The Lesotho government has renewed the mining lease for LSE-listed Gem Diamonds’ Letšeng mine, CEO Clifford Elphick confirmed last week.

The terms of the renewed mining lease were agreed with the Lesotho Mining Board, following a statutory negotiation process. The lease was renewed for an immediate period of ten years, with exclusive rights granted to Letšeng to renew the mining lease for a further ten years.

The renewal follows on the back of Letšeng’s high-value large diamond production having experienced price pressure during the third quarter, ended September 30.

This, together with the diamonds sold from the lower-value ore mined in the previous quarter, resulted in an average price 6% lower than the previous quarter, the miner said in a statement.

Letšeng’s plants treated 1.5-million tonnes of ore during the three-month period, of which 400 000 t was sourced from the Satellite pipe and 1.1-million from the Main pipe.

Capital expenditure (capex) for the year-to-date has been reduced to about $7-million, thereby reducing the expected capital spend for the full year to about $12-million.

Last week, Gem also updated its guidance for the full year, with improved ore tonnes treated, lower unit costs, lower capex and marginally lower carat sales expected.

Following the positive impact of the improved plant performance in the quarter and the lower contribution from Satellite pipe ore and its scheduling impacting on carat sales for the year, production guidance for the full year had been revised, the miner said.

It added that, given the consistent performance of Letšeng’s plants, ore treated guidance has been increased and, owing to the contact variance in the Satellite pipe, the forecast contribution for the year has been reduced.

The overall impact on carats recovered for the year remains unchanged; however, carats sold have been reduced, owing to the lower contribution from the higher-grade Satellite pipe.

During the three months under review, the miner recovered four diamonds greater than 100 ct, bringing the total to seven for the nine-month period to September 30, 2019. Gem Diamonds sold 25 631 ct during the period, and achieved an average price of $ 1417/ct.

Gem Diamonds sold five diamonds for more than $1-million each, generating revenue of about $11-million during the period.

Meanwhile, commissioning of the integrated pilot plant to detect diamonds within kimberlite and the nonmechanical liberation unit continues, with ramp-up and ongoing testing of the technology expected to continue.

Touching on its business transformation objectives, Gem noted that the targeted $100-million in incremental revenue, productivity improvements and cost savings over the four-year period to end-2021 was on track to be delivered, with $50-million expected by the end of this year.

The sales process of the miner’s Ghaghoo mine, which is subject to regulatory approvals in Botswana, is ongoing, with finalisation expected before December 31.

The application to transfer the mining lease to the buyers has been filed with the Department of Mines.

Financial

At the end of the quarter, Gem had $21.9-million in cash, of which $17.6-million was attributable to Gem.

The group’s net debt position was $11.6-million.

In compliance with local tax requirements, Letšeng made additional tax payments of $4.2-million during the three months based on 2018’s profitability. This payment increased to $17.5-million the total paid to date, resulting in an estimated tax receivable balance of $7.8-million at period-end.

Normalised corporate costs incurred are expected to reduce by about $1-million for the full year, compared with 2018’s costs of $9.3-million.

Undrawn and available facilities at period- end were $49.3-million.