Gem Diamonds sparkled on Wednesday as it announced the recovery of yet another diamond of more than 100 carats and said full-year revenue rose 13%.
The company has recovered a 169 carat, top white colour Type IIa diamond from the Letseng mine in Lesotho. This is the seventh diamond of more than 100 carats recovered so far this year.

It also said revenue in the year to the end of December rose to $214.3m from $189.8m as it achieved an average of $1,930 per carat from the sale of 107,152 carats, up 14% from the previous year's $1,695. This improved price per carat was largely attributable to the improvement in the frequency of the recovery of large, high-quality white rough diamonds.

However, attributable profit pre-exceptional items fell to $9.1m from $17.7m while underlying earnings before interest, tax, depreciation and amortisation dropped to $48.6m from $62.8m.

Gem said it will not be paying a dividend for the year as in the current circumstances, this would constrain the business and act against shareholders' long-term interests. It said that while this decision may be disappointing to its shareholders, it's “a necessary step” in strengthening the company's balance sheet and positioning it for the future, ultimately generating greater returns.

Chief executive Clifford Elphick said: “The second half of 2017 saw the company begin to benefit from the operational improvements implemented during the year, with a significant improvement in the recovery of the large diamonds from Letseng. The market for the mine's large, high quality white rough diamonds remained strong over the course of 2017, a trend which has continued into early 2018.

“With the benefits of the efficiency programme bearing fruit, a positive market outlook, and an investment case underpinned by the proven quality of the Letseng mine, we look to the future with confidence.”

Gem said it continues to focus on cost savings at the mine and in head office. It initially identified $20m of annualised cost savings and has now set a cumulative $100m target by the end of 2021, with a run-rate of $30m annually thereafter.

Canaccord Genuity, which rates the stock at 'speculative buy', said the results are a beat against its forecast for revenue of $196m. The brokerage said the decision not to pay a dividend is “sensible”, with net cash at end-December of only $1.4m.

“Given Gem is a single-asset company and needs to plan for underground operations at Letseng and continues to invest in improving large-diamond recovery techniques, re-building cash makes sense, we think. Gem should not, in our view, look to fund underground operations by relying on debt.”

At 0940 GMT, the shares were up 5.3% to 97.88p.