Diamond miner Gem has been hit by falling diamond prices as gloomy economic conditions bite – that sent the group's half-year underlying cash profit sliding 42 per cent year-on-year to $52.7m (£33.6m). And with delays announced at two projects: the Kholo expansion scheme at the Letseng site and the Ghaghoo project in Botswana, catalysts for a rerating look hard to spot.
Those project delays were largely expected after management said last month that it was considering extending the period over which capital was expended at the two sites – to defend Gem's balance sheet against "further deterioration in market conditions". Development at Kholo, for instance, will now be extended by 12 months. Meanwhile, diamond pricing has been weak and the average price achieved at Gem's Letseng site – responsible for over two thirds of group revenue – fell 30 per cent year-on-year to $2,133 (£1,353.02) a carat. Analysts at JP Morgan Cazenove expect even weaker realisations in the third quarter. Still, Gem’s Australian Ellendale operation, which mines rare yellow diamonds, did better. Carats sold here rose 29 per cent and the average price achieved rose 35 per cent to $772 a carat.
Prior to these figures JP Morgan Cazenove was expecting full-year EPS of 36¢ (2012: 47¢).
GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 190p | MARKET VALUE: | £263m | |
| TOUCH: | 189.8-190p | 12-MONTH HIGH: | 317p | LOW: 174p |
| DIVIDEND YIELD: | nil | PE RATIO: | 8 | |
| NET ASSET VALUE: | 305¢ | NET CASH: | $139m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 197 | 79.0 | 21.8 | nil |
| 2012 | 180 | 36.3 | 10.4 | nil |
| % change | -9 | -54 | -52 | - |
£1 = $1.57 | ||||
