Has Gem Diamonds (GEMD) got the stones to see out its current predicament? Philosophically, one should never doubt a miner’s determination. From a geological perspective, the jury is out. While Gem highlighted an improvement in the recovery of large diamonds from its Letšeng mine in the first half of 2017, those high value discoveries have failed to raise the metrics in which investors want to see improvement: carats recovered, and carats sold.
In fact, the former dropped by 12 per cent and the latter declined 6 per cent year on year to $1,779 (£1,380) per carat, as a result of lower grades and a reduction in plant availability, which in turn led to a fall in ore treated. Nonetheless, this was a better performance that the second half of 2016, when diamond sales averaged $1,480 per carat. Further encouragement came via a post-period sale in July that averaged $2,835 per carat. But to call this “trending”, as Gem did in these results, seems optimistic, given the company’s recent history.
Either way, the trend will certainly have to step up if the bottom line is to offer anything to regular shareholders. Exclude the $3m one-off cost of placing Ghaghoo under care and maintenance, and $3.5m of the post-tax profit went to non-controlling interests. Broker finnCap expects adjusted pre-tax profit of $11.6m and EPS of 1.8¢ this year, down from $52.4m and 12.8¢ in 2016.
| GEM DIAMONDS (GEMD) | ||||
| ORD PRICE: | 83.75p | MARKET VALUE: | £116m | |
| TOUCH: | 80.75-83.75p | 12-MONTH HIGH: | 132p | LOW: 75p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 100¢ | NET DEBT: | 7% | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| 30 Jun | ($m) | profit ($m) | share (¢) | per share (¢) |
| 2016 | 109 | -0.84 | -19.2 | nil |
| 2017 | 92.9 | 2.30 | -2.11 | nil |
| % change | -15 | - | - | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.29 | ||||
