Gem Diamonds more than doubled sales from its Letšeng mine in the first half of 2011 as prices for high quality rough diamonds soared during the period. The company reported that Letšeng sales rose 124 percent year on year to $160.6 million during the six months that ended June 30, 2010 with average prices up 77 percent to $3,052 per carat. Production at Letšeng increased 18 percent top 52,798 carats.

“Increasing consumption of diamond jewelry in the U.S., China and India, the lack of significant new mines coming on stream and very low stocks of rough and polished diamonds in the cutting centers is being reflected in strongly rising prices of both rough and polished diamonds,” said Clifford Elphick, chief executive officer (CEO) of Gem Diamonds. “Prices are extremely strong for rare, large high quality, good color diamonds, of which Gem Diamonds’ Letšeng Mine in Lesotho is the single largest producer.”

Letšeng continued to produce high value stones during the period with 105 diamonds achieving prices above $20,000 per carat while a 2.79 carat blue diamond sold for $199,199 per carat.

Included in the Letšeng sales were 300 carats valued at $9.5 million which were extracted for manufacturing in the company’s downstream program that was launched in October 2011. Gem Diamonds has sold $8.5 million worth of the resulting polished by the end of June achieving its planned 20 percent margin uplift on the polished sales.

Gem Diamonds restructured its exclusive sales agreement with Tiffany & Co for fancy yellow stones from the Ellendale mine in Australia raising prices in April by 24.73 percent. Under the agreement, the parties decided to update prices on a monthly basis rather than six monthly, effective retroactively on October 1, 2010. Average prices for Ellendale yellows increased 56 percent year on year to $4,045 per carat in the first half of 2011 and Gem Diamonds reported that prices in July for these goods have increased by 27.4 percent since April.

Despite the price increases, Ellendale sales fell 1 percent to $33.2 million in the first half as production declined by 36 percent to 52,349 carats largely due to significant rainfall which impacted the open pit operations. The average price of Ellendale’s commercial output increased 35 percent to $195 per carat.

Gem diamonds reported a cash balance of $138.4 million at the end of June, which will contribute to its planned expansion at Letšeng and the development of its Gope project in Botswana, which the company has renamed Ghaghoo. The company also renamed its Botswana subsidiary to Gem Diamonds Botswana (PTY) Limited.

“The name changes signify a change from an exploration focused company to one which is both an economically active and sustainable operation,” Elphick said. “We are also particularly pleased that as a result of our proactive ongoing community consultations with the residents of the Central Kalahari Game Reserve we are able to recognize the original name Ghaghoo, by re-naming the mine site.”

Gem Diamonds shares were up 1 percent to 240.48 pence in early Monday morning trade on the London Stock Exchange.