First-half production focused on lower grade mining at Gem Diamonds (GEMD) and, while costs were lower, operating profits still fell from $37.7m (£24m) to $23.8m. However, mining will move into higher-grade ore in the second half and four new cone crushers have been installed at the group's 70 per cent-owned Letšeng mine - in order to reduce diamond damage.
The benefits are already apparent, after a number of high-value diamonds were recovered largely undamaged in the period. For example, a 164 carat white diamond was sold for $9m, while a 100 carat stone fetched $6.5m. Moreover, the high value and rarity of such diamonds means that prices are less affected by market fluctuations, with Letšeng diamond prices showing a modest increase against a broadly flat wider market, although Letšeng production did decline 4 per cent. Still, the most recent resource and reserve statement saw a 32 per cent increase in Letšeng's resource base, which - together with 2.1m carats at Ghaghoo - lifted gross resources to an estimated 25.8m carats at an average diamond price per carat of $625. At Ghaghoo, further tunnelling is expected to result in production starting in the second half of next year.
Prior to these figures, JPMorgan Cazenove was expecting full-year adjusted EPS of 12¢ (12¢ in 2012).
| GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 157p | MARKET VALUE: | £217m | |
| TOUCH: | 156-157p | 12-MONTH HIGH: | 202p | LOW: 106p |
| DIVIDEND YIELD: | nil | PE RATIO: | 35 | |
| NET ASSET VALUE: | 217¢ | NET CASH: | $61.4m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 123 | 38.2 | 11.7 | nil |
| 2013 | 96.5 | 23.2 | 6.23 | nil |
| % change | -21 | -39 | -47 | - |
Ex-div: - Payment: - £1=$1.55 | ||||
