Shares in Africa focused Firestone Diamonds went ballistic on Wednesday after it announced that stable power had returned to its Liqhobong mine in Lesotho, with the plant processing at full capacity.
Firestone had warned in October that the mine was struggling due to insufficient power supply due to a two-month maintenance shutdown at its only power supplier — Lesotho Highlands Water Project.
As a result, processing operations were halted from the beginning of the month to Oct. 26, when diesel generators were commissioned. The plant then operated at between 80% and 90% capacity throughout November.
While the LHWP resumed operations on Dec. 1, the company said it had to book $1.1 million in additional costs from the use of the generators, adding that it had also filed an insurance claim over loss of profit.
Firestone’s stock was up 128% on Wednesday mid-day in London at 0.97 pence a share, leaving the company with a market capitalization of £6.18 million. The stock price, however, is far from the £3.88 the company’s shares were trading at a year ago.
Diamond miners are struggling across the board, especially those producing cheaper and smaller stones, where there is an over-supply.
Increasing demand for synthetic diamonds has also weighed on prices. Man-made diamonds require less investment than mining natural stones and can offer more attractive margins.
Buyers, those that polish and cut diamonds for retailers, have been hit this year by lower prices and tighter credit, prompting them to delay purchases.
De Beers, the world’s No.1 diamond miner by value, has responded by axing production — with a target of 31 million carats this year compared with 35.3 million in 2018. It has also given buyers more room to maneuver, by allowing them to refuse half the stones in many of the diamond parcels.
The Anglo American unit is also spending more on marketing. At the latest sale, the company increased the amount of stones buyers were allowed to reject in each lot purchased from 10% to 20%, according to people familiar with the auction.
Firestone’s chief executive, Paul Bosma, has said he’d expect prices for smaller diamonds to increase towards the end of 2020, in part due to the closure of Rio Tinto’s Argyle mine in Australia.