JOHANNESBURG (miningweekly.com) – London-listed diamond producer Gem Diamonds has placed plans to develop beneficiation facilities in Dubai and Mauritius on hold, owing to the economic downturn, it reported on Tuesday.

Gem Diamonds is establishing a cutting and polishing facility in Dubai that would capture post-mining margin on the high quality diamonds from its flagship Letšeng mine, in Lesotho, as well as its Ellendale mine, in Australia.

The Dubai operation, Gem Diamonds Technology DMCC, as well as Gem Diamonds Technology Mauritius were expected to be operational in 2009.

Meanwhile, Gem Diamonds reported that there had been a substantial reduction in capital expenditure at its producing mines, and a continuing programme of cost cutting and retrenchments at its noncash generating projects in the first quarter of 2009.

“Since October 2008, Gem Diamond’s workforce has been reduced by 51%. There has been a substantial reduction in central costs through salary reduction, no bonuses, a recruitment freeze, and a voluntary separation programme,” the company said in an interim statement.

Gem Diamonds had set a cost target of $10-million for 2009, which compared with the $18,4-million central cost figure in 2008.

During February this year, the company also placed its lower value E4 pipe, at the Ellendale mine in Western Australia, on care-and-maintenance.

The planned front-end modifications at the Ellendale E9 processing facility, which would have further increased the processing capacity, have also been placed on hold until further notice in line with the company's stated plan to decrease all non-essential capital and project development expenditure in the light of the current global financial crisis and the resultant impact on the diamond industry.

However, Gem Diamonds stated that plans to relocate a dense medium separator (DMS) unit from the E4 processing facility to the E9 facility have proceeded to plan, and commissioning of this unit was scheduled for the end of May 2009. This would allow the E9 facility to treat up to 600 t/h.

“With the operations at E4 being placed on care-and-maintenance, the tonnage treated and the carats recovered have decreased accordingly. The production through the E9 facility was affected by one of the wettest seasons in the history of the mine. The grade from the E4 pit is higher than that of the E9 pit and as such the grade variance quarter on quarter reflects a larger adverse variance with the cessation of mining of the E4 operation,” the company said.

The recovered grade from E9 was in line with expectations.

Operations in the E9 pit restarted on schedule in mid-March, after the wet season, and was progressing well.

POSITIVE DEMAND, HIGHER PRICES

Meanwhile, Gem Diamonds reported that it had sold more carats in the first quarter of 2009, owing to the sale of excess commercial diamond inventory held at the year-end.

It also reported that it had seen positive demand and therefore, improving prices for its commercial product through the first quarter of 2009. However, the average prices achieved in the first quarter 2009 were “significantly lower” than those realised for the same period in 2008 when market conditions were more buoyant.

Gem Diamonds sold 45 polished diamonds weighing 180,91 polished carats for $10-million in January 2009, from rough diamonds extracted and polished from its Letšeng production, in 2008 as part of the beneficiation trials.

During the period under review, a total of 1,84-million tons of kimberlite ore was treated through the three Letšeng plants. The Satellite pit contributed 22% of the ore and the remainder was obtained from the Main pit and Main pit stockpile. Plant 1 processed 670 000 t, Plant 2 processed 660 000 t and the Alluvial Ventures pan plant processed 515 000 t. Waste stripping in the Satellite pit totaled 1,68-million tons.

“Letšeng remains a best in class asset in the diamond industry and has remained profitable during the first quarter of 2009,” Gem Diamonds said.

During the first quarter, Letšeng held two tenders which achieved an average price of $1 017/ct. The April Letšeng tender comprised a lower quality production of diamonds but nonetheless showed a rising trend on a price-point by price-point basis. The May Letšeng tender comprised a better range of diamonds than the April tender and the year to date average price for Letšeng now stands at over $ 1 100/ct.

Gem Diamonds further stated that the average prices for the Ellendale production in the first quarter were over $ 100/ct, which included production from the lower quality E4 pipe and the sale of diamond inventory held over from 2008.

In the period under review, the takeoff arrangement between Kimberley and a high-end jewellery retailer continued. The company added that negotiations for a long-term formal agreement were ongoing.

“For those Ellendale diamonds which are not the subject of the takeoff arrangement and which were sold in January 2009, prices fell to a low of about $30/ct, this included a portion of lower value diamonds from the E4 pipe. Since then, prices have since firmed substantially. In the most recent sale, the average price of diamonds from the E9 pipe, sold outside the takeoff arrangement, achieved more than $ 70/ct.”

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