Gem Diamonds Limited (LON: GEMD) have reduced their sales outlook for diamonds as prices ‘remain under pressure’, additionally the firm has renewed its lease or the Letseng mine in Lesotho.
In their third quarter trading update, ending 30th September the miner said that capital expenditure has been reduced by $7 million, reducing expected capital spend for 2019 to around $12 million.
The company said it sold 25,631 carats during the quarter, down 10% from 28,379 in the second quarter, while achieved prices declined by 6% to $1,417 per carat from $1,501.
The cut in sales forecast will not worry shareholders as significantly as expected.
The global mining industry has seen slumps, particularly with firms such as Antofagasta (LON: ANTO) cutting their production guidance and Centamin (LON: CEY) also experienced output declines.
“Prices for smaller and commercial type goods remain under pressure with polished inventory levels remaining high,” the company said. “Larger high-quality diamonds have also experienced some price pressures in 2019, contributing to the lower prices achieved during the period.”
Production from the Letseng mine totalled 27,539 carats in the third quarter, up 1% from 27,210 in second quarter.
Gem Diamonds said there was lower-than-expected contribution from the mine’s Satellite pipe, which is being developed in addition to the Main pipe.
It said that as the mine transitioned into the new cutback to accommodate the planned increase in contribution from the Satellite pipe, a deviation was identified in the anticipated contact face position.
“Due to the contact variance in the Satellite pipe, the forecast contribution for 2019 has been reduced. The overall impact on carats recovered for the year remain unchanged; however carats sold have been reduced due to the lower contribution from the higher-grade Satellite pipe,” the company said.
Gem Diamonds owns 70% of Letseng mine, said the lease is renewed for an immediate period of ten years which will come as a positive for the firm, despite the cut in sales forecast.
Despite this cut, investors seem optimistic about the potential of Gem Diamonds.
The share price of Gem has jumped 2.89% trading at 63p per share. 5/11/19 12:21BST.
