TIDMGEMD
RNS Number : 2526F
Gem Diamonds Limited
11 November 2015
11 November 2015
GEM DIAMONDS LIMITED
Trading update for Q3 2015
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds" or the
"Company" or the "Group") is pleased to report a Trading Update
detailing the Company's operational and sales performance for the
Period 1 July 2015 to 30 September 2015 ("Q3 2015") or ("the
Period").
Letšeng:
Prices firm, costs down and production up
-- Revised 2015 production and cost guidance following strong
operational performance and cost discipline
-- Average price of US$ 2 578 per carat was achieved in Q3 2015
-- 13 rough diamonds achieved a value of greater than US$ 1.0
million each, including an exceptional
quality 357 carat Type IIa white diamond which achieved US$ 19.3 million on tender
-- A total of three diamonds of over 100 carats each were sold in the Period
-- Zero Lost Time Injuries (LTIs) at Letšeng for the past 365 days
Ghaghoo:
Grade remains higher than reserve and carat production up
-- Average recovered grade of 29.1 cpht (compared to the average reserve grade of 27.8 cpht)
-- Five development tunnels being mined, with a further four tunnels being developed
-- 115 diamonds greater than 4.8 carats each were recovered
during the Period, including 13 diamonds larger than 10.8
carats
-- 31 923 carats recovered during the Period, including two blue
rough diamonds weighing 2.2 carats and 1.5 carats
-- Second parcel sold in July achieving an average price of US$
165 per carat, bringing the total average
US$ per carat achieved for the year to date to US$ 176 per carat
-- Zero LTIs at Ghaghoo for the past 365 days
Financial:
-- Group cash on hand of US$ 86.1 million cash as at 30
September 2015, of which US$ 72.0 million attributable to Gem
Diamonds
-- Group has drawn down US$ 32.1 million of its available
facilities, resulting in net cash position of US$ 54.0 million
-- During the Period, Letšeng paid dividends of US$ 20.2
million, which resulted in a net cash flow of US$ 12.7 million to
Gem Diamonds and a cash outflow from the Group as a result of
withholding taxes of US$ 1.4 million and payment of the Government
of Lesotho's dividend portion of US$ 6.1 million.
Gem Diamonds' CEO, Clifford Elphick commented:
"It is pleasing to see that the prices achieved for Letšeng's
diamonds during the third quarter have remained robust despite the
challenging market conditions experienced throughout this Period.
The large high quality diamonds, for which Letšeng is renowned,
have contributed to a strong Q3 2015 average price of US$ 2 578 per
carat.
Letšeng has also delivered a strong operational performance,
with ore treated, grade and carat recoveries ahead of those of the
previous quarter and expected to exceed original full year
guidance.
Ghaghoo continues its ramp up, with ore treated and carats
recovered up over 30% on the previous quarter. The Ghaghoo
production faces a very challenging market at present."
1. Diamond Market
Prices for the large, high value rough production from Letšeng
remained robust during the Period, achieving an average of US$ 2
578 per carat, amid continued liquidity constraints, high inventory
levels and the slowdown of the Chinese economy. The general
sentiment in the diamond market remained cautious, and with
continuing global macro-economic uncertainty, has placed further
downward pressure on both rough and polished diamond prices.
Following the Hong Kong Diamond and Jewellery Show in September
2015, focus has now turned to the US market and the approaching
year-end holiday sales as diamantaires look to sell down polished
diamond inventories.
2. Letšeng
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
Q3 2015 H1 2015 9 months to 30 September 2015
------------------------- ---------- ----------- ------------------------------
Waste stripped (tonnes) 6 244 432 11 364 784 17 609 216
------------------------- ---------- ----------- ------------------------------
Ore treated (tonnes) 1 758 295 3 110 351 4 868 646
------------------------- ---------- ----------- ------------------------------
Carats recovered 29 460 50 019 79 479
------------------------- ---------- ----------- ------------------------------
Grade recovered (cpht) 1.68 1.61 1.63
------------------------- ---------- ----------- ------------------------------
During the Period, 6.24 million tonnes of waste were mined, in
line with the revised life of mine plan which will allow increased
levels of higher grade ore from the Satellite pipe to be mined
annually.
Following the Plant 2 Phase 1 upgrade, ore processed through the
plant is currently achieving the planned head feed tonnage which
will increase throughput by 250 000 tonnes on an annualised
basis.
Letšeng's Plants 1 and 2 treated a total of 1.47 million tonnes
of ore during the Period, of which 55% was sourced from the Main
Pipe and 45% from the Satellite pipe. The balance of the ore (0.29
million tonnes) was treated through the Alluvial Ventures
contractor plant, of which 70% was sourced from the Main pipe and
30% from stockpiles.
Following on from the good progress made in the Satellite pipe
waste stripping, the year to date contribution of ore from the
Satellite pipe has already reached 1.58 million tonnes against the
initial full year target of 1.65 million tonnes and is now expected
to reach 1.8 million tonnes by year end.
2.2 Rough Diamond Sales and Diamonds Extracted for Manufacturing
Q3 2015* H1 2015* 9 months to 30 September 2015*
---------------------------- --------- --------- -------------------------------
Carats sold 25 460 46 961 72 421
---------------------------- --------- --------- -------------------------------
Total value (US$ millions) 65.6 106 .3 171.9
---------------------------- --------- --------- -------------------------------
Achieved US$/ct 2 578 2 264 2 374
---------------------------- --------- --------- -------------------------------
*Includes carats extracted at rough value for polishing.
Two Letšeng tenders were held in the Period, achieving an
average price of US$ 2 578* per carat, bringing the 12 month
rolling average at 30 September 2015 to US$ 2 303* per carat.
33 carats were extracted for own manufacturing during the Period
at a rough value of US$ 1.0 million.
2.3 Letšeng revised guidance for 2015
Guidance has been revised from that previously reported in March
2015.
FY 2015 FY 2015
--------------------------- ---------------- -----------------
Revised Guidance Previous Guidance
September 2015 March 2015
--------------------------- ---------------- -----------------
Waste tonnes mined (Mt) 23.5 - 24.5 22 - 24
--------------------------- ---------------- -----------------
Ore treated (Mt) 6.5 - 6.7 6.3 - 6.5
--------------------------- ---------------- -----------------
Carats recovered (Kct) 105 - 108 102 - 107
--------------------------- ---------------- -----------------
Carats sold (Kct) 103 - 105 102 - 107
--------------------------- ---------------- -----------------
Direct cash costs (before
waste) per tonne treated
(Maloti) 140 - 150 145 - 155
--------------------------- ---------------- -----------------
Mining waste cash costs
per tonne of waste mined
(Maloti) 26 - 28 28 - 30
--------------------------- ---------------- -----------------
Operating costs per tonne
treated(1) (Maloti) 205 - 225 210 - 230
--------------------------- ---------------- -----------------
1. Operating costs per tonne excludes royalty, selling costs,
depreciation and mine amortisation, but includes inventory, waste
and ore stockpile adjustments.
3. Ghaghoo
Gem Diamonds' wholly-owned subsidiary, Gem Diamonds Botswana, is
currently developing the Ghaghoo mine ("Ghaghoo") in Botswana.
Q3 2015 H1 2015 9 months to 30 September 2015
------------------------ -------- -------- ------------------------------
Ore treated (tonnes) 109 751 132 125 241 876
------------------------ -------- -------- ------------------------------
Carats recovered 31 922 35 283 67 205
------------------------ -------- -------- ------------------------------
Grade recovered (cpht) 29.1 26.7 27.8
------------------------ -------- -------- ------------------------------
All ore mined is being sourced from tunnels one to five on Level
1. Production build up is continuing. Development of the next four
tunnels is well advanced in order to generate reserves for
sustainable production. The water at the rim tunnel has been
successfully sealed and development has now progressed through the
fissure area.
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