Botswana – The Gem Diamonds Ghaghoo operation, which has been operational for 11 months, is progressing slower than planned but recovering larger-than-expected diamonds to compensate for its lower grades.
This was revealed in LSE-listed Gem Diamonds’ trading update detailing the company’s operational and sales performance for the period 1 January 2015 to 30 June 2015 (H1, 2015), ahead of its half yearly results which will be released on 19 August 2015.
“The development of the Ghaghoo mine is progressing slower than planned due to difficult ground conditions which have hampered slot development in the first five production tunnels and constrained production ramp-up,” says Gem Diamonds CEO Clifford Elphick.
“Specialist expertise has been employed to ensure there is no further major ingress of water as the access decline and rim tunnel on Level 1 both begin advancing through the water fissure area in order to gain access to the second production section.” To date, five stoping tunnels have been opened, providing increased ore availability.
On a positive note, Ghaghoo’s recovered grade in the latter part of H1, 2015 was above reserve grade (27.8 cpht) with larger diamonds starting to fill gaps in the size frequency distribution model. The recovered grade fluctuated between 28 and 30 cpht in the last two months of H1, 2015.
Small size blue and pink coloured diamonds were also recovered; confirming the presence of these valuable diamonds in the ore body.
A 48 carat diamond was recovered in July 2015 with an increasing number of diamonds in the 10 to 30 carat size range being recovered, albeit still below modelled frequencies. A second parcel of 29 891 carats of commissioning phase production sold for US$4.9 million in July 2015 ($165/carat) in a difficult market.
During the half year period, Letšeng achieved an average price of $2 264/carat, slightly below H2, 2014 ($ 2 338/carat).
13 rough diamonds achieved a value of greater than $1 million each and in addition to the 314 carat Type IIa white diamond previously reported, another outstanding quality 357 carat Type IIa white diamond was recovered and is expected to be sold in Q3, 2015.
A further four diamonds of over 100 carats each were sold in the period, including a top quality 108 carat Type IIa rough diamond which sold for $65 226/carat.
The Plant 2, Phase 1 upgrade and the coarse recovery plant construction were successfully completed on time and within budget. On the first day of its operation, the new XRT unit recovered a high quality 52 carat Type IIa diamond.
“The recovery of large high quality diamonds continues to define the Letšeng mine and it is pleasing to see that prices for these goods have remained firm despite the current difficult diamond market conditions. The Plant 2 Phase 1 upgrade was completed on time and within budget and will achieve its increased head feed target of an additional 250 000 t on an annualised basis. In addition, the construction of the coarse recovery plant is complete, and during commissioning, the first diamonds from run of mine ore were recovered,” Elphick states.
Gem Diamonds had $83.8 million cash on hand as at 30 June 2015, of which $70.5 million is attributable to the company. It has drawn down $34.2 million of its available facilities, resulting in a net cash position of $49.6 million.
A maiden annual dividend of $0.05 cents per share ($6.9 million) was paid on 9 June 2015.