The London-listed diamond producer Gem Diamonds has placed plans to extend beneficiation amenities in Dubai and Mauritius on hold, owing to the economic downturn, it reported on Tuesday.

Gem Diamonds is establishing a cutting and polishing facility in Dubai that would capture post-mining margin on the high superiority diamonds from its flagship Letšeng mine, in Lesotho, as well as its Ellendale mine, in Australia. The Dubai operation, Gem Diamonds Technology DMCC, as well as Gem Diamonds Technology Mauritius were likely to be operational in 2009.

In the meantime, Gem Diamonds reported that there had been a substantial reduction in capital expenditure at its producing mines, and a continuing programme of cost cutting and retrenchments at its noncash generating projects in the first quarter of 2009. “Since October 2008, Gem Diamond’s workforce has been reduced by 51%. There has been a substantial reduction in central costs through salary reduction, no bonuses, a recruitment freeze, and a voluntary separation programme,” the company said in an interim statement.

Gem Diamonds had set a cost target of $10-million for 2009, which compared with the $18,4-million central cost figure in 2008.
During February this year, the company also placed its lower value E4 pipe, at the Ellendale mine in Western Australia, on care-and-maintenance. The planned front-end modifications at the Ellendale E9 processing facility, which would have further increased the processing capacity, have also been placed on hold until further notice in line with the company’s stated plan to decrease all non-essential capital and project development expenditure in the light of the current global financial crisis and the resultant impact on the diamond industry.

However, Gem Diamonds stated that plans to relocate a dense medium separator (DMS) unit from the E4 processing facility to the E9 facility have proceeded to plan, and commissioning of this unit was scheduled for the end of May 2009. This would allow the E9 facility to treat up to 600 t/h. “With the operations at E4 being placed on care-and-maintenance, the tonnage treated and the carats recovered have decreased accordingly. The production through the E9 facility was affected by one of the wettest seasons in the history of the mine. The grade from the E4 pit is higher than that of the E9 pit and as such the grade variance quarter on quarter reflects a larger adverse variance with the cessation of mining of the E4 operation,” the company said.

The recovered grade from E9 was in line with expectations.
Operations in the E9 pit restarted on schedule in mid-March, after the wet season, and was progressing well.