Shareholders in Gem Diamonds (GEMD) will take encouragement from increased profitability and the promise of a maiden dividend in a year's time. Meanwhile, remedial initiatives at the Letseng mine in Lesotho, which accounts for most of the company's output, have significantly reduced the incidence of damage to diamonds.
Aside from issues linked to quality control, the company was focused on achieving greater capital discipline at Letseng, with priority given to projects that could deliver near-term returns. Gem Diamonds was able to build revenues even as a fall in the local currency (loti) helped to keep costs flat on last year. That pushed underlying cash profits up by 18 per cent to $77m (£46m).
For three-quarters of 2013, mining was focused on lower-value diamond deposits at Letseng, with the final quarter given over to a more profitable body of rock within the mine. As a result, overall production at Letseng came in at 95,053 carats, down from 114,350 in 2012, but the loss was partially mitigated by a 6 per cent increase in the average price received to $2,043 per carat. Output from the higher value deposits mined in the final quarter achieved an average price of $2,533, and the company is intent on further driving up the proportion of higher value ore processed.
| GEM DIAMONDS (GEMD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 170p | MARKET VALUE: | £235m | |
| TOUCH: | 169-171p | 12-MONTH HIGH: | 178p | LOW: 106p |
| DIVIDEND YIELD: | nil | PE RATIO: | 19 | |
| NET ASSET VALUE: | 217¢ | NET CASH: | $71m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 243 | 39 | 17 | nil |
| 2010 | 266 | 54 | 15 | nil |
| 2011 | 396 | 156 | 47 | nil |
| 2012 | 202 | 35 | -74 | nil |
| 2013 | 213 | 59 | 15 | nil |
| % change | +5 | +70 | - | - |
£1 = $1.67 | ||||
