There’s something either very exciting or very disconcerting about the idea of making more money in one day’s work than everything you did last year. This month, Gem Diamonds (GEMD) learned what that felt like, when the group netted $40m (£29m) from the sale of the 910-carat diamond spat out of its Letšeng mine in January.
The ‘Lesotho Legend’, as it was christened at auction in Antwerp, is thought to be the fifth-largest gem-quality diamond ever recovered and, says Gem, is testament to the calibre of its operations and the quality of Letšeng’s geology. The recovery of a further six 100-plus carats since January this year – in total matching the 2017 haul – would appear to support this contention.
For diamond miners, erratic cash flows are a well-known blessing and a curse. Yet Gem might have found a way to dispel its uncorrelated investment case: a plan to obtain “$100m of cash savings” by the end of 2021. Details on the efficiency and productivity drive were light, and not explicitly linked to the eventual sale of Ghaghoo mine in Botswana, which remains on care and maintenance.
Consensus expectations are for adjusted pre-tax profit of $81.3m and EPS of 19¢ this year, up from $32.3m and 5¢ in 2017.
| GEM DIAMONDS (GEMD) | ||||
| ORD PRICE: | 100p | MARKET VALUE: | £139m | |
| TOUCH: | 99-100p | 12-MONTH HIGH: | 115p | LOW: 66p |
| DIVIDEND YIELD: | nil | PE RATIO: | 35 | |
| NET ASSET VALUE: | 114¢ | NET CASH: | $1.4m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 213 | 59.0 | 15.3 | nil |
| 2014 | 271 | 95.4 | 24.0 | 5.0 |
| 2015 | 249 | 109 | 37.6 | 5.0* |
| 2016 | 190 | -124 | -115 | nil |
| 2017 | 214 | 30.3 | 4.0 | nil |
| % change | +13 | - | - | - |
| Ex-div: | n/a | |||
| Payment: | n/a | |||
| £1=$1.40. *Excludes special dividend of 3.5¢ a share | ||||
