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Gem Diamonds is planning to move into the gem processing business with the opening of a $10m (£5.5m) cutting and polishing factory in Dubai.

Clifford Elphick, chief executive of the mining group, said that the factory would be up and running early next year and would use diamond-mapping technology to get the best polished gems out of each rough stone.

Gem will still sell the bulk of its diamonds as rough stones but will polish those where it thinks it can add most value. Mr Elphick said he would expect processing to add between 25 per cent and 100 per cent to the value of each stone.

He said that a good illustration of how cutting and polishing adds value to rough diamonds was the 603-carat Lesotho Promise stone, found at Gem’s Letseng mine in Lesotho in 2006 and sold to Graff for £12.4m. The jeweller cut the stone into 26 polished gems and turned them into a necklace that is reportedly up for sale for $50m.

Gem yesterday also published its half-year results, showing a big jump in revenues but a 16 per cent fall in pre-tax profits.

Gem’s diamond output rose 18 per cent to 44,507 carats in the first half, the result of expansion at the Letseng mine and a turnround at the Ellendale mine in Australia, which Gem bought last year. Diamond prices also rose, pushing up revenues to $166.8m, from $69.8m in the same period of 2007.

Mining costs rose sharply, however, especially at the lossmaking Ellendale operation.

Pre-tax profit fell from $28.4m to $23.8m. However, earnings last year were boosted by $12m of interest on Gem’s post-flotation cash pile.

Mr Elphick said that while he was always looking for more acquisitions, there was “nothing compelling at the moment”. He said his focus in the second half was to “make the mines we have acquired profitable and make them pay for themselves”.

Source: FT.com

While noting rising prices of rough diamonds, Israel Diamond Exchange President Avi Paz said that manufacturing of mid-range diamonds can return to Israel and be done economically. Israel, once a major polishing center, now mostly polishes larger and expensive goods, for which the cost of labor is marginal. “As the price of rough diamonds is rising, the cost of labor as a component [in the cost of polishing] decreases,” Paz said.

At the same time, labor costs are rising in centers such as China, and therefore polishing of mid-range goods could soon become economical in Israel again, Paz said.

Speaking at the Israel Diamond Industry Dignitary Award ceremony in Tel Aviv Thursday, Paz said Israel’s exports of polished will increase this year in value, and hopefully in carat volume as well.

In the past few years, exports of polished diamonds from Israel have continually grown in value, however in terms of volume, exports have been far from stellar.

source: idexonline