Gem Diamonds Limited, which operates the Letseng and Ghagoo projects in southern Africa, has reported an attributable loss of US$ 158.8 million for 2016, as compared to a US$ 52 million profit a year earlier.

The miner said this massive shift in its fortunes was due to the lower recovery of large diamonds from its Letseng mine during the year coupled with the weakness in prices of rough for the category of diamonds mined from Ghagoo, which had led to the latter being put on care and maintenance in February this year. The Company reported non-cash impairments relating mainly to the decision to place Ghaghoo on care and maintenance of US$ 176.5 million.

Gem Diamonds said it earned revenue of US$ 189.8 million (US$249.5 million in 2015) during the year. It reported an underlying EBITDA of US$ 62.8 million (US$103.5 million in 2015) and said that its profit for the year was US$32.3 million (US$67.4 million in 2015), with an attributable profit (before exceptional items) of US$17.7 million (US$41.8 million in 2015).

During the year, the Company recovered 108,206 carats (108,579 in 2015) from Letseng at an average value of US$1,695 per carat achieved (US$2,299 in 2015) due to fewer +100 carat diamonds recovered. Of these, 34 rough diamonds achieved a greater value than US$ 1.0 million each, with five diamonds larger than 100 carats being recovered (eleven in 2015). Highlights of the year included a 11.8 carat pink diamond, sold for US$187,700 per carat, making it the third highest price per carat sold by Letšeng and a 160.2 carat Type II white diamond which was the largest recovered in 2016.

Gem Diamonds reported satisfactory progress of work at the Ghaghoo mine, with 40,976 carats being recovered (91,499 in 2015) at an average value of US$ 152 per carat achieved (US$ 162 per carat in 2015). Total sales from Ghagoo were US$ 7.2 million for 47,266 carats sold.

Commenting on the results today, Clifford Elphick, Chief Executive of Gem Diamonds, said: "Letšeng has performed well operationally and achieved all production metrics within targets and guidance. Demand and prices achieved for the large, high quality diamonds recovered from Letšeng have remained firm, but the decline in 2016 in the recovery of diamonds larger than 100 carats has had a disappointing impact upon revenue and cash flow. This recovery rate is consistent with the normal, short term variability of the resource. Based on a detailed geological understanding of the resource, we remain confident that Letšeng will continue to produce exceptional diamonds.”

 Elphick added that at Ghaghoo, solid progress was made developing the mine and though low prices for the category of diamonds it was yielding led to the mine being placed on care and maintenance in February 2017. He said that it still provides Gem Diamonds with flexibility to restart operations, when prices for this category of diamonds recover.