Work hard and you will find success

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Gem Diamonds Sales Average $331/ct in 4Q 2008

03 february 2009

Gem Diamonds’ sale of the 478-carat Leseli La Letseng diamond in the fourth quarter may have boosted company revenues, but average prices for the group remained significantly below those realized in the third quarter, RAPAPORT reported. The company, which operates the Letseng mine in Lesotho, the Ellendale mine in Australia and Cempaka in Indonesia, reported Monday that its fourth quarter sales of 220,937 carats of rough diamonds garnered $73.2 million. The average price fell to $331.26 per carat, down from approximately $641 per carat in the third quarter, when 88,042 carats from across the group’s mines generated sales of $56.4 million. Comparable sales data for the fourth quarter of 2007 were not available.
The fall in average prices was in line with fourth-quarter global trends, which have seen rough prices declining in step with the global financial situation. In response to the crisis, Gem Diamonds initiated a cost-cutting program, including retrenchments at almost all its operations. It also placed Cempaka, the E4 pipe at Ellendale and its alluvial operations in the Democratic Republic of the Congo (DRC) and the Central African Republic (CAR) on care and maintenance. The company's focus in the short-to-medium term will be on its strongest producing assets at Letseng and the higher-value E9 pipe at Ellendale.
The company also cancelled its December 2008 tender, but a company spokesperson confirmed that a tender had taken place in late January. She could not provide the results of the sale, however.
During the quarter, Gem Diamonds sold the Leseli la Letseng, the 20th-largest rough diamond yet recovered, for $18.4 million, or $38,387 per carat. This boosted total sales from Letseng to $50 million for the quarter, and average prices to $2,139 per carat. Prices from Letseng slid from $2,687 per carat in the second quarter to $1,557 per carat in the third. Without the exceptional sale of the 478-carater, fourth-quarter prices would have shown a further decline to an average $1,379.87 a carat, according to Rapaport News calculations.
For the full year 2008, Gem Diamonds reported that total sales rose 32 percent to $286 million, from the sale of 654,304 carats. Average prices for the year rose 11 percent to $437.11 per carat. Sales from Letseng grew 18 percent compared with 2007 to $179 million, while sales from Ellendale rose 57 percent to $99 million and from Cempaka they quadrupled to $8 million.
Gem Diamonds said it expects its 2008 earnings to be “significantly lower” than its previously stated expectations when it publishes its full results on April 1, noting that “a loss...is to be expected.” It anticipates improved performance in 2009. Shares in Gem Diamonds were up 1.7 percent at 226 pence a share in early Monday morning trade on the London Stock Exchange (LSE). The share price has fallen 75 percent from a year ago.