Gem Diamonds (LON:GEMD) is apparently a City broker’s best friend, after expectation-beating results from the first six month of the year.
It revealed improved output from the Letseng mine, in Lesotho, and encouraged investors with the news that ramp-up at the Ghaghoo, in Botswana, is on track to deliver the targeted rate of 60,000 tonnes per month before the end of the year.
It comes as much improved diamond prices have drawn increasing levels of interest from investors, and after London-listed peer Petra had also revealed upbeat production and sales stats.
Gem shares rose 1.5% to 48.75p Tuesday after the company revealed an 80% rise in revenue from Letseng to US$147.8mln – amid a 29% increase in carats recovered to 54,678, a 58% improvement in average ‘value per carat’ to US$$2,747 and a 14% rise in sales to 53,799 carats.
Breaking down more sales stats reveals that 37 rough diamonds were sold for more than US$1mln each, 77 rough stones were priced above US$20,000 per carat and five achieved more than US$60,000.
Overall, Gem sold 311 rough diamonds that were larger than 10.8 carats. Among the selection were three exceptional stones (more than 100 carats) – a 162.02 carat diamond sold for US$11.1mln, another with 161 carats fetched US$2.4mln and US$7.5mln was paid for the third which had 132 carats.
Chief executive Clifford Elphick said: “This has been a strong half-year for Gem Diamonds with one of the best ever performances at Letšeng.
“This reflects the current mine plan and the technical improvements and optimisation programmes which are taking place at Letšeng. Additionally, good progress has been made with the development of the Ghaghoo mine.”
City broker Westhouse called it a “flawless start” to the year for the diamond miner, while Investec highlighted Gem’s “big step forward” and with a positive yet measured appraisal Panmure described “a credible performance”.
Westhouse, repeating a ‘buy’ recommendation, increased its target price to 235p from 220p.
“Gem was one of our two preferred picks at the start of FY2014 due to its exposure to the higher value end of the diamond market, and upside potential at Ghaghoo,” said Rob Broke, Westhouse analyst.
“The company has seen positive news flow from both of these, which has helped drive the share price up by c.33% since the start of the year.
“While a lot of upside has therefore gone from the stock, we still see further room for optimism for those comfortable with a degree of risk.”