Production halved at Ghaghoo Mine
Staff Writer | Friday May 20, 2016 15:02
“During the period, Ghaghoo treated 50,514 tonnes of ore. This reduced tonnage is in line with the strategy of downsizing and reducing the production plan for 2016 to approximately 300,000 tonnes,” said CEO, Clifford Elphick.
At the beginning of the year, Gem Diamonds announced that it would downsize production at Ghaghoo in 2016 in line with market conditions in a development that market reports say has resulted in about 100 workers being laid off.
Although Ghaghoo will operate at a reduced production rate during year, Elphick said prices for production will continue to be monitored and the option of returning to full production regularly reviewed.
A parcel of 14,114 carats of Ghaghoo diamonds was sold during the period for an average of $160 per carat, which is some seven percent above the previous price achieved in December 2015.
The downsizing of operations at Ghaghoo Mine will preserve cash for the London-based miner in a challenging period characterised by low rough prices.
According to 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.
During 2015, 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.
On the diamond market, Elphick pointed out that positive actions taken by the major diamond producers had led to an overall steady sentiment in the diamond market in the first quarter of this year. Although there were signs of improvement in the quarter, the diamond market as a whole remained cautious during the period.
“The continued slowdown in Chinese retail demand, a strong U.S dollar and reports of continued high levels of polished inventory contributed to a cautious approach being adopted in the purchasing of rough and polished diamond,” the company stated.
Investment banking and research firm, Liberum expected rough diamond prices to remain largely flat for the next 12 months owing to a high level of rough inventories and weak global demand for luxury goods.