Gem Diamonds, the FTSE 250 diamond mining company, which today has released its half year results, is pleased to announce it is moving downstream in the diamond business through the establishment of its own cutting and polishing operation.

In a bid to capture additional margin post the mine gate, Gem Diamonds has recruited the Antwerp-based Matrix Diamond Technology executive team, who were responsible for developing the world’s most sophisticated and advanced diamond mapping technology.

When applied to large complex rough diamonds, such as those recovered at the Letšeng mine, this technology has the ability to enhance the polished yield.

Gem Diamonds has also acquired the Intellectual Property from Matrix and purchased its machinery to set up the beneficiation centre in Dubai.

The implementation of the beneficiation strategy comes after Gem Diamonds undertook several trials on diamonds from its Letšeng and Ellendale mines.

Matrix Diamond Technology cut and polished the rough diamonds under contract before the stones were put up for sale by tender in Antwerp.

The extra margin achieved by polishing the rough diamonds averaged 30% but the trials also achieved up to 100% margin uplift for some diamonds.

The value uplift of polishing rough diamonds was recently demonstrated by the sale of the 603ct “Lesotho Promise” which was recovered from Gem Diamonds’ Letšeng Mine in Lesotho in September 2006 and sold to Bond Street Jeweller Lawrence Graff for $12.4M.

The Lesotho Promise was cut into 26 individual diamonds totaling 233 carats which Graff has reportedly set a pricetag at $50 million for the entire collection. Graff has recently made the Lesotho Promise into a necklace which has been advertised widely in glossy magazines.

In addition to setting up a cutting and polishing operation, Gem Diamonds is also exploring the establishment of off-take agreements from its Ellendale mine which produces stunning fancy yellow diamonds. These agreements with global top end jewellery retailers will enable Gem Diamonds to share in the diamond value chain beyond the mine gate.

Gem Diamonds Chief Executive Clifford Elphick commented: “Our Letšeng mine in Lesotho produces 60% of the world’s large white high quality rough diamonds, these stones, together with the rare fancy yellow diamonds produced from the Ellendale mine in Australia gives us plenty of high quality rough diamonds to polish and sell to retailers all over the world. It will also provide an additional source of revenue and margin for the Company.”