Gem Diamonds Ltd

Gem Diamonds Acquisitions Pay-off in 2007
Letseng Sales +81% (Source: Rapaport)

By Avi Krawitz Posted: 02/04/2008 08:38
RAPAPORT...

Gem Diamonds claimed its acquisition spree in 2007 was already paying off as production rose at most of its operations.

The company spent some $404 million on acquisitions in 2007, most notably on Kimberley Diamond Company (KDC) in Australia, and including operations in Botswana, Indonesia, and the Democratic Republic of the Congo (DRC.)

The strongest performance for the year, however, came from Gem Diamonds’ flagship Letseng mine in Lesotho, where sales grew 81 percent to $152 million. Production at the mine increased 35 percent to 73,916 carats for the year, the company determined.

Letseng, which is 70 percent owned by Gem Diamonds and 30 percent by the Lesotho Government, produced five diamonds greater than 100 carats during the year, including the 493-carat Letseng Legacy which sold for $10.4 million.

The company also reported that it sold 45 carats of diamonds for $3.1 million, or $68,000 per carat, at its January 2008 Letseng tender, which included a 26 carat pink diamond going for $2.6 million.

Gem said it would be ready to start commission of a second plant at Letseng in the first quarter of 2008, which would reach full capacity in the second quarter.

Ellendale Mine

Following the completion of its Kimberley acquisition in November, Gem's first tender of diamonds from the Ellendale mine, yielded $14 million from 63,500 carats, or $220 per carat.

During the second half of calendar 2007 -- 254,657 carats of diamonds were mined at Ellendale. KDC had reported production of 378,026 carats for the fiscal year ending June 30, 2007.

Cempaka Mine

Gem’s Indonesia-based Cempaka alluvial channel, which it gained from its acquisition of BDI Mining in May, produced 14,594 carats in the second half of 2007, and 23,034 carats during the full year.

Gem, which owns 80 percent of Cempaka, revised the sales channel for the project and held its first tender from the property in January 2008, selling approximately 15,000 for $4.96 million, or $331 per carat.

DRC Projects

The company also sold its first diamonds from the Mbelenge Mine in the DRC, a parcel of 2,986 carats for $247,838, or $83 per carat. During 2007, Gem also sold three parcels totaling 16,652 carats for $1.46 million, or $88 per carat, from its Lubembe Project in the DRC.

Gem plans to start trial mining at its third DRC project, the Longatshimo Project in the third quarter of 2008.

Diamond exploration projects are also underway in Angola, Botswana, and the Central African Republic.

CEO Clifford Elphick said the company was profitable and had a positive cash flow moving into 2008.

“Operations have generally performed ahead of expectations and problem areas are being addressed,” Elphick said. “We are examining how to capture additional margin for the company over the complete range of exceptional diamonds that the mines under our control produce.”

Shares of Gem Diamonds were up 5.9 percent to GBP 951.50 in early Monday afternoon trade in London.