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Gem Diamonds’ Letšeng loses sparkle

We exit our buy tip on a weak production update from the diamond miner.
February 7, 2017

Shares in Gem Diamonds (GEMD) fell 7 per cent after a fourth-quarter trading update revealed that the company's Letšeng mine recovered fewer large special diamonds than expected. That was despite a surge in production in the quarter, and the recovery of 26,438 carats - a figure 8 per cent up on the prior quarter.

IC TIP: Sell at 114p

As previously announced, the future of the Ghagoo mine is also set to be decided this quarter, although analysts at Liberum believe that with prices of $142 (£114) per carat, the company is "likely to opt for placing it under care and maintenance". The broker has also downgraded 2016 cash profit forecasts from $64m to $54m, and year-end net cash from $22m to $4m.