Trading Statement

RNS Number : 2693C

Gem Diamonds Limited

29 August 2008

 



News Release                                                                                                        29 August 2008

GEM DIAMONDS LIMITED

(Gem Diamonds) or (the Company)

TRADING UPDATE FOR THE SIX MONTHS ENDED 30 JUNE 2008

This trading update reflects Gem Diamonds' performance in the first six months of the 2008 financial year.  The Company's financial results for the same period are detailed in its Half Yearly Results Announcement also released today.

Highlights

 

-    H108 sales up 140% to US$167 million vs. H107 of US$69.6 million and more than FY07 sales of US$152 million;

-    Tonnes processed increased almost four-fold to 6.9 mt from comparative period;

-    Diamonds recovered increased almost eight-fold to 283 000 carats from comparative period;

-    Letšeng second plant successfully constructed and commissioned with ramp up well progressed;

-    Ellendale turnaround on track and production ramp up ongoing;

-    Gope initial feasibility study completed, SEIA ongoing;

-    Mambéré in CAR continues to deliver promising grades;

-    Further beneficiation trials yield solid additional margin; and

-    Strong global demand sees diamond price appreciation continue.

 

1          Corporate

During the period Glenn Turner and Alan Ashworth were appointed to the Board of Directors. Graham Wheelock resigned as an Executive Director but retains his position of Chief Mineral Resources Manager for the Company.  In line with his appointment to the Board, Glenn Turner has relocated to the Company's head office in London.

2           Lesotho

Gem Diamonds has a 70% shareholding in Letšeng Diamonds (Letšeng) in partnership with the Government of the Kingdom of Lesotho which owns the remaining 30%.

            2.1       Expansion and Development

Commissioning of the second plant commenced in March 2008 and production was ramped up throughout Q208. Full production of 440 000 tonnes for both plants was achieved in July 2008.

           2.2        Production

A total of 3 215 257 tonnes of ore were mined in H108 of which 2 848 988 tonnes were processed and 366 269 tonnes stockpiled.

	H108	H107	% Change
Waste mined  (tonnes)	4 932 210	893 809	452%
Ore processed (tonnes)	2 848 988	1 875 306	52%
Carats produced	44 507	37 864	18%

During the period, cut three on the Satellite Pipe pit commenced with significant waste stripping activities in advance of mining to take place in H208.

           2.3         Rough Diamond Sales

	H108	H107	% Change
Carats sold	35 814	39 212	-9%
Total tender value (US$ millions)	89.95	69.67	29%
Achieved US$/ct	2 512	1 776	41%

The following diamonds achieved the highest prices during the period:

-          26.9 carat light pink sold for US$99 182 per carat;

-          55.5 carat D colour type IIa sold for US$69 560 per carat;

-          70.9 carat D colour type IIa sold for US$61 809 per carat;

-          11.1 carat pink sold for US$60 000 per carat; and

-          44.2 carat D colour type IIa sold for US$59 094 per carat.

 

Total carats sold in H107 were higher due to a carry over of large diamonds from 2006.

            2.4        Beneficiation

Three tenders of polished diamonds took place in H108:

 

-          In January 14 diamonds totalling 41.6 carats were sold for US$3.1 million or US$ 74 300 per carat;

-          In April ten diamonds totalling 38.5 carats sold for US$4.1 million or US$106 700 per carat; and

-          In June a single diamond of 13.1 carats sold for US$2.3 million or US$171 500 per carat. 

                 2.5       Power Supply

Letšeng Diamonds is supplied with power by the Lesotho Electricity Corporation (LEC) which generates some power at its hydro-electric plant and receives additional power from the South African parastatal ESKOM.  Although ESKOM-sourced power outages occurred in Q108 they were generally scheduled and short in duration. As a result, there was no loss of production in H108.

Notwithstanding this, orders have been placed for six megawatts of standby generating capacity on the mine at a cost of US$2.9 million. This backed up with an alternative supply of four megawatts of power from the LEC (not subject to power outages), will enable both process plants to run at full capacity in the event of ESKOM power outages.

3          Australia

The Ellendale mine, located in Western Australia, was acquired as part of the Kimberley Diamond Company acquisition, which was completed in December 2007.

            3.1       Expansion and Development

Upgrades to the East plant, which processes ore from the E9 lamproite, were successfully initiated in the period and will allow the East plant to build from current throughput rates of 350 - 400 tph to 700 tph over the next six to eight months.  Minor modifications to the front end of the South plant, processing ore from the E4 lamproite, are in design.  The modifications to both of these plants will increase Ellendale's total ore processing capability from circa 8.5 mtpa to 10.5 mtpa over the next twelve months.  Plans for the construction of a new final recovery section at the East plant are also progressing well.

            3.2       Production

Improvements in operational performance at the mine over the period resulted in record production levels achieved in June with 697 000 tonnes processed to produce 57 800 carats.

	Jan	Feb	Mar	Apr	May	Jun
Ore processed (Tonnes)	686 374	438 373	535 576	542 872	558 891	696 995
Carats recovered (Carats)	45 743	22 446	30 913	32 750	43 417	57 814

In order to allow for increased processing rates and enhanced flexibility on the mine, an investment stripped reserve was made during the period.  Production schedules for the remainder of the year plan for increases to stripped reserve and ore stockpiles ahead of the wet season.  

	H108	H107	% Change
Waste mined (tonnes)	8 547 934	3 705 443	130%
Ore processed (tonnes)	3 459 081	2 827 785	22%
Carats produced	233 082	220 649	5%

The grade difference between H107 (7.8 cpht) and H108 (6.9 cpht) is as a result of mining in different grade areas.  Overall grades achieved in the different pits were in line with the resource grade.

              3.3     Rough Diamond Sales

	H108	H107	% Change
Carats sold	287 693	268 960	7%
Total tender value (US$ millions)	59.55	33.7	77%
Achieved US$/ct	207	125	66%

              3.4     Beneficiation

During the period 56 carats of rough Ellendale diamonds were cut and polished by Matrix Diamond Technology, which yielded 29 carats of polished diamonds. Of this collection four intense and vivid polished yellow diamonds totalling 15.7 carats were sold on tender in Antwerp for an average price of US$28 860 per carat. Among the collection was a 7.1 carat cushion cut vivid yellow diamond which sold for US$52 000 per carat.

4          Indonesia

BDI Mining was acquired by Gem Diamonds in May 2007. It owns 80% of the Cempaka alluvial diamond mine in South Kalimantan, Indonesia in partnership with PT Aneka Tambang, a company controlled by the Government of Indonesia.  The alluvial deposits at the Cempaka Mine are found in the Danau Seran and Cempaka paleochannels. 

Minor gold and platinum is present in the diamondiferous gravels in both channels and a precious metal concentrate is recovered as a by-product.

            4.1       Expansion and Development

Expansion of the plant capacity to 216 000 tpm was completed with the delivery and installation of the 15 tph dense media separation (DMS) plant. The incorporation of the DMS plant will significantly decrease the amount of concentrate reporting to final recovery and reduce the bottle neck previously experienced at the x-ray machine and allow for increased productivity. A grease belt has also been installed to recover any non-fluorescing diamonds

A prefeasibility study into future alternative mining methods has been initiated and the results of this study are expected in 2009.

            4.2        Production

	H108	H107	% Change
Waste mined (tonnes)	2 038 806	1 256 323	62%
Gravel processed (tonnes)	562 148	187 350	200%
Carats produced	6 251	8 441	(26%)
Au/Pt concentrate produced (kg)	4.7	6.03	(22%)

Gravel mined and treated during months of operation was satisfactory at 183 590 tonnes for January and the targeted production of 220 439 tonnes for February.  March 2008 production was below target due to heavy flooding followed by the suspension of mining due to environmental concerns in April 2008 as detailed below.

Waste stripping normalised in H108 from the high levels seen in H107. The target strip ratio for 2008 remains approximately 4.2 times.

Diamond production was lower than in the comparative period despite considerably higher tonnes mined and processed. This is on account of the lower grade of the Cempaka channel mined in the period compared to that of the Danau Seran channel mined in 2007. Work is ongoing to improve the geological understanding of the Cempaka channel and higher grade areas have been targeted for H208.

Operations at the mine were suspended in April 2008 due to concerns raised by the Provincial Government relating to water discharge quality. Construction of approved water treatment facilities was subsequently completed. A revised feasibility study, environmental impact assessment and environmental monitoring and management plan were completed and approved by the authorities post the interim period end.  

           4.3         Rough Diamond Sales 

	H108	H107	% Change
Carats sold	21 790	10 411	109%
Total tender value (US$ millions)	6.66	2.27	193%
Achieved US$/ct	305	218	40%

5          Botswana

Gem Diamonds acquired Gope Exploration Company (Gope Exploration) in May 2007. Gope Exploration was the holder of a suspended Retention License covering the Gope 25 Kimberlite deposit in the Central Kalahari Game Reserve.  The Retention License is valid until the end of February 2009.

The De Beers feasibility study was revised in April 2008 and a detailed bankable feasibility study is ongoing.  This is planned to be complete by the end of FY08.

The social and environmental impact assessment (SEIA) is underway with the scoping report having been approved by the department of Environmental Affairs.  A first round of Public Participation Meetings with local communities was held in April 2008.  The draft report was submitted in June and was posted on an open Government website to allow interested parties to comment up until the end of July 2008.  The final SEIA report will be submitted in Q308.

A Mining License application was submitted in July 2007 and section 51 negotiations with the Government of Botswana, which will determine the key terms of the mining license, are expected to commence in Q308.

The development of a mine will be financed by a combination of cash and debt and discussions are ongoing with a number of banks in this regard.  Pending the award of the mining license, mine construction is planned to commence in H109.

6          DRC

Gem Diamonds has interests in three projects in the DRC at Mbelenge, Lubembe and Longatshimo. These interests are held via a number of companies in which Gem Diamonds has between an 80% and 100% shareholding.

            6.1       Mbelenge

The grades realised in the terraces of the Kasaï river in the north and south of Mbelenge were lower than expected and work here was terminated in February 2008.  Better grades were recorded with bulk sampling of the river flats adjacent to the Kasaï river further upstream with grades of 0.2 cts/m³ recorded.

In order to provide an indication of river grades, representative samples from the present Kasaï river bed were obtained.  Dredges and experienced divers were transferred from the Lubembe Project to sample geologically orientated sites based on bathymetric survey interpretation.  A partial river diversion was constructed that allowed dredging to be undertaken in an otherwise inaccessible part of the Kasaï river.  An overall grade of 0.9 ct/m³  was achieved in the river.

Exploration will continue in the Kasaï river in Q308, through further bathymetric and ground penetrating radar surveys.

            6.2        Lubembe

                         6.2.1  Sampling

The dredge sampling of the Lubembe river near Nsambula continued in Q108.  In Q208, dredges were transferred to Mbelenge to sample the Kasaï river.

The Lubembe river grades continue to be positive with grades averaging 7.9 cts/m³  achieved.  An appropriate mass mining technique for Lubembe remains to be determined.

                        6.2.2  Kimberlite Programme

No kimberlite drilling was undertaken at Lubembe in H108, as such over 22 higher interest anomalies remain to be drilled.  Additional anomalies were identified using ground geophysics.

A programme of intensive stream sediment sampling has produced two discrete areas of kimberlite indicator mineral concentrations.  The size of the grains and an examination of their surface features are considered indicative of a proximal source rock.

            6.3        Longatshimo

                        6.3.1  Sampling

Resource definition of river terraces and floodplains was ongoing in H108 in the Longatshimo area through systematic field mapping, reconnaissance pitting and limited sampling. Significant additional high level terrace gravels have been identified and are being delineated.  Bulk evaluation pitting is expected to commence at the end of Q308.

A river sampling programme in the Longatshimo river, using dredges previously stationed at Mbelenge, is planned for Q308.

                        6.3.2  Kimberlite Programme

Drilling has been undertaken on ten anomalies in this area during the period but no kimberlitic bodies have been identified.  Four of the initial anomalies, plus one new anomaly recently identified, remain to be investigated further and the drilling programme will continue in H208.  Additional anomalies were identified using ground geophysics.

A programme of intensive stream sediment sampling has produced an interesting distribution of kimberlite indicator mineral concentrations that will guide future exploration.

7          CAR

Gem Diamonds holds a 75% interest in Gem Diamonds Centrafrique, in partnership with the Government of the Central African Republic which holds the remaining 25%. Gem Diamond Centrafrique holds exclusive exploration and mining rights to the Mambéré Concession.

             7.1      Sampling

Since January 2008, sampling in the modern day Mambéré river has produced a total of 2 779 carats from 11 293 tonnes mined giving an average grade of 25 cpht but with daily grades of up to 60 cpht often achieved.  This result contrasts favourably with the results from sampling the Mambéré river terrace gravels at le Buckle in 2007. 

Average stone size in the river gravels is 0.3 carats per stone and the largest stone recovered to date weighed 11.4 carats.

              7.2     Expansion and Development

Four bulk sample sites have been identified in the south of the concession that require testing before a resource for the river gravels from the southernmost part of the Mambéré river can be inferred.  Thereafter, sample sites in the river to the north of le Buckle will be identified and sampled.  Work to determine the extent of these potential resources will continue throughout the remainder of 2008.

8          Angola

A Cooperation Agreement was signed in January 2007 between Gem Diamonds and Avantis Angola Inc (Avantis) with respect to a feasibility study to be conducted on the known Chiri kimberlite in the Lunda Sul Province of Angola in which Avantis have a 25% interest. An Option Agreement whereby Gem Diamonds can acquire an effective 11.25% interest in Chiri from Avantis was signed at the same time.

Project activities started in Q108 and in Q208 the site infrastructure was established.  A detailed geophysical survey was completed for which an initial assessment of results was derived and the final interpretation is awaited.  The earthworks, civil foundation work and assembly of the 10 tph DMS plant was completed during the period and the plant commissioning began.  Earthmoving equipment for bulk sampling is on site.

Angolan import and permitting procedures have caused some delay to the project timeline.

Based on the results of the geophysical survey the kimberlite has been determined to be some 50 - 60 ha in extent.

Diamond drill sites have been selected to refine and calibrate the geophysical model with 207m of 3 000m of drilling completed by the end of the half year.

The large diameter drill rig and ancillary equipment are in the process of being imported into Angola and once the diamond drilling is complete, large diameter drilling will commence.

For further information: 

Gem Diamonds Limited Clifford Elphick  Tel: [phone] Gem Diamond Technical Services Angela Parr  Tel: [phone]

Pelham PR Candice Sgroi  Tel: [phone] James Henderson Tel : [phone]

About Gem Diamonds:

Gem Diamonds Limited (LSE: GEMD) is a global diamond company that is pursuing an accelerated growth strategy through targeted acquisitions and the development of existing assets.

The Company's portfolio comprises producing kimberlite, lamproite and alluvial mines, development projects, exploration assets as well as a diamond beneficiation centre. Operations are situated in Angola, Australia, Botswana, the Central African Republic, the Democratic Republic of Congo, Dubai, Lesotho and Indonesia.

Gem Diamonds has a specific focus towards higher value diamonds, a segment of the market expected to deliver superior long term returns. The Company produces some of the world's most remarkable white diamonds from its Letšeng mine and rare fancy yellow diamonds from its Ellendale mine and an array of coloured diamonds from its Cempaka mine.

Established in July 2005, Gem Diamonds listed on the main board of the London Stock Exchange in February 2007 raising US$635 million. It is currently capitalised at approximately US$1.3 billion and had US$144 million of cash on its balance sheet at the end of June 2008.

For further information about Gem Diamonds visit www.gemdiamonds.com.

 

END

 

 

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