Cut and polish not enough for Gem

Production largely coming from the main pipe saw the number of major stones recovered fall year on year and overall carats come down, although this should improve in the second half as mining ramps up again at the satellite pipe. 

The bigger picture does not provide major hope for Gem, however. The diamond industry is in a tough moment. The sector’s bellwether, the De Beers sightholder auction, has seen sales decline dramatically. The most recent sale was down 44 per cent year on year, to $280m, and the Anglo American-owned company has let buyers postpone purchases and upped the proportion of boxes they can hand back. 

In recent years, Gem has floated above the turbulent small stone market by finding and selling 100-carat-plus diamonds. In 2018, it recovered 15 of these, including the 910-carat Lesotho Legend, which sold for $40m. It recovered 10 in the first half of 2018, compared with three in the first six months of this year. This year’s haul so far is more in line with previous years, with 2018’s performance a standout. 

Gem has not had the larger stones to lean back on with the market struggling. Its find of a “very rare” 13-carat pink diamond – sold for $8.8m at a record $657,000 per carat – brought only limited solace. Despite a move back to the satellite pipe in the second half, the earnings top-up could be limited as the price lows are spreading beyond the small stones. “During the period, rough prices of large, high-value diamonds have shown signs of weakness,” Gem said, although it expects very large stones to hold their value. 

Chief executive Clifford Elphick said there was “huge interest” in Gem’s current rough sale, but emphasised the tough backdrop. “We do think that being at the very top end on the quality curve that our goods would be less vulnerable to market pressures, but I mustn't mislead you and say that they are immune,” he said.