London-listed, Gem Diamonds Limited (LSE: GEMD) released its Full Year Results for the fiscal year of 2023, revealing a challenging year marked by global economic turmoil and a significant downturn in the diamond market. Gem Diamonds owns 70% of Letšeng Diamonds and 30% by Government of Lesotho. Letšeng is Gem Diamonds only cash generating asset.
The company’s profit for the year fell sharply by 92% to US$1.6 million, down from US$20.2 million in 2022. This decline in profit was attributed to a 26% decrease in revenue, which amounted to US$140.3 million compared to US$188.9 million in the previous year.
The primary factor contributing to the decrease in revenue was the lower prices achieved for its rough diamonds, a result of the challenging market conditions. Sales volume slipped by 3% to 104,520 carats, while the average price per carat dropped by 24% to US$1,334. Despite these challenges, Gem Diamonds remained focused on cost control measures, enhanced operational efficiencies, and the deferment of non-essential longer-term projects.
Gem Diamonds also made significant changes to its management, workforce, and operating methodologies at its Letšeng and Ghaghoo mines to meet the challenges of lower revenues and increasing costs. The company’s safety performance at Letšeng was commendable, with zero fatalities recorded in 2023, an improvement from the previous year.
In December 2023, Gem Diamonds acquired employees, mining fleet, and support operations from Matekane Mining Investment Company for US$22.7 million, terminating its contract with the service provider 11 months early due to the election of its owner, Sam Matekane, as prime minister of Lesotho.
Looking ahead, Gem Diamonds expects sales to improve slowly in 2024, with signs of price recovery at the top and bottom end of the market. The company remains cautiously optimistic that prices will stabilize and that there will be some growth towards the end of the year. However, global economic growth outlooks for major economies and important diamond consumer markets such as the US and China remain uncertain. Gem Diamonds continues to focus on sustainability and climate action, achieving a 26% reduction in scope 1 and scope 2 carbon emissions compared to its target of a 30% reduction by 2030. The company’s efforts to optimize its mine plan aim to ensure sustainable returns for its stakeholders in the years to come.
