TIDMGEMD
RNS Number : 5017U
Gem Diamonds Limited
30 July 2015
30 July 2015
GEM DIAMONDS LIMITED
H1 2015 Trading Update
Gem Diamonds Limited (LSE: GEMD) is pleased to provide a Trading
Update detailing the Company's operational and sales performance
for the period 1 January 2015 to 30 June 2015 (H1 2015) (the
Period), ahead of its Half Yearly results which will be released on
19 August 2015.
Letšeng:
Successful delivery of projects and solid operational
performance; prices achieved for high value diamonds remain firm
despite difficult market conditions
-- Average price of US$ 2 264 per carat was achieved in H1 2015
(US$ 2 338 per carat in H2 2014)
-- 13 rough diamonds achieved a value of greater than US$ 1.0 million each
-- In addition to the 314 carat Type IIa white diamond
previously reported, another outstanding quality 357 carat Type IIa
white diamond was recovered and is expected to be sold in Q3
2015
-- Further four diamonds of over 100 carats each were sold in
the Period, including a top quality 108 carat Type IIa rough
diamond which sold for US$ 65 226 per carat
-- The Plant 2 Phase 1 upgrade and the Coarse Recovery Plant
construction were successfully completed on time and within budget.
On the first day of its operation, the new XRT unit recovered a
high quality 52 carat Type IIa diamond
Ghaghoo:
Recovered grade in latter part of H1 2015 was above reserve
grade; recovery of larger diamonds beginning to fill gaps in size
frequency distribution model
-- Recovered grade fluctuated between 28 and 30 cpht in the last
two months of H1 2015 (compared to the reserve grade of 27.8
cpht)
-- Small size blue and pink coloured diamonds recovered;
confirming presence of these valuable diamonds in the ore body
-- 5 stoping tunnels opened providing increased ore availability
-- A 48 carat diamond was recovered in July 2015 with an
increasing number of diamonds in the 10 to 30 carat size range
being recovered, albeit still below modelled frequencies
-- A second parcel of 29 891 carats of commissioning phase
production sold for US$ 4.9 million in July 2015 (US$ 165 per
carat) in a difficult market
Financial:
-- The Group had US$ 83.8 million cash on hand as at 30 June
2015, of which US$ 70.5 million is attributable to Gem Diamonds
-- The Group has drawn down US$ 34.2 million of its available
facilities, resulting in a net cash position of US$ 49.6
million
-- A maiden annual dividend of 5 US cents per share (US$ 6.9 million) was paid on 9 June 2015
Gem Diamonds' CEO, Clifford Elphick, commented:
"The recovery of large high quality diamonds continues to define
the Letšeng mine and it is pleasing to see that prices for these
goods have remained firm despite the current difficult diamond
market conditions. The Plant 2 Phase 1 upgrade was completed on
time and within budget and will achieve its increased head feed
target of an additional 250 000 tonnes on an annualised basis. In
addition, the construction of the Coarse Recovery Plant is
complete, and during commissioning, the first diamonds from run of
mine ore were recovered.
"The development of the Ghaghoo mine is progressing slower than
planned due to difficult ground conditions which have hampered slot
development in the first five production tunnels and constrained
production ramp-up. Specialist expertise has been employed to
ensure there is no further major ingress of water as the access
decline and rim tunnel on Level 1 both begin advancing through the
water fissure area in order to gain access to the second production
section. A second parcel of Ghaghoo commissioning goods was sold in
July for
US$ 4.9 million (US$ 165 per carat) in a difficult market.
Encouragingly, a number of larger diamonds and small coloured
diamonds have also been recovered during the Period."
1. Diamond Market
In H1 2015 the overall diamond market experienced high inventory
levels and continued liquidity concerns. This, combined with global
macro-economic uncertainties, has continued to place pressure on
both rough and polished diamond prices. Letšeng's high value large
production has remained resilient through the Period, however, the
current market conditions have had a negative effect on the pricing
achieved for the more commercial Ghaghoo production.
2. Lesotho
Gem Diamonds holds a 70% shareholding in Letšeng Diamonds (Pty)
Ltd (Letšeng) in partnership with the Government of the Kingdom of
Lesotho, which owns the remaining 30%.
2.1 Production
Q1 2015 Q2 2015 H1 2015 H2 2014 HoH Change %
------------------------- ---------- ---------- ----------- ---------- -------------
Waste stripped (tonnes) 5 299 922 6 064 862 11 364 784 9 863 293 15%
------------------------- ---------- ---------- ----------- ---------- -------------
Ore treated (tonnes) 1 427 656 1 682 695 3 110 351 3 192 613 -3%
------------------------- ---------- ---------- ----------- ---------- -------------
Carats recovered 22 472 27 547 50 019 53 890 -7%
------------------------- ---------- ---------- ----------- ---------- -------------
Grade recovered (cpht) 1.57 1.64 1.61 1.69 -5%
------------------------- ---------- ---------- ----------- ---------- -------------
During the Period, 11.4 million tonnes of waste was mined, up
15% compared with H2 2014. This is in line with the revised mine
plan (published in March 2015), which will allow increased levels
of higher grade ore from the Satellite pipe to be mined
annually.
As previously reported, the Plant 2 Phase 1 upgrade was
completed on schedule and within the budget of
M50 million (US$ 4.2 million), with the shutdown for the
changeover completed within 19 days. The shutdown of Plant 2
limited the production days available during February and March and
this is reflected in the lower production figures reported for Q1
2015.
Following the upgrade, Plant 2 is operating well and is on track
to achieve its increased head feed target of an additional 250 000
tonnes on an annualised basis. Letšeng is expected to deliver
against the new mine plan and guidance as updated on 17 March 2015
remains unchanged.
Letšeng's Plants 1 and 2 treated a total of 2.6 million tonnes
of ore during the Period, 67% of which was sourced from the Main
pipe and 33% from the Satellite pipe. The balance of the ore (0.5
million tonnes) was treated through the Alluvial Ventures
contractor plant, 80% of which was sourced from the Main pipe and
20% from stockpiles. Total treated tonnes were down 3% against H2
2014 due to the aforementioned shutdown. For the Period, the grade
was down 5% against H2 2014 due to more Satellite pipe higher grade
ore having been treated in H2 2014.
Although the power supply situation within South Africa and
neighbouring states continues to be unreliable, with frequent and
numerous power outages, the impact upon operations at Letšeng has
been minimal due to the additional on-site back-up power generating
capacity installed in 2014.
2.2 Rough Diamond Sales and Diamonds Extracted for Manufacturing
H1 2015 H2 2014 % Change
---------------------------- -------- -------- ---------
Carats sold 46 961 55 164 -15%
---------------------------- -------- -------- ---------
Total value (US$ millions) 106.3 129.0 -18%
---------------------------- -------- -------- ---------
Achieved US$/ct 2 264 2 338 -3%
---------------------------- -------- -------- ---------
As previously reported, a strategic revision to the number,
composition and timing of the Letšeng tenders was made, with eight
tenders now being held during the year (instead of 10). During the
Period, Letšeng held four tenders, achieving an average price of
US$ 2 264* per carat (compared to US$ 2 338* per carat in H2 2014).
This brings the 12 month rolling average to US$ 2 304* per
carat.
Letšeng's small commercial production from the second and third
exports, which had been held over for sale in June 2015, achieved
US$ 7.7 million (compared to the estimated value of US$ 7.3 million
which was reported in the Sales and Operational Update on 21 May
2015).
In H1 2015, 237 carats were extracted for manufacturing at a
rough value of US$ 3.0 million. US$ 6.9 million (at rough value)
remained in polished inventory at the end of the Period.
* Includes carats extracted at rough valuation for
polishing.
2.3 Projects
The construction of the Coarse Recovery Plant was completed on
schedule and within the budget of
M140 million (US$ 11.7 million) by the end of Q2 2015.
Commissioning continues and the first diamonds have been recovered
from run of mine ore.
3. Botswana
Gem Diamonds' wholly-owned subsidiary, Gem Diamonds Botswana, is
currently developing the Ghaghoo mine (Ghaghoo) in Botswana.
During the Period, 132 125 tonnes of ore were treated, sourced
mainly from Level 0, whilst work continued in establishing the
production section on the first production level (Level 1) and
ramping up to steady state production. Extraction of ore from Level
0 was completed in early June and since then all ore has been
sourced from Level 1.
Five tunnels on Level 1 have now been fully developed to the
northern orebody-country rock contact, with development having
commenced on the next two tunnels. Slot development and opening has
progressed steadily, albeit slower than anticipated due to
localised difficult ground conditions, but has now been completed
from Tunnel 1 to Tunnel 5 which will allow the retreat of the
production faces back along these tunnels. The slower than
anticipated progress in the slot opening has constrained the
production ramp-up.
Development of the decline down to the Level 2 production level
progressed to a point, but then was halted just short of the same
main water fissure that was intersected on Level 1. Both the
decline and the rim tunnel on Level 1 need to advance through the
fissure in order for development to continue in order to allow
access to the second production section. Specialists have been
deployed to ensure that the fissure is fully sealed prior to the
tunnels advancing, and work is progressing slowly and carefully in
order to avoid any further major ingress of water.
As the tonnage of ore from underground increases, the processing
plant will continue to ramp up to the name plate capacity of 60 000
tonnes per month. In both May and June, over 32 000 tonnes of ore
per month were treated, with recovered grades in excess of the
modelled reserve grade of 27cpht being consistently achieved,
resulting in a total recovery of 35 283 carats for the Period.
Optimisation of processing and recovery efficiencies within the
plant is on-going.
With the increasing tonnage being treated and the plant running
more consistently, it has been encouraging to see the gaps in the
larger sizes of the size frequency distribution starting to be
filled. During the Period, eight diamonds larger than 10.8 carats
were recovered, including a 41 carat and a 35 carat diamond. In
July a 48 carat diamond was recovered, the largest diamond
recovered at Ghaghoo to date. Importantly, a number of fancy colour
diamonds, ranging from Blues, Pinks, Orange, Lilacs and Yellows,
although predominantly in the smaller sieve sizes, were also
recovered during the Period.
The second sale of Ghaghoo commissioning production took place
in July, achieving a total value of US$ 4.9 million (US$ 165 per
carat). Although this was below the average price achieved for the
first sale of US$ 210 per carat (total value of US$ 2.1 million)
during the Period, the production was not comparable from a quality
perspective and this, together with a declining market for these
goods, had a negative effect on the price achieved.
It is anticipated that the next Ghaghoo sale will take place
before the end of the year and will include a higher proportion of
diamonds from the main body of the VKSE phase of the kimberlite
ore.
4. Health, Safety, Social and Environment (HSSE):
The Group continues to strive toward its goal of zero harm to
its people and the environment and to operate within the Group's
sustainable development framework.
For the Period, no lost time injuries were recorded, resulting
in a Group-wide Lost Time Injury Frequency Rate (LTIFR) of 0.00 and
the Group All Injury Frequency Rate (AIFR) was 3.26.
Gem Diamonds continues to work closely with its project affected
communities to ensure that the social projects implemented continue
to be sustainable.
Zero major or significant environmental incidents have occurred
across the Group for the year to date.
For further information:
Gem Diamonds Limited
Sherryn Tedder, Investor Relations
Tel: +44 (0) 203 0430 2080
Mob: +44 (0) 7778 246 321
Bell Pottinger
Daniel Thöle / Joanna Boon
Tel: +44 (0) 203 772 2500
About Gem Diamonds:
Gem Diamonds is a leading global diamond producer of high value
diamonds. The company owns 70% of the Letšeng mine in Lesotho and
100% of the Ghaghoo mine in Botswana. The Letšeng mine is famous
for the production of large, top colour, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond
mine in the world. Since Gem Diamonds' acquisition of Letšeng in
2006, the mine has produced four of the twenty largest white gem
quality diamonds ever recorded.
Gem Diamonds has a growth strategy based on the expansion of the
Letšeng mine and bringing the Ghaghoo mine into production, while
maintaining its strong balance sheet. The Company seeks to maximise
revenue and margin from its rough diamond production by pursuing
cutting, polishing and sales and marketing initiatives further
along the diamond value chain. With favourable supply/demand
dynamics expected to benefit the industry over the medium to long
term, particularly at the high end of the market supplied by Gem
Diamonds, this strategy positions the Company well to generate
attractive returns for shareholders in the coming years.
www.gemdiamonds.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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