The global diamond market has continued on its recovery trajectory for the first half of this year, said diamond producer Gem Diamonds, which reported positive demand for its diamonds for the period, while global events continued to negatively affect operational costs.

Gem said in its interim financial results for the six months ended June 30 and published on September 1 that the sanctions imposed on major Russian diamond mining group Alrosa had caused a shortage of rough diamonds in the market, which had supported strong demand and robust prices for high-quality white diamonds from Gem’s flagship Letšeng diamond mine, in Lesotho.

During the period, Gem reported that a record number of average bids per lot were received and that an average price of $17 45/ct was achieved – down from $1 886/ct a year ago.

These results did not include the sale of three diamonds weighing more than 100 ct each, which were recovered in June and sold in July.

Gem said the global economic backdrop for the period had been challenging, with unprecedented high levels of inflation and interest rates experienced in major economies.

The World Bank downgraded its global real gross domestic product forecast for this year to 2.9%, compared with a high-water mark of 5.7% in 2021. Moreover, the Russian invasion of Ukraine contributed significantly to slowing down global economic growth by disrupting global supply chains and negatively impacting on energy and commodity prices.

Gem reported that its Letšeng mine operated in line with expectations during the period, despite numerous challenges presented by severe weather conditions such as a high rainfall season and snow, which impacted on both mining and treatment activities.

The increased frequency of electricity supply disruptions and increased operating costs also proved to be significant headwinds.

Gem noted that 6.3-million waste tonnes were mined during the period, down from 10.2-million for the first six months of last year, which was in accordance with the mine plan. Meanwhile, three-million tonnes of ore was treated, down from 3.1-million tonnes in the prior comparable period.

Further, 55 157 ct were recovered, also down from 58 831 ct in the prior comparable period. However, Gem said the mine’s full-year production metrics remained on track.

“The decrease in volume of recoveries during the period is due to lower tonnes treated and the reduced contribution for the higher-grade satellite pit,” the company said.

Gem reported a 4% year-on-year decrease in revenue to $100-million. This, together with “extraordinary increases” in operating costs – most notably diesel prices and explosive consumables – resulted in the company reporting a decrease in underlying earnings before interest, taxes, depreciation and amortisation from continuing operations from $34.7-million in the first half of 2021 to $20.9-million in the period under review, with attributable profit decreasing from $9.3-million to $3.8-million.

“We are driving initiatives to reduce the impact of the significant uncontrollable cost increases experienced during the period, to drive efficiencies and effectively manage operating costs in the current volatile environment,” Gem said.

Moreover, the company said that it was advancing the implementation of its critical control management strategy, which is a safety risk mitigation initiative that is on track to be completed by the end of the year.

“A solid operational performance has been achieved despite exceptionally high rainfall over the period to April and grid electricity interruptions, which have necessitated increased reliance on diesel power generation with resulting cost increases, as well as supply chain disruptions resulting from adverse global events,” Gem CEO Clifford Elphick said.

The company reported $0.034 in earnings a share from continuing operations, which was down from $0.076 in the prior comparable period.