Gem Diamonds Share Discussion Threads

[michaelfenton] 29/7/2016 09:53

Question - has anyone any ideas as to the position re GEMD and the Mothae mine in Lesotho?

[superg1] 22/7/2016 19:50

The mention of the 85 carat stone is a bit of a hint too, they seem to be scratching around for news perks, it was easy in the last 3 years, especially 2015 with 2 over 300 carats.

Big stones seem to sell for between 45k to 65k per carat. Taking £55k it comes to around $19 mill for the 3 stones mentioned which is equal to the one 357 stone found last year. As said they had a 314 and 9 others over 100 carats, so they need a very good run to match last year.

[tomatoma2] 22/7/2016 17:15

Waiting on positive news

[michaelfenton] 22/7/2016 12:35

Superg1 - you could re right which is why they mentioned a 100+ stone found in July.

[superg1] 22/7/2016 10:08

It's tough work trying to pick out info but for 2013 they included big stones sold in a presentation.

9 stones with 3 over 100 carats sold for $53 mill. Without those the price per carat drops about $360 dollars to $1684 for that year.

The simple way to do values (from a geologist) is ore values v cpht and opex etc. etc.

They just listed the grade as 1.72 cpht (carats per 100 tonnes) and $1899 per carat achieved.

So 1.72 x 1899 gives $3266 of diamonds per 100 tonnes mined. So your break even there would be all in opex costs of $32.66 per tonne.

I suggest due to the things they have reported and lack of large stones so far this year that figure is going to drop but can be supported by whatever they have unsold from last year etc (if any).

So it's probably best to get the exact cost of mining per tonne from the accounts including waste cost and royalties etc. The all in cost if possible.

It was on over $2,500 per carat not long ago. If material multiple big stones don't get reported or are in H2 then personally I think the share price is in for a dive once the figures come out.

[superg1] 22/7/2016 09:08

Michael just sharing it as you know I tarckd all Lesotho mines and know GemD have to keep hitting big stones to be be viable.

Interesting that they hit a 100+ and 85.

I do owner about the 12.99 largets diamond though mentioned in news, does that mean they found none between all the categories mentioned, perhaps a question that needs asking. I'm guessing they could mean 12.99 is the largest below the 20 plus category but I don't see where they put that.

I'll look up the 2015 stones if they have them listed.

[michaelfenton] 22/7/2016 08:35

Superg1 - good research and you are right however - the key to this year will be July (good start)onwards as they have moved the area being mined from a poor one to what appears already to be producing larger stones.. And yes it would be great to have values listed for the big stones which as you say are critical to profits.Always happy to read what you have well researched.

[superg1] 22/7/2016 07:53

Michael

Look at the annual report for 2015. It lists various things including the number of large diamonds found on page 38. It covers all years from 2008 to 2015.

EG 2015

carat size diamonds found

20-30 126 Diamonds
30-60 65
60-100 15
100+ 11

total 217 diamonds over 20 carats.

It also says

diamonds Letšeng places the Group at the top end of the diamond
market in terms of value and price with its greater than
10.8 carat production accounting for approximately 80%
of its value.

11 diamonds larger than 100 carats recovered, setting a new record for the mine
■ Largest diamonds recovered were a 357 carat and a 314 carat diamond
■ 36 rough diamonds achieved a value greater than US$1.0 million each


Now check that against H1 2016

Amongst the exceptional diamonds recovered, an undamaged Type II 160 carat and an 11.8 carat pink diamond (which sold for US$ 187 000 per carat) were recovered during the Period.

If you look at waste stripped it looks set to jump from 24 million tonnes to 30 million year which seems to carry about a $2 per tonne cost.

$1900 per carat and 9000 carats more for H1 = $17 million, extra waste cost $12 million

Extra ore treated 226,000 tonnes, much higher cost than waste. So the extra carats revenue gets wiped out, but the key point is the large stones as the price per carat plummets without exceptional stones.

They did also find an 85 carat diamond but if you add up the big stones mentioned it covers one form 2015.

'as the mining moved into a different area of the Satellite Pipe in early July 2016, an exceptional 104 carat and an exceptional 85 carat diamond were recovered.'

But even with the 160 stone, the 104 stone and the 85 carat stone, it just covers the 357 stone found last year, but won't cover the value of that. Then there was the 314 carat stone and nine others over 100 carats.

The way the news has been given out tends to suggest large stone recoveries have plummeted and they quote in their 2015 annual report that such stones cover 80% of the company value.

I've only had a quick look so may have missed plenty of information but it would seem revnue and $ per carat is going to plummet once the revenue filtering through from the previous large stone finds evaporates.

It seems to me they need to be finding some large stones 100+ at a regular rate over the next 6 to 12 months just to stand still.

There was a diamond list with values somewhere for those big stones, I'll try to find it.

[superg1] 21/7/2016 11:10

Here you go, they did find a 100+ stone in H1 but for Q1 the largest stone was 12.99 carats.

47 diamonds greater than 4.8 carats each were recovered during the Period, including 3 diamonds larger than 10.8 carats, with the largest being a 12.99 carat diamond.

Amongst the exceptional diamonds recovered, an undamaged Type II 160 carat.

I'll look up 2015 when they found 11 100+ and add in into this post.

2015

H1

13 rough diamonds achieved a value of greater than US$ 1.0 million each

-- In addition to the 314 carat Type IIa white diamond previously reported, another outstanding quality 357 carat Type IIa white diamond was recovered and is expected to be sold in Q3 2015

- Further four diamonds of over 100 carats each were sold in the Period, including a top quality 108 carat Type IIa rough diamond which sold for US$ 65 226 per carat

Q3 covering full year to date

13 rough diamonds achieved a value of greater than US$ 1.0 million each, including an exceptional

quality 357 carat Type IIa white diamond which achieved US$ 19.3 million on tender
-- A total of three diamonds of over 100 carats each were sold in the Period

Full year

The increase in the recoveries of the important +100 carat diamonds from an average of 6 per year to 11 in 2015 demonstrates the success of the initiatives.

So it seems for 2015 there were eleven 100+ diamonds found including two of 357 carats and 314 carats, one of which sold for near $20 mill.

For 2016 it seems they have 2 so far which don't cover the value of one of those 300 plus diamonds. So unless they get the big rocks going soon then the figures are going to drop as it unwinds.

Perhaps they changed the area mined as they stopped hitting big stones.



US$ 6.9 million (at rough value) remained in polished inventory at the end of the Period.

[michaelfenton] 21/7/2016 11:02

superg1- thanks for that it is food for thought. Presumably they cannot switch mining areas overnight. Big stones are like needles in a haystack they will not arrive evenly. You cannot read much into figures over the short term and longterm is a bit of a lottery.I am still inclined to the optimistic side and not add anymore for now. I only have about 5000 shares so it is a small punt on diamonds prices especially the large ones.

[superg1] 21/7/2016 10:55

re

.The delaying of news one quarter may have something to do with Mothae?

Just to clarify

I was on about 2014 or 2015 when the report covered 4 months rather than 3 which conveniently captured a large stone value, otherwise the $ per carat and revenue would have been far different. That's what alerted me to that aspect.

I'll look it up

[superg1] 21/7/2016 10:49

Just had a quick look. I always like to compare what companies have previously said to give an idea more for things they don't suya now.

EG

Gem were keen to mention the big stones and do so throughout 2015 finding 5 x 100+ carat stones in H1 and 6 in H2 2015.

For Q1 and 2 2016 they don't mention any as found as far as I can see. All they say is 'fewer' 100+ found, which I'm taking as none as they mention the July one but nothing for H1.

They do however mention the 100+ stone found in July which should be worth around $5 mill plus. The $ per carat price has taken a decent hit even though they include previous finds and polished stones in the revenue.

So my thoughts are, unless they get some regular big stones in H2 and H1 next year then $ per carat rates are going to tumble depending on what they may have left in the inventory from previous finds. So as it stands imo it's not looking good, but such is the nature of diamond mines just 1 stone can change everything.

GemD are no doubt in the Mothae tender and I have no doubt there are some big stones to be found there too, but first comes the expense of developing the mine if they get it, which I think is likely.

[michaelfenton] 21/7/2016 08:53

superg1- Good point about the large stones. Which they are finding. I think finding a large stone in a poorer area is great news.It is all about extending the life of the mine until they can aquire further prospects.They have plenty of cash and are paying a dividend.The delaying of news one quarter may have something to do with Mothae? The Lesotho Mining Minister has made no announcements about who is getting this mine given up by Lucara. This news is late.

Also it goes to prove that low cpht does not necessarily mean no profits. Technology too is proving a driver with fewer breakages.

[superg1] 21/7/2016 08:36

Michael

I did read the news but would have to dig deeper. From a non-holder view.

Why not mine the best area when GemD is totally reliant on large stones, if they don't hit large stones the average $ per carat implodes due to it being the lowest cpht mine in the world.

That's not a negative but I took it they mined an area less likley to hit the big stones. Obviously it will look good when they switch back, but it did seem they delayed news one quarter (making it 4 months) to capture the finding of a large stone to include in the figures.

No big stones makes the mine a substantial loss maker, yet one decent stone keeps things very much on track.

I'll have a read.

[michaelfenton] 20/7/2016 07:38

I cannot understand why anyone would be negative with this update. It is quite NORMAL for miners to concentrate on slightly less areas to prolong the life if the mine. These are good figures and it appears there is always a chance of a large rock? I will be dding a few more today as in my opinion they should have risen on the news which if read logically is good.

[michaelfenton] 19/7/2016 08:07

results look good if you read it carefully as lower grade areas have been mined. And a very nice find this month. I am happy.

[alan@bj] 15/7/2016 15:53

Half-yearly results are out next Tuesday.

[jimmywilson612] 15/7/2016 15:04

I've Bought into this recently - Wanted more basic materials for my portfolio as its heavily skewed in other areas. This with TSG is my entry points into the sector.

[gucci] 01/7/2016 11:52

recovering fast from drop last week

[weemonkey] 16/6/2016 11:01

Evidence of a switch from PDL to here? Consistently more profitable and on a much more reasonable valuation so makes sense.

[woodpeckers] 15/6/2016 13:16

“We are hoping to make an announcement on who has been awarded a stake in the mine in two weeks’ time,” he added.

Note the word 'hoping' and remember this is Africa. Not expecting news until next week at the very earliest.

[flyposter] 15/6/2016 13:09

We should know about Mothae by Friday.

[alan@bj] 15/6/2016 09:50

Thanks - just checked again and mine is in now too.