Maseru - Gem Diamonds said it recovered 26% fewer carats in the first half compared with the second half of last year and cut its 2013 production forecast for its key Letseng mine in Lesotho, sending its shares down 5 percent.
Gem Diamonds said it expected to recover between 95 000 and 105 000 carats from Letseng in 2013.
Carats recovered during the six months to June 30 fell to 42 268 from 57 234 in the second half of 2012.
The company said the shortfall was because of mining within the lower-grade main pipe, tonnage loss due to the installation of crushers, and mining within a region of high basalt content.
"Although higher grade recoveries are expected in H2 2013, this won't be sufficient to recover the full shortfall," the company said in a statement.
The Letseng mine located in the Maluti mountains in Lesotho is known for its large white diamonds.
Gem Diamonds said the year had begun positively for the rough diamond market and that it expected the supply of rough diamonds to reduce in the short term.
"The production performance and downgrade are disappointing, although this is likely to be offset somewhat by a better market outlook," Numis Securities analyst Cailey Barker said in a note.
Gem Diamonds' shares were down 3.5% at 137 pence at 09:30 GMT on the London Stock Exchange on Monday.