TIDMGEMD
RNS Number : 5239E
Gem Diamonds Limited
19 July 2016
19 July 2016
GEM DIAMONDS LIMITED
H1 2016 Trading Update
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds" or the
"Company" or the "Group") is pleased to provide the following
Trading Update detailing the Group's operational and sales
performance for the Period 1 January 2016 to 30 June 2016 ("H1
2016" or the "Period") ahead of its Half Yearly Results which will
be released on 17 August 2016.
Letšeng:
Letšeng Diamonds continues to perform well with consistent
prices achieved on a like-for-like basis. Carat production is
currently tracking towards the top end of guidance for 2016.
-- Recovered 57 380 carats during the Period (50 019 carats in H1 2015).
-- Average grade achieved over the Period was 1.72 cpht (1.61cpht in H1 2015).
-- Average price of US$ 1 899 per carat achieved in H1 2016 (US$
2 264 in H1 2015). The price achieved reflects the mix of diamonds
recovered and fewer +100 carat diamonds, as mining worked through a
lower value, but higher grade area during the Period.
-- Waste stripping is progressing well and in line with the optimised mine plan.
-- Amongst the exceptional diamonds recovered, an undamaged Type
II 160 carat and an 11.8 carat pink diamond (which sold for US$ 187
000 per carat) were recovered during the Period.
-- Post Period end: an exceptional quality 104 carat Type II
white diamond was recovered in July 2016.
Ghaghoo:
Development of production Block 2 on Level 1 completed.
-- Development of production Block 2 on Level 1 completed and
development of Level 2 has commenced.
-- As reported, a sale of Ghaghoo production was held in Q1 2016
and achieved an average price of US$ 160 per carat. A further sale
took place in June 2016 and achieved an average price of US$ 155
per carat due to an increase in the proportion of finer material
sold.
Financial:
-- The Group had US$ 66.4 million cash on hand as at 30 June
2016, of which US$ 53.1 million is attributable to Gem Diamonds
Limited.
-- An annual dividend of 5 US cents per share (US$ 6.9 million)
and a special dividend of 3.5 US cents per share (US$ 4.9 million)
were paid on 14 June 2016.
-- US$ 28.7 million of its available facilities have been drawn
down resulting in a net cash position of US$ 37.7 million. No new
draw down of any facilities took place during the Period.
-- During the Period, Letšeng paid dividends of US$ 20.8
million, which resulted in a net cash flow of US$ 13.1 million to
Gem Diamonds after withholding taxes of US$ 1.5 million and the
payment to the Government of Lesotho's dividend portion of US$ 6.2
million.
Gem Diamonds' CEO, Clifford Elphick commented:
"Production at Letšeng has proceeded well during the Period with
carat production up 15 per cent compared to H1 2015 and average
grade significantly up at 1.72 carats per hundred tonnes, and we
are tracking towards the top end of carat production guidance for
2016.
It is pleasing to note that the work on diamond damage reduction
is continuing to produce results with an undamaged 160 carat Type
II white diamond recovered during the Period and an undamaged 104
carat Type II white diamond of exceptional quality being recovered
in early July[1].
There has been a modest recovery in Letšeng's rough diamond
prices towards the end of the Period on a like-for-like basis. The
average dollar per carat value achieved in the Period is a function
of fewer +100 carat stones than usual being recovered as mining has
worked through the lower value areas of the mine.
At Ghaghoo, completion of mining in the first block and
commencement of mining in the second block has meant that a large
proportion of ore treated has been from diluted areas near the pipe
extremities with lower recovered grades achieved; however grades
have improved as mining in the second block has advanced towards
the centre of the pipe. Development of Level 2 has commenced."
[1] A photograph of this diamond can be viewed on the Company
website.
1. Diamond Market
Letšeng's high quality large white rough diamonds have seen a
modest improvement in prices, on a like-for-like basis, during the
Period. Liquidity constraints, high polished inventory levels and
the uncertain macro-economic outlook continue to characterise the
polished diamond market. It is anticipated that the modest recovery
in rough prices will continue into the second half of 2016.
2. Letšeng
Gem Diamonds holds a 70% shareholding in Letšeng Diamonds (Pty)
Ltd ("Letšeng") in partnership with the Government of the Kingdom
of Lesotho which owns the remaining 30%.
2.1. Production
H1 2016 H1 2015 YoY
% Change
------------------------- ----------- ----------- ----------
Waste stripped (tonnes) 15 287 897 11 364 784 35%
------------------------- ----------- ----------- ----------
Ore treated (tonnes) 3 336 300 3 110 351 7 %
------------------------- ----------- ----------- ----------
Carats recovered 57 380 50 019 15%
------------------------- ----------- ----------- ----------
Grade recovered (cpht) 1.72 1.61 7%
------------------------- ----------- ----------- ----------
During the Period, 15.3 million tonnes of waste were mined and
waste mining continues to ramp up in line with the optimised mine
plan. Additional mining fleet was commissioned and mobilised
successfully during the Period.
Letšeng treated a total of 2.9 million tonnes of ore during the
Period, 66% of which was sourced from the Main pipe, and 34% from
the Satellite pipe. The balance of the ore (0.4 million tonnes) was
treated through the Alluvial Ventures contractor plant, 66% of
which was sourced from the Main pipe and 34% from stockpiles.
57 380 carats were produced during the Period - up 15 per cent
on H1 2015. The good grades achieved are reflective of the area
mined in the Satellite Pipe that has historically produced higher
than reserve grades albeit at a slightly smaller average stone
size. This also saw a reduction in +100 carat diamonds recovered
during the Period, but, as the mining moved into a different area
of the Satellite Pipe in early July 2016, an exceptional 104 carat
and an exceptional 85 carat diamond were recovered.
The Coarse Recovery XRT Plant is successfully operating at a
>5mm size cut off with final materials handling improvements
rolled out during June 2016.
Guidance for 2016 is maintained with carat production tracking
toward the top end of guidance.
2.2. Rough Diamond Sales and Diamonds Extracted for
Manufacturing
H1 2016 H1 2015 YoY
% Change
---------------------------- -------- -------- ----------
Carats sold 55 959 46 961 19%
---------------------------- -------- -------- ----------
Total value (US$ millions) 106.3 106.3 0%
---------------------------- -------- -------- ----------
Achieved US$/ct* 1 899 2 264 -16%
---------------------------- -------- -------- ----------
(*Includes carats extracted at rough value for polishing.)
Four Letšeng tenders have been held during the Period, achieving
an average price of US$ 1 899 per carat, bringing the 12 month
rolling average to US$ 2 113 per carat. Prices achieved in H1 2016
were impacted by the mix of production and fewer +100 carat
diamonds. Pricing has also been impacted by an improvement in the
recovery of lower value fine diamonds at Letšeng.
3. Ghaghoo
Gem Diamonds' wholly-owned subsidiary, Gem Diamonds Botswana
(Pty) Ltd, is currently developing the Ghaghoo Mine ("Ghaghoo") in
Botswana.
Q1 2016 Q2 2016 H1 2016 H2 2015 HoH
% Change Change
------------------------ -------- -------- -------- -------- -----------------
Ore treated (tonnes) 50 514 45 055 95 569 194 797 -51%
------------------------ -------- -------- -------- -------- -----------------
Carats recovered 11 029 9 847 20 876 56 217 -63%
------------------------ -------- -------- -------- -------- -----------------
Grade recovered (cpht) 21.8 21.9 21.8 28.9 -24%
------------------------ -------- -------- -------- -------- -----------------
As previously reported, a sale of Ghaghoo production was held in
the first quarter which achieved an average price of US$ 160 per
carat. A second sale took place in June 2016 and achieved an
average price of US$ 155 per carat. The average $/ct has been
impacted by an increase in the recovery of fine diamonds because of
an improvement in diamond liberation in the mill.
Ghaghoo has predominantly focussed on downsizing from the
original production targets of
2 000 tonnes per day, improving efficiencies, processes and
further progressing operational developments during the Period.
Towards the end of the Period mining rates improved and are
currently at a rate consistent with the 300 000 tonnes per annum
target.
The total recovered grade YTD was 21.8 cpht. The lower grade
recovered was due to a significant portion of the ore treated being
sourced from lower grade areas, specifically close to the contact
zones as Block 1 was mined out and development of Block 2
commenced. Development of Level 2 has commenced.
4. Health, Safety, Social and Environment (HSSE)
The Group continues to strive toward its goal of zero harm to
its people and environment and to operate within the Group's
sustainable development framework.
One Lost Time Injury (LTI) was reported at Letšeng and one at
Ghaghoo during the Period. This has resulted in a Group Lost Time
Injury Frequency Rate (LTIFR) of 0.15. The Group All Injury
Frequency Rate (AIFR) is 2.61 for the first half of 2016. For the
same Period in 2015, the Group AIFR was 3.26.
Gem Diamonds continues to work closely with its project affected
communities to ensure that the social projects implemented continue
to benefit the communities and are sustainable.
No significant community or environmental incidents have
occurred across the Group in 2016.
For further information:
Gem Diamonds Limited
Juliet Kirk, Investor Relations Manager
Tel: +44 (0) 203 043 0280
Celicourt Communications
Joanna Boon / Mark Antelme
Tel: +44 (0) 207 520 9265
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
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 and
100% of the Ghaghoo mine in Botswana. The Letšeng mine is famous
for the production of large, top colour, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond
mine in the world.
Gem Diamonds has a growth strategy based on the expansion of the
Letšeng mine and bringing the Ghaghoo mine into production, while
maintaining its strong balance sheet. The Company seeks to maximise
revenue and margin from its rough diamond production by pursuing
cutting, polishing and sales and marketing initiatives further
along the diamond value chain. With favourable supply/demand
dynamics expected to benefit the industry over the medium to long
term, particularly at the high end of the market supplied by Gem
Diamonds, this strategy positions the Company well to generate
attractive returns for shareholders in the coming years.
www.gemdiamonds.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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