Gem Diamonds Cuts Costs and Operations at Letšeng Mine After Share Price Plunge
Gem Diamonds, listed on the London Stock Exchange, saw its share price plummet by over 22% on July 23 following the announcement of significant operational cutbacks at its flagship Letšeng mine in Lesotho.
The move comes in response to continued weakness in global diamond prices, a soft US dollar, and uncertainty surrounding US tariffs.
In a statement to shareholders, the company said, “Despite achieving production targets, Gem has not been immune to sustained pressure on rough diamond prices and unfavorable exchange rate movements.
We have implemented decisive cost-saving measures to preserve cash and protect long-term shareholder value.”
Following a comprehensive review of its short-term mine plan and cost structure, Gem aims to reduce monthly operating expenses by $1.4 million to $1.6 million.
As part of this initiative, waste mining volumes in both the Main and Satellite pits at Letšeng will be reduced to a minimum over the next 12 months.
However, ore processing will continue at existing levels—approximately five million tonnes per year. Additionally, 500,000 tonnes of high-value material from the Satellite pipe will be mined and processed in the second half of the year.
To align with the reduction in waste mining, Gem may reduce its workforce by around 250 employees, or 20% of its total staff.
The company has begun consultations with affected employees and stakeholders to manage the process transparently and responsibly.
Gem is also taking steps to lower overhead costs at its corporate office. These include temporary salary reductions for board members, executives, and senior management.
In lieu of part of the lost cash compensation, the company is considering awarding shares to affected personnel, thereby aligning their interests more closely with those of shareholders.
As a result of the cost-saving measures, the company has updated its operational guidance for the financial year:
Waste tonnes mined: Revised to 1.8–2.0 million tonnes, down from the previous 5.0–5.5 million tonnes
Ore treatment: Unchanged at 4.9–5.1 million tonnes
Carat recovery: Unchanged at 87,000–90,000 carats
Carat sales: Lowered to 84,000–87,000 carats, from 86,000–89,000 carats
Gem emphasized its continued commitment to producing high-quality diamonds and expressed confidence that these changes will position the company for a strong recovery once market conditions stabilize.
The operational cutbacks come at a challenging time for Lesotho’s economy, which is already grappling with the effects of US tariffs—particularly on its textile industry.
On July 8, AFP reported that Lesotho had declared a national state of disaster due to widespread job losses, as many US companies canceled orders in response to a 50% import tariff.
Lesotho, which relies heavily on textile exports to the US, faces rising unemployment and increased economic strain, making the Letšeng mine’s workforce reductions even more impactful.
First-Half 2025 Performance
Gem also released its trading update for the first half of the year:
Waste tonnes stripped: Down 46% year-on-year to 1.7 million tonnes
Carats recovered: Fell 16% to 47,125 carats
Carats sold: Dropped 22% to 44,360 carats
Revenue: $44.7 million, a 43% decline from the same period last year
Average price per carat: Down 26% to $1,008/ct
Despite market challenges, the company recovered four diamonds over 100 carats during the period, three of which were sold. Six diamonds sold for over $1 million each, generating $9.3 million in total.
After the reporting period, Gem also recovered a 250-carat Type II white diamond. However, the stone’s quality suggests it will yield a relatively low-value polished product.
