Gem Diamonds rethinking Ellendale sale

British-based Gem Diamonds is reassessing its options surrounding the Ellendale diamond mine in the Kimberley, while at the same time hinting it may have to reduce the asking price for the operation after nearly 12-months on the market.

In its interim management statement released to the British stock exchange this week, Gem said despite improved production at its Ellendale operation, the limited remaining mine life and the tough economic environment had led to the review. Gem had previously reported Ellendale's single producer, the E9 pipe, is expected to produce its last diamonds in 2014.
"The company is currently reviewing the resources and mine plan at Ellendale," the statement said.
"And in light of the short remaining life of mine and the current economic environment, even with the improvement in prices for the Tiffany quality goods, this may potentially lead to a review of the carrying value of the asset at the end of the year."
Ellendale is one of the world's best sources of highly prized fancy yellow diamonds, which are sold to luxury jeweller Tiffany & Co.
The company sold 4880 carats to Tiffany at an average price of $US3902 ($3748) per carat during the September quarter - down from $US5153 per carat in the 2011 September quarter.
The company introduced a floor price of $US5231 per carat starting last month.
It sold 36,372 carats of "commercial goods" at an average price of $US179 per carat during the quarter.
The mine has been on the market since December but binding bids for it were expected back in April.
Ellendale was bought for $300 million in December 2007 from a company backed by one-time business partners Miles Kennedy and Karl Simich.
It is operated by Gem Diamonds' wholly owned subsidiary Kimberley Diamond Company. It is understood about 200 people work for Kimberley.