Gem Diamonds has announced significant operational changes at its Letšeng mine in Lesotho, including potential workforce reductions of about 250 employees, representing 20% of its current staff.
The London-listed miner cited prolonged weakness in global diamond prices, unfavourable exchange rates, and ongoing US tariff uncertainties as key factors driving its decision to implement cost-saving measures.
The company has undertaken a comprehensive operational review, resulting in plans to reduce monthly costs by $1.4 million to $1.6 million.
Central to this strategy is scaling back waste mining activities in both the Main and Satellite pits to minimum levels for an initial 12-month period.
While ore processing will continue at current volumes of approximately 5 million tonnes annually, the company has dramatically revised its waste tonnage guidance downward from 5-5.5 million tonnes to just 1.8-2 million tonnes for the financial year.
Gem emphasised its continued focus on high-value ore production, noting that an additional 500,000 tonnes of Satellite pipe material has been made accessible for mining and processing during the second half of 2024.
The company maintains its commitment to producing exceptional-quality diamonds but has adjusted its sales guidance slightly downward to between 84,000 and 87,000 carats from the previously projected 86,000 to 89,000 carats.
The restructuring extends beyond operational changes to include corporate cost reductions.
Executive and board member salaries will be temporarily reduced, with potential partial compensation through equity awards designed to align management's interests with those of shareholders.
The company has begun engagement with employees and stakeholders regarding the proposed workforce reductions, emphasising its commitment to managing the process responsibly.
These measures follow a challenging first half of 2024 that saw waste tonnage strip decline 46% year-on-year to 1.7 million tonnes, carats recovered fall 16% to 47,125 carats, and average prices drop 26% to $1,008 per carat.
While the mine recovered four diamonds weighing more than 100 carats each and sold six stones for over $1 million each, the total sales value still decreased by 43% to $44.7 million.
The recent recovery of a 250-carat Type II white diamond, while notable for its size, is expected to yield limited polished value due to quality considerations.
The operational changes come at a sensitive time for Lesotho's economy, which recently declared a national state of disaster due to rising unemployment, particularly in the textile sector following US tariff increases.
Mathew Nyaungwa, Editor-In-Chief, Rough & Polished
