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It seems like the new guy doesn't have any downstream sales and marketing experience. That said, with what the previous CEO claimed (last May's teleconference) he knew, and contacts he had, the crap that was presented for sale and prices achieved I doubt if it will make any difference whatsoever in the short-term. If the mine plan proves successful, then we may see the long-awaited up-turn. It's just as interesting understanding what wasn't said in this communication. In particular that no explanation for Stuart leaving was provided, so it may be that initial results from the new mine plan aren't yielding any improvement in results...leaving us all in the brown stuff!!
Holeefook, It has been a question on my mind for many years why the major shareholders do not do something to influence the share price of this stock. I am not currently a holder, but have taken a big hit over the years from the decline and pulled back a bit here and there on a few upswings. My comments are intended to bring balance to those that that I perceive to be exited one liners or over exaggerated based on my own industry research and experiences. As you said recently, they may have hit a sweet spot which could well be the case, but the reports that they may have over worked the main pipe are more of a concern that I doubt management would want to report anytime soon. If its not that there has to be a reason why directors/major shareholders are not buying at such low levels, even just to average down. In terms of turning the situation around my suggestions are influenced by what we have witnessed before with this company, in that everything they have touched appears to have huge costs for little if any return. I would like to see more opportunities being presented but with much better due diligence based on market trends and management capability.
Holeefook, I hope that you are correct, however, I cannot help reminding myself that GEMD is a one trick pony right now. Added to that winter in the Southern Hemisphere is on its way, Lucara has 15 exceptional stones ready to sell between 3rd and 11th May, Lucapa is regularly finding exceptional stones in Angola and Firestone are busy ramping up with more large stones expected anytime soon. Also, given the rumours of over mining in the key satellite pipe, I have concluded this is too risky now to try to recover my earlier losses. Good Luck with whatever you decide.
Mr P, Thank you very much for your effort, it is appreciated. Just a thought on the possible strategic investor scenario: On 30th March Petra diamonds announced that they would be issuing $600m of 'notes' to restructure its debt with 50% of these going to replace the existing $300m notes, the rest being used to pay bank drawdown facilities, improve liquidity and general corporate purposes. (I must admit I don't fully understand what a note is compared to other methods of funding). Anyway, on 6th April they announced that the issue of new notes would be increased to $650m with no reason being given for the requirement for another $50m within a 7day time frame. It is interesting that the CEO said on 30th that 'this represents a further step forward in the next phase of the Company's development as the eight-year capital expenditure programme at the Group's flagship Finsch and Cullinan mines nears completion'. Given my understanding of Petras objectives this is likely to mean more acquisitions and/or increased exploration. I have long held the belief that Petra is best suited (for technical capability and location reasons) to take over or partner DCP if BRP fails. If this is the case, I only hope that they make a sensible offer with the funds they now have available.
Hi Visiontrader, Thank you for the post. I don't subscribe to WSJ so couldn't read the full article, however, it's not too difficult to understand from the headline what Gemfields tactic is; to try to stay ahead of the emerging competition and add shareholder value. Unfortunately, I fear that this action is too little too late. The reason that I say that is that it will not be too long before they find themselves spending massive amounts of money creating brand recognition and then, due to difficulty creating differentiation for their stones, accusing the competition of getting a free ride. Industry cooperation is now required. I like what Gemfield have achieved so far, but my fear is that they lack sufficient focus to gain significant competitive advantage in the future. Just my thoughts. Good Luck.
At the moment, what Mustang have for sale (63,989cts) have for sale is small (<5%) compared to Gemfields December sale of 1.372million cts (6 months output). What is interesting is that in Mustang news releases their total availability for sale increased from 37,291 cts over a 6 day period. The most basic calculations show production to be 4450cts/day or 980,000 cts/annum. However, it is important to remember that they are in their ramp up phase so this output figure is likely to increase. It will be important to watch the Mustang output and the quality of stones offered for sale and prices achieved. It is possible that Gemfields prices could reduce, though there could be a wider impact eg Gemfields may no longer have the option to hold back sales as they did to help their Indian clients tied up in the demonetisation crisis. (Jeopardising their objective of following the old De Beers model). Another important point is that the Mustang rubies are reported to me mainly alluvial so probably cheaper to recover, giving them more flexibility on sales prices. It will be interesting to do further research to find out how long these will last. I think its a case of reading between the lines on future news releases from both parties. Longer term there are several options available eg Actively marketing to grow the market and adding value by downstream partnerships with gemstone cutters. I would view it as interesting times ahead considering that it is in both companies interest to maintain prices.
I've just been doing a bit of research and found the following: 1. The former COO, Dev Shetty has re-emerged as the CEO of Fura Emeralds of Colombia. 2. Mustang resources, that operates a neighbouring property on the Montepuez field are now producing and have recently sent 60,000cts of Rubies to Thailand for sale in Q2. It looks like Gemfields are going to be playing in a much more competitive arena from now on.
I agree with you Sityboy. It seems to me that this announcement has been made to counter nearby Firestone's 110ct recovery, announced the day before. Especially as they have not considered it necessary to make announcements of large stone finds since August 2014. It could also be that this is a signal that the stone smashing issue has now been resolved. Now I'm looking forward to the directorate grabbing issue being resolved!
When they doubled the number of shares in circulation around 2008/9 I eventually sold out of GEMD realising a big hit several years later. I have managed to claw some back, riding the upswings, but eventually gave up on them when it became apparent that Graff was being very passive with his holding and no material added value for shareholders would be forthcoming. Just having a quick look at their website it would appear that their multichannel marketing strategy could be open to some abuse, ie the take off arrangements and partnerships elements. Admittedly, I haven't read far enough to determine if third party valuers are ensuring fair value for government and other shareholders. On a more positive note, it is good to see that predators are out there with today's news of an offer from 'Billionaire Washington' for Dominion Diamonds, see: https://www.bloomberg.com/news/articles/2017-03-19/washington-cos-makes-hostile-bid-for-canada-s-dominion-diamonds It also seems that Rio, by their recruitment activity, is gearing up to follow up on their intentions to find good quality diamond assets. I'm not sure that GEMD now falls into that category, but Lucara and Lucapa (similar spelling but different companies, finding very high-quality diamonds) definitely would.
Over the years polishedprices.com have provided some very insightful comments on the behaviour of management of Gem Diamonds. The most recent one, issued after the 2106 FY results were issues reveal some very interesting hearsay info on market feedback, mining activity and management remuneration, so well worth a read. https://www.polishedprices.com/go/market-news/comment~6814
I've just called HSBC Invest Direct team to find out why I cannot trade. Apparently, due to suspension needs to be reviewed and reactivated on their system. This could take a couple of days, however, they have agreed to call me and let me know when it is clear to trade.
My feeling is that quality is unlikely to have gone off, but not having seen the stones or having detailed information on the size distribution or number of companies that viewed the lots for sale I cannot be sure. I would suggest that two other factors can be attributed to the reduction in price achieved. 1. Selling the full amount in Johannesburg. While I believe DCP have an obligation to offer goods in JHB first it is rather a backwater to be selling full lots, compared to other major diamond sales centers. As a result this sale may not have attracted the interest of many of the major buyers. 2. The liquidity issue, in Indian, caused by removal of currency in the down stream industry could have meant that the important Indian buyers may have had to put the brakes on for a while. What I found surprising in yesterday's announcement was that DCP are reliant on a third party for boiling (cleaning of stones). Given the relatively small cost of setting up a basic level of safe kit the impact of this cannot be over stated, because i) they don't have the capability to accurately grade and values stones as they come from production ii) smaller lots of similar stones are unlikely to be sold together, therefore failing to attract specialist buyers and premium prices. iii) Passing the goods through more hands adds risk to the sales process. While 0.26% boiling loss does not appear to be unusual on this occasion I would suggest that this process should be carried out in house. Clearly Sales and Marketing are not at the top of PL's agenda right now, but it seems there are opportunities to improve and get back to price expectations.
Exactly. Ideally, ending at the latest, a few days ago to have everything cleared and cash in the bank before the Indian buyers close for Diwali holidays.
I agree they could have been much more proactive with their sales. The 10kct figure optimum sales lot size unfortunately seems to be a figure of their own making. Diamcor, also ramping up have been selling lots of 2.5kct with no reported detrimental effect on $ price achieved. What is important to buyers is consistency of lots presented to attract the most suitable specialist buyer. While DCP have been keen to show the average price target of $164 is being achieved there should be nothing stopping them sorting out the clean white ones, from recent production, for early sale to reduce the cash flow issues. Undoubtedly 80% or more, of the value is likely to be in less than 20% of the diamonds recovered. From the stock they have £500k looks like it could have been relatively realised.
Hi Traderman, Like you I don't normally bother with these chat but do find this one particularly informative. I'm now hoping that Petra Diamonds have taken an interest in this operation as it would fit into their portfolio very well. I have been particularly impressed how they have bought most of the older De Beers underground mines in South Africa recent years, invested in expansion programmes (including block caving methods) and are now ramping up to 5mct / year output by 2019. They are not one of the biggest mining companies, but within their skill base will have the necessary technical capability to solve the current Lace issues very quickly. Clearly they are very well accustomed to SA working practices and have the necessary infrastructure to deal with the preparation of Run of Mine diamonds and prepare suitable lots for sale. This capability has been sadly overlooked by DCP. In my opinion PL should step down immediately. He has managed to get by so far, but a new set of skills are now required for ramp up. EW also has to go, having added next to no apparent value to this project. Here' hoping for Petra to purchase Lace for a decent share swap.