, was seen by analysts as a vote of confidence in long-term consumer demand for diamond jewellery.
But other industry figures say more drastic action by diamond mining companies is needed to help bedraggled manufacturers. Martin Rapaport, founder of the world’s largest diamond trading platform, said the price cut was insufficient. “It’s not enough to recapitalise the industry,” he said.
“They need to drop prices as much as 50 per cent to return liquidity to the market. It’s too little too late.”
Source: ft.com
Gem Diamonds has recovered a diamond weighing 161 carats from its Letšeng mine in Lesotho.
The miner found the “high-quality” white, type IIa stone on October 28, it said. Including this rough, Gem Diamonds has retrieved five white stones over 100 carats this year. It also produced a further three of that size in other colors.
In 2018, the mine, known for its large, high-quality stones, yielded 15 diamonds over 100 carats.
Source: diamonds.net
Gem Diamonds published its results for the first half of 2019, reporting a revenue of $91.3 million, compared to $167.7 million during the first half of 2018.
The miner’s earnings before interest, taxes, depreciation and amortization (EBITDA) stood at 25.3 million, compared to 70.7 million in 2018. Its attributable profit, from continuing operations was $6.6 million against $26.8 million in 2018.
The considerable fall in income and profits also had its impact on the basic earnings per share: 4.8 US cents from continuing operations , opposite 19.4 US cents in 2018.
Commenting on the company’s results, Clifford Elphick, Chief Executive of Gem Diamonds, said:
“Letseng achieved $ 1,697 per carat for the period with the sale of the 13.32 carat pink diamond achieving a Letseng record of $ 656,934 per carat, reaffirming the unique quality of Letseng’s diamond production.
The prices achieved for the period are 10 percent up from the prices achieved in the preceding six month period, notwithstanding the planned limited contribution from the Satellite pipe ore and current diamond market conditions.
The Group has successfully implemented the business transformation program, already achieving $42 million net of fees, and is on track to deliver the planned $100 million in cost savings and efficiencies by 2021.”
Source: idexonline
Gem Diamonds has recovered its third yellow diamond over 100 carats this year, following a two year dearth of stones in that hue and size.
The miner found the 114.2-carat rough on August 22 at its Letšeng mine in Lesotho, it said Monday. The company unearthed a 135-carat, yellow diamond from the deposit in June, and a similar 134-carat stone was brought up in March. Prior to those recoveries, Letšeng hadn’t yielded a yellow diamond over 100 carats since June 2017, when Gem Diamonds retrieved a 151.52-carat rough at the site.
The discovery is also the sixth over 100 carats the miner, known for its large-stone retrieval, has unearthed so far this year. These include three white diamonds, weighing 123.5, 140 and 161 carats.
During the first six months of the year, the miner recovered three stones over 100 carats, compared to 10 of that size during the same period a year ago. The lack of large stones in comparison with last year has hurt Gem Diamonds’ revenue. Sales of rough diamonds fell 44% to $94.5 million in the first half, with the average price dropping from $2,742 per carat to $1,697.
Source: diamonds.net
Gem Diamonds, which operates the Letšeng diamond mine in Lesotho, has published its sales performance for the first half of the year ended June 20, 2019. Gem Diamonds sold 55,714 carats during the period, achieving an average price of $1,697 per carat – 10% more than the average price for H2 2018. Revenue for the period totaled $41.6 million USD.
During the period, the miner sold a 13.32 carat pink diamond for a Letšeng record of $656,934 per carat, and recovered three diamonds greater than 100 carats. It sold 15 diamonds for more than $1 million each. Gem Diamonds added that it is on track to deliver its targeted $100 million “in incremental revenue, productivity improvements and cost savings over the 4-year period to end 2021”.
Gem Diamonds concluded by announcing that prices for the smaller and commercial goods “have been under pressure for some time with the larger goods having been less affected, although showing recent signs of weakness”. However, the miner expects “Letšeng’s unique, ultra-high-quality goods to be less vulnerable over time to market pressures”.
Source: israelidiamond
Gem Diamonds has recovered a white diamond weighing 140 carats, the second over 100 carats it has reported this year.
It found the high-quality stone on July 6 at its Letšeng mine in Lesotho, the company said Monday. In March, it found a 161-carat white diamond at the deposit.
The miner recently recovered two yellow diamonds from Letšeng weighing more than 100 carats. It retrieved a 134-carat stone in March, and another weighing 135-carats last month.
So far this year, Gem Diamonds has recovered four diamonds over 100 carats. In 2018, it unearthed a total of 15.
Source: Diamonds.net
The miner has sold Ghaghoo for a fraction of what it cost to build as it fails yet again to diversify away from its Letšeng mine in Lesotho
Gem Diamonds has sold its Ghaghoo operation for a fraction of what it cost to build what was Botswana’s first underground diamond mine, as it failed yet again to diversify away from its Letšeng mine in Lesotho.
Gem Diamonds agreed to sell its failed Ghaghoo mine in Botswana to Pro Civil, a local company, for $5.4m USD.
London-listed Gem, which has had a string of setbacks in attempting to diversify its portfolio away from being a single-asset company with its Letšeng mine in Lesotho, invested about $90m in building the first phase of Ghaghoo.
In March 2017, Gem reported a $170m impairment against Ghaghoo after mothballing the mine in the Central Kalahari Game Reserve in February, as low prices for smaller rough diamonds pushed the operation into a loss.
There was no information about the Pro Civil business in the Gem statement on Thursday, and internet searches proved fruitless. No indication was given about what Pro Civil intended doing with Ghaghoo once the deal closes in the third quarter of 2019.
Gem said it had reached a binding agreement with Pro Civil for the sale of the London-listed company’s wholly owned subsidiary Gem Diamonds Botswana for an upfront payment of $5.4m.
“On behalf of Gem, we wish the Pro Civil team well for the future, and I would also like to thank the government of Botswana for its assistance during the sale process,” said Gem CEO Clifford Elphick.
The Botswana subsidiary reported a pretax loss of $4.9m in the year to end-December 2018 and gross assets of $3.9m.
Ghaghoo, when it was officially opened in September 2014, had expected to sell its diamonds for about $260/carat, but by 2017 it was realising prices of nearly half that number.
Ghaghoo, the first underground diamond mine in Botswana, was a difficult mine to build. A decline shaft was sunk through an 80m-thick layer of loose Kalahari Desert sand in a remote location in the north of the country.
Part of the reason to go underground, instead of building an opencast mine, was to reduce the size of the mining footprint in the game reserve to 20km² instead of 100km².
The mining project started in October 2011 and did not come close to reaching commercial production of 150,000 carats a year.
Gem’s attempts to extend operations beyond its Letšeng mine in Lesotho have been unsuccessful — the Ellendale mine in Australia was sold for $15m in 2012 and the Cempaka alluvial mine in Indonesia was closed in 2008.
Exploration efforts in Angola and elsewhere in Africa came to naught.
Gem would now focus on improving Letšeng, said Elphick, adding the $5.4m would be put towards “general corporate purposes”.
“Every little bit will help,” said Shore Capital analyst Yuen Low, pointing out that large-diamond recoveries at Letšeng had been poor recently.
“In the first half of 2019, Gem recovered only two stone greater than 100 carats (versus 10 in first half 2018), continuing the falling trend that became evident in the second half of 2018,” he said.
Letšeng is the world’s richest diamond mine when measured by dollars achieved per carat, consistently delivering large, high-quality diamonds.
Source: bdfm.co.za
Gem Diamonds has recovered a 161 carat rough stone, the first over 100 carats it has reported this year.
It found the high quality, white, type IIa diamond on March 21 at its Letšeng mine in Lesotho, the company said Friday.
Last year, Gem Diamonds found 15 stones weighing more than 100 carats, a record for the company. That haul included the 910 carat Lesotho Legend, which sold for $40 million.
In February, the miner also found a 13.33 carat pink diamond, which it sold to Graff for $8.8 million, or $656,933 per carat.
Image: The 161 carat diamond Gem Diamonds
Source: Diamonds.net
Tough times in some parts of the diamond-mining industry has prompted an innovative solution, a four-way merger to create a new southern African diamond specialist.
The proposal, from the London office of the German bank, Berenberg, could see Gem Diamonds, Petra Diamonds, Lucara Diamond Corporation and Firestone Diamonds emerge as a single business with enhanced financial metrics courtesy of cost savings and a focus on big, high-quality gems.
If the deal happens, and at this stage it is just a proposal from Berenberg and not something the diamond-miners have embraced, the new business would have mines in South Africa, Botswana, Tanzania and Lesotho.
3% By Volume, 8% by Value
Collective diamond production would total five million carats a year, which is equivalent to 3% of global output, but more importantly the proposed business would account for 8% of diamond supply by value.
The difference between volume and value is the key to Berenberg’s plan which has been published at a time when miners of small and low-grade diamonds are battling a flooded market whereas companies able to supply high-quality gems are generating strong profits.
An uncut 25 carat diamond mined in Botswana.
Values At Trough Levels
Berenberg said in a research report titled “Consolidating African diamond mining” that current valuations of diamond mining companies were at trough levels with lacklustre enthusiasm for the sector.
“We think something new is needed to return this sector to its former glory,” Berenberg said.
The bank said the logical way to start the process would be for a transaction between Lucara and Gem, which would create the go-to business for large diamonds, followed by a transaction with Petra and then with Firestone rolled into the structure.
Each company has its own production profile but Lucara is the best known for big diamonds having given the world the monster Lesedi La Rona in 2015, an 1109 carat stone which sold for $53 million and has since been cut into 67 smaller gems by Graf Diamonds.
Strong Cash Flow
According to Berenberg’s multi-stage merger proposal the new business would emerge with annual revenue of around $1.1 billion and free cash flow of $200 million.
The merged business would overcome problems which hurt investor interest in smaller diamond miners including low stock-market value, high debt levels, project risk, limited growth options and a lack of return to shareholders.
“Our $1.3 billion market capitalization business would have listings in Canada, London and Sweden and, through the ability to pay an attractive dividend (we calculate a possible yield of 7%-to-8%) and the potential to attract investment from a range of global investors,” Berenberg said.