TIDMGEMD
RNS Number : 0496W
Gem Diamonds Limited
06 February 2017
6 February 2017
GEM DIAMONDS LIMITED
Q4 2016 Trading Update
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds" or the
"Company" or the "Group") is pleased to provide the following
Trading Update detailing the Group's operational and sales
performance for the Period 1 October 2016 to 31 December 2016 ("Q4
2016" or the "Period").
Letšeng:
Full year operational guidance achieved
-- Waste mined 7 861 775 tonnes (19% increase from 6 626 385 in
Q3 2016), taking full year waste mined to 29 776 058 tonnes.
-- Ore treated 1 697 070 tonnes (5% increase from 1 612 728 in
Q3 2016), taking full year ore treated to 6 646 098 tonnes.
-- Recovered 26 438 carats during the Period (8% increase from
24 388 carats in Q3 2016) taking full year production to 108
206.
-- 7 diamonds sold for more than US$ 1.0 million in the Period
generating revenues of US$ 12.3 million.
-- During the Period US$ 109 677 per carat was achieved for a
12.31 carat pink diamond and US$ 53 451 per carat for a 56.48 carat
white diamond.
-- During the Period Letšeng recovered fewer large special
diamonds than expected, resulting in an average US$ per carat of
US$ 1 444, bringing the average for the year to US$ 1 695.
Ghaghoo:
Optimisation programme continued
-- Mill refurbishment completed on time and within budget with positive results.
-- 67 466 tonnes of ore treated during the Period (up 24% from 54 337 in Q3 2016).
-- 12 380 carats recovered during the Period, an increase of 60%
from previous quarter (7 720 carats in Q3 2016) with a positive
presence of larger diamonds than typically recovered.
-- During the Period, 16 989 carats were sold on open tender for
a total value of US$ 2.4 million, achieving an average price of US$
142 per carat.
-- Largely due to the weak prices achieved, the future of the
operation remains under review, as previously announced.
Financial:
-- The Group had US$ 30.8 million cash on hand as at 31 December
2016, of which US$ 28.5 million is attributable to Gem Diamonds
Limited.
-- US$ 26.9 million of available facilities have been drawn down
resulting in a net cash position of US$ 3.8 million. At Period end,
the Group had US$ 53.3 million worth of undrawn and available
facilities.
Gem Diamonds' CEO, Clifford Elphick commented:
"The market for large special diamonds for which Letšeng is
renowned has remained firm to date, but the relative paucity of
these diamonds recovered during 2016 has had an adverse impact upon
the Company's revenues and cash flows during the year.
Operationally, all other production metrics were achieved and
within guidance issued.
At Ghaghoo, the fall in prices of its diamonds from US$ 210 per
carat in early 2015 to US$ 142 per carat at its most recent sale in
December 2016, emphasises the weak state of the diamond market for
this category of diamonds. With the Company's focus on profitable
production, and as indicated previously, the future of the
operation remains under review with a decision scheduled to be made
during Q1 2017 with regards to its current financial
viability."
1. Diamond Market
The overall mood of the diamond market continues to remain
cautious. Demand for, and prices of, Letšeng's large high quality
white diamonds have remained firm throughout the Period. The
smaller commercial goods mined at Ghaghoo remain under pressure.
The recent Indian demonetisation and high levels of polished
inventory available, and because the supply of this category of
diamonds will increase significantly from production of some 7
million carats per annum from 2017 from the new Liqhobong, Renard
and Gahcho Kué mines, the Company believes prices for this category
may remain constrained.
2. Letšeng
2.1. Production
Q4 2016 Q3 2016 QoQ Full year 2016 YoY
% Change Full year 2015 % Change
------------------------ ---------- ---------- ---------- --------------- ----------------- ----------
Waste mined (tonnes) 7 861 775 6 626 385 19% 29 776 058 24 010 847 24%
------------------------ ---------- ---------- ---------- --------------- ----------------- ----------
Ore treated (tonnes) 1 697 070 1 612 728 5% 6 646 098 6 679 581 -1%
------------------------ ---------- ---------- ---------- --------------- ----------------- ----------
Carats recovered 26 438 24 388 8% 108 206 108 579 0%
------------------------ ---------- ---------- ---------- --------------- ----------------- ----------
Grade recovered (cpht) 1.56 1.51 3% 1.63 1.63 0%
------------------------ ---------- ---------- ---------- --------------- ----------------- ----------
Letšeng plants treated a total of 1.4 million tonnes of ore
during the Period, 75% of which was sourced from the Main pipe, and
25% from the Satellite pipe. The balance of the ore (0.31 million
tonnes) was treated through the Alluvial Ventures contractor plant,
77% of which was sourced from the Main pipe and 23% from
stockpiles. Waste mined during the full year was 29 776 058 tonnes
and the overall stripping ratio for the year was 4.4.
During 2016, the frequency of exceptional large diamonds being
recovered was lower than expected. Following a detailed review of
the resource and operational processes, it was considered that this
paucity of large exceptional stones is due to the normal
statistical short term variability of the resource, as was
experienced during 2012. This is expected to revert to normal
recovery levels in the near future. In addition, options are
currently being assessed to further enhance recovery and reduce
damage to these size diamonds through a large-diamond specific
recovery plant.
A review of the Letšeng mine plan is currently being undertaken
to further optimise the waste mining profile which in turn will
improve cashflow. This review will be completed during Q1 2017 and
is likely to lead to reduced waste tonnes mined.
2.2. Rough diamond sales and market for Letšeng diamonds
Q4 2016* Q3 2016* QoQ Full year 2016* Full year 2015* YoY
% Change % Change
---------------------------- --------- --------- ---------- ---------------- ---------------- ----------
Carats sold 26 341 26 656 -1% 108 945 102 778 6%
---------------------------- --------- --------- ---------- ---------------- ---------------- ----------
Total value (US$ millions) 38.0 40.4 -6% 184.6 236.3 -22%
---------------------------- --------- --------- ---------- ---------------- ---------------- ----------
Achieved US$/ct 1 444 1 516 -5% 1 695 2 299 -26%
---------------------------- --------- --------- ---------- ---------------- ---------------- ----------
(*Includes carats extracted at rough value for polishing.)
Two tenders were held during the Period with 26 341 carats sold
for a total value of US$ 38 million, achieving an average price of
US$ 1 444 per carat.
The lower revenues and average US$ per carat achieved during the
Period was largely the consequence of a continued paucity of high
quality large diamonds seen in 2016, rather than any notable
decrease in demand or weakening of the prices for these diamonds.
The decrease in annual revenue contribution from the +100 carat
high value diamonds in 2016 compared to the previous four years is
illustrated in the table below:
Year Number of diamonds Number of diamonds Revenue contribution
> 100 carats > 100 carats that of diamonds >
achieved more 100 carats
than $10 000 per
carat
------ ------------------- ------------------- ---------------------
2012 3 1 US$ 6.8m
------ ------------------- ------------------- ---------------------
2013 5 2 US$ 15.6m
------ ------------------- ------------------- ---------------------
2014 8 7 US$ 43.6m
------ ------------------- ------------------- ---------------------
2015 11 7 US$ 65.4m
------ ------------------- ------------------- ---------------------
2016 4 2 US$ 12.2m
------ ------------------- ------------------- ---------------------
Letšeng's large high quality diamonds continue to achieve firm
prices. In October 2016, a 12.31 carat pink diamond sold for US$
109 677 per carat and a 56.48 carat white diamond also recovered
during the Period, achieved US$ 53 451 per carat.
2.3. Costs
Letšeng has managed to maintain its costs within expected
targets. Costs are largely in line with the full year 2016 guidance
and are expected to approximate the figures below:
Direct cash costs (before waste) per tonne treated: Maloti
160
Operating costs per tonne treated(1) : Maloti 220
Mining waste cash costs per tonne of waste: Maloti 31
(1) Operating costs excludes royalty, selling costs,
depreciation and mine amortisation but includes inventory, waste
and ore stockpile adjustments.
Waste cast costs have marginally exceeded the upper end of
guidance mainly driven by the lower volume of waste mined (at the
lower end of guidance).
Guidance for the 2017 year will be published during March 2017
together with the new mine plan.
3. Ghaghoo
Q4 2016 Q3 2016 QoQ Full year 2016* Full year 2015 YoY
% Change % Change
------------------------ -------- -------- ---------- ---------------- ---------------- ----------
Ore treated (tonnes) 67 466 54 337 24% 217 372 326 922 -34%
------------------------ -------- -------- ---------- ---------------- ---------------- ----------
Carats recovered 12 380 7 720 60% 40 976 91 499 -55%
------------------------ -------- -------- ---------- ---------------- ---------------- ----------
Grade recovered (cpht) 18.4 14.2 29% 18.9 28.0 -33%
------------------------ -------- -------- ---------- ---------------- ---------------- ----------
(*The decision to downsize the operation was taken in 2016 and
the operational results reflect this reduction when compared to
2015.)
Planned operational improvements progressed well. Mill
modifications yielded positive results with increased and improved
diamond liberation. These modifications however are not sufficient
to sustain the operation given current weak prices achieved for the
Ghaghoo diamonds.
In December, 16 989 carats were sold on tender for a total value
of US$ 2.4 million, achieving US$ 142 per carat.
4. Health, Safety, Social and Environment (HSSE)
One Lost Time Injury (LTI) occurred during the Period. This has
resulted in a Group Lost Time Injury Frequency Rate (LTIFR) of 0.17
for 2016.
No significant community or environmental incidents have
occurred across the Group in 2016.
For further information:
Gem Diamonds Limited Celicourt Communications
Juliet Cox Joanna Boon / Mark Antelme
Investor Relations Manager Tel: +44 (0) 207 520 9265
Tel: +44 (0) 203 043 0280
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
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, high quality, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond
mine in the world.
www.gemdiamonds.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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