Some 18 months into its four-year business transformation programme, diamond miner Gem Diamonds is on track to deliver its targeted $100-million in incremental revenue, productivity improvements and cost savings by the end of 2021.

Since implementation, the LSE-listed group has achieved $42-million in cost savings, net of implementation costs and fees.

“It is pleasing to report that the group has successfully implemented the business transformation programme, already achieving $42-million net of fees, and is on track to deliver the planned [cumulative] $100-million in cost savings and efficiencies by 2021,“ said Gem Diamonds CEO Clifford Elphick.

The group is targeting ongoing savings of $30-million a year thereafter.

The group-wide business transformation started in the last quarter of 2017 amid continued short- and medium-term price pressures, challenging operational conditions and increasing costs related primarily to deeper-level mining, increased waste and longer haul distances, which placed increasing pressure on margins and cash flow.

At the time, Elphick said every aspect of the company’s activities would be challenged to enhance the efficiency of operations by improving day-to-day performance, optimising mine planning and mine efficiencies, increasing plant uptime, enhancing recoveries, vigorously improving cost control and capital discipline and disposing of any noncore assets.

PRODUCTION OUTPUT

Meanwhile, during the six months to June 30, Gem Diamonds sold 55 714 ct at an average price of $1 697/ct, an increase of 10% on the average of $1 537/ct achieved in the second half of 2018.

A 13.32 ct pink diamond was recovered and sold for a Letšeng record of $656 934/ct, in addition to the $48 225/ct achieved for a 70.69 ct D-colour Type IIa diamond during the six months to June.

Further, three diamonds in excess of 100 ct had been recovered during the first half the year, with another two recovered post-period-end, in July.

Gem Diamonds had set a record production year in 2018 with the recovery of 15 diamonds greater than 100 ct.

During the half-year under review, 15 diamonds were sold for more than $1-million each, generating revenue of $41.6-million.

In line with the group’s plan and guidance previously published, the limited contribution from the high-value satellite pipe ore during the period resulted in a lower grade recovered compared with the second half of 2018.

“This, together with lower volumes treated, resulted in lower carats recovered.”

While Letšeng had been mining in the lower-value part of the orebodies during the first half of the year under review, the miner started mining in the higher-value parts of the orebodies in the second half of this year.

“We anticipate that production guidance previously provided to the market will be achieved for the year,” he added.

GHAGHOO SALE

Gem expects to conclude the $5.4-million sale of its share capital in Gem Diamonds Botswana, which owns the Ghaghoo diamond mine, to Pro Civil in the second half of this year.

The sale, which is subject to regulatory approvals in Botswana, followed a binding agreement entered into between the parties in June.

The Ghaghoo diamond mine has been on care and maintenance since March 2017.

Elphick said the sale was in line with the company’s strategic objective to dispose of noncore assets.

Gem Diamonds will use the sale proceeds for general corporate purposes.