JOHANNESBURG (miningweekly.com) – As the demand for rough diamonds continues on an upward trend, Aim-listed Gem Diamonds reports a continued strong output from its Letšeng mine, with prices achieved per carat during the first quarter of the year 70% higher than the first quarter of 2013.

More than 30 000 ct were sold at an average value of $2 723/ct during the first three tenders of 2014 from the Lesotho-based mine, which produced 26 055 ct during the period under review – a 29% jump on the 18 775 ct reported in the corresponding quarter the year before, Gem Diamonds CEO Clifford Elphick commented in a statement on Monday.

“Strong diamond prices continue to be seen at the Letšeng tenders and this, coupled with the continuing contribution of ore sourced from the satellite pipe at Letšeng, has resulted in an increase in carats sold and an improvement in the average dollar per carat achieved,” he explained.

During the period from January to May, a total of 171 rough diamonds greater than 10.8 ct were sold – equating to 81% of Letšeng's revenue during the five-month period, Elphick noted in the company’s interim management statement.

Seventeen rough diamonds achieved a value in excess of $1-million each, while 44 rough diamonds achieved a value of more than $20 000/ct during the five months since January.

Two exceptional large diamonds – a 162.02 ct and a 161.31 ct – were recovered in January 2014 and sold in February for $11.1-million, or $68 687/ct, and $2.4-million, or $14 636/ct, respectively.

“The demand for rough diamonds … continued the positive trend seen in the fourth quarter of 2013, with increased buying activity and strong prices, notwithstanding that the same liquidity concerns raised in 2013 and the tightening of lending criteria previously announced by certain Belgian banks remain,” Elphick added.

Liberum Capital added in a note to clients that the positive trend in diamond prices was expected to continue for the rest of the year, albeit at a slower pace than the first quarter had seen.

Meanwhile, the development of Gem Diamond’s Botswana-based Ghaghoo mine remained on schedule, with Elphick pointing to the first ore having been put through the plant during the commissioning period prior to the commercial production scheduled for the second half of the year.

The company’s wholly owned subsidiary, Gem Diamonds Botswana, was currently developing the Ghaghoo mine, where “strong progress” continued to build “long-term value potential”, he said.

Kimberlite was intersected in the first production tunnel on Level 1 early in May, while the drilling of the first of three ventilation holes was completed and the second well advanced.

CASH POSITION
Gem Diamonds on Monday reported a strong cash position of $89.1-million as at April, of which $78.6-million was attributable to the company, providing the group with the “financial flexibility” to meet medium-term ambitions.

This was up from the $71.2-million recorded as at December 31, 2013, of which $62.6-million was attributable to Gem Diamonds.