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Gem Diamonds delivers 'pleasant surprise' with higher prices

Last year Gem unearthed the Lesotho Legend, a 910-carat diamond that went on to sell for $40m
Last year Gem unearthed the Lesotho Legend, a 910-carat diamond that went on to sell for $40m

Gem Diamonds delivered a "pleasant surprise" to investors by overcoming a slump in the gemstone market to report higher prices. 

The small-cap company, which owns the Letšeng diamond mine in Lesotho, recovered three diamonds greater than 100 carats during the first half of the year, and achieved an average price of $1,697 (£1,400) per carat, an increase of 10pc on the second half of last year.

This is despite the relative weakness of the diamond market over the last few years, especially in low-quality diamonds.

Letšeng was acquired by Gem in 2006 is renowned for producing high carat white gem-quality diamonds.

The mine also yielded a rare 13.32 carat pink diamond earlier this year, which sold for $8.75m, setting a Letšeng record of $656,934 per carat. The company also auctioned off 15 diamonds for more than $1m each, generating revenue of $41.6m during the six months.

Last year Gem unearthed the Lesotho Legend, a 910-carat diamond that went on to sell for $40m. It was the second largest gem-quality diamond recovered in the past century and the largest diamond recovered to date at Letšeng.

Gem Diamonds also announced that a pilot project to scan for diamonds inside rock would start next month.

Kieron Hodgson, an analyst from Panmure Gordon, said: “Gem Diamonds' first-half trading update will pleasantly surprise many given the negative sentiment towards the diamond industry at this time. 

“Operationally, Gem remains on target and pricing is better than we expected.”

Analysts at Liberum noted that weakness in diamond prices was beginning to spread to higher-end stones, which could affect Gem's prices in the second half of the year.

"There is little reason to expect a short term recovery [in prices] with the ongoing weakness in the global economy and the protests in Hong Kong," they added.

 Shares dropped 2.4pc in thin afternoon trading.