Gem to ramp production at Ghaghoo

Staff Writer | Friday August 21, 2015 15:01

Ghaghoo output was below target in the first six months of the year, with the company treating 132,125 tonnes, to produce 35,285 carats.

“Focus will be on converting the Ghaghoo mine from its commissioning phase into sustaining operational activities and achieving steady state production. We plan to ramp up production to a steady state rate of 60 000 tonnes per month. “The main risks to achieving full production in the second half of the year are considered to be availability of ore from underground, due to difficult ground conditions, and traversing the main water fissure that was previously encountered,” read a statement from the company accompanying their first half financials.

During the period, 13 diamonds larger than 10 carats each, were recovered, including a 35-carat diamond recovered in March 2015, and a 48-carat diamond recovered in May 2015, being the largest diamond recovered at Ghaghoo to date. The mine deposit is estimated to possess 20 million carats of diamonds worth more than $3 billion (P30 million). At full production, Ghaghoo Mine is expected to produce up to one million carats a year.

The first parcel of Ghaghoo commissioning diamonds was sold in February 2015 for US$ 2.1 million, achieving US$ 210 per carat.

“Subsequent to period end, a second sale of 29 891 carats of Ghaghoo commissioning production took place in July 2015, achieving a total value of US$ 4.9 million (US$ 165 per carat). Although this was below the average price achieved for the first sale, the production was not comparable from a quality perspective and this, together with a declining market for these goods, had a negative effect on the price achieved. It is anticipated that the next Ghaghoo sale will take place before the end of the year,” read the statement. While the small stones recovered from Ghaghoo mine did not fetch high prices in the market, the company said the bigger diamonds from its Letseng mine in Lesotho are holding their value. Prices for Gem Diamonds Ltd. stones that are larger than 10 carats have fallen about three percent in the first half of this year, Chief Executive Officer Clifford Elphick said.

“That compares with declines of about 30 percent for smaller gems. The big stones seem to be holding up their value,” he said.

Prices have slumped in the past 12 months as traders, cutters and polishers suffered from a credit squeeze and weaker-than-expected jewellery demand. De Beers, the biggest producer, has responded by cutting output and allowing its customers to defer pre-agreed purchases. “This is really going to have a big impact. We have seen some indications at the bottom end that things are starting to turn,” Elphick said.  For the first half of the year, Gem Diamonds reported a profit of $15.4 million that was down 22 percent from a year earlier.   Sales declined 21 percent to $118 million.