Gem's strong sales outweigh operational difficulties

Southern-Africa-based miner Gem Diamonds trimmed its production guidance for 2022, after a troubled October, but is reaping the benefit of high diamond prices.

Gem's strong sales outweigh operational difficulties

In October Gem halted production for two days at its Letšeng mine in Lesotho, to allow for votes in a general election. In addition, October saw a secondary crusher breakdown at its Plant 2, and continued power disruptions. Repairs to the secondary crusher have been completed and the plant is running at normal capacity.

As a result of the disruptions, Gem Diamonds said its full-year guidance for ore treatment is now 5.45Mt, down from a previous range of 5.60-5.80Mt.

Gem is now guiding for recovery and sales of around 104,000ct, down from a previous guidance of 112,000-116,000ct. Sales are guided for 105,000ct, down from around 110,000-114,000ct.

But balancing recent operational issues were third-quarter results that highlighted higher diamond prices.

Gem reported revenue in September quarter of US$56.6 million, up by 19.7% year-on-year. The increase in revenue was thanks to higher diamond prices, with an average price of US$2,028/ct, compared to US$1,589 a year earlier.

Diamond production in the quarter was 25,018ct, in the quarter, taking the year-to-date total to 80,174ct, down from 82,266ct over the same period last year.

And analysts downplayed the effect of the guidance revision.

"We believe the benefit from a weaker Rand and resilient diamond prices will help to reduce the impact of this revision," Panmure Gordon said in a note.

Liberum was upbeat on rough diamond prices.

"We have been surprised by the robustness of rough diamond prices being reported by the diamond companies, considering the weakness we are seeing in polished prices," Liberum said in a note. "It's possible these companies are enjoying a substantial non-Russia premium."

Gem Diamonds shares in London were up 2.4% at 29.90p, at 12.04 London time.

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