Gem Diamonds (LON:GEMD) hailed record first half earnings thanks to soaring diamond prices and a particularly good performance by its white diamond mine Letšeng in Lesotho. It cautions, however, that the ongoing global economic uncertainty poses a risk going forwards.
Earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half to June soared to US$90.8m from US$18.5m last time, and even exceeded the US$82m earned by the group for the whole of its 2010 year.
Profit before tax from continuing operations came in at US$79 million, up from US$7.8 million last time, on revenue totalling US$196.5 million, up from US$104 million.
Its cash position has been bolstered too, rising to US$165.6 million from the US$108.3 million in its coffers at the end of its first half in 2010.
Diamonds from its key Letšeng operation achieved a record average value of US$3,052 per carat in over the period, up from US$1,728 per carat last time.
Meanwhile, the Ellendale mine in Australia, which produces rare fancy yellow diamonds, achieved a record average price of US$4,045 per carat for its output, up from US$2,588 per carat last time.
A pre-feasibility study for the Letšeng expansion is nearing completion and a detailed presentation by management on the proposals is scheduled to take place in London on 5 September 2011.
Clifford Elphick, chief executive of Gem Diamonds says: “The first half of 2011 has seen the continued benefit of Letšeng having a more active role in managing its sales and marketing strategy, as well as the implementation of the downstream initiatives.”
Elphick says lower stocks of rough and polished diamonds in the cutting centres and strong diamond jewellery demand from India and China have resulted in record rough diamond prices being achieved, reflected in rising polished diamond prices.
With a strong balance sheet of US$165.6 million of cash on hand, Elphick is confident Gem Diamonds is well positioned to deliver on its growth plan and benefit from the positive supply demand dynamics, although he cautions that the current economic uncertainty presents a risk to outlook.