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Gem Diamonds core earnings jump 87 pct

Wednesday, August 20 08:48:55

Gem Diamonds Ltd reported an 87 percent jump in first-half underlying core earnings as the miner sold more diamonds at higher prices and said it expected pricing to remain strong in the second half.

The company, which has operations in Lesotho and Botswana, said underlying earnings before interest, taxes, depreciation and amortisation rose to $62.2 million during the six months ended June 30, from $33.2 million a year earlier.

Reduced breakage, higher quality diamonds mined in Letseng, Lesotho and a strong market for large, high-quality rough diamonds helped push revenue up 54 percent to $148.9 million, the company said on Wednesday.

Natural rough diamond prices may rise 5 to 10 percent this year, helped by recovering demand for polished stone used in jewellery, according to Belgium's Antwerp World Diamond Centre (AWDC).

Healthier credit conditions in India, the world's leading diamond polishing market, and a rise in disposable incomes in the hands of China's burgeoning middle class is boosting demand for the precious stone.

Furthermore, researchers are predicting growth in the U.S. jewellery market, traditionally the largest retail diamond market, to help buoy rates fetched by miners.

"The second half of the year should see strong pricing maintained as (Gem Diamonds) continues to see robust long-term support for diamond prices with continued growth in demand from non-traditional markets in Asia and strength in traditional markets alongside limited growth in supply," Gem Diamonds said.

The company said in July that carats recovered from Letseng during the first-half rose 29 percent to 45,678 carats. Average value per carat from the first five tenders of the year soared 58 percent to $2,747.

Rough diamonds mined at its flagship Letseng mine, located in the Maluti mountains of Lesotho, are sold on tender in Antwerp by a unit of the miner.

Since Gem Diamonds acquired a 70 percent stake in 2006, the mine has unearthed four of the 20 largest white gem-quality diamonds ever recorded. The government of Lesotho owns the remaining 30 percent stake.

Gem Diamonds, which is also developing the Ghaghoo mine in Botswana, said a sale of the mine's initial production was scheduled to take place before the year end.

Gem Diamonds shares closed at 207.75 pence on the London Stock Exchange on Tuesday. (Reuters)

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