JOHANNESBURG (miningweekly.com) – LSE-listed Gem Diamonds was confident that it could meet its full-year targeted output at its 70% owned Letšeng mine, in Lesotho, despite production having dropped by 5% to 44 748 ct in the first half of this year.

This was compared with the 47 165 ct produced in the first half of 2009.

“In the first half of the year, we have had a number of operational challenges at both Letšeng and Ellendale. With the unique nature of Letšeng's very high-value, low-diamond content resource, fluctuations in production are expected, however, management believe[s] that production targets for 2010 will be achieved by year-end,” CEO Clifford Elphick said on Monday.

Production from the satellite pit at Letšeng had been curtailed during the first half of the year, as a result of kimberlite instabilities in two localised areas of the satellite pit.

Further, high rainfall and illegal industrial action by workers had also impacted on waste stripping at the mine.

However, Gem Diamonds noted that production trends over the second quarter had provided confidence that the year-end targets for the amount of carats recovered could be achieved.

Rough diamond sales from Letšeng were down 27% to 41 544 ct, compared with the 56 663 ct sold in the first half of last year. However, sales in the first half of 2009 had included diamonds held over the financial year-end from the December 2008 tender, which was postponed owing to adverse market conditions.

Rough diamond prices had increased by 32% to an average of $1 728/ct in the first half of this year, compared with an average of $1 308/ct the year before.

Further, Gem Diamonds was planning to implement a new sales and marketing strategy that could include the cutting and polishing of selected Letšeng diamonds to increase its revenues.

Its current sales and marketing arrangement expires at the end of August, but it had already approached marketing agents and diamantaires to submit marketing proposals for the Lesotho mine’s output.

Meanwhile, production, both in tonnage treated and carats recovered, at the diamond miner’s Ellendale mine, in Australia, would be slightly below the previously anticipated full-year target.

Plant availability and rain had impacted on the plant throughput between March and June, which had resulted in an underperformance against the targets set for the first half of the year.

Nevertheless, the E9 pipe at the mine produced 81 501 ct during the six months, a 28% increase on the 63 624 ct produced the year before.

Rough diamond sales were down 60% to 77 198 ct, compared with the 192 732 ct sold the year before. The 2009 first-half rough diamond sales had, however, included production from the E4 pipe at the mine, which had since been placed on care-and-maintenance, as well as production and stocks held over from 2008 and sold in 2009.

Meanwhile, Gem Diamonds would continue to try to obtain a mining licence for its Gope exploration project, in Botswana, during the second half of this year. A retention license for the project had been extended to December.

The diamond miner would release its interim results on August 24.