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Gem declares maiden 5c a share dividend on back of ‘solid’ year

17th March 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – LSE-listed Gem Diamonds has announced a maiden dividend of 5c a share following a year in which the diamond producer lifted revenue 27% to $271-million and delivered a 57% jump in earnings a share to $0.24.

Similarly, it posted a 35% increase in underlying earnings before interest, taxes, depreciation and amortisation to $104-million for the year ended December 31, with improved revenue driven by a 12% increase in the volume of rough carat sales from the flagship Letšeng mine, in Lesotho, and a 24% increase in achieved diamond prices over the period.

“Management interventions initiated in 2013, effective mining plans and favourable external market conditions for the majority of 2014 have all resulted in a positive impact on revenue,” the company said in a results statement on Monday.

Demand for rough diamonds from Letšeng remained “strong” during the year, with an average $2 540/ct achieved from the sale of 108 963 ct.

This resulted in an overall increase of 39% in Letšeng’s revenue compared with the prior year.

The company said the increased contribution of the higher-grade Satellite pipe ore, together with the higher-than-expected performance of the reserve grade during the year, resulted in Letšeng recovering 108 569 ct – a 14% increase from the prior year.

GHAGHOO GROWTH
Gem Diamonds also continued the development of the Ghaghoo mine, in Botswana, over the year. The mine was currently in Phase 1, with the capital project complete and commissioning progressing well.

By the end of 2014, 48 023 t of ore had been treated, with 10 167 ct recovered, including a 20 ct white diamond, a 17 ct white diamond, and a 3 ct orange diamond.

As part of the mine’s Phase 1 plan, a production rate of around 60 000 t/m was expected to be achieved by mid-year.

Commenting on the results, CEO Clifford Elphick described 2014 as a “solid” year – both financially and operationally – for Gem Diamonds.

“We successfully delivered on a number of key growth objectives, including bringing Ghaghoo into production, significantly enhancing operational efficiencies at Letšeng and delivering a maiden dividend.

“With a continued focus on cost control, the company is in a very strong position financially with a cash balance of $111-million, supported by the high average price achieved for the year,” he outlined.

PROSPECTS
Nonexecutive chairperson Roger Davis added that the long-term outlook for the diamond market remained strong and, despite a weakening of prices in the fourth quarter of 2014, the group expected some firming in the market as banks in Dubai and elsewhere took steps to fill the funding gap that triggered these concerns.

“The medium- to long-term outlook for diamond demand, therefore, is expected to remain favourable, with diamond prices beginning to trend upward in the second half of the year,” he said.

As Gem expanded from a single producing mine to two producing mines, with the ramp-up of production at Ghaghoo, Elphick noted that the market could expect a “significant” shift in production figures.

“While there have been a number of challenges in the diamond market recently, the medium- to long-term fundamentals look positive. This, combined with the resilience of Letšeng diamonds to pricing constraints, leaves Gem Diamonds well placed to take advantage of the favourable supply and demand dynamics in the market in order to continue its growth in 2015 and beyond,” he remarked.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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