Gem Diamonds Ltd (LON:GEMD) shares sparkled as it announced it recovered a 169 carat diamond in South Africa and reported an increase in full year revenues.
The diamond, which is top white colour Type IIa, was recovered from the Letšeng mine in Lesotho. It marks the seventh diamond over 100 carats the miner has found in 2018.
On Monday, the company sold one of the largest gem-quality diamonds ever mined for US$40mln to an unnamed buyer in Antwerp, Belgium.
Gem Diamonds said the 910-carat diamond, named ‘The Lesotho Legend’, was retrieved in January and was the fifth largest gem ever recovered.
Revenues rise but profits fall
In its full year results, the group said revenue rose to US$214.3mln in 2017 from US$189.8mln the previous year as the number of carats it sold rose by 14% to 107,152. It recovered 111,811 carats last year from Letšeng compared to 108,206 in 2016.
“The second half of 2017 saw the company begin to benefit from the operational improvements implemented during the year, with a significant improvement in the recovery of the large diamonds from Letšeng,” said chief executive Clifford Elphick.
“The market for the mine's large, high quality white rough diamonds remained strong over the course of 2017, a trend which has continued into early 2018.”
However, attributable profit before exceptional items fell to US$9.1mln from US$17.7mln, reflecting an increased waste amortisation charge at Letšeng and costs incurred in placing its Ghaghoo mine in Botswana under care and maintenance.
Last year a 6.5-magnitude earthquake with an epicentre 25km damaged the underground water fissure at the Ghaghoo, leading to a large influx of water into the mine.
The company was in talks with a potential buyer for Ghaghoo last year but it did not result in an agreement.
Operational improvements deliver cost savings
On the back of efforts to improve efficiency, Gem Diamonds identified a potential of US$20mln of annualised cost reduction initiatives at the end of last year. It is targeting US$100mln of cash savings by the end of 2021 with an ongoing target of US$30.0mln per year thereafter.
“With the benefits of the efficiency programme bearing fruit, a positive market outlook, and an investment case underpinned by the proven quality of the Letšeng mine, we look to the future with confidence,” said Elphick.
The company said it would not pay a dividend for the year as it works on strengthening its balance sheet.
Shares rose 4.3% to 97p.