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UPDATE - Letšeng mine sparkles as Gem Diamonds continues to deliver

Published: 20:41 20 Aug 2014 AEST

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An 'exceptional' performance at the world famous Letšeng mine in Lesotho helped Gem Diamonds (LON:GEMD) post an excellent financial performance in the first half of the year, which was welcomed by City analysts.

The firm saw considerable growth in revenue and cash flow, bolstering the balance sheet and means it's on track for a first dividend payment for the 2014 year.

The market too reacted warmly to the statemement, with shares up 3.13% to 214.25p.

Clifford Elphick, the chief executive, told investors: "The ongoing focus on low capex, value accretive projects, resulting in increased diamond liberation and reduced diamond damage have been implemented at Letšeng and are bearing fruit.  

"This, together with the current mine plan and the higher proportion of satellite pipe ore mined during the period, has resulted in a 29% increase in carats recovered compared to the corresponding 2013 period," he said, adding the half year had seen strong sales and robust demand.

At Letseng, 54,678 carats were recovered - 29% more than the 42 268 carats in the first half last year, while three stone with greater than 100 carats were recovered.

These were a 162.02 carat, a 161.31 carat and a 132.55 carat, achieving a whopping total sales value of US$21million.

Meanwhile, at the Ghaghoo mine in development in Botswana, good progress has been made with the mine having been built on time and on budget and commissioning has begun. 

First diamonds have been produced during the commissioning and a 20 carat and two 10 carat diamonds have been recovered from the first 2,400 carats recovered as at end of June 2014, Gem said.

For the six months to end June, overall group revenue rose 54% to US$148.9mln (2013: US$96.5mln), while underlying earnings (EBITDA) was lifted 87% to US$62.2mln.

The firm had cash on hand of US$113.9 million as at the end of June, of which US$98.4 million was attributable to Gem.

VSA Capital said it saw the "strong results" as extremely positive, with falling costs and increased production coupled with strong product demand and pricing.

Meanwhile City firm Investec noted: "The company is running well, with the balance sheet position looking good for dividends. The company will, however, have to keep some powder dry if it wants to ramp up Ghaghoo towards more commercial production rates."

SP Angel added: "A consistent mix of satellite and main pipe ore in H2 2014 with Ghaghoo scheduled to come into production the second half of the year should see a good performance in the second half with positive price momentum continuing in the diamond market."

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