The fall-away in prices for smaller, commercial stones continued to burden Gem Diamonds (GEMD) during the first half, along with liquidity concerns linked to the closure of Antwerp Diamond Bank. Underlying cash profits fell more than a quarter to $46.1m (£29.6m), but the miner is on track to meet full-year production guidance following a successful processing upgrade at the flagship Letseng mine in Lethoso.
Encouragingly, the Ghaghoo mine in Botswana has moved into the initial production phase, which determines the most effective production processes required to optimise diamond quality, liberation and recovery rates. Though production ramped up efficiently, progress was slightly slower-than-expected due to difficult localised ground conditions within the orebody. During the period, 35,283 carats were recovered, while the first sale of 10,096 carats of Ghaghoo product was held in February.
The Letseng mine produced 50,019 carats, down on the 54,678 carats during the first half of 2014. This was due to the 19-day shutdown of plant two for treatment capacity improvement. Five diamonds greater than 100 carats were recovered, including a 357 carat white diamond. An average price of $2,264 per carat was realised, slightly down on the $2,747 achieved in 2014, but above analysts' expectations.
Broker Panmure Gordon expects adjusted EPS of 16.6¢ for the full-year, down from 24¢ in 2014.
GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 129p | MARKET VALUE: | £178m | |
| TOUCH: | 128-130p | 12-MONTH HIGH: | 223p | LOW: 123p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 216¢ | NET CASH: | $79.2m | |
| Half-year to 30 June | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 149 | 56.3 | 15.3 | nil |
| 2015 | 118 | 40.7 | 10.7 | nil |
| % change | -21 | -28 | -30 | - |
£1 = $1.56 Ex-div:na Payment:na | ||||
