Gem Diamonds, producer of some of the biggest diamonds found in recent years, trebled annual profits on the back of improved global demand for the precious stones and improved output at its flagship Letšeng mine in Lesotho, southern Africa.
The company, founded in 2005 by Clifford Elphick, a former De Beers executive, saw revenues jump by a half to $396m as improving efficiencies led to a rise in pre-tax profit from $36m to $106m in the year to December.
Production of high-value yellow diamonds at the company’s Ellendale mine in Australia, which contributes an estimated 50 per cent of the world’s supply of this category of gem, was interrupted by production difficulties.
But the average selling price of yellow diamonds, sold under an offtake agreement to jewellery retailer Tiffany & Co, rose from $2,891 a carat to $4,409 in 2011.
Mr Elphick said Gem Diamonds was pushing ahead with a $280m expansion at Letšeng and also investing in its Ghaghoo mine development project in Botswana in spite of concerns over volatility in diamond prices.
Roger Davies, chairman, said a sharp rise in prices achieved in the first half of the year had been overtaken by the financial crisis in the eurozone and tightened liquidity of the lending banks.
The crisis had resulted in a sharp fall in rough diamond prices as the market corrected, he said, with prices across the sector dropping by approximately 30 to 35 per cent.
Nevertheless, he predicted further recovery in prices during this year while Mr Elphick added the company continued to enjoy “strong demand for our high quality diamonds from both developed and emerging markets, despite the backdrop of challenging times for the global economy”.
Mr Elphick holds just under 8 per cent in the FTSE 250 company. Laurence Graff, owner of the high-profile gem retailer Graff Diamonds, is the company’s leading investor with a 15 per cent stake.
Earnings per share at Gem Diamonds, which ended the year with net cash of $159m, rose from 15 cents to 46 cents.
Shares in the company rose by 8½p to 289½p on Tuesday.