Gem Diamonds swings to loss amid industry crisis

[Ben Graham]

Gem Diamonds (LON: GEMD) is buckling under the weight of a worsening diamond market, reporting on Thursday an attributable loss of $11.7 million for the six months ended June 30.

The Africa-focused miner took a $10.7 million goodwill impairment as rough diamond prices continue to fall, supply outpaces demand, and lab-grown stones gain ground. The results mark a sharp reversal from the $2.1 million profit posted in the same period of 2024.

At its flagship Letšeng mine in Lesotho, Gem Diamonds assessed the recoverable amount of the operation and recorded the impairment to bring the carrying value in line with the market reality.

“The industry continues to face significant challenges. Sustained pricing pressure, softer demand in key markets, ongoing macroeconomic and geopolitical uncertainty and tariff uncertainties in respect of India combine to create difficult trading conditions,” chief executive Clifford Elphick said.

During the six months to June 30, the company recovered 47,125 carats of diamonds,down from 55,873 carats a year earlier. Average prices slipped to $1,008 per carat from $1,366, dragging revenue down to $45.4 million from $78 million in 2024.

Further cost cuts

Despite hitting production targets, Gem Diamonds conceded it has not been insulated from tumbling prices and adverse currency swings.

In response, the miner said it would accelerate cost cuts, including scaling back Letšeng operations, temporary salary reductions for board and senior management, and laying off about 240 employees — roughly one-fifth of the mine’s workforce.

Lab-grown gems put squeeze on diamond mining industry

Shares sank more than 35% in mid-afternoon trading on the London Stock Exchange, last changing hands at 4.3 pence. That values the company at just £6.13 million ($8.2 million).

Industry under pressure

Gem Diamonds’ measures mirror industry-wide distress. In May, Lucapa (ASX: LOM) entered administration after years of weak prices, later securing a lifeline from a Dubai-based investor group.

Lucara (TSX: LUC), with operations in Botswana and Canada, also warned in May there was “significant doubt” about its ability to remain a going concern.

In July, Burgundy Diamond Mines (ASX: BDM) halted open pit operations at its Ekati mine in Canada’s Northwest Territories, triggering mass layoffs. All three operating diamond mines in the region — Ekati, Diavik and Gahcho Kué — are facing eventual closure, with Diavik set to wind down next year and Gahcho Kué by 2030. Ekati’s long-term future remains uncertain.

De Beers, the world’s leading diamond producer by value, has been in limbo since Anglo American (LON: AAL) announced plans last year to sell or spin off the unit. Anglo has twice cut De Beers’ valuation, most recently to $4.1 billion in February, but no buyers have emerged. Botswana, a key partner in De Beers, is reportedly seeking to take control.