Ups and Downs of Recovering +100-cts Diamonds

Gem Diamonds recovered five +100-cts rough stones last year from its Letseng mine.

This year it's recovered 13. And it's only the start of October.

A rough gem of that size will typically sell for $3m to $4m, so for a junior miner like Gem, the number of such high-value recoveries has a huge impact on the bottom line.

Letseng, in the Kingdom of Lesotho (an enclave of South Africa) is no ordinary mine.

For one thing it's the world's highest - 10,000ft above sea level - and for another it commands the highest average price per carat, currently over $2,000.

High-value stones are its bread and butter, Brandon de Bruin, Gem's COO, tells IDEX Online, but they are needles in a very large haystack.

Gem excavates many millions of tonnes of earth to find very few diamonds. Yield is typically 2 carats per 100 tonnes, compared to well over 100 carats for a mine like Jwaneng (the world's biggest), in Botswana.

It's hard to know whether you'll recover three +100-cts in a year or 16 - the lowest and highest totals since Gem bought the mine in 2006.

For context, Gem's first-half revenue this year was $78m, buoyed by the recovery of eight +100-cts. Take them out of the equation and revenue would be down by as much as $32m (eight stones at $4m each).

So what determines how many +100-cts and other large, high-value stones are recovered, and to what extent can Gem make accurate predictions?

"We plan to meet our long-term averages of larger size diamond recoveries every year, but in the > 100 carat diamonds it can be up-and-down," says de Bruin. "The question is why it's up-and-down and how to sustain that average every year.

"A lot of it has to do with where we're mining within the mine (there's a main kimberlite pipe and a satellite).  The satellite pipe has different domains and depending where you are mining within the pit, you'll be more likely to find the big stones."

For operational reasons ore from different parts of the  Letseng mine is crushed together, so it's hard to know exactly where the big stones come from.

"We have a good idea though," says de Bruin. "If we doing 80 per cent of one ore and 20 per cent of another, the chances are it's coming from the 80 per cent ore.

"Our average for +100-cts over the last 17 years at Letseng is eight per year. Our record year was 2020 when we recovered 16.

"We've done a lot of work since 2016 on our resource management and understanding of the ore bodies, and we published our Resource and Reserve Statement in March 2024.

"This has helped considerably in understanding the ore body and the characteristics that make up both the main and satellite kimberlite pipes, but because of the very low grade (carats per 100 tonnes) of the ore bodies it's very difficult to get absolute certainty on that.

"You either have to drill it like Swiss cheese, which is just not economical, or you mine it. And we're mining it.

"We're working hard to try to break the record of 16 greater than 100 carat diamonds in a year but I can't predict with certainty that we will achieve this.

"We cannot say with absolute certainty that we're going to mine this area and we will definitely get a +100-cts. It just doesn't work like that."

So what happens to the +100-cts?  "One would typically target a D flawless cut, but it's up to the diamond manufacturer what they ultimately decide to cut the rough diamond into, whether they cut a big 50 -100 carat polished diamond if they can, or whether they cut it into 20-cts, 10-cts and 5-cts diamonds," says de Bruin.

"For example, the 603 carat diamond recovered at Letseng in 2006 was cut into 26 pieces by Graff, the largest being a 76-carat pear shape.

"Generally, with the high color and quality of a Letseng diamond, if there's an inclusion in the rough diamond, they'd rather sacrifice a little on the size of the resultant polished diamond to achieve a flawless polish.

He says a 100-cts rough stone would typically sell for £3m to $4m if the color and quality are good, possibly more.
 
"If we get 10 of those it could add around $30m to $40m to our revenue. But the biggest challenge at the moment is the market.

"Five to eight years ago we were getting much higher prices for the same diamonds. The market is depressed throughout the diamond chain. Everybody's feeling it."

Have a fabulous weekend.