Gem Diamonds Limited recently provided the following Trading Update detailing the Group's operational and sales performance for the Period 1 October 2016 to 31 December 2016 ("Q4 2016" or the "Period").

Letšeng:

Full year operational guidance achieved

• Waste mined 7 861 775 tonnes (19% increase from 6 626 385 in Q3 2016), taking full year waste mined to 29 776 058 tonnes.


• Ore treated 1 697 070 tonnes (5% increase from 1 612 728 in Q3 2016), taking full year ore treated to 6 646 098 tonnes.


• Recovered 26 438 carats during the Period (8% increase from 24 388 carats in Q3 2016) taking full year production to 108 206.


• 7 diamonds sold for more than US$ 1.0 million in the Period generating revenues of US$ 12.3 million.


• During the Period US$ 109 677 per carat was achieved for a 12.31 carat pink diamond and US$ 53 451 per carat for a 56.48 carat white diamond.


• During the Period Letšeng recovered fewer large special diamonds than expected, resulting in an average US$ per carat of US$ 1 444, bringing the average for the year to US$ 1 695.

Ghaghoo:

Optimisation programme continued

• Mill refurbishment completed on time and within budget with positive results.


• 67 466 tonnes of ore treated during the Period (up 24% from 54 337 in Q3 2016).


• 12 380 carats recovered during the Period, an increase of 60% from previous quarter (7 720 carats in Q3 2016) with a positive presence of larger diamonds than typically recovered.


• During the Period, 16 989 carats were sold on open tender for a total value of US$ 2.4 million, achieving an average price of US$ 142 per carat.


• Largely due to the weak prices achieved, the future of the operation remains under review, as previously announced.

Financial:

• The Group had US$ 30.8 million cash on hand as at 31 December 2016, of which US$ 28.5 million is attributable to Gem Diamonds Limited.


• US$ 26.9 million of available facilities have been drawn down resulting in a net cash position of US$ 3.8 million. At Period end, the Group had US$ 53.3 million worth of undrawn and available facilities.

Gem Diamonds' CEO, Clifford Elphick commented:
"The market for large special diamonds for which Letšeng is renowned has remained firm to date, but the relative paucity of these diamonds recovered during 2016 has had an adverse impact upon the Company's revenues and cash flows during the year. Operationally, all other production metrics were achieved and within guidance issued.

At Ghaghoo, the fall in prices of its diamonds from US$ 210 per carat in early 2015 to US$ 142 per carat at its most recent sale in December 2016, emphasises the weak state of the diamond market for this category of diamonds. With the Company's focus on profitable production, and as indicated previously, the future of the operation remains under review with a decision scheduled to be made during Q1 2017 with regards to its current financial viability."

1. Diamond Market

The overall mood of the diamond market continues to remain cautious. Demand for, and prices of, Letšeng's large high quality white diamonds have remained firm throughout the Period. The smaller commercial goods mined at Ghaghoo remain under pressure. The recent Indian demonetisation and high levels of polished inventory available, and because the supply of this category of diamonds will increase significantly from production of some 7 million carats per annum from 2017 from the new Liqhobong, Renard and Gahcho Kué mines, the Company believes prices for this category may remain constrained.