Gem Diamonds expects prices to keep rising

Rough diamond prices were expected to continue climbing “across the market” this year, London-listed Gem Diamonds said on Monday.

In an interim management statement, the company said that its price index showed increases in every sale since the September 2011 market correction. The index was up by 7% for the year.

The miner, which has two producing mines – the Letšeng mine in Lesotho and the Ellendale mine in Australia – as well as the Ghaghoo mine currently in development in Botswana, said Letšeng exceeded expectations, growing carats recovered and grade in the year to date.

“28,114 carats were recovered at Letšeng during the first quarter of 2012, up 5.9% from the first quarter of 2011. In addition, the recovered grade at Letšeng during the quarter was up 10.6% on the first quarter of 2011,” reported the company.

The Gem board approved Project Kholo in November last year, which will increase Letseng’s production through the construction of a third processing plant. Output is planned to be ramped up to a 10 tonnes per year by July 2014 from the current 5.7 million tonnes a year.

Gem Diamonds holds a 70% shareholding in Letšeng, with the King of Lesotho holding the remaining 30%. Operated by De Beers from 1977-1982, Letšeng reopened operations in 2004 and was acquired by Gem Diamonds in late 2006 for US$118.5 million.

In October last year, reported that Gem sold the world’s 14th largest white diamond discovered at Letšeng two months before for $16.5 million in cash. Gem will also share in the profit of any polished diamond cut from the 550 carat Letšeng Star.

Without the occasional large diamond find, the Letšeng pipe would probably be a marginal deposit, but the mine, 30% owned by the King of Lesotho, has also yielded the 478 carat Light of Letšeng that went for $18.4 million in 2008 and two other big rocks.

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