Gem Diamonds Ltd swung to a pretax loss in the full year after taking a massive impairment charge for lower diamond prices and restructuring and announced plans to raise £75 million pounds in a share placing mostly to existing shareholders.
After a US$546.5 million impairment charge for the year to end-December 2008, the company made a pretax loss of US$576.7 million, compared with a profit of 68.4 million in 2007. Revenue rose 94 year-on-year to US$296.9 million, the group said in a statement.
It does not expect to take a further impairment charge this year if diamond prices remain at current levels, chief executive Clifford Elphick told Reuters in an interview.
"Anything that is not profitable has been impaired completely," said Elphick. "It's probably too aggressive but from my point of view there is no harm in doing that and our shareholders have supported us."
Gem Diamonds said it is placing 75 million new shares at 11 pence each, 68 million of which have already been taken up by existing shareholders and new investors. The remaining 7 million will be placed with existing Shareholders only. Shares are placed at 33 percent discount to the share price at the close on March 31.
The company is currently reviewing its business plan in Australia, and it may shut down the E9 pipe, the only pipe left producing, at the at the Ellendale mine if supply talks fail.
The E9 pipe and the Letseng mine in Lesotho are the only producing operations after a drop in diamond prices forced the company, and many of its rivals, to put a number of mines on care and maintenance and to mothball future projects.