LONDON (ShareCast) - (Sharecast News) - Gem Diamonds has agreed to sell its failed mine in Botswana to Pro Civil for $5.4m.
The Ghaghoo mine, which has been on care and maintenance since March 2017, is owned by Gem Diamonds Botswana (GDB). In the period to 31 December 2018, GDB reported a loss before tax of $4.9m and had gross assets of $3.9m.

Gem Diamonds said it will use the sale proceeds for general corporate purposes. Pro Civil will assume the environmental liability currently associated with GDB.

Chief executive officer Clifford Elphick said: "This sale is in line with our strategic objective to dispose of non-core assets. Gem Diamonds remains focused on optimising production and efficiency at the Letšeng mine in Lesotho.

On behalf of Gem, we wish the Pro Civil team well for the future, and I would also like to thank the government of Botswana for its assistance during the sale process."

The transaction is expected to complete in the third quarter.

As far as the proceeds are concerned, broker Shore Capital said: "Every little bit will help, given that the large stone potents for 2019 at Letšeng have thus far been poor. In H1 2019, Gem recovered only two more than 100ct stones (versus ten in H1 2018), continuing the falling trend that became evident in H2 2018."

Berenberg said it had included no value for Ghaghoo in its model, but had included $3m of care and maintenance costs in its FY 2019 assumptions, so the receipt of $5.4m and sale of the mine in Q3 should be a net positive for its estimates.

"We think that this is a positive development and enables Gem to focus on its core asset, the Letseng mine in Lesotho," it said.

At 1255 BST, Gem Diamonds shares were up 0.5% at 78p.

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