Gem Diamonds Limited has posted record prices for rough diamonds from its Letšeng Mine in Lesotho and Ellendale Mine in Western Australia for the first half of the year, ended June 30, 2011.
"Prices are extremely strong for rare, large high quality, good colour diamonds, of which Gem Diamonds' Letšeng Mine in Lesotho is the single largest producer. The strength in prices for Ellendale's rare fancy yellow diamonds which are sold to Tiffany & Co are also reflected in the 35.3% price increases in H1 2011. The group is generating substantial positive cash flow and progress with the Letšeng Expansion and the construction of the Ghaghoo Mine in Botswana continues according to plan," says Clifford Elphick, Gem Diamonds Chief Executive Officer.
The Letšeng Mine in Lesotho, of which Gem Diamonds holds a 70 percent share in partnership with the government of the Kingdom of Lesotho, achieved a 77 percent increase in its average value of US$3,052 per carat for its exports during the first half of 2011.
In the second quarter alone, 36 of the mine's rough diamonds achieved a value in excess of US$40,000 per carat. In June 2011, a 73.10-carat white diamond was sold for US$69,000 per carat, and in May 2011, a 71.17-carat white diamond sold for US$67,955 per carat, the highest prices per carat ever paid for Letšeng's white diamonds. Also in June, a 10.00-carat pink diamond sold for $171,851 per carat. In the first quarter, a 2.79-carat blue diamond sold for a Letšeng record of US$199,199 per carat.
Letšeng produced 52,798 carats during the first half of the year, 18 percent more than a year ago. Out of the total produced during the first six months, 295 rough diamonds were greater than 10.8 carats in size and 105 rough diamonds were valued at greater than US$20,000 per carat.
Moreover, Gem Diamonds reports that Letšeng has successfully implemented its manufacturing and downstream sales initiative.
During the first half of the year, Gem Diamonds' Ellendale mine in Western Australia, owned and operated by Gem Diamonds' wholly owned subsidiary, Kimberley Diamond Company NL, faced significant production challenges mainly due to weather factors. Ore-processing operations and the post-wet season resumption of in-pit mining (which normally commences in mid-March) were hampered due to significant rainfall in the first four months of the year, reports the miner.
As such, Gem Diamonds only sold 57,875 carats worth US$33.2 million during the half year, a 25 percent decline in volume and a 1 percent decline in value compared to the first half of 2010. However, the price per carat value of US$573 represents a 32 percent year-over-year increase in value.
During the half year, 5,687 carats of fancy yellow diamonds were sold to Tiffany & Co. at an average price of US$4,045 per carat compared to US$2,588 per carat in the first six months of 2010.
The increase in price of Ellendale's production was achieved following an agreement that was reached for a 24.73 percent increase as of April 1, 2011, of an amended yellow diamond-pricing mechanism for Gem Diamonds' fancy yellow diamonds that are directly sold to Laurelton Diamonds, Inc., the diamond sourcing and manufacturing subsidiary of Tiffany & Co. The new pricing mechanism will result in monthly adjustments to the fancy yellow prices and has been back dated to October 1, 2010, notes the company.
Additionally, 52,186 carats of commercial goods were sold at an average price of US$195 per carat compared to US$144 per carat in the first half of 2010. The new pricing mechanism has resulted in the July 2011 fancy yellow delivery being sold at a further 27.4 percent increase over the April 1, 2011, increase of 24.73 percent, notes Gem Diamonds.
"Increasing consumption of diamond jewellery in the US, China and India, the lack of significant new mines coming on stream and very low stocks of rough and polished diamonds in the cutting centres is being reflected in strongly rising prices of both rough and polished diamonds," adds Elphick.
Gem Diamonds has changed the name of its wholly owned subsidiary company in Botswana, Gope Exploration Company (Pty) Limited, which holds a mining license for the Gope deposit, to Gem Diamonds Botswana (Pty) Limited. The Gope deposit has been renamed Ghaghoo Diamond Mine.
The name change to Ghaghoo Diamond Mine resulted from numerous consultations with the residents of the Central Kalahari Game Reserve (CKGR) and reflects the company's ongoing commitment to encouraging community involvement and building strong community relations.
According to Gem Diamonds, "Ghaghoo" refers to a species of camel thorn acacia tree, which is abundant in the area. It is also the name that CKGR residents have historically used to refer to the Gope area, prior to the arrival of the geological exploration teams over 30 years ago who re-named the area Gope, which literally translated, means "nowhere."
Gem Diamonds acquired Gope Exploration from De Beers and Xstrata in May 2007 for US$34 million. On March 14, 2011, Gem Diamonds Board approved the first stage of development of the Ghaghoo mine. Development is progressing according to plan. A temporary camp is in operation onsite; the main camp (catering for Phase 1 of the mine) is under construction and will be completed by year end.
To read the H1 2011 Trading Update in its entirety, click on the image below: