Gem Diamonds has decided to respond to the recent downturn in the diamond market by reviewing expenditure on their projects. Included in this is Ghagoo mine, located in the Central Kalahari Game Reserve, which is under construction at the moment.
Due to the demand falling for diamonds and other precious stones, Gem Diamonds is questioning whether it should continue construction on the mine, or put all expansion ambitions on hold in order to protect themselves financially. The estimated cost of the not-yet completed Ghagoo mine is $85 million, but Gem Diamonds has announced that they are not over budget with the mine, so far costing them $31 million of the total budget allowance.
According to experts, Gem Diamonds is in a strong position during this downturn, as they have substantial capital and no debt. However, plans are being made to review the company’s investment plans in order to strengthen them during this time. The prices of diamonds and diamond rings have fallen a staggering 13%, partially due to slowing Asian consumption of diamonds, as well as the economic downturn in many European countries.
Gem Diamonds remain positive about the long-term growth of the diamond industry, confident that the current downturn in the market is a temporary setback for their company and the diamond trade. Gem Diamonds wants to make sure that they are in a stable position to hasten the completion of their mining projects in the event that the conditions of the diamond market will improve quickly and significantly.
The company’s half-year report will be released to the public at the end of August 2012, after their review has been completed. In July 2012, they announced that they were making the decision to pause the construction of the Ghagoo mine in the Central Kalahari Game Reserve for two years, due to an unfortunate accident that took the lives of two of their workers. The company says that the first diamonds mined from the mine were expected to be mined within 2013, but these plans will have to be put on hold until the economic climate stabilizes.