TIDMGEMD
RNS Number : 2169O
Gem Diamonds Limited
17 August 2017
Half Year 2017 results
Gem Diamonds Limited (LSE: GEMD) (Gem Diamonds, the Company or
the Group) today announces its half-year results for the six months
ended 30 June 2017 (H1 2017 or the Period).
FINANCIAL RESULTS:
-- Revenue US$92.9 million (US$109.1 million in H1 2016)
-- Underlying EBITDA US$13.0 million (US$43.5 million in H1 2016)
-- Attributable net profit, before exceptional items US$49k
(US$13.4 million attributable net profit, before exceptional items,
in H1 2016)
-- Basic earnings per share 0.04 US cents before exceptional
items (Basic earnings per share 9.70 US cents before exceptional
items in H1 2016)
-- Cash on hand US$20.0 million
OPERATIONAL RESULTS:
LET ENG:
-- Waste tonnes mined of 15.0 million (15.3 million tonnes in H1 2016)
-- Ore treated of 3.2 million (3.3 million tonnes in H1 2016)
-- Carats recovered of 50 478 (57 380 carats in H1 2016)
-- Grade recovered of 1.59cpht (1.72cpht in H1 2016)
-- Rough tender revenue of US$88.8 million (US$106.2 million in H1 2016)
-- Average price of US$ 1 779 per carat achieved (US$1 899 per carat in H1 2016)
-- Recovered four diamonds greater than 100 carats
GHAGHOO:
-- Operation placed on Care and Maintenance on 31 March 2017
Commenting on the results today, Clifford Elphick, Chief
Executive of Gem Diamonds, said:
"The improvement in the greater than 100 carat diamond
recoveries at Letšeng is encouraging with the US$ per carat
achieved trending positively at US$1 779, up 20% from US$1 480 in
H2 2016. The latest sale in July achieved US$2 385 per carat. The
updated life of mine plan was implemented during the Period with
the objective of reducing waste tonnes mined and improve near term
cash flows, and mining progressed well against this plan during the
Period.
At Ghaghoo, the mine was successfully placed on care and
maintenance during the Period which will result in further cost
optimisation during the remainder of the year. Shareholders are
advised that an offer to acquire 100% of the Ghaghoo asset has been
received and the Board is considering the offer.
The cost reduction and transformation programme is firmly
underway and at this early stage US$15 million of annualised
efficiency and cost reduction initiatives have already been
identified for implementation from October 2017."
The Company will host a live audio webcast presentation of the
half year results today, 17 August 2017, at 09:30 BST. This can be
viewed on the Company's website:www.gemdiamonds.com
This announcement contains inside information for the purpose of
Article 7 of Regulation (EU) No596/2014.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67.
FOR FURTHER INFORMATION:
Gem Diamonds Limited
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Jimmy Lea
Tel: +44 (0) 207 520 9265
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. The Ghaghoo mine in Botswana has been placed on
care and maintenance until market conditions allow for
recommencement of production.
www.gemdiamonds.com
Interim Business Review
The first half of 2017 (the Period), saw an improvement in the
recovery of large diamonds at the Letšeng mine with four diamonds
greater than 100 carats being recovered during the Period. The
demand for Letšeng's high-value diamonds remained firm, achieving
an average price of US$1 779* per carat during the Period. This
average price is 20% higher than that achieved for the prior
six-month period (H2 2016) of US$1 480*.
Letšeng successfully implemented an updated Life of Mine plan
during the Period which is designed to reduce waste mined and
improve near term cash flows. Mining progressed well during the
Period and is in line with this mine plan. During the Period,
construction of the relocated mining complex, which is financed
through bank funding, commenced. Construction progressed well and
is expected to be completed in early 2018, on time and on budget.
Following the disbandment of the Lesotho Parliament in early 2017,
peaceful elections were concluded in June when a new government was
elected. Initial engagement with the new government has commenced
positively with the aim of developing effective relationships.
In February 2017, the Board decided to place the Ghaghoo mine on
care and maintenance to preserve the value of the asset while
continuing to monitor viable options for the mine. This decision
was based on the decrease in the prices achieved for its diamonds
from US$ 210 per carat in early 2015 to US$ 142 per carat at its
sale in December 2016, reflecting the weak state of the diamond
market for this category of diamonds. The care and maintenance
status was successfully achieved during the Period, in line with
management's objective to maintain the asset as a going concern.
The planned annual care and maintenance cost of US$3.0 million is
expected to be achieved in H2 2017.
As part of the Group's cash preservation focus, a Group-wide
cost efficiency and bench-marking review has commenced and has
already identified opportunities that are being actively
pursued.
The Group ended the Period with a cash balance of US$20.0
million which included utilised facilities of US$34.2 million,
resulting in a net debt position of US$14.2 million and unutilised
facilities of US$36.2 million. Subsequent to Period end, the Group
successfully restructured its existing US$35.0 million Revolving
Credit Facility at the corporate office into a new US$45.0 million
facility with a tenure of 3.5 years, thereby increasing the current
available facilities to US$45.1 million.
During the Period, Roger Davis stepped down as Chairman of the
Group and was succeeded by Harry Kenyon-Slaney who was appointed to
as Chairman to the Board on 6 June 2017. Harry's wide-ranging
experience, knowledge and contacts in the diamond mining industry
are perfectly suited to lead Gem Diamonds forward. During the
Period, the Letšeng Chief Executive Officer, Ms. Mazvi Maharasoa,
retired from the organisation after 10 years of diligent service.
As part of the restructuring following her retirement, a new Chief
Operating Officer, Jeremy Taylor, has been appointed. Jeremy brings
to Letšeng a wealth of experience that will drive Letšeng's focus
on improving operational excellence.
Diamond market
The global market for both rough and polished diamonds remained
cautious. Financing challenges persist and the volatile
macro-economic environment continues to create challenges for the
middle diamond market. In the medium to long term, rough diamond
prices are expected to be supported by favourable demand/supply
fundamentals, which are underpinned by a continued growth in demand
from emerging markets coupled with a limited growth in supply.
Against this background, Letšeng's large, high quality goods
continued to perform well, as demonstrated by the price achieved
for an exceptional high-value 8.65 carat pink diamond which was
sold for US$164 855 per carat, the sixth highest single diamond per
carat value achieved at Letšeng. In addition, one of the large high
value white diamonds achieved the highest price per carat for a
Letšeng white diamond since February 2016. A moderate increase was
also seen in the prices achieved for certain categories of the
smaller goods.
Health, safety, corporate social responsibility and environment
(HSSE)
The Group remains committed to its goal of zero harm to its
people and the environment and strives to achieve its operational
goals within its sustainable development framework. The Group
reports a fatality and lost time injury (LTI) free Period,
resulting in a Group-wide lost time injury frequency rate (LTIFR)
of 0.00. The Group-wide all injury frequency rate (AIFR) is 1.69
for the Period. No major or significant environmental or
stakeholder incidents were reported over the Period and the Group
continues to work closely with project affected communities to
implement sustainable community projects.
(* Includes carats extracted for manufacturing at rough
valuation)
Operating review: Letšeng
Sustainability overview
-- Zero LTI's
-- LTIFR 0.00
-- AIFR 1.67
-- Zero major or significant stakeholder and environmental incidents
Operational overview
-- Waste tonnes mined of 15.0 million (15.3 million tonnes in H1 2016)
-- Ore treated of 3.2 million (3.3 million tonnes in H1 2016)
-- Carats recovered of 50 478 (57 380 carats in H1 2016)
-- Grade recovered of 1.59cpht (1.72cpht in H1 2016)
-- Rough tender revenue of US$88.8 million* (US$106.2 million* in H1 2016)
-- Average price of US$ 1 779* per carat achieved (US$1 899* per carat in H1 2016)
-- Recovered four diamonds greater than 100 carats
(* Includes carats extracted for manufacturing at rough
valuation)
Operational performance
H1 2017 H1 2016
=============================== ========= =========
15 004 15 287
Waste mined (tonnes) 160 897
=============================== ========= =========
Ore treated (tonnes) 3 178 631 3 336 300
=============================== ========= =========
Carats recovered 50 478 57 380
=============================== ========= =========
Grade recovered (cpht) 1.59 1.72
=============================== ========= =========
Carats sold 49 930 55 948
=============================== ========= =========
Average price per carat (US$)* 1 779 1 899
=============================== ========= =========
(* Includes carats extracted for manufacturing at rough
valuation)
Gem Diamonds owns 70% of Letšeng Diamonds (Letšeng) in
partnership with the government of the Kingdom of Lesotho, which
owns the remaining 30%. Letšeng was acquired in July 2006. The
Letšeng mine, famous for its exceptional top-quality diamonds and
having the highest proportion of large, high-value diamonds, is the
highest average dollar per carat kimberlite diamond mine in the
world.
Letšeng started mining in line with its updated mine plan during
the Period with the aim to reduce and smooth the waste profile over
the remaining Life of Mine. This plan had a material positive
impact on the maximum annual volumes of waste stripping, improving
near term cash flows. The deferral of waste resulted in a reduction
of mining cash costs amounting to LSL100 million (US$7.6 million)
for 2017.
Letšeng treated a total of 2.6 million tonnes of ore through its
two main plants during the Period, of which 69% was sourced from
the Main pipe, and 31% from the Satellite pipe. Alluvial Ventures,
who operate a third plant at Letšeng, treated the balance of 0.6
million tonnes in the Period, 71% of which was sourced from the
Main pipe and 29% from ore stockpiles. The contract with Alluvial
Ventures was extended for a further two years, to the end of
2018.
The lower than planned ore tonnes treated during the Period was
due to reduced plant availability and downtime associated with the
installation and commissioning of the split front-ends for Plants 1
and 2. The availability issues have largely been addressed by mine
management and the processing contractor. A significant amount of
time and resources were utilised in addressing these issues and as
a consequence, availability of both plants have improved towards
the end of the Period.
The project to split the front ends of both plants was completed
in March 2017, on time and within budget, resulting in the
following benefits:
-- Increased ability to set up the individual plants to treat specific material;
-- Improved understanding of the performance of each plant
depending on the material being treated; and
-- Improved understanding of diamond damage related issues, specific to each plant.
During the Period, 50 478 carats were recovered (12% lower than
H1 2016), primarily due to lower tonnages treated and lower grades
recovered. The recovered grade for the Period was 1.59 carats per
hundred tonnes (cpht) against an expected reserve grade of 1.63
cpht. The lower than expected grade was mainly due to the
underperformance of the Main pipe contact material and internal
changes in the geology of this pipe.
Recovery of large diamonds has improved, with four greater than
100 carat diamonds and two exceptional D-colour Type IIa diamonds
of 98.42 and 80.58 carats being recovered during the Period. The
table below shows the frequency of large diamonds recovered in the
Period compared to prior years.
Frequency of recovery of large diamonds
2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
Number of
diamonds
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
>100 carats 7 6 7 6 3 6 9 11 5 4
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
60-100 carats 18 11 11 22 17 17 21 15 21 8
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
30-60 carats 96 79 66 66 77 60 74 65 70 34
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
20-30 carats 108 111 101 121 121 82 123 126 83 50
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
Total diamonds
> 20 carats 229 207 185 215 218 165 227 217 179 96
=============== ==== ==== ==== ==== ==== ==== ==== ==== ==== =======
The construction of the relocated mining complex, which is
required to make way for the expansion of the open pits, progressed
well and the project is currently on schedule and tracking against
budget. Bank funding has been secured for this project.
A core drilling programme will be implemented during the second
half of the year to improve confidence in the geology at depth,
including volume, grade, and revenue inputs of the resource.
Details of overall costs and capital expenditure incurred at
Letšeng during the Period are included in the Group financial
performance section.
Diamond sales
Four tenders were completed during H1 2017, with a total of 49
930 carats sold in Antwerp through Gem Diamonds Marketing Services,
a wholly owned Gem Diamonds subsidiary. Rough tender revenue of
US$88.8 million* with an average price of US$1 779* per carat was
achieved, bringing the 12-month rolling US$ per carat average to
US$1 625* per carat.
HSSE
No LTI's were recorded at Letšeng during the Period, resulting
in an LTIFR of 0.00. The AIFR for the Period was 1.67. Letšeng
continues to work towards its goal of zero harm and has implemented
various health and safety management initiatives aimed at building
on the existing culture of behaviour based care.
Zero significant or major environmental incidents have occurred
at the operation during the Period and Letšeng is continuing with
its environmental stewardship work through initiatives such as
rehabilitation trials, water protection programmes and waste
management plans.
Letšeng has continued with the successful implementation of its
corporate social investment (CSI) plan with the focus being on
small and medium enterprise development and support to projects
within the affected communities. These projects include the
Botha-Bothe Vegetable Project and the Dairy Project in
Mokhotlong.
No significant or major environmental or stakeholder incidents
were recorded in the Period.
H2 2017 and onwards
The focus at Letšeng will be on the following key areas:
-- engage and build relationships with the newly elected government in Lesotho;
-- continue to pursue and implement efficiency and cost reduction initiatives identified;
-- continue work streams on enhancing value through reducing diamond damage;
-- annual revision of the mining plan to further enhance value; and
-- deliver the mining complex on time and on budget.
(* Includes carats extracted for manufacturing at rough
valuation)
Operating review: Ghaghoo
Sustainability overview
-- Zero LTI's
-- LTIFR 0.00
-- AIFR 2.14
-- Zero major or significant stakeholder or environmental incidents
Operational overview
-- Operation placed on care and maintenance on 31 March 2017
Gem Diamonds owns 100% of Gem Diamonds Botswana (the Ghaghoo
mine) which lies within the Central Kalahari Game Reserve. The mine
was officially opened in September 2014. Owing to the suppressed
diamond market for the size and quality of goods produced by
Ghaghoo, the decision to place the operation on care and
maintenance was taken in February 2017, with full care and
maintenance status being achieved in March 2017. The mine is being
maintained in such a way to ensure that when the diamond market
recovers, the operation can be brought back into production. The
Ghaghoo resource is significant, with over 20 million carats and an
in-situ value in excess of US$4 billion.
The operational performance up until the operation was placed on
care and maintenance is set out in the table below.
Operational performance
H1 2017 H1 2016
=========================== ======= =======
Development mined (metres) 97 1 168
=========================== ======= =======
Ore treated (tonnes) 43 991 95 569
=========================== ======= =======
Carats recovered 8 084 20 876
=========================== ======= =======
Grade recovered (cpht) 18.4 21.8
=========================== ======= =======
Carats sold - 30 277
=========================== ======= =======
Average price per carat
(US$) - 157
=========================== ======= =======
During the Period, an earthquake of magnitude 6.5 with an
epicentre 25km from the mine, occurred. There was superficial
damage to the surface infrastructure, however the earthquake
damaged the seal of the underground water fissure. This led to a
large influx of water into the underground workings of the mine.
This water is successfully being pumped out of the mine and
rehabilitation of the seal will be completed in Q3 2017.
A significant amount of work has been done to put the operation
on care and maintenance. All contracts have been renegotiated and
modified for the new operating environment. The majority of the
once off costs relating to retrenchment and the renegotiated
contracts to place the operation on care and maintenance have been
incurred. Once the water fissure has been sealed, the operation's
annual care and maintenance costs will return to the anticipated
costs of US$3.0 million per annum.
The Company continues to evaluate the diamond market conditions
for the Ghaghoo diamonds. The sale of the final c.13 000 carats on
hand will be finalised in Q3 2017.
Operating review: Sales, marketing and manufacturing
Operational overview
-- Sales of US$88.8 million* with an average price of US$1 779*
per carat achieved for Letšeng's production
-- 18 rough diamonds sold for more than US$1.0 million each at a
total value of US$37.0 million
-- Sales of polished diamonds contributed US$0.7 million of additional margin to the Group
The Group's in-house sales and marketing function provides a
flexible sales strategy with multiple marketing channels to
maximise revenue from the Group's production. This is achieved
through competitive tenders and other targeted sales and marketing
channels for its rough and polished diamonds.
The Group's rough diamond analysis capabilities provide in-depth
knowledge of the value of Letšeng's large, rough diamonds and are
vital in the setting of appropriate reserve prices for the diamonds
to be sold at each tender.
The Group selectively manufactures some of its own high-value
rough diamonds and has the flexibility to place other exceptional
diamonds into strategic partnership arrangements with select
customers in order to achieve additional margins along the diamond
value chain.
Sales and marketing
Gem Diamonds owns 100% of Gem Diamonds Marketing Services (GDMS)
which markets and sells Letšeng's rough diamond production through
an electronic tender platform. The tender platform is designed to
enhance engagement with customers by allowing continual access,
flexibility and communication, as well as ensuring transparency
during the tender process. Although viewing of Letšeng's diamonds
take place in Antwerp, the electronic tender platform allows
customers the flexibility to participate in each tender from
anywhere in the world. This flexibility, together with the
professional and transparent manner in which the tenders are
managed and the reputable customers who participate in the tenders,
contribute to the strategy of achieving highest market-driven
prices for Letšeng's rough diamond production. A total of 367
clients viewed the diamonds during the four tenders held at the
GDMS premises during the Period.
During the first half of 2017, four Letšeng tenders were held
with 49 930 carats sold for a total value of US$88.8 million*,
achieving an average price of US$1 779* per carat. The highest US$
per carat achieved for a rough diamond was US$164 855 per carat for
an 8.65 carat pink diamond that was sold on tender. One of the
large high value white diamonds achieved the highest US$ per carat
for a white diamond since February 2016.
During the Period, nine diamonds totaling 464.3 carats were sold
into partnership arrangements at a total rough value of US$12.5
million. In addition to the rough value, Letšeng will share in the
revenue uplift at the time of the sale of the resultant polished
diamonds.
Analysis and manufacturing
Rough diamonds selected for own manufacturing are analysed,
planned and managed by Baobab Technologies (Baobab), a 100% owned
subsidiary of Gem Diamonds. The final polished diamonds are sold by
GDMS through direct selling channels to reputable high-end
diamantaires.
Baobab analysed 27 of Letšeng's large, exceptional quality rough
diamonds during the Period and 42 third-party diamonds.
(* Includes carats extracted for manufacturing at rough
valuation)
Group financial performance
Results overview
-- Revenue US$92.9 million (US$109.1 million in H1 2016)
-- Underlying EBITDA(1) US$13.0 million (US$43.5 million in H1 2016)
-- Attributable net profit, before exceptional items(2) US$49k
(US$13.4 million attributable net profit, before exceptional
items(2) , in H1 2016)
-- Basic earnings per share 0.04 US cents before exceptional
items(2) (Basic earnings per share 9.70 US cents before exceptional
items(2) in
-- H1 2016)
-- Cash on hand US$20.0 million
-- After the Ghaghoo once-off costs of US$3.0 million,
attributable loss for the Period was US$2.9 million resulting in a
loss per share of 2.11 US cents
H1 2017 H1 2017 H1 2017
Pre-exceptional Exceptional Post-exceptional
(US$ million) items Items(1) items H1 2016
================================ ================ ============ ================= =========
Revenue 92.9 - 92.9 109.1
Royalty and selling costs (8.4) - (8.4) (9.8)
Cost of sales(2) (66.7) (3.0) (69.7) (48.7)
Corporate expenses (4.8) - (4.8) (7.1)
================================ ================ ============ ================= =========
Underlying EBITDA(3) 13.0 (3.0) 10.0 43.5
================================ ================ ============ ================= =========
Depreciation and mining asset
amortisation (5.9) - (5.9) (5.0)
Share-based payments (0.8) - (0.8) (0.9)
Other income 0.1 - 0.1 0.1
Foreign exchange gain 1.1 - 1.1 1.9
Net finance costs (2.2) - (2.2) (0.4)
Impairment(1) - - - (40.0)
================================ ================ ============ ================= =========
Profit/(loss) before tax 5.3 (3.0) 2.3 (0.8)
================================ ================ ============ ================= =========
Income tax expense (1.7) - (1.7) (15.1)
================================ ================ ============ ================= =========
Profit/(loss) for the Period 3.6 (3.0) 0.6 (15.9)
Non-controlling interests (3.5) - (3.5) (10.7)
================================ ================ ============ ================= =========
Attributable Profit/(loss) 0.1 (3.0) (2.9) (26.6)
================================ ================ ============ ================= =========
Earnings/(loss) per share (US
cents) 0.04 (2.15) (2.11) 9.70
================================ ================ ============ ================= =========
Loss per share after impairment - - - (19.23)
================================ ================ ============ ================= =========
(1 Exceptional costs relate to once-off costs associated with
placing Ghaghoo on care and maintenance during the Period. In 2016
the exceptional items related to an impairment charge to the
carrying) (value of the Ghaghoo development asset)
(2 Including waste stripping costs amortisation but excluding
depreciation and mining asset amortisation)
3 Underlying earnings before interest, tax, depreciation and
mining asset amortisation (EBITDA) as defined in Note 5 of the
condensed notes to the consolidated interim financial
statements
During the Period, there was a continued focus on cash
generation which was aided by the successful implementation of the
updated Life of Mine plan at Letšeng and the decision to place
Ghaghoo on care and maintenance. The updated Life of Mine plan had
a positive impact on the near term cashflows as a result of
optimising the waste profile by reducing the maximum annual volumes
of waste stripping. The improved recovery of greater than 100 carat
diamonds during the Period (four in H1 2017) was encouraging and
aligned with management's expectation that the variability in the
resource would revert back to normalised levels during the year
when compared to the previous year. Care and maintenance status at
Ghaghoo was achieved during the Period and will result in reduced
costs for the operation in the latter half of the year. As part of
the Group's continued focus on cost discipline, a Group-wide
efficiency and cost reduction review has commenced and has already
identified various opportunities which will be actively
pursued.
Revenue
The Group continues with its objective of maximising the value
achieved on rough and polished diamond sales. The Group's revenue
during the Period was primarily derived from its mining operations
in Lesotho (Letšeng) and to a lesser extent through additional
margin generated from its rough diamond manufacturing operation in
Belgium. The market for both rough and polished diamonds remained
cautious for the first six months of the year. Letšeng's large
high-quality white rough diamonds however continued to be in strong
demand and the improvement in the frequency of the recovery of
these types of diamonds saw four diamonds greater than 100 carats
being recovered during the Period, compared to a total of five for
the full 2016 year.
Group revenue of US$92.9 million in the Period was 15% lower
than that achieved in H1 2016. Letšeng achieved an average of
US$1 779* per carat (US$1 899* per carat in H1 2016) during the
Period which was 20% higher than that achieved for the immediately
preceding six-month period, H2 2016, of US$1 480*. During the
Period, two of the greater than 100 carat diamonds which were
recovered, were sold, with the remaining two recovered late in Q2
2017 sold after Period end. In addition to the two greater than 100
carat diamonds sold, exceptional high-value diamonds which
contributed to the increased average price achieved (compared to H2
2016), included an 8.65 carat pink diamond which was sold for
US$164 855 per carat and two exceptional D-colour Type IIa diamonds
of 98.42 and 80.58 carats.
Letšeng revenue
H1 2017 H1 2016
=============================== ======= =======
Carats sold 49 930 55 948
=============================== ======= =======
Average price per carat (US$)* 1 779 1 899
=============================== ======= =======
(* Includes carats extracted for manufacturing at rough
valuation)
The Group's manufacturing operation contributed additional
revenue of US$3.9 million, comprising US$0.7 million polished
margin and US$3.2 million from the effect of recognising Group
revenue from the movement in own manufactured closing inventory for
the Period. There were no sales of Ghaghoo production in the
Period. The final production of c.13 000 carats is anticipated to
be sold in Q3 2017.
Group revenue summary
H1 2017 H1 2016
============================ ======= =======
Sales - rough 88.8 106.2
============================ ======= =======
Sales - polished margin 0.7 1.2
============================ ======= =======
Sales - other 0.2 0.1
============================ ======= =======
Impact of movement in
own manufactured inventory 3.2 1.6
============================ ======= =======
Group revenue 92.9 109.1
============================ ======= =======
Royalties consist of an 8% levy paid to the Lesotho Revenue
Authority on the sale of diamonds in Lesotho. Diamond selling and
marketing-related expenses are incurred by the Group's sales and
marketing operation in Belgium. During the Period, royalties and
selling costs decreased by 14% to US$8.4 million, driven by lower
sales.
Operations
While revenue is generated in US dollars, the majority of
operational expenses are incurred in the relevant local currency in
the operational jurisdictions. The Lesotho loti (LSL) (pegged to
the South African Rand) and Botswana Pula (BWP) were stronger
against the US dollar during the Period (compared to the same
period in 2016) which negatively impacted the Group's US dollar
reported costs. Group cost of sales for the Period was US$66.7
million, compared to US$48.7 million in H1 2016, the majority of
which was incurred at Letšeng.
Exchange rates H1 2017 H1 2016 % change
============================== ======= ======== ========
LSL per US$1.00
============================== ======= ======== ========
Average exchange rate for the
Period 13.21 15.41 (14%)
============================== ======= ======== ========
Period-end exchange rate 13.10 14.65 (11%)
============================== ======= ======== ========
BWP per US$1.00
============================== ======= ======== ========
Average exchange rate for the
Period 10.41 11.13 (6%)
============================== ======= ======== ========
Period-end exchange rate 10.26 10.85 (5%)
============================== ======= ======== ========
US$ per GBP1.00
============================== ======= ======== ========
Average exchange rate for the
Period 1.26 1.43 (12%)
============================== ======= ======== ========
Period-end exchange rate 1.30 1.34 (3%)
============================== ======= ======== ========
Letšeng mining operation
Cost of sales for the year was US$61.7 million, up 33.0% from
US$46.4 million in H1 2016, an increase of US$15.3 million of which
US$13.7 million represents an increase in waste stripping
amortisation costs due to the mining mix. Total waste stripping
costs amortised of US$31.7 million were incurred compared to
US$18.0 million in H1 2016.
In line with the updated mine plan, 15.0 million tonnes of waste
were mined during the Period. Ore tonnes treated of 3.2 million
tonnes were 4.7% lower than H1 2016. Of the total ore treated, 2.6
million tonnes were treated through the Letšeng Plants, with a
Satellite to Main pipe ratio of 31:69, compared to 34:66 in H1
2016. Carats recovered during the Period of 50 478 were 12.0% lower
than H1 2016 driven by the lower tonnes treated.
H1 2017 H1 2016 % change
==================================== ======= ======= ========
US$ (per unit)
==================================== ======= ======= ========
Direct cash cost (before waste)
per tonne treated(1) 12.23 9.48 (29%)
==================================== ======= ======= ========
Operating cost per tonne treated(2) 19.81 14.26 (39%)
==================================== ======= ======= ========
Waste cash cost per waste tonne
mined 2.53 1.80 (41%)
==================================== ======= ======= ========
Local currency (per unit) LSL
==================================== ======= ======= ========
Direct cash cost (before waste)
per tonne treated(1) 161.57 146.15 (11%)
==================================== ======= ======= ========
Operating cost per tonne treated(2) 261.63 219.70 (19%)
==================================== ======= ======= ========
Waste cash cost per waste tonne
mined 33.38 27.80 (20%)
==================================== ======= ======= ========
(1 Direct cash costs represent all operating costs, excluding
royalty and selling costs)
(2 Operating costs include waste stripping cost amortised,
inventory and ore stockpile adjustments, and excludes
depreciation)
Total direct cash costs (before waste costs) in local currency
increased by 5.3% to LSL513.6 million in H1 2017 compared to
LSL487.6 million in H1 2016. This resulted in a unit cost per tonne
treated of LSL161.57 relative to the prior year of LSL146.15,
representing an effective increase of 10.6%. This increase was
impacted by local country inflation and longer hauling distances as
a result of mining in deeper sections of both pits. The additional
increase in the unit costs is due to the lower ore tonnes treated
of 4.7% during the Period compared to H1 2016 with no commensurate
saving in fixed costs.
Operating costs per tonne treated of LSL261.63 were 19.1% higher
than H1 2016's cost of LSL219.70 per tonne treated. The increase
was mainly driven by higher waste amortisation costs during the
Period, as a result of the different waste to ore strip ratios for
the particular Satellite pipe ore mined. During the year, ore was
sourced from a cut within the Satellite pipe with a significantly
higher strip ratio compared to H1 2016. The amortisation charge
attributable to the Satellite pipe ore accounted for 76% of the
total waste stripping amortisation charge in the Period (H1 2016:
64%).
The increase in the local currency waste cash cost per waste
tonne mined of 20.1% was impacted by local country inflation costs
and longer haul distances for the various waste cut, in line with
the new mine plan adopted.
Other operating information
(US$ million) H1 2017 H1 2016
======================== ======= ========
Waste cost capitalised 42.9 31.3
======================== ======= ========
Waste stripping cost
amortised 31.7 18.0
======================== ======= ========
Depreciation and mining
asset amortisation 5.9 5.0
======================== ======= ========
Capital expenditure 7.2 3.7
======================== ======= ========
Ghaghoo mining operation
With the ongoing difficult market conditions for Ghaghoo's
production and the Company's focus on profitable production, the
decision was made to place the operation on care and maintenance.
As a result, all costs for the Period amounting to US$6.1 million
have been recognised in the income statement. The majority of these
costs related to the operating cost up to the date of care and
maintenance of US$2.6 million and once-off costs associated to
achieve care and maintenance status of US$3.0 million. These
once-off costs mainly relate to retrenchment costs and costs
associated with renegotiating and modifying existing contracts
under the new care and maintenance environment. These once-off
costs have been classified as exceptional items in the income
statement, having an overall effect of US Cents 2.15 on earnings
per share in the Period. The prior Period exceptional item relates
to the US$40.0 million impairment on Ghaghoo's development
asset.
Diamond manufacturing operation
The Group generated additional margin on selected high-value
diamonds through its manufacturing facilities and partnership
arrangements. The diamond manufacturing operation in Antwerp
contributed US$0.7 million to Group revenue (through additional
polished margin generated) and US$0.4 million to underlying EBITDA.
Extracted diamond inventory on hand at the end of the Period was
US$1.2 million compared to US$4.4 million at 31 December 2016,
further increasing recognised Group revenue by US$3.2 million.
Corporate office
Corporate costs relate to central costs incurred by the Group
through its technical and administrative offices in South Africa
and the United Kingdom and are incurred in both South African Rand
and British Pound. Corporate costs for the Period amounted to
US$4.8 million (H1 2016: US$7.1 million).
The share-based payment charge for the Period amounted to US$0.8
million (H1 2016: US$0.9 million). On 4 July 2017 (post the Period
end), 1 335 000 nil-cost options were granted to certain key
employees and Executive Directors under the Long-term Incentive
Plan of the Company with similar conditions as previous awards
granted under this scheme. The charge of the new award will be
recognised in the income statement from its grant date.
Underlying EBITDA(1) and attributable profit
Based on the above operating results, the Group generated an
Underlying EBITDA(1) of US$13.0 million. The profit attributable to
shareholders for the Period was US$49k before exceptional items,
equating to an earnings per share of 0.04 US cents on a weighted
average number of shares in issue of 138.3 million. After including
the effect of the exceptional items of US$3.0 million, the Group's
attributable loss was US$2.9 million.
The forecast effective tax rate for the full year is 32.60% and
has been applied to the actual results for the Period. This rate is
the result of profits generated by Letšeng being taxed at 25.0%,
deferred tax assets not recognized on losses incurred in
non-trading operations which is partially offset by a reduction in
the deferred tax liability on unremitted earnings.
Financial position and funding review
The Group continued its prudent cash management and ended the
Period with cash on hand of US$20.0 million (31 December 2016:
US$30.8 million) of which US$16.1 million is attributable to Gem
Diamonds and US$0.2 million is restricted. At Period end, the Group
had utilised facilities of US$34.2 million, resulting in a net debt
position of US$14.2 million. Furthermore, standby undrawn
facilities of US$36.2 million remain available, comprising US$9.9
million at Gem Diamonds and US$26.3 million (of which US$11.0
million relates to the mining complex project funding) at
Letšeng.
The Group generated cash from operating activities
(pre-exceptional items) of US$37.1 million (30 June 2016: US$44.5
million) before investment in waste stripping costs at Letšeng of
US$42.9 million and capital expenditure of US$8.8 million, incurred
mainly at Letšeng.
After placing the Ghaghoo mine on care and maintenance, its
US$25.0 million fully accessed facility was settled by utilising
the available Gem Diamonds Limited US$35.0 million Revolving Credit
Facility (RCF). The Gem Diamonds Limited RCF was subsequently
restructured post Period end to increase it from a US$35.0 million
to a US$45.0 million facility. This restructured facility consists
of two tranches with the first tranche relating to the Ghaghoo
US$25.0 million debt whereby quarterly capital repayments have been
re-scheduled to commence in September 2018 with final repayment on
31 December 2020. The second tranche of US$20.0 million is a
revolving facility and includes an upsize mechanism whereby the
available facility of this tranche will increase by a ratio 0.6:1
for every repayment made under the first tranche.
During the Period, construction of the relocated mining complex,
which is bank funded, commenced. The loan is an unsecured project
debt facility for LSL215.0 million (US$16.4 million) which was
signed jointly with Nedbank Limited and the Export Credit Insurance
Corporation (ECIC). The loan is repayable in equal quarterly
payments commencing in September 2018. At Period end, LSL70.1
million (US$5.4 million) has been drawn down resulting in LSL144.9
million (US$11.0 million) being available.
At Period end US$3.8 million on the LSL250.0 million (US$19.1
million) revolving credit facility at Letšeng was utilised.
During the Period, no dividends were paid by Letšeng.
Outlook
Capital and cash management discipline remains a high priority
in the short term and the Company remains committed to generating
cash and strengthening its balance sheet.
The various opportunities identified through the efficiency and
cost reduction review will be actively pursued.
Options for the Ghaghoo asset will be considered and focus will
remain on further optimising the care and maintenance costs.
(1 Underlying earnings before interest, tax, depreciation and
mining asset amortization)
Risks to our business
The Group is exposed to a number of risks and uncertainties that
could have a material impact on its performance and long-term
growth. The effective identification, management and mitigation of
these risks and uncertainties are a core focus of the Group as they
are key to achieving the Company's strategic objectives.
Many of these risks are beyond the control of the Group but a
formal risk management process exists to assist in identifying and
reviewing potential risks. Mitigating plans are formulated and
reviewed regularly to understand their effectiveness and progress.
The Group is focused on continuously analysing and assessing the
risks faced and improving the risk management process
accordingly.
The Group internal audit function carries out a risk-based
programme approved by the Audit Committee to evaluate the
effectiveness and contribute to the improvement of risk management
controls and governance processes.
A reassessment of the principal risks and uncertainties, which
have been previously reported in the Business Overview in the 2016
Annual Report, has been performed to take into account the current
market and operational conditions. These may impact the Group over
the medium to long term; however, the following key risks (in no
particular order of priority) may impact the Group over the next
six months.
Cash generation (financial risk)
The lack of cash flow generation may negatively affect the
Group's ability to effectively operate, fund capital projects and
repay debt.
Cash flows which were negatively impacted by lower than expected
revenues achieved resulted in additional utilisation of debt
facilities. This was due to a lower number of high value diamonds
being recovered during the latter part of 2016 and Q1 2017
impacting the overall US$ per carat, and lower plant availability
impacting tonnage treated and carats recovered. Although a
significant amount of time and resources were utilised in
addressing the plant availability issues which have resulted in
improvements towards the end of the Period, the possibility of
further unplanned maintenance issues could further impact tonnage
treated in the short term. In Q2 2017, there has been an
improvement in the recoveries of the larger higher value diamonds
resulting in an increased overall US$ per carat, positively
contributing to cash flows. The Group has the ability to reassess
its capital projects and operational strategies. Strict treasury
management procedures are in place to monitor cash and capital
project expenditure.
In February 2017, the Board made a decision to place the Ghaghoo
mine on care and maintenance to preserve the value of the asset and
to reduce cash consumed. Although once off costs have been incurred
during the Period to bring the operation into care and maintenance
status it is expected that the reduction in cash consumption will
be realised in H2 2017.
Following the placing of Ghaghoo on care and maintenance, the
Company's US$35.0 million short term Revolving Credit Facility
(RCF) was utilised to repay the Ghaghoo US$25.0 million long term
facility. The Group successfully restructured its short term RCF
into a new US$45.0 million facility, deferring debt repayment
commitments. Refer to note 14, Interest-bearing loans and
borrowings for details of the tenure and structure.
To further improve cash generation, a Group-wide efficiency and
cost reduction review has commenced and has already identified
opportunities that are being actively pursued.
Currency volatility (financial risk)
The Group receives its revenue in US dollars, while its cost
base is incurred in the local currency of the various countries
within which the Group operates. The volatility of these currencies
trading against the US dollar impacts the Group's profitability and
cash. In order to mitigate currency risk, these fluctuations are
closely monitored and, when weaknesses in the local currency reach
levels where it would be appropriate, the Group enters into
exchange rate contracts to protect future cash flows.
Extreme volatility between the Lesotho loti and US dollar has
been experienced during the Period, and this is expected to
continue into H2 2017.
Rough diamond demand and prices (market risk)
While the medium to long-term fundamentals of the diamond market
remain intact, with demand forecast to outpace supply, in the short
term the prevailing climate of global economic uncertainty may
cause some volatility in rough diamond pricing. The cautious
approach adopted by rough and polished diamantaires and
manufacturers is expected to continue into the second half of the
year. Market conditions are constantly monitored to identify
current trends that pose a threat or create an opportunity for the
Group. The Group has flexibility in its sales processes.
Mineral resource risks (operational risk)
The Group's mineral resources influence the mine plans.
Uncertainty or underperformance of mineral resources could affect
the Group's ability to operate profitably. With Letšeng being the
world's lowest grade operating kimberlite mine, the risk of
resource underperformance is elevated. Various bulk sampling
programmes, combined with geological mapping and modelling methods,
significantly improve the Group's understanding of and confidence
in optimising the mining of its resources.
The short-term volatility in the mineral resource is evidenced
by the lower number of high quality diamonds which were recovered
in 2016. During the Period, an increase in the recovery of these
higher value diamonds contributed to an improved US$ per carat in
line with expectations.
A major production interruption (operational risk)
The Group may experience material mine and/or plant shut downs
or periods of decreased production due to numerous events. Any such
event could negatively affect the Group's operations and impact its
profitability and cash flows. The likelihood of possible
interruption events is continually reviewed and the appropriate
controls, processes and business continuity plans are in place to
immediately mitigate this risk.
Country and political risks (operational risk)
The political environments of the various jurisdictions that the
Group operates within may adversely impact the ability to operate
effectively and profitably. Emerging market economies are generally
subject to greater risks, including regulatory and political risk,
and can be exposed to a rapidly changing environment. Changes to
the political environment and regulatory developments are closely
monitored. Where necessary, the Group engages in dialogue with
relevant government representatives to remain well informed of all
legal and regulatory developments impacting its operations.
Following the disbandment of the Lesotho Parliament in early
2017, peaceful elections were concluded in June 2017 where a new
government was elected. Engagement with the new government has
commenced positively with the aim of developing effective
relationships.
Clifford Elphick
Chief Executive Officer
16 August 2017
Half-yearly financial statements
30 June 2017
Contents
Responsibility Statement of the Directors in Respect of the
Half-yearly Report and the Financial Statements
Independent Review Report to the Members of Gem Diamonds
Limited
Interim Consolidated Income Statement
Interim Consolidated Statement of Comprehensive Income
Interim Consolidated Statement of Financial Position
Interim Consolidated Statement of Changes in Equity
Interim Consolidated Statement of Cash Flows
Condensed Notes to the Consolidated Interim Financial
Statement
Responsibility Statement of the Directors in Respect of the
Half-yearly 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-yearly 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 a description of the
principal risks and uncertainties for the remaining six months of
the year; 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
2016.
The names and functions of the Directors of Gem Diamonds are
listed in the Annual Report for the year ended 31 December 2016 and
updates have been disclosed in the Interim Business Review on pages
1 to 11.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
16 August 2017
Independent Review Report to the Members of Gem Diamonds
Limited
We have been engaged by Gem Diamonds Limited (the Company) to
review the condensed consolidated set of financial statements
of the Company and its subsidiaries (the Group) in the
Half-yearly Report for the six months ended 30 June 2017 which
comprises the interim consolidated income statement, interim
consolidated statement of comprehensive income, interim
consolidated statement of financial position, interim
consolidated statement of changes in equity, interim
consolidated
statement of cash flows and the related explanatory notes. We
have read the other information contained in the Half-yearly Report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information
in the condensed set of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than
the
Company, for our work, for this report, or for the conclusions
we have formed.
Directors' responsibilities
The Half-yearly Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for
preparing the Half-yearly Report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's
Financial
Conduct Authority. As disclosed in note 1.2.1 in the 2016
audited annual financial statements, the Annual Financial
Statements of
the Group are prepared in accordance with International
Financial Reporting Standards (IFRS). The condensed consolidated
set
of financial statements included in this Half-yearly Report have
been prepared in accordance with International Accounting
Standard 34 Interim Financial Reporting.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed consolidated set of financial statements in the
Half-yearly Report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim
Financial Information Performed by the Independent Auditor of
the Entity issued by the Auditing Practices Board for use in
the
United Kingdom.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated set of
financial statements in the Half-yearly Report for the six months
ended 30 June 2017 are not prepared, in all material respects, in
accordance with International Accounting Standard 34 and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Ernst & Young LLP
London
16 August 2017
Interim Consolidated Income Statement
for the six months ended 30 June 2017
30 June 30 June
2017(1) 30 June 2016(1) 30 June
Before 2017(1) 30 June Before 2016(1) 30 June
exceptional Exceptional 2017(1) exceptional Exceptional 2016(1)
Notes item item Total item item Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
=========================================================== =================== =============== =================== ================= ================ =================
Revenue 3 92 908 - 92 908 109 140 - 109 140
(2 971) (53 (53
Cost of sales (72 458) (2) (75 429) 649) - 649)
=========================================================== =================== =============== =================== ================= ================ =================
Gross profit/(loss) 20 450 (2 971) 17 479 55 491 - 55 491
Other operating income 131 - 131 69 - 69
Royalties and selling
costs (8 397) - (8 397) (9 782) - (9 782)
Corporate expenses (4 937) - (4 937) (7 214) - (7 214)
Share-based payments
13 (842) - (842) (914) - (914)
Foreign exchange
gain 1 079 - 1 079 1 936 - 1 936
(40 000)
Impairment of asset - - - - (2) (40 000)
=========================================================== =================== =============== =================== ================= ================ =================
Operating profit/(loss)
3 7 484 (2 971) 4 513 39 586 (40 000) (414)
Net finance costs (2 218) - (2 218) (422) - (422)
Finance income
Finance costs
=========================================================== =================== =============== =================== ================= ================ =================
285 - 285 972 - 972
(2 503) - (2 503) (1 394) - (1 394)
=========================================================== =================== =============== =================== ================= ================ =================
Profit/(loss) before
tax 5 266 (2 971) 2 295 39 164 (40 000) (836)
Income tax expense
7 (1 717) - (1 717) (15 052) - (15 052)
=========================================================== =================== =============== =================== ================= ================ =================
(15
Profit/(loss) 3 549 (2 971) 578 24 112 (40 000) 888)
=========================================================== =================== =============== =================== ================= ================ =================
Attributable to:
Equity holders of (26
parent 49 (2 971) (2 922) 13 417 (40 000) 583)
Non-controlling interests 3 500 - 3 500 10 965 - 10 965
=========================================================== =================== =============== =================== ================= ================ =================
Earnings/(loss) per
share (cents)
0.04 - (2.11) 9.70 - (19.23)
* Basic earnings/(loss) for the Period attributable to
ordinary equity holders of the parent 0.04 - (2.11) 9.70 - (19.23)
- Diluted earnings/(loss)
for the Period
attributable to
ordinary equity holders
of the parent
=========================================================== =================== =============== =================== ================= ================ =================
1 Unaudited
2 Refer to Note 4, Exceptional items
Interim Consolidated Statement of
Comprehensive Income
for the six months ended 30 June 2017
30 June 30June
20171 20161
US$'000 US$'000
======================================= ============== ================
Profit/(loss) for the Period
Other comprehensive income that could
be classified to the income statement
in subsequent periods 578 (15 888)
Exchange differences on translation
of foreign operations 6 880 11 488
======================================= ============== ================
Other comprehensive income net of tax 6 880 11 488
======================================= ============== ================
Total comprehensive income/(expense) 7 458 (4 400)
Attributable to:
Equity holders of parent 4 797 (21 512)
Non-controlling interests 2 661 17 112
======================================= ============== ================
Total comprehensive income/(expense)
net of tax 7 458 (4 400)
======================================= ============== ================
1 Unaudited
Interim Consolidated Statement of
Financial Position
as at 30 June 2017
30 June 31 December
20171 2016(2)
Notes US$'000 US$'000
======================================= ================= ====================
ASSETS
Non-current assets
Property, plant and equipment 9 281 921 257 199
Investment property 615 615
Intangible assets 14 572 14 014
Receivables and other assets 10 27 31
======================================= ================= ====================
297 135 271 859
======================================= ================= ====================
Current assets 34 293 30 911
Inventories 5 695 6 557
Receivables and other assets 10 2 385 4 636
Income tax receivable 20 046 30 787
Cash and short-term deposits 11
======================================= ================= ====================
62 419 72 891
======================================= ================= ====================
Total assets 359 554 344 750
======================================= ================= ====================
EQUITY AND LIABILITIES
Equity attributable to equity holders
of the parent
Issued capital 12 1 386 1 384
885 648
Share premium (1) 885 648(1)
(134 937) (143 498)
Treasury shares3 (613 251) (610 329)
Other reserves (610 329)
Accumulated losses
======================================= ================= ====================
138 845 133 204
======================================= ================= ====================
Non-controlling interests 73 284 70 623
======================================= ================= ====================
Total equity 212 129 203 827
======================================= ================= ====================
Non-current liabilities
Interest-bearing loans and borrowings
14 5 354 -
Trade and other payables 1 709 1 409
Provisions 17 968 16 630
Deferred tax liabilities 69 297 65 676
======================================= ================= ====================
94 328 83 715
======================================= ================= ====================
Current liabilities
Interest-bearing loans and borrowings
14 28 895 27 757
Trade and other payables 23 903 29 012
Income tax payable 299 439
======================================= ================= ====================
53 097 57 208
======================================= ================= ====================
Total liabilities 147 425 140 923
======================================= ================= ====================
Total equity and liabilities 359 554 344 750
======================================= ================= ====================
1 Unaudited
2 Audited
3 Shares held by Gem Diamonds Limited Employee Share Trust
Interim Consolidated Statement of Changes in Equity
for the six months ended 30 June 2017
Attributable
to equity
holders
of the parent
Accu-
Issued Share Own Other mulated Non-controlling Total
capital premium Shares(2) reserves losses Total interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
==================== ======== ======== ========== ========= ======== ========= =============== =========
Balance at 885 (143 (610 133 203
1 January 2017 1 384 648 (1) 498) 329) 204 70 623 827
Total comprehensive
income/(expense) - - - 7 719 (2 922) 4 797 2 661 7 458
======== ======== ========== ========= ======== ========= =============== =========
(Loss)/profit (2
for the Period - - - - (2 922) 922) 3 500 578
Other comprehensive
income/(expense) - - - 7 719 - 7 719 (839) 6 880
======== ======== ========== ========= ======== ========= =============== =========
Share capital
issued (Note
12) 2 - - - - 2 - 2
Share-based
payments
(Note 13) - - - 842 - 842 - 842
==================== ======== ======== ========== ========= ======== ========= =============== =========
Balance at 885 (134 (613 138 212
30 June 20171 1 386 648 (1) 937) 251) 845 73 284 129
==================== ======== ======== ========== ========= ======== ========= =============== =========
Balance at 885 (163 (439 283 343
1 January 2016 1 383 648 (1) 420) 764) 846 59 923 769
======== ======== ========== ========= ======== ========= =============== =========
Total comprehensive (26 (21 (4
income/(expense) - - - 5 071 583) 512) 17 112 400)
======== ======== ========== ========= ======== ========= =============== =========
Loss/(profit) (26 (26 (15
for the Period - - - - 583) 583) 10 695 888)
Other comprehensive 11
income - - - 5 071 - 5 071 6 417 488
======== ======== ========== ========= ======== ========= =============== =========
Share-based
payments
(Note 13) - - - 954 - 954 - 954
Dividends paid (11 (11 (18
(Note 8) - - - - 755) 755) (6 246) 001)
==================== ======== ======== ========== ========= ======== ========= =============== =========
Balance at 885 (157 (478 251 322
30 June 2016(1) 1 383 648 (1) 395) 102) 533 70 789 322
==================== ======== ======== ========== ========= ======== ========= =============== =========
1 Unaudited
2 Shares held by Gem Diamonds Limited Employee Share Trust
Interim Consolidated Statement of Cash Flows
for the six months ended 30 June 2017
30 June 30 June
20171 20161
Notes US$'000 US$'000
=============================================== ==================== =========================
Cash flows from operating activities
Cash generated by operations 15.1
Working capital adjustments 15.2 34 202 44 454
=============================================== ==================== =========================
42 070 59 463
(7 967) (529)
=============================================== ==================== =========================
34 103 58 934
285 1 089
(1 890) (1 839)
1 704 (13 730)
=============================================== ==================== =========================
Interest received Interest paid
Income tax received/(repaid)
=============================================== ==================== =========================
Cash flows used in investing activities
Purchase of property, plant and equipment
9
Ghaghoo costs capitalised 9
Letšeng waste cost capitalised
9
Proceeds from sale of property, plant
and equipment (51 685) (45 599)
=============================================== ==================== =========================
(8 808) (5 982)
(8 375) (31
- (42 877) 269)
- 27
=============================================== ==================== =========================
Cash flows from/(used in) financing
activities 6 346 (20 669)
==================== =========================
Financial liabilities raised 49 318 -
Financial liabilities repaid (42 972) (2 667)
==================== =========================
Net financial liabilities raised/(repaid) 6 346 (2 667)
Dividends paid to equity holders of
the parent Dividends paid to non-controlling
interests - (11 755)
- (6 247)
==================== =========================
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning
of Period
Foreign exchange differences (11 137) (21 814)
==================== =========================
30 787 85 719
396 2 551
==================== =========================
Cash and cash equivalents at end of
Period
Cash and cash equivalents at end of
Period held with banks
Restricted cash at end of Period
Cash and cash equivalents at end of
Period 11 20 046 66 456
=============================================== ==================== =========================
19 879 63 785
167 2 671
=============================================== ==================== =========================
20 046 66 456
=============================================== ==================== =========================
1 Unaudited
Condensed Notes to the Consolidated
Interim Financial Statements
for the six months ended 30 June 2017
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. 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 16 August 2017, is
unaudited and does not constitute statutory financial
statements.
The report of the auditors on the Group's 2016 Annual Report and
Accounts was unqualified.
The Group is principally engaged in operating of diamond
mines.
2. Basis of preparation and accounting policies
2.1 Basis of presentation
The condensed consolidated interim financial statements for the
six months ended 30 June 2017 (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 2016.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and
position
are set out in the Interim Business Review on pages 1 to 11. The
financial position of the Group, its cash flows and liquidity
position are described in the Interim Business Review on pages 6
to 11.
After making enquiries which include reviews of forecasts and
budgets, timing of cash flows, borrowing facilities and
sensitivity analyses and considering the uncertainties described
in this report either directly or by cross reference, the
Directors
have a reasonable expectation that the Group and the Company
have adequate financial resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing this
half-yearly
report and accounts of the Group.
2.2 Significant 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 2016,
except for the adoption of new standards and amendments as of 1
January 2017. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but
is not yet effective.
2. Basi s of preparation and accounting policies (continued)
2.2 Significant accounting policies (continued)
Standards issued but not effective
The standards and interpretations that are
issued, but not yet effective, up to the date
of issuance of the Group's financial statements
are disclosed below. The Group intends to adopt
these standards if applicable when they become
effective.
Standard, amendment
interpretation Effective date*
IFRS Classification Amendments to IFRS 1 January
2 and measurement 2 in relation to the 2018
of Share-based classification and
Payment Transactions measurement of share-based
payment transactions.
The Group will assess
the impact prior to
the effective date.
===== ====================== ============================ ==========
IFRS Financial Classification and 1 January
9 Instruments measurement of financial 2018
assets and financial
liabilities that replaces
IAS 39. The Group
will assess the impact
prior to the effective
date.
===== ====================== ============================ ==========
IFRS Revenue from The new revenue standard 1 January
15 Contracts introduces a single, 2018
with Customer principles- based,
five-step model for
the recognition of
revenue when control
of a good or service
is transferred to
the customer. The
Group is currently
reviewing the potential
impact of IFRS 15.
===== ====================== ============================ ==========
IFRS Leases The new standard requires 1 January
16 lessees to recognise 2019
assets and liabilities
on their balance sheets
for most leases, many
of which may have
been off balance sheet
in the past. The Group
will assess the impact
prior to the effective
date.
===== ====================== ============================ ==========
Annual periods beginning on or after
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. Other regions
where no direct mining activities take place are organised into
geographical regions in the areas where the operations are managed.
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);
-- Botswana (diamond mining activities through Ghaghoo, which
was placed on care and maintenance in February 2017, and sales
and marketing of diamonds through Gem Diamonds Marketing
Botswana (Proprietary) Limited);
-- Belgium (sales, marketing and manufacturing of diamonds);
and
-- BVI, RSA and UK (technical and administrative services).
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. Inter-segment 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
manufacturing margins and Group services.
The following tables presents revenue and profit, and asset and
liability information from operations regarding the Group's
geographical segments:
BVI,
Lesotho Botswana Belgium RSA and Total
Six months ended US$'000 US$'000 US$'000 UK(2) US$'000
30 June 2017(1) US$'000
======================= ========== =========== ========== ========= ==========
Revenue
88 185
Total revenue 068 - 92 776 4 913 757
(87 (92
Inter-segment 713) - (388) (4 748) 849)
======================= ========== =========== ========== ========= ==========
92
External customers 355 - 92 388 165(2) 908
======================= ========== =========== ========== ========= ==========
Segment operating 16
profit/(loss) 328 (5 824) 109 (6 100) 4 513
(2
Net finance costs 218)
======================= ========== =========== ========== ========= ==========
Profit before tax 2 295
(1
Income tax expense 717)
======================= ========== =========== ========== ========= ==========
Profit for the Period
after exceptional
item 578
======================= ========== =========== ========== ========= ==========
1 Unaudited
2 No revenue was generated in BVI
BVI,
Lesotho Botswana Belgium RSA and Total
Six months ended US$'000 US$'000 US$'000 UK(2) US$'000
30 June 2016(1) US$'000
===================== ========== =========== ========== ========= ==========
Revenue
105 113 224
Total revenue 709 - 488 4 922 119
(104 (114
Inter-segment 932) - (5 213) (4 834) 979)
===================== ========== =========== ========== ========= ==========
108 109
External customers 777 - 275 88(2) 140
===================== ========== =========== ========== ========= ==========
Segment operating (39
profit/(loss) 46 856 050)(3) (912) (7 308) (414)
Net finance costs (422)
===================== ========== =========== ========== ========= ==========
Loss before tax (836)
(15
Income tax expense 052)
===================== ========== =========== ========== ========= ==========
(15
Loss for the period 888)
===================== ========== =========== ========== ========= ==========
1 Unaudited
2 No revenue was generated in BVI
3 The operating loss on the Botswana segment mainly relates to
the impairment provided for on the Ghaghoo development asset (refer
to Note 4,
Exceptional items)
BVI,
Lesotho Botswana Belgium RSA Total
US$'000 US$'000 US$'000 and US$'000
UK
US$'000
====================== ========== =========== ========== ========= ==========
Segment assets
====================== ========== =========== ========== ========= ==========
359
At 30 June 20171 341 332 5 095 4 693 8 434 554
344
At 31 December 20162 309 469 6 190 5 996 23 095 750
====================== ========== =========== ========== ========= ==========
Segment liabilities
====================== ========== =========== ========== ========= ==========
78
At 30 June 20171 46 372 4 855 73 26 826 126
75
At 31 December 20162 39 677 33 182 591 1 797 247
====================== ========== =========== ========== ========= ==========
1 Unaudited
2 Audited
Included in revenue is revenue from a single customer which
amounted to US$30.0 million (30 June 2016: US$24.2 million)
arising from sales reported in the Lesotho and Belgium
segments.
Segment assets and liabilities do not include net deferred tax
liabilities of US$69.3 million (31 December 2016: US$65.6
million).
The prior Period operating loss included an exceptional item of
US$40.0 million impairment charge. Pre-exceptional items, operating
profits have decreased in the current Period due to lower carats
recovered and lower prices achieved at Letšeng together with an
increase in mining costs.
4. Exceptional items
30 June 30 June
20171 20161
US$'000 US$'000
======== ============== ===============
Ghaghoo 2 971(2) 40 000(3)
======== ============== ===============
1 Unaudited
2 Ghaghoo - exceptional costs
The Ghaghoo mine was placed on care and maintenance in February
2017. No impairment charge was recognized during the current
Period. The costs incurred in the Period included development
costs, retrenchment costs, once-off costs to renegotiate contracts
and once-off costs associated with the additional water pumping and
sealing of the fissure as a result of the earthquake, have been
classified as exceptional costs.
3 Ghaghoo - impairment
In the prior Period, the Group recognised a consolidated income
statement impairment charge of US$40.0 million (post-tax) for the
Ghaghoo asset. At 31 December 2016, the asset was impaired by a
further US$130.8 million.
5. Underlying earnings before interest, tax, depreciation and
mining asset amortisation (EBITDA) before exceptional item
Underlying EBITDA is shown, as the Directors consider this
measure to be a relevant guide to the performance of the Group and
excludes such non-operating costs as listed below. The
reconciliation from operating profit to underlying EBITDA is as
follows:
30 June 30 June
20171 20161
US$'000 US$'000
============================================= ============== ===================
Operating profit 7 484 39 586
Other operating income Share-based
payments (131) (69)
Foreign exchange gain 842 914
Depreciation and mining asset amortisation
(excluding waste stripping cost amortised) (1 079) (1 936)
5 912 4 993
============================================= ============== ===================
Underlying EBITDA before exceptional
item 13 028 43 488
============================================= ============== ===================
1 Unaudited
6. Seasonality of operations
The Group's sales environment regarding its diamond sales is not
materially impacted by seasonal and cyclical fluctuations. The
mining operations may be impacted by seasonal weather conditions.
Appropriate mine planning and ore stockpile build-up ensures that
mining can continue during adverse weather conditions.
7. Income tax expense
30 June 30 June
20171 20161
US$'000 US$'000
================= ================== ==================
Income statement
Current
- Overseas (283) (7 957)
Withholding tax (71) (1 516)
- Overseas (1 363) (5 579)
Deferred
- Overseas
================= ================== ==================
(1 717) (15 052)
================= ================== ==================
1 Unaudited
The forecast effective tax rate for the full year is 32.60% and
has been applied to the actual results, excluding exceptional
items, for the Period. The exceptional items (refer to Note 4,
Exceptional items), have been excluded from the forecast effective
tax rate for the full year and taxed separately. There is no tax
effect on the exceptional items.
Following the placing of the Ghaghoo mine on care and
maintenance, the 2017 full year tax rate will no longer be
reconciled to the statutory UK corporation tax rate of 19.25%, but
to the statutory Lesotho corporation tax rate of 25.0%, as this is
the jurisdiction in which the majority of the Group's taxes are
incurred.
The forecast effective tax rate for the full year is above the
Lesotho statutory tax rate primarily as a result of deferred tax
assets not recognised on losses incurred in non-trading operations,
which is partially offset by a reduction in the deferred tax
liability on unremitted earnings.
8. Dividends paid and proposed
30 June 30 June
20171 20161
US$'000 US$'000
====================================== =============== ===============
Dividends on ordinary shares declared
and paid
Final ordinary dividend for 2016:
Nil (2015: 5 US cents per share) - 6 915
Final special dividend for 2016: Nil
(2015: 3.5 US cents per share) - 4 840
====================================== =============== ===============
Total - 11 755
====================================== =============== ===============
1 Unaudited
There were no dividends proposed for the 2016 financial year.
The dividend policy is dependent on the results of the
Group's operations, its financial condition, cash requirements,
future prospects, profits available for distribution and
other factors deemed to be relevant at that time.
The 2015 dividends were approved on 7 June 2016 and a final cash
dividend of 8.5 US cents per share was paid to shareholders on 16
June 2016.
9. Property, plant and equipment
During the Period, the Group invested US$8.8 million (30 June
2016: US$6.0 million) into property, plant and
equipment, of which US$7.2 million (30 June 2016: US$3.7
million) related to Letšeng and US$1.6 million (30 June 2016: US$
1.9 million) related to Ghaghoo.
Letšeng's capital spend was incurred mainly on the commencement
of the mining support services complex construction
(US$5.1 million), rehabilitation of the fresh water dam (US$0.4
million) and installation of the split front-ends for Plants 1 and
2 (US$0.2 million).
At Ghaghoo, the majority of the capital spend was incurred on
the construction of the slimes dam (US$1.5 million) prior to
placing the operation on care and maintenance.
Letšeng further invested US$42.9 million (30 June 2016: US$31.3
million) in deferred stripping costs which were capitalised.
Borrowing costs of US$0.1 million incurred in respect of the LSL
215.0 million (US$16.4 million) Letšeng facility (refer to Note 14,
Interest-bearing loans and borrowings) have been capitalised. The
weighted average rate used to
determine the amount of borrowing costs eligible for
capitalisation was 3.40%.
In addition to the above, foreign exchange movements on
translation affecting property, plant and equipment were US$10.6
million (30 June 2016: US$16.7 million).
Depreciation and mining asset amortisation of US$5.8 million (30
June 2016: US$5.0 million) was charged to the income statement
during the Period.
At Letšeng, amortisation of the deferred stripping asset (waste
stripping cost amortisation) of US$31.7 million (30 June
2016: US$18.0 million) was charged to the income statement
during the Period. The amortisation is directly related to
the areas that were mined during the Period and their associated
waste to ore strip ratios.
10. Receivables and other assets
30 June 31 December
20171 20162
US$'000 US$'000
=========================================== =================== ===================
Non-current
Other receivables 27 31
=========================================== =================== ===================
27 31
=========================================== =================== ===================
Current
Trade receivables(3) Prepayments Deposits 538 1 187
Other receivables 682 756
VAT receivable 141 135
401 334
3 933 4 145
=========================================== =================== ===================
5 695 6 557
=========================================== =================== ===================
1 Unaudited
2 Audited
3 Trade receivables as at 31 December 2016 mainly related to the
margins recognised on partnership arrangements for which proceeds
were received post year end. As at Period end, the value of these
receivables was lower than at 31 December 2016.
11. Cash and short-term deposits
30 June 31 December
20171 20162
US$'000 US$'000
============================= ============== ===================
Cash on hand 1 2
Bank balances 17 144 15 762
Short-term bank deposits 2 901 15 023
============================= ============== ===================
Cash and short-term deposits 20 046 30 787
============================= ============== ===================
1 Unaudited
2 Audited
At 30 June 2017, the Group had restricted cash of US$0.2 million
(31 December 2016: US$3.1 million).
Finance income relates to interest earned on cash and short-term
deposits.
Finance costs include interest incurred on bank overdraft and
borrowings and the unwinding of rehabilitation provisions.
12. Issued capital and reserves
30 June 2017(1) 31 December
2016(2)
======================== =========================
Number Number
of of
shares US$'000 shares US$'000
'000 '000
===================================== ======== ============== =========== ============
Authorised - ordinary shares
of US$0.01 each 200 200
Balance at beginning of Period/year 000 2 000 000 2 000
Increase in authorised shares - - - -
===================================== ======== ============== =========== ============
200 200
Balance at end of Period/year 000 2 000 000 2 000
===================================== ======== ============== =========== ============
Issued and fully paid 138 138
Balance at beginning of Period/year 361 296 1 383
==============
Allotments during the Period/year 205 1 384 65 1
2
===================================== ======== ============== =========== ============
138 138
Balance at end of Period/year 566 1 386 361 1 384
===================================== ======== ============== =========== ============
1 Unaudited
2 Audited
13. Share-based payments
There were no option awards granted during the current Period.
Post Period end, on 4 July 2017, there was a share option awarded
(refer to Note 18 Events after reporting Period).
The expense recognised for employee services received during the
year is shown in the following table:
30 June 30 June
20171 20161
US$'000 US$'000
====================================== ================= ===================
Equity-settled share-based payment
transactions - charged to the income
statement 842 961
Reversal of previous expense due to
forfeiture - credited to the income
statement - (47)
====================================== ================= ===================
842 914
Equity-settled share-based payment
transactions - capitalised - 40
====================================== ================= ===================
842 954
====================================== ================= ===================
1 Unaudited
14. Interest-bearing loans and borrowings
30 June 31 December
20171 20162
Effective interest rate % US$'000 US$'000
Maturity
============================================================================== ================= ===================
Non-current
LSL215.0 million bank
loan facility
============================================================================== ================= ===================
Tranche 1 South African JIBAR + 3.15% 2 683 -
30 September 2022(3)
============================================================================== ================= ===================
Tranche 2 South African JIBAR + 6.75% 2 671 -
31 March 2022(3)
============================================================================== ================= ===================
5 354 -
============================================================================== ================= ===================
Current
LSL140.0 million bank
loan facility South African JIBAR
+ 4.95% 30 June 2017(4) - 2 047
============================================================================== ================= ===================
LSL250.0 million bank 3 816
loan facility Lesotho prime 30 June -
2018(5)
============================================================================== ================= ===================
US$25.0 million bank
loan facility London US$ three-month
LIBOR + 5.5% 31 January 2019(6) - 25 710
============================================================================== ================= ===================
US$35.0 million bank
loan facility London US$ three-month 25 079 -
LIBOR + 5.3% 31 January 2019(6)
============================================================================== ================= ===================
28 895 27 757
============================================================================== ================= ===================
1 Unaudited
2 Audited
(3) LSL215.0 million (US$ 16.4 million) bank loan facility at
Letšeng Diamonds
This loan comprises two tranches of debt as follows:
-- Tranche 1: South African Rand denominated ZAR180.0 million
(US$13.7 million) debt facility supported by the Export Credit
Insurance Corporation (ECIC) (five years tenure);
-- Tranche 2: Lesotho Loti denominated LSL35.0 million (US$2.7
million) term loan facility without ECIC support (five years and
six months tenure)
The loan is an unsecured project debt facility which was signed
jointly with Nedbank and the ECIC on 22 March 2017 for the total
funding of the construction of the Letšeng mining support services
complex. The loan is repayable in equal quarterly payments
commencing in September 2018.
At Period end LSL70.1 million (US$5.4 million) had been drawn
down, resulting in LSL144.9 million (US$11.0 million) available to
be drawn down under this facility.
The South African Rand based interest rates for the facility at
30 June 2017 are:
-- Tranche 1: 10.48%;
-- Tranche 2: 14.08%
Total interest for the Period on this interest-bearing loan was
US$0.1 million, and has been capitalised to the cost of the
project.
(4) LSL140.0 million (US$10.7 million) bank loan facility at
Letšeng Diamonds
This loan was a three-year unsecured project debt facility which
was signed jointly with Standard Lesotho Bank and Nedbank Limited
for the total funding of the Coarse Recovery Plant. Final repayment
was made on 10 February 2017 and the facility was closed on that
date.
(5) LSL250.0 million (US$19.1 million) bank loan facility at
Letšeng Diamonds
This loan is a three-year unsecured revolving working capital
facility, signed jointly with Standard Lesotho Bank and Nedbank
Capital, which was renewed in July 2015. The facility bears
interest at the Lesotho prime rate.
At Period end LSL50.0 million (US$3.8 million) had been drawn
down, resulting in LSL200.0 million (US$15.3 million) available to
be drawn down under this facility. The South African Rand based
interest rate for this facility at 30 June 2017 is 11.75%.
(6) US$25.0 million / US$35.0 million bank loan facility at Gem
Diamonds Limited
The US$25.0 million was a six-and-a-half-year project debt
facility for the Ghaghoo asset. At 31 December 2016, this facility
was fully drawn down. In February 2017, this facility was fully
repaid in line with placing the Ghaghoo asset on care and
maintenance.
The US$35.0 million loan is a three-year revolving credit
facility (RCF) with Nedbank Capital which was renewed on
29 January 2016 for a further three years. The facility was
accessed in order to settle the Ghaghoo US$25.0 million loan.
At Period end, US$25.1 million had been drawn down, resulting in
US$9.9 million available to be drawn down under this facility. The
US$ based interest rate for this facility at 30 June 2017 is
6.6%.
The Gem Diamonds Limited US$35.0 million RCF was restructured
post Period end to increase the facility to US$45.0 million. This
restructured facility consists of two tranches:
-- Tranche 1: relates to the Ghaghoo US$25.0 million debt
whereby capital repayments have been re-scheduled to commence in
September 2018 with a final repayment due on 31 December 2020.
-- Tranche 2: this tranche of US$20.0 million relates to an RCF
and includes an upsize mechanism whereby this tranche will increase
by a ratio 0.6:1 for every repayment made under Tranche 1. This
will result in the available facility increasing to US$35.0 million
once Tranche 1 is fully repaid.
15. Cash flow notes
30 June 30 June
2017(1) 2016(1)
US$'000 US$'000
------ ----------------------------------------- --------------- ----------
15.1 Cash generated by operations
Profit before tax and exceptional
items 5 266 39 164
(40
Exception items(2) (2 971) 000)
Adjustments for:
Depreciation and amortisation on
property, plant 5 789 5 182
31
Waste stripping cost amortisation 681 17 975
Impairment of asset - 40 000(2)
Finance income (285) (972)
Finance costs 2 503 1 394
Unrealised foreign exchange differences (1 995) (5 674)
Profit on disposal of property,
plant and equipment - (14)
Movements in prepayments 99 83
Other non-cash movements 1 141 1 411
Share-based equity transaction 842 914
================================================ =============== ==========
42 070 59 463
================================================ =============== ==========
15.2 Working capital adjustments
(Increase)/Decrease in inventories (2 001) 4 263
Decrease in receivables 2 189 1 482
Decrease in trade and other payables (8 155) (6 274)
================================================ =============== ==========
(7 967) (529)
================================================ =============== ==========
1 Unaudited
2 Refer to Note 4, Exceptional items
16. Commitments and contingencies
The Board has approved capital projects of US$16.0 million (31
December 2016: US$23.2 million), mainly relating to the Letšeng
mining support services complex, of which US$14.9 million (31
December 2016: US$3.3 million) have been contracted at 30 June
2017.
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 relating to ongoing employee-related legal costs
approximating US$1.0 million
(31 December 2016: US$0.5 million) and tax claims within the
various jurisdictions in which the Group operates approximating
US$1.0 million (31 December 2016: US$1.0 million).
17. Related parties
Relationship
Jemax Management (Proprietary) Limited Common
director Jemax Aviation (Proprietary) Limited Common
director Gem Diamond Holdings Limited
Common director Government of Lesotho
Non-controlling interest
30
30 June June
2017(1) 2016(1)
US$'000 US$'000
================================================================ ========= ===============
Compensation to key management personnel (including Directors)
Share-based equity transactions 609 715
Short-term employee benefits 1 383 2 573
================================================================ ========= ===============
1 992 3 288
================================================================ ========= ===============
Fees paid to related parties
Jemax Aviation (Proprietary) Limited (55) (50)
Jemax Management (Proprietary) Limited (51) (36)
Royalties paid to related parties
Government of Lesotho (7 030) (8 415)
Lease and license payments to related parties
Government of Lesotho (138) (120)
Purchases from related parties
Jemax Aviation (Proprietary) Limited 90 (76)
Jemax Management (Proprietary) Limited (4) (3)
Amount included in trade receivables owing by/(to) related
parties
Jemax Aviation (Proprietary) Limited 37 15
Jemax Management (Proprietary) Limited (10) (7)
Amounts owing to related party
Government of Lesotho (2 551) (2 112)
Dividends paid
Government of Lesotho - (6 247)
================================================================ ========= ===============
1 Unaudited
18. Events after the reporting Period
There were two events which took place between the Period end
and the approval of the financial statements which are of
significance in assessing the state of the Group's affairs:
-- In July, the Gem Diamonds Limited US$35.0 million revolving
credit facility was restructured to increase the facility from
US$35.0 million to US$45.0 million (refer to Note 14
Interest-bearing loans and borrowings). Following the
restructure,
US$1.1 million was drawn down, resulting in US$18.8 million
available to be drawn down under this facility;
-- In July, 1 335 000 nil-cost options were granted to certain
key employees and Executive Directors under the Long-term
Incentive Plan of the Company. The vesting of the options will
be subject to the satisfaction of certain market and non-market
performance conditions over a three-year period. The satisfaction
of certain performance as well as service conditions are classified
as non-market conditions. 185 000 of the options granted relate to
market conditions. The options vest after a three year period and
are exercisable between 4 July 2020 and 3 July 2027. If the
performance or service conditions are not met, the options lapse.
The performance conditions relating to the non-market conditions
are not reflected in the fair value of the award at grant date, and
therefore the Company will assess the likelihood of these
conditions being met with a relevant adjustment to the cumulative
charge as required at each financial year end. The fair value of
the nil-cost options is GBP0.86 (US$1.11) and the option grants are
settled by issuing shares.
Contact Details and Advisers
Gem Diamonds Limited
Registered office
Coastal Building, 2nd Floor Wickham's Cay II
Road Town, Tortola
British Virgin Islands
Head office
2 Eaton Gate
London SW1W 9BJ United Kingdom
T: +44 (0) 203 043 0280
F: +44 (0) 203 043 0281
Financial adviser and sponsor
JPMorgan Casenove Limited
20 Moorgate
London EC2R 6DA
United Kingdom
T: +44 (0) 20 7588 2828
F: +44 (0) 20 7155 9000
Financial adviser
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street London EC2Y 9LY United Kingdom
Tel: +44 (0) 20 3100 2000
Fax: +44 (0) 20 3100 2099
Panmure Gordon & Co.
One New Change
London EUM 9AF United Kingdom
T: +44 (0) 20 7886 2500
Legal adviser
Linklaters
One Silk Street London EC2Y 8HQ
United Kingdom
T: +44 (0) 20 7456 2000
F: +44 (0) 20 7456 2222
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF United Kingdom
T: +44 (0) 20 7951 2000
F: +44 (0) 20 7951 1345
Financial PR Adviser
Celicourt Communications
Adam House
7-10 Adam Street, The Strand
London WC2N6AA United Kingdom
T: +44 (0) 20 7520 9265
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKADBNBKBPFD
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