HomeDiamonds & GemstonesGem Diamonds may close mine

Gem Diamonds may close mine

The Gem Diamonds
Ellendale mine which
may be closed down
Perth, Australia — MININGREVIEW.COM — 06 April 2009 – Gem Diamonds Limited – a leading global diamond producer headquartered in London and with diamond mining, cutting and polishing operations throughout the world – may close one of its two mines still in operation as a result of the dramatic decline in prices of  the precious stones.

“The Ellendale mine in Australia is marginal at today’s prices,” said CEO Clifford Elphick from here in a telephone conversation with Bloomberg News. “If we cannot improve that, then to protect the asset, we will put it on care and maintenance,” he added.

Various diamond producers have shut mines after the global economic slump hurt demand for jewellery. Gem Diamonds – which fell as much as 17% in London trading after reporting a US$552.8 million (R5.3 billion) annual loss and saying it would raise money in a share sale – closed down all its properties in February except its mine in Lesotho and one so-called pipe at Ellendale.

“Remaining production at Ellendale will be halted unless talks about a diamond supply agreement result in satisfactory terms,” said Elphick.

De Beers – the world’s largest diamond producer – has suspended production at its Debswana joint venture in Botswana that mines a fifth of the world supply of diamonds. Its closest rival, ZAO Alrosa, has halted gem sales to non-state customers. And Toronto-based Harry Winston Diamond Corporation said this week that jobs would be eliminated at a Canadian mine.

Gem’s loss for 2008, which compares with a year-earlier profit of US$23.2 million (R223 million), followed asset and inventory write-downs totaling US$565.8 million (R5.4 billion), Gem Diamonds has revealed in a statement. The company wrote down assets by US$546.5 million (R5.2 billion) and reduced the value of diamond and ore inventories by US$19.3 million (R183 million).

The company plans to raise 75 million pounds (R1 billion) by selling as many as 75 million new shares for 100 pence each.

Ellendale mine, the world’s leading source of vivid yellow diamonds, produced 589 000 carats in 2008 at US$185 a carat.