REG - Gem Diamonds Limited - Half Year 2024 Results
29/08/2024 07:00
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RNS Number : 0465C Gem Diamonds Limited 29 August 2024
Thursday, 29 August 2024
Gem Diamonds Limited
Half Year 2024 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the
"Group") announces its Half Year Results for the six months ended 30 June 2024
(the "Period").
FINANCIAL RESULTS:
· Revenue of US$78.0 million (H1 2023: US$71.8 million)
· Underlying EBITDA of US$19.1 million (H1 2023: US$8.4 million)
· Profit for the Period of US$5.5 million (H1 2023:
US$1.5 million)
· Attributable profit of US$2.1 million (H1 2023: loss of
US$1.0 million)
· Earnings per share of 1.5 US cents (H1 2023: loss per share of
(0.7) US cents)
· Cash on hand of US$30.0 million as at 30 June
2024 (US$21.6 million attributable to Gem Diamonds) and unutilised
facilities of US$54.9 million
· Net debt of US$8.4 million (31 December 2023: US$21.3 million)
OPERATIONAL RESULTS:
Letšeng
· Three lost time injuries
· Recovered 55 873 carats (H1 2023: 50 601 carats)
· Waste tonnes mined of 3.2 million tonnes (H1 2023: 4.8 million
tonnes)
· Ore treated of 2.5 million tonnes (H1 2023: 2.5 million tonnes)
· Average value of US$1 366 per carat achieved (H1 2023: US$1 373
per carat)
· The highest dollar per carat achieved for a white rough diamond
during the Period was
US$41 007 per carat
Safety performance
Letšeng recorded three LTIs during the Period (2023: two), resulting in an
LTIFR and AIFR of 0.36 (2023: 0.10) and 0.60 (2023: 0.67), respectively. Each
of the LTIs in the Period had minor consequences and were fully investigated
with corrective actions to prevent repeat occurrences implemented.
Diamond market
The diamond market remains under significant pressure which has negatively
impacted prices achieved during the Period. An increase in both the number of
larger than 100 carat diamonds and overall diamond recoveries aided in
offsetting the market impact on prices.
Operational performance
Focused cost and operational efficiency initiatives undertaken at Letšeng
since H2 2023, have resulted in enhanced plant stability, increased overall
plant utilisation, increased carats recovered and an improvement in large
diamond recoveries. Eight diamonds greater than 100 carats were recovered
during the Period compared to two in H1 2023. Post Period end, two more
diamonds greater than 100 carats were recovered.
Letšeng full year guidance
In line with continued mine plan optimisation and efforts to contain costs,
the full year guidance for waste tonnes mined has been revised down to 5 - 6
million tonnes.
The full year guidance on carats recovered and carats sold has been revised
upwards due to the improved operational performance. Carats recovered have
been revised to 98 - 101 kcts and carats sold have been revised to 100 - 103
kcts.
All other guidance as issued in March 2024 remains unchanged.
Commenting on the results today, Clifford Elphick, Chief Executive Officer of
Gem Diamonds, said:
"The pressure on the global diamond market persists which negatively impacted
the revenue generated during the Period. We have, however, had great success
in improving our operational outputs and cost containment which mitigated the
market impact on diamond prices. In line with the improved performance, we
have revised our guidance for 2024."
The Company will host a live audio webcast presentation of the half year
results today, 29 August 2024, at 9:30 BST. This can be viewed on the
Company's website: www.gemdiamonds.com.
The page references in this announcement refer to the Half Year Report 2024,
which can be found on the Company's website: www.gemdiamonds.com
(file://///g4/Gemdiamond/Accounts1/Reporting%20Periods/2024/HY/Front%20end/RNS/www.gemdiamonds.com)
.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Kiki Constantopoulos, Company Secretary
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Felicity Winkles
Tel: +44 (0) 207 777 6424
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value diamonds. The
Company owns 70% of the Letšeng mine in Lesotho. The Letšeng mine is famous
for the production of large, exceptional white diamonds, making it the highest
dollar per carat kimberlite diamond mine in the world.
INTERIM BUSINESS REVIEW
OVERVIEW
The Group presents its results for the six months ended 30 June 2024 (the
Period), achieving an underlying EBITDA of US$19.1 million (H1 2023: US$8.4
million) and an attributable profit of US$2.1 million (H1 2023: attributable
loss of US$1.0 million).
The global economy remains subdued with the International Monetary Fund
currently forecasting a 3.2% and 3.3% growth for 2024 and 2025, respectively.
International conflicts, geopolitical tensions and national elections in major
economies taking place in 2024 have created significant uncertainty which is
curbing a return to improved sustainable growth. The risk of higher inflation
has increased, which in turn raises the risk of higher interest rates for
longer periods, exacerbating the cost of living crisis.
The troubled global economy may however be positively influenced by certain
factors, including China managing through its property crisis and tightening
controls around its shadow banking industry; and the US Federal Reserve
potentially implementing an interest rate cut in September, with other central
banks expected to follow suit. Another positive indication is that other
economies, such as the UK, Canada, Sweden and Switzerland, have recently
implemented modest interest rate cuts.
The global diamond market remains under significant pressure primarily due to
the challenging global economic environment. In addition, Russian diamonds are
reported to be entering the market despite imposed sanctions, therefore still
adding to the overall rough diamond supply. The manufacturing of lab-grown
diamonds continues to increase despite the steady decrease in prices,
impacting the smaller, commercial rough diamond market. These factors have
cumulatively placed severe pressure on rough and polished diamond prices
during the Period. In response, De Beers recently cut its 2024 production
guidance by 10% and Petra Diamonds has postponed its August/September tender
to support steps taken by major producers to restrict supply in this weaker
market.
Revenue for the Group increased by 9% to US$78.0 million compared to US$71.8
million in H1 2023, resulting in an average price of US$1 366 per carat (H1
2023: US$1 373 per carat) from the sale of 56 994 carats (H1 2023: 52 163
carats). Although similar overall prices were achieved in H1 2023, an increase
in both the number of larger than 100 carat diamonds and overall diamond
recoveries aided in offsetting the market impact on prices in the Period.
The Group ended the Period with a cash balance of US$30.0 million (31 December
2023: US$16.5 million) and drawn down facilities of US$38.4 million (31
December 2023: US$37.8 million), resulting in a net debt position of US$8.4
million (31 December 2023: US$21.3 million) and unutilised available
facilities of US$54.9 million (31 December 2023: US$45.9 million).
Focused cost and operational efficiency initiatives taken at Letšeng were
reported in the Group's Annual Report and Accounts 2023 published in March.
These initiatives included a change in leadership, a right-sizing programme,
the insourcing of its mining and certain other activities and the
interrogation of all contracts and operational and capital expenditure. The
Group is pleased to report that there have been no operational disruptions
following the insourcing and that the positive outcomes of this and other
initiatives have come to fruition, and are reflected in the operational and
financial results for the Period.
Waste tonnes mined during the Period were 3.2 million tonnes (H1 2023: 4.8
million), in accordance with the 2024 mine plan. Ore tonnes treated were 2.5
million tonnes (H1 2023: 2.5 million), and 55 873 carats were recovered (H1
2023: 50 601). Eight greater than 100 carat diamonds were recovered and six
were sold during the Period.
The safety of our workforce remains a top priority. The critical control
management strategy that commenced in 2021 to drive further improvement in the
maturity of the organisational safety culture at Letšeng has been fully
implemented and our safety performance during the Period remained solid with
an all injury frequency rate (AIFR) of 0.60.
We remain focused on achieving our decarbonisation target of reducing our 2021
Scope 1 and 2 carbon emissions by 30% by 2030. The Group achieved a 3.4%
reduction in carbon emissions compared to H1 2023, the details of which are
briefly discussed in the Operations Review.
LOOKING AHEAD
The key focus areas for the remainder of 2024 are:
· extension of the Group's revolving credit facilities that expire
in December 2024;
· further reducing mining costs and optimising activities following
the insourcing at the end of 2023;
· reducing treatment costs through contract review and/or
insourcing; and
· reviewing Letšeng's long term mine plan to reduce waste mining.
OPERATIONS REVIEW
H1 2024 IN REVIEW
• Zero fatalities and three lost time injuries (LTIs)
• Zero significant or major environmental or social incidents
• Recovered eight diamonds greater than 100 carats (H1 2023: two)
• Achieved an average price of US$1 366 per carat (H1 2023:
US$1 373 per carat)
• The highest price achieved was US$41 007 per carat for a 62.78
carat white diamond
SUSTAINABILITY
Health, safety and environment
We remain committed to prioritising health and safety throughout the
organisation, with a zero harm and zero tolerance policy. Our focus on
thoughtful, caring yet firm practices with leadership committed to proactive
safety-focused initiatives has resulted in significant safety improvements.
The Group maintained its high standard of safety achieving an AIFR of 0.60 in
the Period. We acknowledge however, that we recorded three LTIs in the Period,
with minor consequences. Each of these LTIs were fully investigated and
corrective actions to prevent repeat occurrences were implemented.
Safety performance Unit H1 2024 2023 2022 2021 2020
Fatalities Number 0 0 0 0 0
LTIs Number 3 2 3 6 1
LTIFR 200 000 man hours 0.36 0.10 0.13 0.24 0.04
AIFR 200 000 man hours 0.60 0.67 0.70 0.93 0.76
No major or significant environmental incidents occurred at any of the Group's
operations during the Period.
Corporate social responsibility investment (CSRI)
In H1 2024 focus was maintained on executing our CSRI strategy and initiatives
to support our communities, our social licence to operate and our commitment
to our adopted UN Sustainable Development Goals. Our 2022 to 2026 five-year
CSRI strategy remains on track, aligning to our community needs and Group
objectives. No major or significant stakeholder complaints were received
during the Period.
Carbon emissions
We are working towards our decarbonisation target of reducing our 2021 Scope 1
and 2 carbon emissions by 30% by 2030. Improving energy-use efficiency and
reducing the consumption of diesel and electricity remain our immediate and
top priorities, while appropriate alternative low-carbon and renewable energy
sources are being considered.
Carbon
In H1 2024, the Group's total carbon footprint (Scope 1, 2 and 3) was 52 283
tCO2e, a 3.4% reduction compared to H1 2023 which was 54 138 tCO2e. Although
the aggregate Scope 1 and 2 emissions for H1 2024 was on par with H1 2023, the
individual emissions for Scope 1 and Scope 2 inversely fluctuated due to
reduced load shedding by Eskom. In H1 2024, Letšeng experienced 331 hours of
load shedding, a reduction of 73.5% compared to 1 249 hours in H1 2023. This
led to increased grid availability and use (Scope 2) and a decrease in diesel
consumption due to reduced generator usage (Scope1).
Carbon emissions Unit H1 2024 H1 2023 % change
Scope 1 (direct) tCO2e 17 601 23 960 (27)
Scope 2 (indirect) tCO2e 29 270 22 913 28
Total Scope 1 and 2 tCO2e 46 871 46 873 -
Scope 3 (indirect) tCO2e 5 412 7 265 (26)
Total Scope 1, 2 and 3 tCO2e 52 283 54 138 (3)
Residue storage facility (RSF) management
The Group has implemented its Group Residue Storage Facility (RSF) management
policy and standard, which is aligned to the Global Industry Standard on
Tailings Management (GISTM). The Group has established appropriate governance
structures at both operational and Group levels to provide oversight and
assurance of safe and responsible management of our RSFs at the operating
sites. The RSFs at Letšeng remain in good condition and are well maintained
with a focused RSF operations management strategy being executed.
PRODUCTION OVERVIEW
Unit H1 2024 H1 2023 % change
Waste mined tonnes 3 163 476 4 846 680 (35)
Ore mined tonnes 2 588 583 2 787 124 (7)
Ore treated tonnes 2 542 114 2 467 250 3
Carats recovered carats 55 873 50 601 10
Recovered grade cpht1 2.20 2.05 7
1 Carats per hundred tonnes.
Waste mining decreased by 35% to 3.2 million tonnes from 4.8 million tonnes in
H1 2023, in accordance with the 2024 mine plan. 2.5 million ore tonnes were
treated in H1 2024, an increase of 0.1 million tonnes compared to H1 2023.
Letšeng recovered 55 873 carats (H1 2023: 50 601 carats). The increase in
ore tonnes treated and volume of carats recovered during the Period is
primarily due to the operational decision to slow throughput in the processing
plant that was implemented in H2 2023 and to focus on improving overall plant
utilisation at a more stable and consistent rate. This has resulted in
improved plant stability, increased overall plant utilisation and carats
recovered, including a marked improvement in large diamond recoveries.
The overall grade for H1 2024 was 2.20 cpht (H1 2023: 2.05 cpht), representing
an increase of 7% despite a lower contribution of higher-grade Satellite Pipe
material, which accounted for 44% of material treated during the Period (H1
2023: 51%).
Frequency of large diamond recoveries
Number of diamonds H1 2024 H1 2023 FY average
2008 - 2023
>100 carats 8 2 8
60 - 100 carats 3 4 18
30 - 60 carats 47 28 76
20 - 30 carats 58 58 114
10 - 20 carats 261 226 449
Total diamonds > 10 carats 377 318 665
DIAMOND SALES
The average price achieved during the Period was US$1 366 per carat (H1 2023:
US$1 373 per carat). 56 994 carats were sold during the Period, generating
rough diamond revenue of US$77.9 million (H1 2023: 52 163 carats at a value
of US$71.7 million). The higher revenue is mainly attributed to the higher
volume of overall recoveries and the recovery and sale of six diamonds greater
than 100 carats during the Period which offset the negative impact of lower
prices experienced during the Period on the overall dollar per carat achieved.
The highest price achieved was US$41 007 per carat for a 62.78 carat white
diamond. 11 diamonds sold for more than US$1.0 million each, generating
revenue of US$29.5 million (H1 2023: 12 diamonds sold for more than US$1.0
million each, generating revenue of US$21.0 million).
ENHANCING OPERATIONAL EFFICIENCIES
Letšeng continually reviews its entire operation to ensure it operates
optimally and with effective cost management to secure its sustainability,
especially considering the impact of market pressure on its ability to
generate revenue.
The insourcing of Letšeng's mining activities at the end of 2023 has
delivered both operational efficiencies and cost savings with the fleet and
execution of its mine plan now directly under management's control. This has
provided flexibility and synergies in the optimal utilisation of the fleet and
eliminated additional expenses for ad hoc mining and operational requirements,
including activities related to concurrent rehabilitation and other necessary
"day works".
Right-sizing to align the workforce to operational requirements has continued
on a smaller scale in 2024 following the mine-wide programme that was
completed in June 2023.
All operational contracts are being reviewed to ensure efficiencies and
effective cost management.
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem
Diamonds is implementing an appropriate rehabilitation plan, including the
demobilisation and removal of the processing plant from site. On completion,
should an option to sell the mine not present itself, the mining license will
be relinquished to the Botswana Department of Mines.
GROUP FINANCIAL PERFORMANCE
H1 2024 IN REVIEW
• Revenue achieved of US$78.0 million (H1 2023: US$71.8 million)
• Underlying EBITDA2 of US$19.1 million (H1 2023: US$8.4 million)
• Attributable profit of US$2.0 million (H1 2023: loss of
US$1.0 million)
PROFITABILITY AND LIQUIDITY
US$ million H1 2024 H1 2023
Revenue 78.0 71.8
Royalties and selling costs (8.4) (7.5)
Cost of sales1 (46.5) (50.7)
Corporate expenses (4.0) (5.2)
Underlying EBITDA2 19.1 8.4
Depreciation and mining asset amortisation (6.0) (3.3)
Share-based payments (0.4) (0.2)
Other operating expenses (0.4) (0.8)
Foreign exchange gain 1.1 2.1
Net finance costs (3.5) (2.2)
Profit before tax for the Period 9.9 4.0
Income tax expense (4.4) (2.5)
Profit after tax for the Period 5.5 1.5
Non-controlling interests (3.5) (2.5)
Attributable profit/(loss) for the Period 2.0 (1.0)
Earnings/(loss) per share (US cents) 1.5 (0.7)
1 Including waste stripping amortisation costs but excluding depreciation and
mining asset amortisation.
2 As defined in Note 6, Underlying earnings before interest, tax, depreciation
and mining asset amortisation (underlying EBITDA) of the condensed notes to
the consolidated interim financial statements.
The Group generated an underlying EBITDA2 of US$19.1 million (H1 2023:
US$8.4 million). The profit attributable to shareholders was US$2.0 million
(H1 2023: loss of US$1.0 million), equating to a profit per share of 1.5 US
cents (H1 2023: loss per share of 0.7 US cents) on a weighted average number
of shares in issue of 142.9 million (H1 2023: 141.6 million shares).
Revenue
US$ million H1 2024 H1 2023
Sales - rough 77.9 71.7
Sales - polished margin 0.6 0.1
Impact of carrying over rough diamonds (0.5) -
Group revenue 78.0 71.8
The Group's revenue of US$78.0 million was mainly generated by the sale of
56 994 carats at an average price of US$1 366 per carat. Additional revenue
is generated through an arrangement with two diamond manufacturing customers
to supply polished diamonds to some of the world's most premium luxury brands,
and other partnership arrangements. These agreements allow the Group to share
in the margin uplift on the sale of polished diamonds. In H1 2024, additional
revenue of US$0.6 million was generated from these arrangements.
Costs
The Group closely manages its costs and preserves cash resources to maintain
appropriate liquidity. Operating expenses were negatively impacted by the
volatile global economic environment and the resultant inflationary pressures.
The reduction in grid electricity interruptions in South Africa experienced
during the Period has resulted in some cost savings from the reduced volumes
of diesel required to operate generators.
OPERATING EXPENSES
Total direct cash costs at Letšeng, including waste costs, decreased 22% to
LSL809.5 million from LSL1 040.8 million in H1 2023. This is due to the
35% decrease in waste tonnes mined, significant cost savings following the
insourcing of mining activities at the end of 2023 and the review of all
aspects of its business from a cost perspective. Reduced load shedding has led
to significantly lower volumes of diesel consumption, resulting in a material
cost reduction. In addition, H1 2023 included once-off costs such as severance
packages and consulting fees relating to the right-sizing programme. As a
result direct cash costs decreased by 18% to LSL243.84 per tonne treated in H1
2024 compared to LSL296.54 in H1 2023.
Non-cash accounting charges comprise waste capitalisation and inventory and
stockpile movement. The lower cost per tonne treated in H1 2023 were driven
by the significant increase in the ore stockpile tonnes during that period. In
the current Period, similar stockpile levels were maintained.
Letšeng unit cost analysis
Unit cost per tonne treated Direct cash Non-cash accounting Total Waste cash
costs1 charges2 operating costs per
costs waste tonne
mined
H1 2024 (LSL) 243.84 100.22 344.06 59.94
H1 2023 (LSL) 296.54 78.24 374.78 63.80
% change (18) 28 (8) (6)
H1 2024 (US$) 13.01 5.35 18.36 3.20
H1 2023 (US$) 16.28 4.29 20.57 3.50
% change (20) 25 (11) (9)
1 Direct mine cash costs represent all operating costs, excluding royalty and
selling costs.
2 Non-cash accounting charges include waste stripping cost amortised,
inventory and ore stockpile adjustments, and the impact of adopting IFRS 16
Leases, and exclude depreciation and mining asset amortisation.
CORPORATE EXPENSES
Corporate office costs are incurred to provide expertise in all areas of the
business to realise maximum value from the Group's assets. These costs are
incurred by the Group through its technical and administrative offices in
South Africa (in South African rand) and head office in the UK (in British
pounds).
General corporate costs are closely managed and ongoing rationalisation has
resulted in costs decreasing to US$4.0 million (H1 2023: US$5.2 million).
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem
Diamonds is discussing various alternatives with affected stakeholders,
including the potential closure of the mine and relinquishment of the mining
license to the Government of Botswana. The care and maintenance costs of
US$0.5 million (H1 2023: US$0.8 million) are included in other operating
expenses and are net of income of US$0.2 million from the sale of scrap
material and previously impaired vehicles and equipment. The decrease in cash
costs is due to ongoing initiatives to reduce costs, such as the installation
of a solar power plant which eliminated the need for generator rentals, diesel
usage and transport.
EXCHANGE RATE IMPACTS
While revenue is generated in US dollars, the majority of operational expenses
are incurred in the relevant local currency of the operational jurisdictions.
Local currency rates for the Lesotho loti (LSL) (pegged to the South African
rand) and Botswana pula (BWP) weakened slightly against the US dollar compared
to H1 2023, which decreased the Group's US dollar reported costs and increased
local currency cash flow generation.
Exchange rates H1 2024 H1 2023 % change
LSL per US$1.00
Average exchange rate 18.73 18.21 3
Period end exchange rate 18.26 18.89 (3)
BWP per US$1.00
Average exchange rate 13.66 13.20 3
Period end exchange rate 13.61 13.52 1
GBP per US$1.00
Average exchange rate 0.93 0.81 15
Period end exchange rate 0.93 0.79 18
FINANCIAL POSITION
The LSL closed at similar levels to the US dollar at the end of the Period
compared to 31 December 2023 and therefore had little to no impact on the US
dollar reported values in the Interim Consolidated Statement of Financial
Position. Selected totals of the Interim Consolidated Statement of Financial
Position and key asset drivers are tabled below.
US$ million H1 2024 FY 2023 % change
Non-current assets 311.5 322.3
Current assets 71.5 62.4
Total assets 383.0 384.7 -
Equity attributable to parent company 141.1 138.9
Non-controlling interest 82.7 79.3
Total equity 223.8 218.2 3
Non-current liabilities 113.4 106.7
Current liabilities 45.8 59.8
Total liabilities 159.2 166.5 (4)
Key asset drivers
US$ million H1 2024 H1 2023 % change
Waste cost capitalised 12.3 19.8 (38)
Waste stripping cost amortised 17.8 17.8 -
Depreciation and mining asset amortisation 6.0 3.3 82
Capital expenditure 1.4 4.6 (70)
Waste cost capitalised decreased due to the lower volumes of waste tonnes
mined. The waste stripping cost amortised remained unchanged at
US$17.8 million (H1 2023: US$17.8 million). Depreciation and mining asset
amortisation increased to US$6.0 million (H1 2023: US$3.3 million) mainly
due to the depreciation charge on the mining fleet which was acquired at the
end of 2023.
During the Period, the majority of capital spent related to the completion of
the 2024 Mineral Resource and Reserve Statement and NI 43-101 Technical Report
published in March 2024 (US$0.4 million) and certain enhancements to Plant 1
and 2 (US$0.4 million).
Liquidity and solvency
The Group ended the Period with cash on hand of US$30.0 million (31 December
2023: US$16.5 million), of which US$21.6 million is attributable to Gem
Diamonds. The Group generated cash from operating activities of
US$28.8 million (H1 2023: US$20.1 million).
On 15 May 2024, Letšeng entered into a secured five-year term loan facility
of LSL200.0 million (US$7.2 million) jointly with Standard Lesotho Bank and
Nedbank Lesotho. The loan is secured by a special notarial bond over the
mining fleet and equipment acquired as part of the insourcing of the mining
activities at the end of 2023. The loan is repayable in equal monthly
instalments which commenced in May 2024, and expires on 30 April 2029.
At Period end, the Group had utilised facilities of US$38.4 million,
resulting in a net debt position of US$8.4 million (31 December 2023:
US$21.3 million) and available facilities of US$54.9 million, comprising
US$22.0 million at Gem Diamonds and US$32.9 million at Letšeng.
The decrease in net debt was mainly due to the higher revenue generated from
rough diamond sales, cost savings following the insourcing of Letšeng's
mining activities, the reduction of waste tonnes mined and the absence of
significant once-off severance packages and consulting fees in H1 2023 which
related to the right-sizing programme.
The Group-wide revolving credit facilities at Letšeng (LSL450.0 million and
ZAR300.0 million) and Gem Diamonds (US$30.0 million), which were concluded in
December 2021 are due to expire in December 2024. The process to extend these
facilities for a 24-month period has commenced.
Letšeng has a LSL100.0 million general banking facility that is reviewed
annually. The Group engages regularly with lenders and credit providers to
ensure access to funding and to manage the Group's cash flow requirements.
Summary of loan facilities as at 30 June 2024:
Company Term/description/ Lender Interest rate Amount Drawn down/ Available
expiry US$ million Balance due US$ million
US$ million
Gem Diamonds Limited Three-year revolving credit facility Nedbank Facility A (US$30 million): Term SOFR + 5.26% 30.0 8.0 22.0
Expires Standard Bank Term SOFR + 5.21%1
22 December 2024
Firstrand Bank
Letšeng Diamonds Three-year revolving credit facility Standard Lesotho Bank Facility B (LSL450 million): Central Bank of Lesotho rate + 3.25% 24.6 8.2 16.4
Expires Nedbank Lesotho
22 December 2024
First National Bank of Lesotho
Firstrand Bank
Nedbank Facility C (ZAR300 million): South African JIBAR + 3.00%1 16.4 5.4 11.0
Letšeng Diamonds Four-and-a-half-year project facility Nedbank ZAR132 million 7.2 6.2 -
Expires Export Credit Insurance Corporation South African JIBAR + 2.50%
31 May 2027
Letšeng Diamonds General banking facility Nedbank ZAR100 million South African 5.5 - 5.5
Annual review in March Prime Lending Rate minus 0.70%
Letšeng Diamonds Five-year term loan facility Standard Lesotho Bank LSL200 million Lesotho prime rate minus 1.50%. 11.0 10.6 -
Expires Nedbank Lesotho
30 April 2029
Total 94.7 38.4 54.9
1 A reduction of 0.05% on the margin of the Nedbank portion of the revolving
credit facilities was effective from 1 January 2024 as the KPIs relating to
the Sustainability Linked Loans were met as at the 31 December 2023
measurement date.
Taxation
The forecast effective tax rate for the full year is 44.2% (31 December 2023:
72.0%) and has been applied to the actual results. The effective tax rate is
above the Lesotho statutory tax rate of 25% primarily as a result of deferred
tax assets not recognised on losses incurred in non-trading operations and the
impact of certain non-deductible expenses for tax purposes. The decrease in
the tax rate compared to 2023 is due to the higher profits generated by
Letšeng.
There has been no change to the amended tax assessment that was issued to
Letšeng by the Revenue Services Lesotho (RSL) in December 2019, contradicting
the application of certain tax treatments in the current Lesotho Income Tax
Act, 1993. There has therefore been no change in the judgement applied and the
accounting treatment compared to that disclosed in the 2023 Annual Report and
Accounts.
Going concern
The projections of the Group's current and expected profitability, considering
reasonable possible changes in operations, key assumptions and inputs,
indicate that the Group will be able to operate as a going concern for the
foreseeable future. Refer to the financial statements on page 9.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's principal risks and uncertainties, both current and emerging, that
could have a material financial, operational and compliance impact on its
performance and long-term growth, are presented in the Annual Report and
Accounts for 2023 (pages 21 to 26). The Group's principal risks as presented
in the Annual Report and Accounts for 2023 remain unchanged in the medium to
long term and take into consideration current market and operational
conditions of the Group's operations and global markets. The Group's risk
management strategy aims to manage Group risk in such a way as to minimise
threats and maximise opportunities.
The Group monitors and manages areas of unpredictability, in particular the
prevailing rough diamond market conditions.
Clifford Elphick
Chief Executive Officer
28 August 2024
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT
AND FINANCIAL STATEMENTS
PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES (DTR) 4.2.10
The Directors confirm that, to the best of their knowledge, this condensed set
of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting and that the Half-Year Report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
(a) an indication of important events that have occurred during the first
six months of the financial year and their impact on this condensed set of
financial statements; and
(b) material related-party transactions in the first six months of the year
and any material changes in the related-party transactions described in the
Gem Diamonds Limited Annual Report 2023.
The names and functions of the Directors of Gem Diamonds Limited are listed in
the Annual Report for the year ended 31 December 2023.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
28 August 2024
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE SIX MONTHS ENDED 30
JUNE 2024
30 June 20241 30 June 20231
Notes US$'000 US$'000
Revenue from contracts with customers 4 78 039 71 763
Cost of sales (52 540) (53 997)
Gross profit 25 499 17 766
Other operating expense 5 (441) (766)
Royalties and selling costs (8 388) (7 476)
Corporate expenses (3 966) (5 239)
Share-based payments 15 (374) (241)
Foreign exchange gain 1 104 2 148
Operating profit 13 434 6 192
Net finance costs (3 506) (2 246)
- Finance income 417 187
- Finance costs (3 923) (2 433)
Profit before tax for the Period 9 928 3 946
Income tax expense 8 (4 392) (2 458)
Profit for the Period 5 536 1 488
Attributable to:
Equity holders of parent 2 056 (991)
Non-controlling interests 3 480 2 479
Earnings/(loss) per share (cents)
- Basic earnings/(loss) for the year attributable to ordinary equity holders 1.47 (0.71)
of the parent
- Diluted earnings/(loss) for the year attributable to ordinary equity holders 1.44 (0.70)
of the parent
1 Unaudited
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE SIX
MONTHS ENDED 30 JUNE 2024
30 June 20241 30 June 20231
US$'000 US$'000
Profit for the Period 5 536 1 488
Other comprehensive income/(loss) that will be reclassified to the interim
Consolidated Statement of Profit or Loss in subsequent periods:
Exchange differences on translation of foreign operations, net of tax (227) (23 525)
Other comprehensive loss for the Period, net of tax (227) (23 525)
Total comprehensive income/(loss) for the Period 5 309 (22 037)
Attributable to:
Equity holders of parent 1 898 (17 611)
Non-controlling interests 3 411 (4 426)
1 Unaudited
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2024
30 June 20241 31 December 20232
Notes US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 9 286 806 295 830
Right-of-use assets 10 4 120 4 746
Intangible assets 11 10 456 10 440
Receivables and other assets 12 4 855 4 487
Deferred tax assets 5 270 6 814
311 507 322 317
Current assets
Inventories 37 006 37 633
Receivables and other assets 12 4 452 3 631
Income tax receivable - 4 631
Cash and short-term deposits 13 30 049 16 503
71 507 62 398
Total assets 383 014 384 715
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 14 1 413 1 413
Treasury shares 14 (1 157) (1 157)
Share premium 885 648 885 648
Other reserves (250 581) (250 797)
Accumulated losses (494 182) (496 238)
141 141 138 869
Non-controlling interests 82 666 79 255
Total equity 223 807 218 124
Non-current liabilities
Interest-bearing loans and borrowings 16 12 893 5 156
Lease liabilities 17 2 707 3 786
Trade and other payables 18 1 610 1 494
Provisions 14 877 14 170
Deferred tax liabilities 81 326 82 136
113 413 106 742
Current liabilities
Interest-bearing loans and borrowings 16 25 452 33 411
Lease liabilities 17 2 446 2 164
Trade and other payables 18 13 278 23 356
Income tax payable 4 618 918
45 794 59 849
Total liabilities 159 207 166 591
Total equity and liabilities 383 014 384 715
1 Unaudited
2 Audited
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED
30 JUNE 2024
Attributable to the equity holders of the parent
Issued capital Share premium Treasury shares Other reserves1 Accumu- Total Non-controlling interests Total equity
lated (losses)/
retained earnings
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2024 1 413 885 648 (1 157) (250 797) (496 238) 138 869 79 255 218 124
Total comprehensive loss - - - (158) 2 056 1 898 3 411 5 309
Profit for the period - - - - 2 056 2 056 3 480 5 536
Other comprehensive loss - - - (158) - (158) (69) (227)
Share-based payments (Note 15) - - - 374 - 374 - 374
As at 30 June 2024 1 413 885 648 (1 157) (250 581) (494 182) 141 141 82 666 223 807
As at 1 January 2023 1 410 885 648 (1 157) (239 169) (494 113) 152 619 80 428 233 047
Total comprehensive loss - - - (16 620) (991) (17 611) (4 426) (22 037)
Profit for the period - - - - (991) (991) 2 479 1 488
Other comprehensive loss - - - (16 620) - (16 620) (6 905) (23 525)
Share capital issued 1 - - (1) - - - -
Share-based payments (Note 15) - - - 241 - 241 - 241
As at 30 June 2023 1 411 885 648 (1 157) (255 549) (495 104) 135 249 76 002 211 251
1 Other reserves relate to Foreign currency translation reserves and
Share-based equity reserves. Refer Note 14, Issued share capital and
reserves for further detail.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 JUNE
2024
30 June 20241 30 June 20231
Notes US$'000 US$'000
Cash flows from operating activities 28 762 20 076
Cash generated by operations 19.1 39 737 28 867
Working capital adjustments 19.2 (12 504) (7 346)
Interest received 209 125
Interest paid (3 074) (1 547)
Income tax paid (129) (23)
Income tax received 4 523 -
Cash flows used in investing activities (13 518) (24 309)
Purchase of property, plant and equipment 9 (1 357) (4 555)
Waste stripping costs capitalised 9 (12 316) (19 835)
Proceeds from sale of property, plant and equipment 155 81
Cash flows (used in)/from financing activities (1 523) 2 514
Lease liabilities repaid 17 (1 179) (950)
Net financial liabilities (repaid)/raised 19.3 (344) 3 464
- Financial liabilities raised 33 874 23 600
- Financial liabilities repaid (34 218) (20 136)
Net increase/(decrease) in cash and cash equivalents 13 721 (1 719)
Cash and cash equivalents at beginning of Period 16 503 8 721
Foreign exchange differences (175) 321
Cash and cash equivalents at end of Period 13 30 049 7 323
1 Unaudited
CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 JUNE 2024
1 CORPORATE INFORMATION
1.1 Incorporation and authorisation
The holding company, Gem Diamonds Limited (the Company), was incorporated on
29 July 2005 in the British Virgin Islands (BVI) and is domiciled in the
United Kingdom (UK). The Company's registration number is 669758.
The financial information shown in this report relating to Gem Diamonds
Limited and its subsidiaries (the Group) was approved by the Board of
Directors on 28 August 2024, is not audited or reviewed by the auditor and
does not constitute statutory financial statements. The report of the auditor
on the Group's 2023 Annual Report and Accounts was unqualified.
The Group is principally engaged in operating diamond mines.
2 BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of preparation
The condensed consolidated interim financial statements for the six months
ended 30 June 2024 (the Period) have been prepared in accordance with IAS 34
Interim Financial Reporting. The condensed consolidated interim financial
statements do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with the Group's
Annual Financial Statements for the year ended 31 December 2023. The condensed
consolidated interim financial statements are unaudited and do not constitute
statutory accounts as defined in section 434 of the Companies Act, 2006. The
financial information for the year to 31 December 2023 included in this report
was derived from the statutory accounts for the year ended 31 December 2023, a
copy of which has been delivered to the Registrar of Companies. The auditor's
report on these accounts was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of an emphasis of matter
and did not contain a statement under sections 498(2) or (3) of the Companies
Act, 2006.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out on pages 1 to 3.
The financial position of the Group, its cash flows and liquidity position are
described in the Group Financial Performance on pages 4 to 7. The Group's net
debt at 30 June 2024 was US$8.4 million (31 December 2023: US$21.3 million).
The Group's available undrawn facilities at 30 June 2024 amounted to US$54.9
million (31 December 2023: US$45.9 million), resulting in liquidity (defined
as net debt/cash and available undrawn facilities) of US$46.5 million (31
December 2023: US$24.6 million). The gross liquidity position
of the Group (defined as gross cash and available undrawn facilities) as at 30
June 2024 is US$84.9 million (31 December 2023: US$62.4 million). The Group's
Revolving Credit Facilities (RCF), which total US$71.1 million when fully
unutilised, mature on 22 December 2024. In addition, there is a US$5.5 million
general banking facility with no set expiry date, which is reviewed annually
(Refer Note 16, Interest-bearing loans and borrowings).
The impact of the current diamond market conditions, the ongoing Russian
invasion on Ukraine and the conflict in Gaza were considered in assessing
future cash flows. The Group's RCFs expire on 22 December 2024. The existing
facility agreement includes an option to extend the facilities for a period of
24 months (subject to lender approval). The Group exercised this option post
Period end and is awaiting lender approval to extend the facility maturity
date to 21 December 2026. These facilities have been in place since 2011 and
have been renewed on three previous occasions through expanding the lender
group and increasing the overall facility amount. The Directors believe that
in considering the future cash flows, the long-standing relationships with the
wider lender group and the history of the successful renewals of the
facilities, it is expected that the facilities will be successfully extended
during 2024 and be in existence for the going concern period of the next 12
months. In the unlikely event that the RCFs are not extended, the Directors
believe that various mitigation actions such as the deferment or further
optimisation of waste stripping activities could be implemented in the short
term.
After making inquiries which include reviews of forecasts and budgets, timing
of cash flows and sensitivity analyses, the Group's operations and production
levels, the various cost reduction initiatives and considering the likely
successful extension of the Group's RCFs, the Directors have a reasonable
expectation that the Group has adequate financial resources without the use of
mitigating actions to continue in operational existence for the foreseeable
future. For this reason, the Directors continue to adopt the going concern
basis in preparing this half-year report of the Group. These financial
statements have been prepared on a going concern basis which assumes that the
Group will be able to meet its liabilities as they fall due for the
foreseeable future.
2.2 Material accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those followed
in the preparation of the Group's Annual Financial Statements for the year
ended 31 December 2023.
New accounting pronouncements which became effective on 1 January 2024 are
detailed below and will be adopted in the 2024 Annual Report and Accounts. The
amendments to IAS 1 will be assessed in line with the Group's existing
facility arrangements and RCFs which are currently being extended. The
adoption of the remaining amendments is anticipated to not have an impact on
the accounting policies, methods of computation or presentation applied by the
Group.
New and amended standards and interpretations
Amendments and improvements Description
IFRS 16 Lease Liability in a Sale and Leaseback
IAS 1 Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants
IAS 7 and IFRS 17 Supplier Finance Arrangements
Standards issued but not yet effective
The standards, amendments and improvements that are issued, but not yet
effective, up to the date of issuance of the Group's consolidated interim
financial statements are listed in the table below. The standards, amendments
and improvements have not been early adopted and it is expected that, where
applicable, these standards and amendments will be adopted on each respective
effective date. The impact of the adoption of these standards cannot be
reasonably assessed at this stage.
New standards, amendments, and improvements Description Effective date*
IAS 21 Lack of exchangeability 1 January 2025
IFRS 19 Subsidiaries without public accountability 1 January 2027
IFRS 18 Presentation and disclosure in financial statements 1 January 2027
* Annual periods beginning on or after.
2.3 Critical accounting estimates and judgements
The estimates and judgements adopted in the preparation of the condensed
consolidated interim financial statements are largely consistent with those
followed in the preparation of the Group's Annual Financial Statements for the
year ended 31 December 2023. The current diamond market, ongoing global
conflicts, interest rates and inflationary impact on costs were considered
during the Period. The outcome of this review required no material changes to
the assumptions used in the judgements and estimates which were applied for
the year ended 31 December 2023.
Further details on estimates and judgements applied during the Period are
detailed in the Going concern section on page 16, Note 11, Intangible assets
and Note 15 Share-based payments.
3 SEGMENT INFORMATION
For management purposes, the Group is organised into geographical units as its
risks and required rates of return are affected predominantly by differences
in the geographical regions of the mines and areas in which the Group operates
or areas in which operations are managed. The below measures of profit or
loss, assets and liabilities are reviewed by the Board of Directors. The main
geographical regions and the type of products and services from which each
reporting segment derives its revenue from are:
• Lesotho (diamond mining activities);
• Belgium (sales, marketing and manufacturing of diamonds);
• BVI, RSA, UK and Cyprus (technical and administrative services);
and
• Botswana (diamond mining activities, currently on care and
maintenance)
Management monitors the operating results of the geographical units separately
for the purpose of making decisions about resource allocation and performance
assessment.
Segment performance is evaluated based on operating profit or loss.
Intersegment transactions are entered into under normal arm's length terms in
a manner similar to transactions with third parties. Segment revenue, segment
expenses and segment results include transactions between segments. Those
transactions are eliminated on consolidation.
Segment revenue is derived from mining activities, polished diamond
manufacturing margins and diamond analysis and manufacturing services.
The following tables present revenue from contracts with customers,
profit/(loss) for the Period, EBITDA and asset and liability information from
operations regarding the Group's geographical segments:
Lesotho Belgium BVI, RSA, Botswana Total
UK and Cyprus3
Six months ended 30 June 20241 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers
Total revenue 76 877 77 737 3 382 - 157 996
Intersegment (76 264) (311) (3 382) - (79 957)
External customers 613 77 426 - - 78 039
Segment operating profit/(loss) 17 943 430 (4 418) (521) 13 434
Net finance costs (2 736) (11) (680) (79) (3 506)
Profit/(loss) before tax 15 207 419 (5 098) (600) 9 928
Income tax expense (3 608) (16) (768)4 - (4 392)
Profit/(loss) for the Period 11 599 403 (5 866) (600) 5 536
EBITDA 22 410 544 (3 870) - 19 084
Lesotho Belgium BVI, RSA, Botswana Total
UK and Cyprus3
US$'000 US$'000 US$'000 US$'000 US$'000
Segment assets
30 June 20241 373 065 2 226 1 684 769 377 744
31 December 20232 371 056 2 770 3 280 795 377 901
Net cash/(debt) and short-term deposits5
30 June 20241 (2 222) 775 (7 057) 77 (8 427)
31 December 20232 (17 908) 642 (4 082) 1 (21 347)
Segment liabilities
30 June 20241 63 179 1 446 10 301 2 955 77 881
31 December 20232 72 193 1 503 7 725 3 034 84 455
1 Unaudited
2 Audited
3 No revenue was generated in BVI and Cyprus.
4 This includes the adjustment to align the forecast effective tax rate for
the full year, to the actual results for the Period. Refer Note 8, Income tax
expense.
5 Calculated as cash and short-term deposits less drawn down bank facilities
(excluding insurance premium financing and credit underwriting fees). Refer
Note 16, Interest-bearing loans and borrowings.
Included in revenue for the Period is revenue from two customers who
individually contributed 10% or more to total revenue. This revenue in total
amounted to US$43.2 million (30 June 2023: US$10.3 million from one customer)
arising from the sales reported in the Belgium segment.
Segment assets and liabilities do not include deferred tax assets and
liabilities of US$5.3 million and US$81.3 million respectively (31 December
2023: deferred tax asset US$6.8 million, deferred tax liabilities US$82.1
million).
Total revenue for the Period is higher than that of the prior period. Although
the dollar per carat achieved of US$1 366 was only marginally lower than the
prior period of US$1 373 per carat, the volume of carats sold of 56 994
carats was 9% higher than the prior period of 52 163 carats. There was an
improvement in the number of diamonds greater than 10.8 carats recovered
during the Period, however the downturn in the rough diamond market continues
to negatively impact rough diamond prices.
Lesotho Belgium BVI, RSA, Botswana Total
UK and Cyprus(2)
Six months ended 30 June 20231 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers
Total revenue 70 688 72 045 3 478 - 146 211
Intersegment (70 564) (406) (3 478) - (74 448)
External customers 124 71 639 - - 71 763
Segment operating profit/(loss) 12 360 330 (5 672) (826) 6 192
Net finance costs (1 734) (12) (412) (88) (2 246)
Profit/(loss) before tax 10 626 318 (6 084) (914) 3 946
Income tax expense (2 361) 4 (101)3 - (2 458)
Profit/(loss) for the Period 8 265 322 (6 185) (914) 1 488
EBITDA 13 099 413 (5 156) - 8 356
1 Unaudited
2 No revenue was generated in BVI and Cyprus.
3 This includes the adjustment to align the forecast effective tax rate for
the full year, to the actual results for the prior period. Refer Note 8,
Income tax expense.
30 June 20241 30 June 20231
US$'000 US$'000
4 REVENUE FROM CONTRACTS WITH CUSTOMERS
Sale of goods 77 426 71 638
Partnership arrangements 613 125
78 039 71 763
1 Unaudited
The revenue from the sale of goods mainly represents the sale of rough
diamonds, for which revenue is recognised at the point in time at which
control transfers.
The revenue from partnership arrangements of US$0.6 million (30 June 2023:
US$0.1 million) represents the additional uplift from partnership
arrangements for which revenue is recognised when the significant constraints
are lifted or resolved and the amount of revenue is guaranteed. At Period end
1 881 carats (30 June 2023: 2 082 carats) have significant constraints in
recognising revenue relating to the additional uplift.
30 June 20241 30 June 20231
US$'000 US$'000
5 OTHER OPERATING EXPENSE
Sundry income 113 61
Ghaghoo care and maintenance costs (709) (906)
Profit on disposal and scrapping of property, plant and equipment 155 79
(441) (766)
1 Unaudited
6 UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET
AMORTISATION (UNDERLYING EBITDA)
Underlying EBITDA is shown, as the Directors consider this measure to be a
relevant guide to the operational performance of the Group and excludes such
non-operating costs and income as listed below. The reconciliation from
operating profit to underlying EBITDA is as follows:
30 June 20241 30 June 20231
US$'000 US$'000
Operating profit 13 434 6 192
Other operating expenses 441 764
Foreign exchange gain (1 104) (2 148)
Share-based payments 374 241
Depreciation and amortisation (excluding waste stripping cost amortised) 5 939 3 307
Underlying EBITDA 19 084 8 356
1 Unaudited
7 SEASONALITY OF OPERATIONS
The Group's sales environment with regard to its diamond sales is not
materially impacted by seasonal and cyclical fluctuations. The mining
operations may be impacted by seasonal weather conditions. Appropriate mine
planning and ore stockpile build-up ensures that operations can continue
during adverse weather conditions.
30 June 20241 30 June 20231
US$'000 US$'000
8 INCOME TAX EXPENSE
Current
- Foreign (3 735) (978)
Withholding tax
- Foreign (2) 5962
Deferred
- Foreign (655) (2 076)
(4 392) (2 458)
1 Unaudited
2 This relates to withholding tax previously overpaid by Gem Diamonds
Limited to the Revenue Services Lesotho (RSL). This overpayment was refunded
in full in September 2023 and disclosed in the 2023 Annual Report.
The forecast effective tax rate for the full year is 44.2% (31 December 2023:
72.0%) and has been applied to the actual results.
The effective tax rate is above the Lesotho statutory tax rate of 25%
primarily as a result of deferred tax assets not recognised on losses incurred
in non-trading operations and the impact of certain non-deductible expenses
for tax purposes. The decrease in the tax rate compared to 2023 is due to the
higher profits generated by Letšeng.
9 PROPERTY, PLANT AND EQUIPMENT
During the Period, the Group invested US$1.4 million (30 June 2023:
US$4.6 million) into property, plant and equipment, of which US$1.3 million
(30 June 2023: US$4.5 million) related to Letšeng.
Letšeng's capital spend was incurred mainly on the completion of the 2024
Mineral Resource and Reserve Statement and NI 43-101 Technical Report
published in March 2024 of US$0.4 million and certain enhancements to Plant 1
and 2 of US$0.4 million.
Letšeng further invested US$12.3 million (30 June 2023: US$19.8 million) in
deferred stripping costs which were capitalised. Amortisation of the deferred
stripping asset (waste stripping cost amortisation) of US$17.8 million (30
June 2023: US$17.8 million) was charged to the Interim Consolidated Statement
of Profit or Loss during the Period. The amortisation is directly related to
the areas that were mined during the Period and their associated waste to ore
strip ratios.
Depreciation and amortisation of US$5.0 million (30 June 2023: US$2.4 million)
was charged to the Interim Consolidated Statement of Profit or Loss during the
Period.
In addition to the above, foreign exchange movements on translation affecting
property, plant and equipment increased the asset balances by US$0.1 million
(30 June 2023: US$27.9 million decrease).
Right-of-use assets
Plant and equipment Motor vehicles Buildings Total
US$'000 US$'000 US$'000 US$'000
10 RIGHT-OF-USE ASSETS
As at 30 June 20241
Cost
Balance at 1 January 2024 3 379 363 6 008 9 750
Additions 321 - 133 454
Derecognition of lease - (63) (122) (185)
Foreign exchange differences 13 (1) 6 18
Balance at 30 June 20241 3 713 299 6 025 10 037
Accumulated depreciation
As at 1 January 2024 1 450 103 3 451 5 004
Charge for the year 500 32 475 1 007
Derecognition of lease - - (122) (122)
Foreign exchange differences 15 1 12 28
Balance at 30 June 20241 1 965 136 3 816 5 917
Net book value at 30 June 20241 1 748 163 2 209 4 120
As at 31 December 20232
Cost
Balance at 1 January 2023 3 190 421 6 430 10 041
Additions 502 508 122 1 132
Derecognition of lease (94) (536) (225) (855)
Foreign exchange differences (219) (30) (319) (568)
Balance at 31 December 20232 3 379 363 6 008 9 750
Accumulated depreciation
As at 1 January 2023 688 115 2 898 3 701
Charge for the year 845 96 951 1 892
Derecognition of lease (42) (100) (225) (367)
Foreign exchange differences (41) (8) (173) (222)
Balance at 31 December 20232 1 450 103 3 451 5 004
Net book value at 31 December 20232 1 929 260 2 557 4 746
1 Unaudited
2 Audited
Plant and equipment mainly comprise back-up power generating equipment
utilised at Letšeng. Motor vehicles mainly comprise vehicles utilised by
contractors at Letšeng. Buildings comprise office buildings in Maseru,
Antwerp, London, Gaborone and Johannesburg.
Right-of-use assets are depreciated on a straight-line basis over the shorter
of the estimated useful life and the lease term.
Movements within right-of-use assets mainly relates to the lease contract for
earth moving equipment at Letšeng being renegotiated during the Period.
During the Period the Group recognised income of US$0.2 million (30 June 2023:
US$0.2 million) from the sub-leasing of office buildings in Maseru. The Group
expects to receive the following lease payments from the operating sub-leasing
in the following years:
US$ '000
1 July 2024 - 30 June 2025 339
1 July 2025 - 30 June 2026 68
Goodwill1
US$'000
11 INTANGIBLE ASSETS
As at 30 June 20242
Cost
Balance at 1 January 2024 10 440
Foreign exchange translation difference 16
Balance at 30 June 20242 10 456
Accumulated amortisation
Balance at 1 January 2024 -
Amortisation -
Balance at 30 June 20242 -
Net book value at 30 June 20242 10 456
As at 31 December 20233
Cost
Balance at 1 January 2023 11 221
Foreign exchange translation difference (781)
Balance at 31 December 20233 10 440
Accumulated amortisation
Balance at 1 January 2023 -
Amortisation -
Balance at 31 December 20233 -
Net book value at 31 December 20233 10 440
1 Goodwill allocated to Letšeng Diamonds.
2 Unaudited
3 Audited
The current diamond prices achieved, interest rates, exchange rates and
financial and operational performance were considered for assessment of
indicators of impairment of Goodwill associated to Letšeng. There were no
material changes required to the assumptions applied to the value in use model
for the year ended 31 December 2023 and therefore no impairment was necessary.
30 June 20241 31 December 20232
US$'000 US$'000
12 RECEIVABLES AND OTHER ASSETS
Non-current
Deposits3 773 90
Insurance asset 4 082 4 397
4 855 4 487
Current
Trade receivables 19 23
Prepayments 743 1 249
Deposits 60 24
Other receivables 415 374
Vat receivable 3 215 1 961
4 452 3 631
The carrying amounts above approximate their fair value due to the nature of
the instruments.
Analysis of trade receivables based on their terms and conditions
Neither past due nor impaired - 2
Past due but not impaired:
> 120 days 19 21
19 23
1 Unaudited
2 Audited
3 Deposits include an amount of US$0.7 million at
Letšeng relating to the sale of diesel on hand at the commencement of the new
three-year diesel contract which was concluded during the Period. The deposit
will be utilised to offset the final diesel payment to the contractor at the
end of the contract.
Based on the nature of the Group's client base and the negligible exposure to
credit risk through its client base, insurance asset and other financial
assets, the expected credit loss is insignificant and has no impact on the
Group.
30 June 20241 31 December 20232
US$'000 US$'000
13 CASH AND SHORT-TERM DEPOSITS
Cash on hand 2 3
Bank balances 19 874 5 101
Short term bank deposits 10 173 11 399
30 049 16 503
1 Unaudited
2 Audited
The amounts reflected in the financial statements approximate fair value due
to the short-term maturity and nature of cash and short-term deposits.
Cash at banks earn interest at floating rates based on daily bank deposit
rates. Short-term deposits are generally call deposit accounts and earn
interest at the respective short-term deposit rates.
The Group's cash surpluses are deposited with major financial institutions of
high-quality credit standing predominantly within Lesotho and the United
Kingdom.
At 30 June 2024, the Group had US$54.9 million (31 December 2023: US$45.9
million) of undrawn facilities, representing the LSL300.0 million (US$16.4
million) (31 December 2023: LSL180.0 million (US$9.8 million)) and ZAR200.0
million (US$11.0 million) (31 December 2023: ZAR120.0 million (US$6.6
million)) of the three-year secured revolving working capital facility at
Letšeng, ZAR100.0 million (US$5.5 million) (31 December 2023: ZAR100.0
million (US$5.5 million)) of the Letšeng general banking facility, and
US$22.0 million (31 December 2023: US$24.0 million) of the Company's
three-year secured revolving credit facility. For further details on these
facilities, refer Note 16, Interest-bearing loans and borrowings.
14 ISSUED SHARE CAPITAL AND RESERVES
30 June 20241 31 December 20232
Number US$'000 Number US$'000
of shares of shares
'000 '000
Authorised - ordinary shares of US$0.01 each
As at Period/Year end 200 000 2 000 200 000 2 000
Issued and fully paid balance at beginning of Period/Year 141 210 1 413 140 923 1 410
Allotments during the Period/Year - - 287 3
Number of ordinary shares outstanding at end of Period/Year 141 210 1 413 141 210 1 413
Treasury shares3 (1 520) (1 157) (1 520) (1 157)
Balance at end of Period/Year 139 690 256 139 690 256
1 Unaudited
2 Audited
3 Represents share repurchased by Gem Diamonds.
15 SHARE-BASED PAYMENTS
Employee Share Option Plan 2017 Award (ESOP) - 17 April 2024 award
On 17 April 2024, 261 950 nil-cost options were granted to certain key
employees under the ESOP of the Company. The value of the award was determined
based on the Group performance for the prior 2023 financial year. The vesting
of the options will be subject to the satisfaction of certain service
conditions which are classified as non-market conditions. The award is subject
to malus and clawback conditions in line with the Group's ESOP.
In addition, 1 734 097 nil-cost options were granted to certain Executive
employees and the Executive Directors on the same terms as detailed above.
These options were granted in line with the adopted Gem Diamonds Incentive
Plan (GDIP) in 2021, which integrated annual bonus awards with awards under
the ESOP. These options are also subject to a two-year holding period after
the vesting date.
All the options vest over a three-year period in tranches of 1/3 commencing on
17 April 2025 and ending on 17 April 2027. The options are exercisable between
the respective vesting dates and 17 April 2034. If the service conditions are
not met, unvested options lapse. The fair value of the award is based on the
observable Gem Diamonds Limited share price on the date of the award with no
adjustments made to the price. The Company's share price on the date of the
award was £0.09 (US$0.11). The option grants are settled by issuing shares.
The timing of the vesting of the options was revisited during the Period which
resulted in an accelerated cost in the current Period of US$0.2 million
relating to previously awarded options. The expense disclosed in the Interim
Consolidated Statement of Profit or Loss is made up as follows:
30 June 20241 30 June 20231
US$'000 US$'000
The expense recognised for employee services received during the Period is
shown in the following table:
Equity-settled share-based payment transactions charged to the statement of 374 241
profit or loss
1 Unaudited
16 INTEREST-BEARING LOANS AND BORROWINGS
Effective interest rate Maturity 30 June 20241 31 December 20232
US$'000 US$'000
Non-current
ZAR132.0 million project debt facility South African JIBAR + 2.50% 31 May 2027 4 131 5 156
LSL200.0 million term loan facility Lesotho prime rate minus 1.50% 30 April 2029 8 762 -
12 893 5 156
Current
ZAR2.5 million insurance premium finance 4.30% 1 April 2024 - 55
LSL30.0 million insurance premium finance 4.20% 1 April 2024 - 671
LSL12.4 million insurance premium finance 4.20% 1 April 2024 - 278
ZAR132 million project debt facility South African JIBAR + 2.50% 31 May 2027 2 066 2 062
LSL450.0 million and ZAR300.0 million bank loan facility Central Bank of Lesotho rate + 3.25% and South African JIBAR + 3.00%3 22 December 2024 13 692 24 632
Credit underwriting fees (75) (175)
US$30.0 million bank loan facility Facility A (US$30 million): Term SOFR + 5.26% 22 December 2024 8 000 6 000
Term SOFR + 5.21%3
Credit Underwriting Fees (56) (112)
LSL200.0 million term loan facility Lesotho prime rate minus 1.50% 30 April 2029 1 825 -
25 452 33 411
1 Unaudited
2 Audited
3 A reduction of 0.05% on the margin of the Nedbank portion of the revolving
credit facility was effective from 1 January 2024 as the KPIs relating to the
Sustainability Linked Loans were met as at the 31 December 2023 measurement
date.
ZAR132.0 million (US$7.2 million) unsecured project debt facility at Letšeng
Diamonds
This loan is an unsecured project debt facility with Nedbank and underwritten
by the Export Credit Insurance Corporation (ECIC) which was entered into on 29
November 2022 to fund the replacement of the primary crushing area (PCA) at
Letšeng. The loan is repayable in equal quarterly payments which commenced in
March 2024. The outstanding balance at Period end was ZAR113.1 million (US$6.2
million) (31 December 2023: ZAR132.0 million (US$7.2 million)). This loan
expires on 27 May 2027.
The South African rand-based interest rate for the facility at 30 June 2024
was 11.00% which comprises South Africa JIBAR plus 2.50%.
Total interest for the Period on this interest-bearing loan was US$0.4 million
(31 December 2023: US$0.7 million). This interest has been capitalised as part
of the PCA asset included within the plant and equipment class within Note 9,
Property, plant and equipment.
LSL200.0 million (US$11.0 million) secured term loan facility at Letšeng
Diamonds
This loan is a five-year secured term loan facility signed jointly with
Standard Lesotho Bank and Nedbank Lesotho on 15 May 2024. The loan is secured
by a special notarial bond over the fleet and equipment acquired as part of
the insourcing of the mining activities at the end of 2023.
The loan is repayable in equal monthly instalments which commenced in May
2024. The outstanding balance at the end of the Period was LSL193.3 million
(US$10.6 million). This loan expires on 30 April 2029.
The interest rate on the loan is 9.75%, representing the Central Bank of
Lesotho prime rate minus 1.50%.
Total interest for the Period on this interest-bearing loan was US$0.1
million.
LSL450.0 million and ZAR300.0 million (US$41.1 million) secured bank loan
facility at Letšeng Diamonds
The Group, through its subsidiary Letšeng Diamonds, has a LSL450.0 million
and ZAR300.0 million (US$41.1 million) three-year revolving credit facility
jointly with Nedbank Lesotho Limited, Standard Lesotho Bank Limited, First
National Bank of Lesotho Limited, Firstrand Bank Limited (acting through its
Rand Merchant Bank division) and Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division).
The facility is secured and expires on 22 December 2024, and has therefore
been recorded as a current liability. The facility has a 24-month extension
option which can be exercised at any time up to 21 September 2024, being three
months before expiry, and is subject to credit approval by the lenders at the
extension date. Post Period end, the Company has engaged the lenders to
discuss the extension of the facilities.
The LSL450.0 million facility is subject to interest at the Central Bank of
Lesotho rate plus 3.25% and the ZAR300.0 million facility is subject to South
African JIBAR plus 3.00% (31 December 2023: South African JIBAR plus 3.05%).
At Period end LSL150.0 million (US$8.2 million) and ZAR100.0 million (US$5.4
million) had been drawn down resulting in LSL300.0 million (US$16.4 million)
and ZAR200.0 million (US$11.0 million) remaining available.
The remaining balance of the credit underwriting fees capitalised is US$0.1
million (31 December 2023: US$0.2 million). The capitalised fees are amortised
and accounted for as finance costs within profit or loss over the term of the
facility.
US$30.0 million secured bank loan facility at Gem Diamonds Limited
This facility is a secured three-year revolving credit facility jointly with
Nedbank Limited (acting through its London branch), Standard Bank of South
Africa Limited (acting through its Isle of Man branch) and Firstrand Bank
Limited (acting through its Rand Merchant Bank division) for US$13.5 million,
US$9.0 million and US$7.5 million, respectively. All draw downs are made in
these ratios.
The facility expires on 22 December 2024, and has therefore been recorded as a
current liability. The facility has a 24-month extension option which can be
exercised at any time up to 21 September 2024, being three months before
expiry, and is subject to credit approval by the lenders at the extension
date. Post Period end, the Company has engaged the lenders to discuss the
extension of this facility.
At Period end, US$8.0 million (31 December 2023: US$6.0 million) had been
drawn down resulting in US$22.0 million (31 December 2023: US$24.0 million)
being available for draw down. The remaining balance of the previously
capitalised credit underwriting fees is US$0.1 million (31 December 2023:
US$0.1 million) at Period end. The capitalised fees are amortised and
accounted for as finance costs within profit or loss over the period of the
facility.
The US$-based interest rate for this facility at 30 June 2024 was 10.54% (31
December 2023: 10.65%) which comprises term SOFR plus a 0.26% credit
adjustment spread and 5.00% margin. The interest rate on any outstanding
amount on the Nedbank portion of the RCF accrues interest at term SOFR plus a
0.26% credit adjustment spread and 4.95% margin. The 5bps decrease in the
margin was effective from 1 January 2024 upon meeting the KPIs relating to the
sustainability-linked loans.
Total interest for the Period on this interest-bearing RCF was US$0.6 million
(31 December 2023: US$0.9 million).
The facility includes an additional US$20.0 million accordion option for Gem
Diamonds, the utilisation of which is subject to all necessary credit and
other approvals from the lenders. There was no utilisation of this facility in
the current or prior periods.
Insurance premium finance for Multi-Aggregate and Asset All Risk Insurance
policies
During the Period, all outstanding insurance premium finance balances were
fully repaid. The total interest paid during the Period relating to these
liabilities was US$18.3 thousand (31 December 2023: US$0.1 million).
Other facilities
Letšeng Diamonds has a ZAR100.0 million (US$5.5 million) general banking
facility with Nedbank Limited (acting through its Nedbank Corporate and
Investment Banking division) which is reviewed annually. During the Period the
facility was utilised from time to time based on cash flow requirements, but
repaid in full at Period end.
30 June 20241 31 December 20232
US$'000 US$'000
17 LEASE LIABILITIES
Non-current 2 707 3 786
Current 2 446 2 164
Total lease liabilities 5 153 5 950
Reconciliation of movement in lease liabilities
As at 1 January 5 950 7 898
Additions 391 1 132
Interest expense 207 497
Lease payments (1 386) (2 589)
Derecognition of lease - (519)
Foreign exchange differences (9) (469)
As at 30 June/31 December 5 153 5 950
1 Unaudited
2 Audited
Lease payments comprise payments in principle of US$1.2 million (31 December
2023: US$2.1 million) and repayments of interest of US$0.2 million (31
December 2023: US$0.5 million).
There were no variable lease payments recognised by the Group during the
Period. During the prior period the Group recognised variable lease payments
of US$16.5 million in the Interim Consolidated Statement of Profit or Loss,
which consisted of mining activities outsourced to a mining contractor, prior
to the transition to insourcing of mining activities which was effective from
1 December 2023.
30 June 20241 31 December 20232
US$'000 US$'000
18 TRADE AND OTHER PAYABLES
Non-current
Severance pay benefits 1 610 1 494
Current
Trade payables3 5 700 15 761
Accrued expenses 4 893 4 066
Leave benefits 654 498
Royalties 1 839 2 679
Withholding taxes 69 224
Other 123 128
13 278 23 356
1 Unaudited
2 Audited
3 US$9.7 million included in the 31 December 2023 balance, related to the
remaining portion of the purchase price for the mining fleet and support
equipment purchased in terms of the insourcing of the mining activities, was
settled during the current Period.
30 June 20241 30 June 20231
Notes US$'000 US$'000
19 CASH FLOW NOTES
19.1 Cash generated by operations
Profit before tax for the Period 9 928 3 946
Adjustments for:
Depreciation and amortisation excluding waste stripping 9 4 978 2 447
Depreciation on right-of-use assets 10 1 007 866
Waste stripping cost amortised 9 17 835 17 787
Finance income (417) (187)
Finance costs 3 923 2 433
Unrealised foreign exchange differences 587 (620)
Profit on disposal and scrapping of property, plant and equipment 5 (155) (79)
Gain on derecognition of leases - (23)
Bonus, leave and severance provisions raised 1 677 2 056
Share-based payments 15 374 241
39 737 28 867
19.2 Working capital adjustment
Decrease/(increase) in inventory 258 (5 086)
(Increase)/decrease in receivables (1 073) 509
Decrease in payables (11 689) (2 769)
(12 504) (7 346)
19.3 Cash flows from financing activities (excluding lease liabilities)
Balance at beginning of Period 38 568 5 944
Net cash (used in)/from financing activities (344) 3 464
- Financial liabilities raised 33 874 23 600
- Financial liabilities repaid (34 218) (20 136)
Interest paid (2 730) (1 285)
Non-cash movements 2 852 786
- Interest accrued 2 730 1 285
- Amortisation of credit underwriting fees 131 133
- Foreign exchange differences (9) (632)
Balance at Period end 38 346 8 909
1 Unaudited
20 COMMITMENTS AND CONTINGENCIES
The Board has approved capital projects of US$4.2 million (31 December 2023:
US$4.3 million) at Letšeng, mainly relating to plant upgrades and
improvements in the recovery and sorthouse areas of US$2.5 million.
Of the total approved capital projects, US$2.6 million has been contracted at
30 June 2024, the majority of which relates to a new XRT sorting machine for
the recovery and sorthouse improvement.
Post Period end, the dismantling and transportation offsite of the Ghaghoo
processing plant commenced, which is expected to cost approximately US$1.8
million. This expenditure will be incurred over the next six months.
The Group has conducted its operations in the ordinary course of business in
accordance with its understanding and interpretation of commercial
arrangements and applicable legislation in the countries where the Group has
operations. In certain specific transactions, however, the relevant third
party or authorities could have a different interpretation of those laws and
regulations that could lead to contingencies or additional liabilities for the
Group. Having consulted professional advisers, the Group has identified
possible disputes approximating US$0.6 million (31 December 2023: US$0.5
million).
The Group monitors possible tax claims within the various jurisdictions in
which it operates. It is noted that tax legislation is highly complex and
subject to interpretation of the application of the law. Due to the complexity
of the legislation, significant judgement is required to determine any effects
of uncertainties in accounting for and disclosure of income taxes. There have
been no further uncertain tax positions that arose during the Period and
therefore there has been no change in judgement applied and the accounting
treatment compared to that disclosed in the 2023 Annual Report and Accounts.
Furthermore, there has been no change to the amended tax assessment that was
issued to Letšeng by the Revenue Services Lesotho (RSL) in December 2019.
21 RELATED PARTIES
Related party Relationship
Jemax Management (Proprietary) Limited Common director
Government of the Kingdom of Lesotho Non-controlling interest
30 June 20241 30 June 20231
US$'000 US$'000
Compensation to key management personnel (including Directors)
Share-based equity transactions 342 110
Short-term employee benefits 1 497 2 126
Post-employment benefits (including severance pay and pension) 148 160
1 987 2 396
Fees paid to related parties
Jemax Management (Proprietary) Limited (37) (38)
Royalties paid to related parties
Government of the Kingdom of Lesotho (7 440) (6 737)
Purchases from related parties
Jemax Management (Proprietary) Limited (2) (2)
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited (7) (6)
Amounts owing to related party
Government of the Kingdom of Lesotho (1 902) (1 244)
1 Unaudited
Jemax Management (Proprietary) Limited provided administrative services with
regards to the mining activities undertaken by the Group. A controlling
interest is held by an Executive Director of the Company.
The above transactions were made on terms agreed between the parties. The
amounts included in trade payables are non-interest bearing and have no
repayment terms.
22 EVENTS AFTER THE REPORTING PERIOD
No other fact or circumstance has taken place between the end of the
reporting period and the approval of the financial statements which, in our
opinion, is of significance in assessing the state of the Group's affairs or
requires adjustments or disclosures.
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. END IR QKFBNPBKDKFBRecent news on Gem Diamonds
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