- Gem Diamonds expects to find more large stones in second half
- Company writes down value of low-quality Botswana mine
After unearthing a dozen giant diamonds last year, one mining company is having a hard time replicating that success.
Gem Diamonds Ltd., which mines the stones in Lesotho and Botswana, recovered only one top-quality diamond bigger than 100 carats in the first half, leading to a decline in sales and profits. Last year, the company found 12 diamonds bigger than 100 carats at the company’s Letseng mine.
“We were not in our best ground,” said Chief Executive Officer Clifford Elphick said in a telephone interview. “It’s hard, with 100 percent confidence, to say we’re going to catch up to the performance of last year.”
The Letseng mine in Lesotho produces some of the world’s best quality and most expensive diamonds, including a 357-carat stone that sold for 19.3 million last year.
Elphick said the company expects to find more large diamonds in the second half. The dearth of big stones caused Gem’s average selling price to fall 16 percent in the first half to $1,899 a carat. That’s still the highest in the industry. The company said it has already found a 104 carat diamond in July.
It’s been a difficult 12 months for diamond producers after prices fell 18 percent last year, the most since the financial crisis of 2008, as Chinese demand slowed and an industrywide credit crunch hit buyers who cut, polish and manufacture the stones.
“The top-quality diamonds are holding their prices,” Elphick said. “There doesn’t seem to be any downward pressure, there doesn’t seem to be any upward pressure. It’s steady as she goes.”
While prices for the best stones have proved resilient, the lower end of the market has been hit hard. Gem Diamonds took a $40 million writedown on its Ghaghoo mine in Botswana, which produces diamonds that sold for $157 a carat in the first half. Prices for the low-end of the market will likely stay flat over the next six months, Elphick said.
Gem Diamonds reported revenue of $109.1 million for the first half, a 7.5 percent decrease from a year earlier. Profit excluding exceptional items fell 13 percent to $13.4 million. The company had a net loss of $26.6 million after the writedown.