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Buy Gem Diamonds #GEMD says VectorVest. A spectacular series of diamond recoveries continues to drive growth.
London-based Gem Diamonds (GEMD.L) is a leading global diamond producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho and 100% of the Ghaghoo mine in Botswana. The Letšeng mine is famous for the production of large, top colour, exceptional white diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.
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On April 26th2018, GEMD published a Q1 trading update, and said during the period Jan 1st2018 to 31stMarch 2018 seven diamonds greater than 100 carats were recovered. The Lesotho Legend, a high-quality 910 carat, D Colour Type IIa diamond, which was recovered on 15thJan was sold on 12 March for US$40m (US$ 43 912 per carat). This is the second largest gem quality diamond recovered in the past century and the largest diamond recovered to date at the Letšeng mine. 16 diamonds sold for more than US$1m each, generating revenue of US$70.7m during the period. GEMD also said a formal sale process has commenced to sell the Ghaghoo mine. The Group had US$91.3m of cash on hand (US$ 66.7m attributable to Gem Diamonds) and net cash of US$48.1m (US$ 28.9m attributable to Gem Diamonds) at the end of the Period, compared to the Q4 net cash position of US$1.4m. CEO Clifford Elphick said:…” It is encouraging to see the improvement in the frequency of large diamond recoveries during the Period with seven diamonds greater than 100 carats being recovered, supported by strong production results driving an 8% increase in carats recovered. The market for Letšeng’s high-quality diamonds has remained robust over the Period, achieving an average price of US$ 3 276 per carat, up 48% from the previous quarter.”Separately on May 22nd2018, GEMD announced the recovery of a 115 carat, top white colour Type IIa diamond from the Letšeng mine. This is the ninth diamond of over 100 carats recovered in 2018, already exceeding the total number of diamonds of over 100 carats recovered in 2017.
In early April 2018, prior to the results announcement, VectorVest flagged the RT (Relative Timing) metric for GEMD, providing early indication of more to come from the steadily rising share price (RT is a fast, smart, accurate indicator of a stock’s price trend). Today at 118p the GEMD RT metric still logs a rating of 1.54, which is excellent on a scale of 0.00 – 2.00. Other high scoring metrics include a GRT (Earnings Growth Rate) of 24%, which VectorVest also considers excellent. Despite trading at year highs of 118p, VectorVest still sees more to come, attributing a current value of 142p.
The chart of GEMD is shown above in my normal format. The share was revalued by VectorVest in April 2018 as EPS improved markedly over the past year. The share is trending higher and is on a BUY recommendation on VectorVest after charting a rounded or a saucer bottom over the past year.
Summary: To be a successful diamond miner requires a world-class mining asset, a great track record and an experienced management team. GEMD has all three in abundance, and no doubt its flagship Letšeng mine is the envy of its competitors, with quite a spectacular series of diamond recoveries already in 2018. With a 115-carat diamond recovery post the trading update and a 48% increase in sale price quarter on quarter, both fundamental and technical VectorVest metrics support further share price gains. Buy
Dr David Paul
June 6th 2018
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CENTAMIN CEY After the trauma of Egypts political upheavals following the fall of Mubarak, the return of democracy and then another military takeover, Centamin was unloved by anyone. Its economic future, even its survival was in question but the restoration of stability (if not of democracy) enabled it to start on what has turned out to be a fairly rapid road to recovery.
Gold production continues to rise with an increase of 30% for the quarter to the 30th June, compared to 2015 and 12% compared to quarter 1 2016. Annual production guidance has been increased from 470,000 oz. to between 520,000 and 540,000 oz. and all in costs have fallen from $900 per oz to between $720 and $750.
Second quarter EBITDA rose by 51%, basic earnings per share by 78% and profit before tax more than quadrupled to $73,379,000 The company is very much debt free and in recognition of the great turn round, the interim dividend is to be more than doubled with a rise from 2015’s 0.97 cents to 2 cents.
A year ago, there appeared to be little immediate hope for Centamin and the share price languished at 53.75p. By the 1st June it had risen to stand at 100p, since when it has rocketed by 70% as recognition of its transformed status, gained ground.
But this is still Egypt and whilst Its present government seems to have a firm hold, it is in a region where terrorism, bombings and internal strife hold sway. Egypt has always managed to remain an oasis of calm, compared to its neighbours but the risks can not be ignored. Subject to that, could the ride continue to be heady ?
Gem Diamonds GEMD Production in Lesotho has been hit by severe weather including excessive snowfall and severe winds which have affected power supplies, forcing the company to rely on stand by generators.
Gem Diamonds (GEMD) has risen by 20% since the 20th December, clawing back some of the falls suffered since last years peak of 165p in June. The rise comes despite the continuing weakness in the diamond market and is partly due to the Letseng mine, the jewel in GEMD’S crown and which specialises in producing high grade diamonds.
Decembers low for the shares was 98p and the recovery has taken the price up to today’s 117p.
Letseng is 70% owned by GEMD and 2015 production came in above guidance. 9 diamonds valued at more than $1m each were mined during the year, together with a further 3 stones of more than 100 carats each. The high quality of Letseng diamonds meant that the company enjoyed what it claims to have been a robust quarter 4, despite a further drop in average prices.
Overall the number of Letseng carats sold in 2015 was down by 6% but their value was down by a much higher 15%.
The damage done by the weakness of the diamond market is well illustrated by the fact that in the first half of the year the average price per carat for Letseng was $2264 but by quarter 4 this had fallen to $2117, despite a surge in the third quarter to $2578
GEMD is also making slightly optimistic noises about prospects for 2016.
It is interesting to note that Petra Diamonds PDL which we commented on in January has also made a recovery of about 20% despite 2015 revenue being down by 28%.
From a low of 69p on the 26th January Petra’s shares rose to 88p before falling back again to today’s 82p
Maybe those diamonds will continue to be the naughty girl’s best friend.