Gem Diamonds Q3 Results Extend 2019 Downturn

Mining and Exploration
06/11/2019 12:51

Leading producer of high-value stones Gem Diamonds recorded modest declines in Q3 compared to Q2, reporting fewer carats sold, lower revenue and average prices achieved for its goods from the Letšeng mine in Lesotho. A year-over-year comparision, however, paints a picture of a more substantial decline and reflects the realities miners are facing in this slumping market.

The miner sold 25,631 carats in Q3, 10% fewer than in Q2 (28,379) while the average price per carat fell 6% to $1,417 from $1,501. This combination of factors led to a 15% decline in revenue, to $36.3 million compared to $42.6 million last quarter. Gem Diamonds' CEO Clifford Elphick attributed the declines to price pressure on high-value diamonds from the Letšeng mine and lower value ore mined in the previous quarter. Compared to Q3 of 2018, Gem Diamonds sold 15% fewer carats achieving an average price that was 23% lower than the year before ($1,417 from $1,841), leading to a 35% reduction in overall sales. For the first nine months of the year, the volume of carats sold (81,345) are only down by 12%), but a 34% decline in the average price per carat earned ($1,609 from $2,445) has resulted in a 42% decline in sales, to $130.9 million from $224.9 million.

During the quarter, the miner recovered four diamonds weighing over 100 carats, bringing the total to seven for the nine-month period. They sold five diamonds for over $1 million each, generating revenues of $11 million. Gem Diamonds has reduced its capital expenditure in 2019 by approximately US$ 7 million, reducing expected capital spend for the full year to about US$12 million. They say that the targeted US$100 million in incremental revenue, productivity improvements and cost savings over the 4-year period to end 2021 is on track and is expected to deliver US$50 million by the end of 2019. Moving forward, the miner has increased its anticipated ore treated guidance but slightly lowered its carats recovered guidance and carats sold.

Also during the quarter, Gem Diamonds agreed terms of the renewed mining lease for an immediate period of ten years with an exclusive right granted to Letšeng to renew the mining lease for a further period of ten years.