GEM DIAMONDS Q1 PRODUCTION FALLS 38%

Gem Diamonds Ltd.'s rough diamond production for the first quarter of 2013 totaled 18,775 carats compared to 30,181 carats recovered in the fourth quarter of 2012. The 37.8 percent reduction in Letseng output during the period is as a result of the lower tonnes of ore mined and treated and mining taking place in lower grade areas, reports the miner.

"As anticipated, this quarter was in line with our reduced expectations for grade and quality. Throughput was relatively low, albeit planned. Rough diamond prices have improved over the quarter, but this is not reflected in our results because of the lower quality diamonds mined so far this year," explains Clifford Elphick, Gem Diamond Chief Executive Officer.

Gem Diamonds mined1.45 million tonnes of ore in the first quarter, down 8.5 percent from the preceding quarter, and treated 1.4 million tonnes of ore, down 9.6 percent from the fourth quarter of 2012. The grade recovered during the period was 1.27 carats per hundred tonnes (cpht), down 31.4 percent over the fourth quarter of 2012.

Letseng

According to the miner, the lower tonnes of ore mined and treated for this first quarter is due to test work undertaken at two plants at its Letseng mine in Lesotho in order to establish diamond damage profiles at various throughput rates in preparation for the site's new crusher installations. Additionally, an unplanned scrubber breakdown at one of the plants resulted in a two-day loss of production.

"Mining will return to the higher value satellite pipe at the end of Q2 this year. It is anticipated that this will result in improved revenues for the remainder of 2013," adds Elphick.

Diamond Sales

Gem Diamonds sold 29,205 carats worth US$46.7 million during three tenders held in the first quarter, an increase of 3.1 percent in volume but a decrease of 3.1 in value compared to the fourth quarter of 2012. The average value per carat decreased 6.1 percent to US$1,599 per carat compared to US$1,703 per carat achieved in the preceding quarter.

Meanwhile, six rough diamonds achieved a value in excess of US$1 million each during the tenders and 24 rough diamonds achieved prices greater than US$20,000 per carat.

Projects

The installation of the new secondary crushers for Plants 1 and 2 at Letseng is underway and on target for installation by the end of the second quarter. Gem Diamonds says it expects these crushers to contribute "significantly" to reducing diamond damage and improving revenues.

The miner notes that work is ongoing to revise Project Kholo implementation options, production levels and waste stripping profiles. Indicative costs, timelines and updates will be provided during the course of the second quarter.

With regard to the Ghagoo mine in Botswana, the company reports that its wholly owned subsidiary, Gem Diamonds Botswana, is progressing with its development of the mine.