A warning that prices had weakened recently took the shine off Gem Diamonds’ (LON:GEMD) strong end to 2014.
The miner said while Letseng mine stones remained relatively resilient due to their high value, the market overall may be under pressure this quarter.
Letseng, 70% owned by Gem and in Lesotho, saw its average carat price rise by almost a quarter in 2014 to US$2,540 helped by some huge rocks uncovered during the year.
Thirteen diamonds were worth more than US$1mln each, including a 112.6 carat white diamond and a 90.4 carat white.
Clifford Elphick chief executive, said: "The fourth quarter of 2014 saw an encouraging end to a very positive year for Gem Diamonds, with the December Letšeng tender achieving an average of US$ 2 799 per carat.
At the new development at Ghaghoo, the production ramp-up has begun and the first sale of diamonds recovered from commissioning will take place in February, he added.
“The long term outlook for the diamond market remains strong, however during the fourth quarter the diamond market saw a weakening of prices following a year of price growth. This trend may continue into the first quarter of 2015.”
Broker Sanlam added that flagship mine Letseng is getting deeper and the strip ratio is rising, which means at some point open pit mining will become impractical and too costly and Gem will need to go underground.
“Shorter term, Gem Diamonds higher value product may well offer more resilience if diamond prices continue to soften.”
Shares fell 7% to 157p.