By Clara Ferreira-Marques and Brenton Cordeiro
LONDON/BANGALORE, March 20 Gem Diamonds
said it would focus on its growth projects to boost production
after pulling out of the race for BHP Billiton's EKATI mine as
it reported a strong start to 2012.
The miner, which more than tripled its attributable profit
in 2011 and beat market expectations, was among the suitors
considering the Canadian EKATI mine earmarked for potential sale
by BHP last year. A deal could have edged London-listed
Gem closer to FTSE 250-listed Petra Diamonds or even
leapfroged its rival, in a sector dominated by giants De Beers
and Russia's Alrosa.
"Our approach to valuation didn't meet the sellers'
expectations. We were a bit stingy, if the truth be told," Gem
Chief Executive Clifford Elphick told Reuters.
"We are always on the lookout for opportunities to grow the
company in a sensible way. We have looked at lots of
opportunities, but for various reasons they have not made it
over the hurdles we have set for ourselves."
BHP, the world's largest miner, focuses on large, scaleable
assets and said last year it was considering pulling out of
diamonds. It sold its majority stake in the Chidliak project in
northern Canada to partner Peregrine in December.
Sources familiar with the matter told Reuters last week that
diamond miner and luxury jeweller Harry Winston was among
several suitors still circling the EKATI mine, which has annual
sales representing 11 percent of global diamond supply by value.
Others considering options for EKATI are private equity firm
KKR, one of the sources said, while another said rival
Apollo had looked but would not bid.
Elphick, a former E Oppenheimer & Son and De Beers manager
and executive, said Gem took an opportunistic approach to deals
and would focus for now on its own pipeline, including the $280
million plan to virtually double the capacity of its Letseng
mine in Lesotho by 2014, and the Ghaghoo project in Botswana.
The miner said last year it was considering options for its
Ellendale mine in Australia, famous for its prized yellow
diamonds, but said improved pricing and changes at the mine
meant it could also consider retaining the asset.
"We have appointed our advisors. We have begun a process of
evaluating interested parties, who may wish to acquire this from
us, but it is very early days in the process," Elphick said.
The mine, which produces an estimated 50 percent of the
world's supply of yellow diamonds, saw a challenging first half
of 2011 owing largely to an unusually long rainy season.
Prices for rough diamonds jumped in the first half of 2011
to well above pre-crisis levels on low inventories and rising
Asian demand, but fell sharply in the last five months of the
year as markets tumbled and investors took cover.
"There was significant pull back in the fourth quarter, but
by the end of the year that had started to come right, certainly
in the space we operate in, premium diamonds - that ended the
year reasonably well and, into the new year, has begun
reasonably strongly," Elphick said.
For the full-year, Gem Diamonds, which focuses on large,
high-quality diamonds, reported a pretax profit of $155.7
million, compared with $54.5 million a year earlier, as prices
more than offset rising costs. Attributable profit jumped to
$67.7 million from $20.2 million.
Letseng production rose 24 percent to 112,367 carats.