Interim Management Statement

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12 Nov 2012

Gem Diamonds Limited (LSE: GEMD) reports an Interim Management Statement (“IMS”) for the Period 1 July to 11 November 2012 (“the Period”).

DURING THE PERIOD:

LETŠENG:
  • Achieved 12 months LTI-free on 4 November 2012.
  • An average value of US$1 673 per carat was achieved for the 2 exports in Q3 2012 (US$ 2 426 per carat in Q3 2011).
  • The October export achieved US$1 944 per carat (US$2 300 per carat in October 2011, excluding the sale of the 550 carat Letšeng Star which sold for US$16.5 million).
  • 10 rough diamonds achieved an average value in excess of US$1 million each during the Period (15 in the corresponding Period in 2011).
  • 34 rough diamonds produced which achieved prices greater than US$20 000 per carat in the Period (50 in the corresponding Period in 2011), totalling 116 and contributing 58% of Letšeng’s production value for the year to date.
  • A total of 180 rough diamonds greater than 10.8 carats in size were produced (171 in the corresponding Period in 2011).
ELLENDALE:
  • Strong operational performance with 41 680 carats recovered in Q3 2012 (up 28% on Q3 2011).
  • Achieved an overall average price of US$618 per carat in Q3 2012 (US$1 015 per carat in Q3 2011), with the fancy yellow diamonds sold to Tiffany & Co. achieving an average of US$3 902 per carat in Q3 2012 (US$5 153 per carat in Q3 2011).
  • New floor index for the fancy yellow pricing mechanism with Tiffany & Co. introduced in October 2012 resulted in a price of US$5 231 per carat for the October sale of fancy yellow diamonds to Tiffany & Co.
GHAGHOO:
  • Tunnelling operations re-commenced in September 2012 although progress remains slow due to unforeseen hard material being encountered.
GROUP:
  • 6 Lost Time Injuries (LTIs) have occurred in the Group for the year to date.
  • Zero major stakeholder and environmental incidents have occurred year to date.
CASH:
  • The Group has US$94.0 million cash as at 31 October 2012, of which US$79.0 million is attributable to Gem Diamonds.
FINANCING:
  • A Term Sheet has been signed with Nedbank for a US$20.0 million 3 year Revolving Credit Facility at GDL providing funding flexibility for the Group.
Gem Diamonds’ CEO, Clifford Elphick commented:

“The diamond mining industry continued to experience rough price headwinds during the Period from the ongoing global financial turmoil and uncertainty. However from October 2012, rough prices have begun to show a more positive trend.

Severe and prolonged winter snow conditions at Letseng have impacted upon carat production for the Period. YTD carat production remains ahead of the corresponding Period for 2011. Carat production at Ellendale is up 28% over the corresponding Period in 2011.

Project Kholo continues and certain of the workstreams have been prioritized with a view to the accelerated enhancement of revenue. In this regard new secondary crushers with improved liner profiles will be installed in the current plants in H1 2013 with the object of reducing large stone damage – thus implementing one of the key strategic objectives of Project Kholo earlier than originally planned. This has the advantage of potentially achieving revenue improvement through relatively light capital expenditure.

It is pleasing to see good progress at Ghaghoo with the erection of the plant and mill progressing well and with the tunnel construction resumed and progressing – albeit at a slower rate than expected due to the adverse ground conditions encountered.”

12 Nov 2012 Interim Management Statement (404KB PDF)