'Extraordinary' Costs Hit Gem Diamonds Profit

RAPAPORT... Gem Diamonds' earnings slumped in the first half of 2022 as the average selling price dropped and the Russia-Ukraine war caused a jump in fuel costs.Net profit fell 51% year on year to $8.3 million for the six months, the miner reported Thursday. Revenue slipped 4% to $100 million.Demand and prices for goods from the company's high-value Let??eng mine in Lesotho was strong, with the volume of sales increasing 4% to 57,075 carats, management explained. However, the average price slid 7% to $1,745 per carat, reflecting a decrease in the proportion of ore coming from Let??eng's high-grade Satellite pit. First-half production declined 6% to 55,157 carats for the same reason.The company saw "extraordinary increases in operating costs, most notably diesel prices and explosive consumables," causing the mine's total operating expenses to rise 22% to $21 million. Electricity supply disruptions forced Gem Diamonds to power more of its generators with diesel, which leaped 87% in price between June 2021 and June 2022. The price of explosives advanced 83% compared with the first half of 2021."The Russian invasion of Ukraine has significantly increased the price of consumables, especially diesel and explosive costs used in the mining activities, and inflation rates across the jurisdictions where the group operates," the company continued. "Management has considered the impact of increased costs on future cash flows, and whether these costs and inflation rates are short or long term in nature."Gem Diamonds is working to reduce the impact of "uncontrollable cost increases," it noted.