Gem Diamonds recovers 478-carat stone at Letseng

Vancouver — For the third time in as many years, Gem Diamonds (GEMD-l) has recovered a diamond from its Letseng mine, in Lesotho, big enough to take a place on the list of the 20 largest rough diamonds ever found.

On Sept. 8, workers at Letseng recovered a 478-carat white diamond. It was immediately transferred to Antwerp, where it was determined to be a type II D-colour diamond, the highest colour grading available for white diamonds. Gem Diamonds says the stone “is of outstanding clarity with no inclusions visible in its rough form.”

The rough diamond is roughly round in shape and thus has the potential to yield one of the largest flawless D-colour round polished diamonds in history.

The diamond, which is yet to be named, is big enough to nab the last spot on the list of the world’s 20 largest diamonds. The Letseng mine has produced three other stones on that list — two of them in the last two years.

In 2006, Letseng produced the Lesotho Promise, a 603-carat white diamond that sold for US$12.4 million. It is the 15th largest stone ever found. The next year, workers recovered the Letseng Legacy, a 493- carat white diamond that garnered US$10.4 million as the 18th largest diamond ever recovered. And in 1967, the mine produced the stone that claims spot 16 on the list: the 601-carat Lesotho Brown.

Subsequent to news of its latest find, the company announced its acquisition of Calibrated Diamonds Investment Holdings, a diamond beneficiation company that uses a proprietary high-tech process to manufacture perfectly symmetrical polished diamonds with minimal need for manual polishing.

Gem Diamonds bought the company from Petra Diamonds (PDMDF-O, PDL-l) for US$5.9 million. Petra bought the company in late 2006, envisioning increasing its revenues by cutting and polishing its own production. But since then, Petra’s production base has grown considerably through acquisitions and the company has decided to instead focus solely on diamond exploration and production.

Gem Diamonds plans to establish two beneficiation facilities making use of Calibrated’s technology, one in Mauritius and one in Dubai. Both facilities are expected to be operational by mid-2009.

De Beers operated the Letseng mine between 1977 and 1982. Operations restarted in 2004 and Gem Diamonds acquired the mine in 2006. The mine consists of two adjacent, near-vertical kimberlite

pipes that carry an average grade of 1.72 carats per hundred tonnes. Some 14% of all stones recovered are larger than 10.8 carats; the average price per carat achieved for the mine’s production is close to US$2,000.

In mid-2008, Gem Diamonds completed an expansion at Letseng that doubled its processing capacity to 5.28 million tonnes of ore per year. The mine still carries a 45-year mine life, though optimal production is estimated to carry through for 33 years.

Gem Diamonds was established in 2005 and listed on the main board of the London Stock Exchange in February 2007, raising US$635 million in its initial offering. At presstime, the company traded near 7.385.