JOHANNESBURG (miningweekly.com) – A strong first-half financial and operational performance by London-listed Gem Diamonds “bodes well” for a maiden dividend in March.

The diamond miner ended the six months to June with a cash position of $114-million – a jump from the $71-million reported at the end of December – paving the way for the board to consider declaring a dividend for the 2014 financial year.

Strong operational performance and good market conditions saw the delivery of $148.9-million in revenue during the first half of the year, a 54% rise on that of the first half of last year. Earnings before interest, tax, depreciation and amortisation were also 87% higher at $62.2-million.

Gem Diamonds posted an attributable profit of $19.7-million for the six-month period under review, up 129% compared with the $8.6-million posted during the first half of 2013.

Basic earnings a share also increased more than 100% from 6.23c in the comparable six months the year before, to 14.28c in the half-year to June.

“Strong sales and robust demand throughout the period have underpinned the positive start to the year,” said Gem Diamonds CEO Clifford Elphick.

“The first half of 2014 was a very strong start to the year for Gem Diamonds with an exceptional performance at Letšeng. The ongoing focus on low capital expenditure, value accretive projects, resulting in increased diamond liberation and reduced diamond damage, have been implemented at Letšeng and are bearing fruit,” he added.

SP Angel on Wednesday indicated that a “consistent mix” of satellite and main pipe ore, with Ghaghoo scheduled to come into production in the second half of the year and a positive price momentum continuing in the diamond market, should result in a “good performance” during the final six months of the year.

However, analysts from Liberum Capital believed that, while market prices would pick up in the fourth quarter, the second half of 2014 would see Gem Diamonds post about half of the first-half earnings, as more of the material treated would be from the lower-value main pipe.

OUTPUT
Gem Diamonds recovered 54 678 ct from Letšeng during the first half of 2014, representing a 29% increase on the 42 268 ct recovered in the comparative period last year. Three diamonds in excess of 100 ct were recovered, achieving a total sales value of $21-million.

During the period under review, the mine had achieved an average of $2 747/ct for the first five tenders of 2014, 58% higher than the $1 741/ct reported in the prior corresponding period.

At Ghaghoo, which had been commissioned on time and within budget, 2 400 ct were recovered by the end of June.

The initial diamonds from Ghaghoo had “been of a higher quality and average size than those mined during the exploration phase,” Elphick said.

“The progress at Ghaghoo is encouraging and the initial sale towards the end of the year will have a strong bearing on the market view about the future economics of the mine,” said Liberum.