Ghaghoo downsizing to reduce cash �burn� � CEO
Staff Writer | Thursday March 17, 2016 14:30
According to the company’s CEO, Clifford Elphick it was considered prudent to restructure Ghaghoo in the short term in order to meet these objectives through downsizing the operation.
“The depressed market has impacted the prices achieved for our Ghaghoo production. Consequently, in the current climate, and after reviewing various options, it was considered prudent to downsize the operation for 2016 to reduce cash consumed during its final development. It is important to note that Ghaghoo remains a key future option for the group and its expansion opportunities, when diamond prices improve, will further deliver on the board’s strategic plan,” he said.
It is estimated that as part of the downsizing, Ghaghoo will cut its original production target of 720,000 tonnes per annum to 300,000 tonnes, while about 100 workers will be retrenched.
During the year, Ghaghoo incurred development costs of $9 million (P100 million) in order to access both current and future ore producing tunnels and further incurred $30.2 million in operating costs.
Despite a challenging year for the diamond mining industry, Gem Diamonds reported a ‘strong’ set of results for the 2015 financial year.
Underlying earnings before interest, taxes, depreciation and amortisation decreased by two percent year-on-year to $103.5-million, while earnings a share rose 26 percent year-on-year to $0.30 a piece and attributable profit increased 57 percent year-on-year to $52-million. Revenue was eight percent lower year-on-year at $249.5 million. An ordinary dividend of $0.05 a share was recommended, along with the recommendation of a special dividend of $0.035 a share.
“It is pleasing to see that the prices achieved for Letšeng’s diamonds during 2015 have remained robust, despite the sharp downturn in the global market.
The high-quality diamonds for which Letšeng is renowned, have contributed to the strong results at an average price of $2,299/carat for the year,” said Elphick. He added that the group continued to implement its strategic objectives of capital discipline by investing in low-cost, high-return capital projects.
The increase in the recoveries of the important larger than 100-carat diamonds from an average of six a year to 11 in 2015 demonstrated the success of the initiatives, he noted.
Meanwhile, Elphick said the key objectives for the development of the first phase at the Ghaghoo mine, had been achieved.
In this regard, the average grade recovered during the year met the expected reserve grade and following the commissioning of the surge bin in January, the key metric of 2,000 tonnes per day through the processing plant was achieved.