Shares in Gem Diamonds Limited (LON:GEMD) slumped on Wednesday morning after the Africa-focused diamond producer posted a less than sparkling set of results.
Revenues for the year to 31 December 2016 fell 31% to US$189mln (2015: US$249.5mln), while profits also took a beating, more than halving to US$32.3mln (2015: US$67.4mln).
Gem has two diamond operations, Letšeng in Lesotho and Ghaghoo in Botswana, with issues at both to blame for the poor performance.
“Letšeng has performed well operationally and achieved all production metrics within targets and guidance…but the decline in 2016 in the recovery of diamonds larger than 100 carats has had a disappointing impact upon revenue and cash flow,” said chief executive Clifford Elphick.
“At Ghaghoo, solid progress was made developing the mine. Given the low prices achieved for this category of diamonds, the mine was placed on care and maintenance in February 2017.”
As Elphick alluded to, diamond prices played a part in the underperformance. At Letšeng, Gem achieved an average value of US$1,695 per carat compared to US$2,299 in 2015.
Similarly, the lower quality diamonds coming out of the Ghaghoo mine sold for an average of US$152 a carat compared to US$162 a year earlier.
Gem Diamonds paid out a maiden dividend of 5 cents a share last year, but given the difficult 12 months it has opted against paying out to investors for 2016.
The company seemed a little more upbeat on future performance, stating that the medium to long-term outlook for diamond demand “is expected to remain favourable”.
Non-executive chairman Roger Davis also confirmed in today’s announcement that he will be stepping down following this year’s annual general meeting after ten years in the role.
Shares were down more than 5% to 109p in early deals on Wednesday.