JOHANNESBURG (miningweekly.com) – As Gem Diamond’s flagship Letšeng mine, in Lesotho, continued to perform well during the year to December, the London-listed diamond miner was gearing up for commercial production from its Ghaghoo mine, in Botswana.

The $96-million mine, situated near the south-eastern border of the Central Kalahari Game Reserve, was on track for commercial production during the second half of 2014, said CEO Clifford Elphick on Tuesday.

The diamond miner aimed to ramp up to the Phase 1 planned production rate of 200 000 ct/y to 220 000 ct/y – extracted from 720 000 t of ore – by the end of the year.

“With the kimberlite now intersected and the development of the mining tunnels taking place, the completion of Phase 1 of the project is in sight,” Elphick said, adding that the main decline reached 50 m from the break-off to the first production level in February 2014.

“It is very satisfying to see that the advance of the decline shaft through difficult and dangerous conditions has taken place on time and within budget,” he said.

The mine, which was in a remote area, characterised by shifting sands and difficult road conditions, had effective operating mining support infrastructure, a camp, a treatment plant and other services in place.

By December, Gem Diamonds had spent $71.2-million of the total capital budget for Ghaghoo and the group had, in January, finalised a $25-million nine-month unsecured loan facility through Nedbank Capital for the remaining capital spend.

This facility was due to be refinanced through a longer-term debt facility prior to its expiry in October.

Gem Diamonds said a decision to delay the sinking of the planned 6-m-diameter ventilation shaft from 2013 to 2015 had allowed the replanning and the redesign of the ventilation system and escape way to smaller 1 100-mm-diameter drilled holes.

“The drilling of these ventilation and escape holes is progressing well and will be completed before the end of the first quarter of 2014,” Elphick noted.

The processing plant was expected to be fully commissioned by May – well ahead of a sustainable feed of run-of-mine ore becoming available from underground.

A build-up to a steady state production rate of 60 000 t/m was planned.

Meanwhile, Gem Diamonds reported that a “significant reduction” in diamond breakage had been achieved after the installation of new crushers in May 2013. By the end of December, the company had recovered 25 diamonds larger than 50 ct through Letšeng's plants 1 and 2 since installation.

“Work to identify further incremental improvements to throughput and breakage at both plants is ongoing. Results are encouraging and this work will progress during early 2014,” added Elphick.

Gem Diamonds reported a decline in recovered diamonds at Letšeng – 95 053 ct in 2013, compared with 114 350 ct in 2012 – as the company mined mostly lower-grade Main pipe ore during the first three quarters of the year.

Mining moved into the higher-grade, higher-value Satellite orebody in the last four months of the year, resulting in the anticipated improvement in the grade, size and quality of diamonds produced.

FINANCIAL RESULTS
Gem Diamonds said the technological and strategic investments made during the year, together with a more stable diamond market, had resulted in 5% higher revenue at $213-million, owing to the sale of 97 294 ct from Letšeng during the year to December.

This compared with the revenue of $202-million from the sale of 107 617 ct in the prior year.

The group reported underlying earnings before interest, tax, depreciation and amortisation of $77-million in 2013 – up 18% from the year before.

Profit for the year rose to $38-million, compared with the $32-million in the prior period, while basic earnings a share increased 24% to $0.15.

OUTLOOK
Gem Diamonds aimed to build a $14-million coarse recovery plant, with X-ray transmissive technology installed during 2014 to extract “better value from our existing assets”.

“This project will use the latest technology to treat the high-value coarse fraction of the ore to ensure greater recovery of the higher-value Type II diamonds. It will also include further security improvements and advanced technology diamond accounting of all diamonds recovered by these units,” Elphick explained.

Further, the group expected diamond prices to remain “relatively stable” during 2014, with the potential for price increases on the back of a firmer US market and continued growth in China.

Liberum Capital agreed, noting in a statement to clients that 2014 should be a "stronger year for revenues, with strong prices being reported at tenders, polished prices small-up on the year and relatively more material being mined year-on-year from the higher value, higher-grade satellite pipe".

“Together with our refined and focused strategy and flexible business model, the group is well positioned to take advantage of this positive trend,” Gem Diamonds nonexecutive chairperson Roger Davis concluded.