Gem Diamonds Ltd reported a 39% rise in its full-year pre-tax profit from continued operations, helped by a recovery in diamond prices and cost controls, and said it made a strong start to 2011, Reuters reported.

The company benefited from the rising demand in China and India that boosted rough diamond prices throughout 2010 across all categories.

De Beers, which controls around 40% of the rough diamond market, said earlier this week that rough diamond prices were expected to rise further this year, but will not match last year's sharp double-digit percentage rebound.

"2011 has begun on an extremely positive note. Not only have rough diamond prices continued to increase as a result of perceived supply shortages, but polished prices have too," the company said in a statement.

Gem Diamonds, which has found three of the world's twenty largest diamonds since it acquired the Letseng mine in Lesotho in mid 2006, said it saw a strong recovery in prices for rough diamonds in the last quarter 2010, boosted by the holiday season.



The diamond mining company recovered more than 500 rough diamonds greater than 10.8 carats in size at Letseng in 2010, the report said.

The company whose operations and projects are located in Angola, Australia, Botswana and Lesotho, has a 70% stake in the Letseng mine.

January-December pre-tax profit from continuing operations rose to $54.5 million from $39.2 million last year, according to the report.

Revenue was up 9.5% to $266.4 million.

Gem Diamond shares, which have gained 28% since the company sold two major gems found at its Letseng mine in November, closed at 260 pence on Monday on the London Stock Exchange, the report said.