Independent Technical Report and Mineral Resource and Reserve Statements

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18 May 2011

Gem Diamonds Limited (LSE: GEMD) (Gem Diamonds) (the Company) is pleased to release its Independent Technical Report (ITR) which includes details of the Group's mineral resources and reserves and pricing as at 31 December 2010, as well as the latest information regarding operations and projects.

The ITR is an independent economic analysis of Gem Diamonds' operations and is the first full guidance on the Company's life of mine planning published since its IPO in 2007. The ITR has been compiled by independent Qualified Persons from Venmyn Rand Pty Ltd (Venmyn) and has been prepared in compliance with the Canadian National Instrument 43-101, and JORC and SAMREC codes for resources and reserves. The effective date of the ITR is 1 March 2011.

The full ITR is available in PDF format for downloading on the company's website as well as a summary of the resource and reserve statements.

Independent Technical Report (7 Mb PDF)

Highlights:

  • Gem Diamonds total resource of 28.89 million carats is valued at an average of US$536 per carat, which increases the in-situ value by 45% (year on year) to US$15.5 billion (US$12.5 billion attributable).
  • The Letšeng mine in Lesotho:
    • Total resource of 3 661 300 carats
    • Main pipe average of US$2 395 per carat
    • Satellite pipe average of US$3 186 per carat
    • In-situ value totalling US$9.9 billion (US$6.9 billion attributable)
    • Improved diamond prices for Letšeng have contributed to a planned open-pit life of approximately 30 years, with further potential from underground operations anticipated.
    • Included within the Expansion Project are various process improvements and cost saving interventions that add further value to the operation.
At an 8% discount rate Letšeng has an NPV attributable to Gem Diamonds of US$ 1 569 million
  • The Gope Mine in Botswana:
    • Total resource of 20 532 300 carats
    • Average of US$223 per carat
    • In-situ value totalling US$4.6 billion (100% attributable)
    • The business case for Gope indicates a substantial life-of mine over and above the currently defined reserves.
At a 10% discount rate Gope has an NPV attributable to Gem Diamonds of US$ 181 million
  • The Ellendale mine in Australia:
    • Total resource of 4 694 200 carats
    • E9 pipe average of US$513 per carat
    • E4 pipe average of US$148 per carat
    • In-situ value totalling US$1.0 billion (100%) attributable
  • At an 8% discount rate Ellendale has an NPV attributable to Gem Diamonds of US$83 million

The ITR contains the latest technical data regarding the individual operations and takes into consideration the new expansion plans at Letšeng, with revised production and revenue forecasts. Included are details of capex schedules, costing schedules, price models and Net Present Values (NPVs) along with updated resource and reserve statements for each of the principal mineral assets, the Letšeng mine in Lesotho, the Ellendale mine in Australia and the Gope mine in Botswana.

Gem Diamonds' CEO, Clifford Elphick commented:

"This Independent Technical Report was commissioned by Gem Diamonds in order to identify the current value of our principal assets, the Letšeng mine in Lesotho; the Ellendale mine in Australia and the Gope mine in Botswana. This independent report highlights the strength of these assets and the Company's considerable growth potential, which is underpinned by a strong balance sheet, expansion plans, rising diamond prices and a long term supply demand disparity."

Summary of the Group's resources and reserves:
Mineral Resources as at 31 December 2010 (inclusive of reserves)*
PROJECT
NAME
RESOURCE
CLASSIFICATION
TONNES (t) GRADE
(cpht)
CARATS VALUE
(USD/ct)
GEM DIAMOND'S
ATTRIBUTABLE CARATS
BOTTOM SCREEN SIZE
CUT-OFF (mm)
Letšeng   76,970,000 1.61 1,238,100 2,629 866,670 2.0
Ellendale Indicated 18,090,000 6.19 1,119,700 245 1,119,700 1.5
Gope   79,390,000 19.51 15,492,000 223 15,492,000 1.5
TOTAL/WT. AVE INDICATED 174,450,000 10.23 17,849,800 391 17,478,370  
Letšeng   140,966,000 1.72 2,423,200 2,733 1,696,240 2.0
Ellendale Inferred 68,387,000 5.23 3,574,500 215 3,574,500 1.5
Gope   28,777,000 17.52 5,040,300 222 5,040,300 1.5
TOTAL/WT. AVE INFERRED 238,130,000 4.64 11,038,000 771 10,311,040  

* Gope reserve effective as of 01 March 2011

Mineral Reserves as at 31 December 2010*
PROJECT
NAME
RESOURCE
CLASSIFICATION
TONNES (t) GRADE
(cpht)
CARATS VALUE
(USD/ct)
GEM DIAMOND'S
ATTRIBUTABLE CARATS
BOTTOM SCREEN SIZE
CUT-OFF (mm)
Letšeng   76,406,000 1.60 1,221,700 2,631 855,100 2.0
Ellendale Indicated 9,229,000 6.27 578,400 346 578,400 1.5
Gope   3,730,000 26.47 987,300 203 987,300 1.5
TOTAL/WT. AVE PROBABLE 89,365,000 3.12 2,787,400 1,297 2,420,800  

* Gope reserve effective as of 01 March 2011

For further information:
Gem Diamonds Limited

Clifford Elphick, Chief Executive Officer
Glenn Turner, Chief Commercial and Legal Officer
Tel: +44 (0) 203 043 0280

Richard Chetwode – Investor Relations
Tel: +44 (0) 203 043 0280
Mob: +44 (0) 759 0064 883

Gem Diamond Technical Services (Pty) Ltd

Sherryn Tedder, Corporate Affairs
Tel: +27 (0) 11 560 9600
Mob: +27 (0) 83 943 4505

Pelham Bell Pottinger

Charles Vivian
Tel: +44 (0) 207 861 3126
Mob: +44 (0) 7977 297 903

James MacFarlane
Tel: +44 (0) 207 861 3864
Mob: +44 (0) 7841 672 831

About Gem Diamonds:

Gem Diamonds is an international diamond mining company that has pursued a long term growth strategy through targeted acquisitions and the development of its existing assets. Following the recovery in diamond prices in 2010 the Company's focus has been to place itself in a position to take advantage of long term growth opportunities.

The Company's mining portfolio comprises producing kimberlite and lamproite mines in Lesotho and Australia, as well as development projects in Angola and Botswana.

With Letšeng's production of the world's most sought after remarkable white diamonds and Ellendale's production of rare fancy yellow diamonds, Gem Diamonds remains focused on higher value diamonds. This segment of the market is likely to deliver attractive long term returns.