Chief executive Clifford Elphick admitted that it had been "some time in coming" as Gem Diamonds delivered records in both its operational and financial performance. The company's cornerstone Letseng mine in Lesotho increased production by 24 per cent to a best ever 112,367 carats. The grade (concentration of diamonds in ore) recovered from the mine had previously disappointed, but improved significantly last year, rising 35 per cent to 1.62 carats per hundred tonnes.
Stones from Letseng achieved a 29 per cent increase in average selling price to $2,776 (£1,749) per carat, which reflects the first full year of the company's "smart sale" marketing strategy. This sees some stones sold not through traditional auctions, but through jewellers such as Tiffany & Co – with which Gem has a sales agreement for rough stones – to capture the additional value associated with certain brands.
The 'Kholo' project to expand Letseng will see Gem invest $280m to double the tonnage of ore that can be treated and thereby increase annual production to around 180,000 to 200,000 carats by 2014. The company is also developing the Ghaghoo mine in Botswana from which first production is expected next year. Away from Africa, the Ellendale mine in Western Australia continues to struggle and may be sold.
Northland Securities is forecasting 2012 EPS of 74¢.
| GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 283p | MARKET VALUE: | £392m | |
| TOUCH: | 282-285p | 12-MONTH HIGH: | 300p | LOW: 173p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 10 | |
| NET ASSET VALUE: | 302¢ | NET CASH: | $142m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 153 | 68 | 40 | nil |
| 2008 | 297 | -368 | -597 | nil |
| 2009 | 243 | 39 | 17 | nil |
| 2010 | 266 | 54 | 15 | nil |
| 2011 | 396 | 156 | 47 | nil |
| % change | +49 | +186 | +213 | – |
£1=$1.587 | ||||
