Gem Diamonds (LSE: GEMD) today reported an encouraging performance in a trading update ahead of its half-year results. The company said carat production was up 15% at its Letšeng mine, which it owns in a 70%/30% partnership with the government of Lesotho. Average grade was also up and “tracking towards the top end of carat production guidance for 2016”.

Financially strong (net cash stands at $37.7m), Gem Diamonds is a well-run company, focused on using the cash it generates for carefully-managed growth and dividends for shareholders. Medium-to-long-term supply/demand dynamics for the industry are favourable, and in addition to its Lesotho mine, the company is developing one in Botswana with over 20m carats in the resource worth over $4bn.

The shares are trading at 126.5p, valuing Gem at £175m. On a forward P/E of 7.3 with a prospective 3.2% dividend yield, I reckon this is a very buyable precious stones play.

Attractive buy

Chilean copper miner Antofagasta (LSE: ANTO) is another conservatively-financed and prudently-managed business. During what has been a challenging period for miners, Antofagasta has used its financial strength to acquire a 50% interest in a high-quality, low-cost copper mine from Barrick Gold. Together with the start of production at a new mine and the closing of its oldest operation, Antofagasta is well-positioned both for resilience and to benefit from the cyclical recovery when it comes.

The price of copper has rallied in fits and starts this year, but I’m not sure market fundamentals support a sustained recovery at this stage. For example, demand from China is a major driver, and data out just yesterday showed home prices slowing in June for a second consecutive month, reigniting concerns about oversupply in the property market there.

At a share price of 490p, Antofagasta trades on a current-year forecast P/E of 59, falling to 37 for 2017, with dividend yields of 0.7%, rising to 1.2%. On the face of it, not very attractive, but when recovery comes and operational gearing kicks in, earnings will rise rapidly as will the reappearance of the juicy special dividends Antofagasta pays out in boom times. As such, I reckon the stock is good value and an attractive long-term buy at current depressed levels in a cyclical trough.

Plenty of risk

South African platinum miner Lonmin (LSE: LMI) has been a serial offender in asking shareholders for cash to shore up its balance sheet: $457m in 2009, $817m in 2012 and $407m last year. The company has been saved from insolvency but wiped out many shareholders in the process.

Lonmin’s shares have rallied strongly from an all-time low since the latest refinancing and are currently trading at 225p. The price looks too high to me at this stage, for although the company reported “significant progress” in its half-year results in May, executing the turnaround will be a long process and fraught with potential pitfalls that could derail it. A current demand from unions for a 56% pay rise is just one of many challenges Lonmin is likely to face. As such, I can’t see a great deal of appeal in the stock, but plenty of risk of things going wrong and yet another fundraising being needed further down the line.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.