Broker snap: Dazzling prices achieved by Gem Diamonds

25th Nov 2010 12:35

Diamond prices in the fourth quarter are remaining strong, judging by the prices achieved by Gem Diamonds' recent sale of two giant stones.Gem announced Thursday the sale of the 196 and 184 carat (ct) diamonds for a total of $22.74m, well above broker Panmure Gordon's $19m estimate.The two rough white diamonds were recovered from the Let?eng mine in Lesotho in the second half of 2010.Excluding the sales, prices for the November tender averaged $2,341/ct, broadly in line with the $2,422/ct achieved in October. However, the broker notes that this is once again well above the $1,680/ct achieved in the previous quarter.Analyst Alison Turner says this is very positive news "confirming that the October result was not just a once-off based on the mix of stones sold".However, she also sounds a note of caution regarding full year production and further sales from Let?eng. The company has indicated that production continues to be dominated by the main rather than the satellite pipe, "which has implications for grade (and thus production assuming that tonnes treated remains constant). Also the timing of the three fourth quarter tenders may mean slightly lower sales than production. Nevertheless, these are minor tweaks in what is a good news story today," Turner concluded.The broker gives a 240p target price and retains its 'buy' rating.