Gem Diamonds records a profit

Finance

A cost-cutting strategy to combat the effects of the global financial crisis has guided Gem Diamond Ltd to a profit for the year to end-December.

Despite falling diamond prices through the first half of 2009, Gem was able to announce a US$37.1 million profit for the period. Revenue was US$244.4 million, falling from US$296.9 million a year earlier.

Chief executive officer Clifford Elphick noted that 2009 was "an extremely challenging year for the diamond mining industry as a whole. However, our ability to react swiftly to changing market conditions enabled us to weather the worst of the economic crisis and maintain production and profitably at our two main operations."

"Consequently with signs of a recovery in the market, we are well placed to benefit from an upturn in the global economy."

Gem produces diamonds at the Letseng mine at Lesotho and at Ellendale in Australia, and is also developing mines in several other countries.

The challenges were typified by the prices at Letseng, which dropped from an average of US$2,687/ct in the second quarter of 2008 to only US$1,017/ct in the first quarter of 2009.

However, Mr Elphick is optimistic after the market bounced back. "Diamond prices have continued to improve in early 2010 following a better than expected 2009 Christmas season in the US, albeit relative to the post crisis fourth quarter sale in 2008," he said.