TIDMGEMD
RNS Number : 4258W
Gem Diamonds Limited
19 August 2015
19 August 2015
GEM DIAMONDS HALF YEAR 2015 RESULTS
Strong operational performance and project delivery drives solid
Half Year 2015 results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company"
or the "Group") today announces its half year results for the six
months ending 30 June 2015 ("H1 2015" or "the Period").
FINANCIAL RESULTS:
Solid financial performance despite challenging market
conditions
-- Revenue of US$ 118.0 million (US$ 148.9 million in H1
2014)
-- Underlying EBITDA of US$ 46.1 million (US$ 63.5 million in H1
2014)
-- Attributable profit of US$ 15.4 million (US$ 19.7 million in
H1 2014)
-- Basic EPS of 10.69 US cents (15.30 US cents in H1 2014)
-- Cash on hand of US$ 83.8 million as at 30 June 2015 (US$ 70.5
million attributable to Gem Diamonds)
-- A maiden dividend of 5 US cents per share (US$ 6.9 million)
paid on 9 June 2015
OPERATIONAL RESULTS:
Letšeng:
Strong operational performance with projects delivered on time
and budget; robust prices achieved in a difficult market
-- Carats recovered of 50 019 (54 678 in H1 2014)
-- Average value of US$ 2 264* per carat achieved (US$2 747* in
H1 2014)
-- Five diamonds greater than 100 carats recovered
-- 13 diamonds achieved a total sales value of greater than US$
1 million each
-- Ore treated of 3.1 million tonnes (3.2 million in H1
2014)
-- Waste tonnes mined of 11.4 million tonnes (10.0 million
tonnes in H1 2014)
-- Zero lost time injuries
*Includes carats extracted for manufacturing at rough
valuation.
Ghaghoo:
Recovered grade trending upward; recovery of some larger
diamonds
-- Carats recovered of 35 283
-- Ore treated of 132 125 tonnes
-- Average grade achieved between 28 and 30 cpht for May and
June
-- Five development tunnels completed
-- Slot tunnel completed between Tunnels 1 and 5 allowing
retreat stoping to commence
-- Sale of 10 096 carats in January 2015, achieved US$210 per
carat
-- 13 diamonds of greater than 10 carats each recovered, with
the largest being 48 carats
-- Zero lost time injuries
Commenting on the results today, Clifford Elphick, Chief
Executive of Gem Diamonds, said:
"Letšeng continues to consistently produce the large,
exceptional quality diamonds. Prices for these goods have remained
firm, despite the current challenging conditions in the diamond
market.
The Company continues to demonstrate capital discipline and, at
Letšeng, we have successfully completed the low capex incremental
growth projects on time and on budget. The previously announced
optimised Life of Mine plan for Letšeng has significantly increased
the NPV of the mine by allowing optimal access to the high value
Satellite pipe material and smoothing out the waste mining profile.
Letšeng remains on track to meet its targets for the year.
At Ghaghoo, the mine development and ramp up to full planned
production rates continues to progress, despite challenges in
localised ground conditions. The first parcel of Ghaghoo
commissioning diamonds was sold in February 2015 for US$ 2.1
million, achieving US$ 210 per carat. In July, a second parcel was
sold for US$ 4.9 million (US$ 165 per carat), a lower price given
the current market conditions. Encouragingly, as production begins
to ramp up, a number of larger white diamonds and small coloured
diamonds were recovered during the Period.
In June, the Company paid its maiden dividend of 5 US cents per
share (US$ 6.9 million)".
The Company will be hosting an audio presentation on its half
year results today, 19 August 2015, at 9:30 am BST.
A live audio webcast of this presentation will be available on
the Company's website: www.gemdiamonds.com
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Sherryn Tedder, Investor Relations
Tel: +44 203 043 0280
Mob: +44 7778 246 321
Bell Pottinger
Daniel Thole/ Joanna Boon
Tel: +44 (0) 203 772 2500
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. Since Gem Diamonds' acquisition of Letšeng in
2006, the mine has produced four of the twenty largest white gem
quality diamonds ever recorded.
Gem Diamonds has a growth strategy based on the expansion of the
Letšeng mine and bringing the Ghaghoo mine into production, while
maintaining its strong balance sheet. The Company seeks to maximise
revenue and margin from its rough diamond production by pursuing
cutting, polishing and sales and marketing initiatives further
along the diamond value chain. With favourable supply/demand
dynamics expected to benefit the industry over the medium to long
term, particularly at the high end of the market supplied by Gem
Diamonds, this strategy positions the Company well to generate
attractive returns for shareholders in the coming
years.www.gemdiamonds.com
INTERIM Business Review
The first half of 2015 marked a solid start to the year with the
Letšeng mine reporting strong operational performance and on track
to deliver the previously announced full year 2015 guidance.
Letšeng also continued to produce exceptional quality large
diamonds, prices for which have remained firm despite the current
challenging conditions in the market.
As part of the Group's broader strategy to identify and
implement low capital, value enhancing opportunities at Letšeng,
the mine successfully delivered both of its low capex incremental
growth projects, the Plant 2 Phase 1 upgrade and the new Coarse
Recovery Plant, on schedule and within budget. The implementation
of these two projects will see an increase in tonnes of ore treated
and carats recovered in the remainder of the year and beyond. While
value accretive opportunities continue to be explored, there are no
other major capital projects planned at Letšeng in the foreseeable
future.
During the Period, Letšeng announced an optimised Life of Mine
plan, which significantly enhances the mine's NPV through
optimising waste stripping and increasing the percentage of the
higher grade, higher value Satellite ore available to be treated
over the life of mine.
Development of the Ghaghoo mine continues to progress with
production being ramped up, albeit slower than planned due to
difficult localised ground conditions which have hampered slot
development across the first five production tunnels. Water
management has been a focus at the mine, with specialist expertise
having been brought in to seal off the water fissure to avoid any
further major ingress of water as work progresses slowly and
carefully through the water fissure area.
The first parcel of Ghaghoo commissioning diamonds was sold in
February 2015 for US$ 2.1 million, achieving US$ 210 per carat. In
July, a second parcel also consisting of commissioning diamonds was
sold for US$ 4.9 million (US$ 165 per carat) in a difficult market.
Encouragingly, a number of larger white diamonds and small coloured
diamonds were recovered during the Period. As Ghaghoo had not
reached commercial production for accounting purposes during the
Period, all revenue achieved and costs incurred were capitalised to
the carrying value of the asset.
In line with the Group's strategy of delivering additional value
to its shareholders, the Company paid its maiden dividend of 5 US
cents per share (US$ 6.9 million) on 9 June 2015.
The Group's financial position remains robust with a strong cash
balance of US$ 83.8 million and undrawn facilities of US $40.6
million as at 30 June, underpinned by Underlying EBITDA achieved of
US$ 46.1 million during the Period.
DIAMOND MARKET
During the first half of 2015 the rough diamond market
experienced continued high inventory levels and liquidity concerns.
This, combined with global macro-economic uncertainties, has
continued to place downward pressure on both rough and polished
diamond prices. Although demand and prices for Letšeng's high
quality diamond production have remained resilient through the
Period, the challenging market conditions have had a negative
effect on prices achieved for Ghaghoo's more commercial quality
production.
In the second half of the year it is expected that prices for
Letšeng's high quality diamonds will remain firm while the prices
for Ghaghoo's production should stabilise.
The Group continues to see robust support for diamond prices in
the medium to long term, with favourable demand/supply fundamentals
being underpinned by the continued growth in demand from the
non-traditional markets in Asia, a strengthening in traditional
markets such as the USA, and a limited growth in supply.
HEALTH, SAFETY, SOCIAL AND ENVIRONMENT (HSSE)
Gem Diamonds continues to strive towards its goal of zero harm
to its people and environment and to operate within its sustainable
development framework. The Group reports a fatality-free and Lost
Time Injury (LTI)-free first half of 2015. The Group-wide Lost Time
Injury Frequency Rate (LTIFR) is 0.00 and the Group-wide All Injury
Frequency Rate (AIFR) is currently 3.26. Gem Diamonds is committed
to working closely with Project Affected Communities and to
implementing sustainable community projects that address the needs
of the various communities. Zero major or significant environmental
or stakeholder incidents were recorded over the Period.
OPERATING REVIEW:
Letšeng
(MORE TO FOLLOW) Dow Jones Newswires
August 19, 2015 02:00 ET (06:00 GMT)
The Letšeng mine is famous for its exceptional, top quality
diamonds, having the highest proportion of large, high value
diamonds, making it the highest average dollar per carat kimberlite
diamond mine in the world. 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 and has consistently delivered exceptional
returns for its shareholders.
OPERATIONAL HIGHLIGHTS
-- Carats recovered of 50 019 (54 678 carats in H1 2014)
-- Rough tender revenue of US$ 106.3 million* (US$ 147.8 million
in H1 2014)
-- Average value of US$ 2 264* per carat achieved (US$ 2 747*
per carat in H1 2014)
-- Five diamonds greater than 100 carats recovered
-- Grade recovered of 1.61cpht (1.69 cpht in H1 2014)
-- Ore treated of 3.1 million (3.2 million tonnes in H1
2014)
-- Waste tonnes mined of 11.4 million (10.0 million tonnes in H1
2014)
-- Successful delivery of the Plant 2 Phase 1 upgrade and new
Coarse Recovery Plant on time and within budget
*includes carats extracted for manufacturing at rough
valuation.
SUSTAINABILITY HIGHLIGHTS
-- Zero LTIs
-- LTIFR 0.00
-- AIFR 3.26
-- Zero significant stakeholder and environmental incidents
OPERATIONAL PERFORMANCE
During the first half of 2015 Letšeng continued to recover some
of the world's largest and highest value diamonds. Five diamonds
recovered were each greater than 100 carats in size, including a
314 carat Type IIa white diamond which was sold into a partnership
arrangement in May 2015. In July 2015, another remarkable 357 carat
Type IIa white diamond was recovered and options for its sale are
being considered.
The Plant 2 Phase 1 upgrade was completed on schedule and within
the budget of Maloti (LSL) 50.0 million (US$ 4.2 million), with the
shutdown for the changeover completed within 19 days. This first
phase will deliver an increase in treatment capacity of 250 000
tonnes per annum, as well as further reducing diamond damage. Phase
1 will lay the foundation for further improvements in both
treatment capacity and diamond damage reduction in subsequent plant
development phases at the appropriate time. The shutdown at Plant 2
to allow for the aforementioned upgrade to be completed, resulted
in 3% lower tonnes treated compared to H1 2014 but remained in line
with the mine plan and guidance for 2015.
The construction of the Coarse Recovery Plant was completed on
schedule at the end of Q2 2015 and within the budget of LSL 140.0
million (US$ 11.7 million). Commissioning has been successful and
on the first day of operation, a 52 carat Type IIa diamond was
recovered. The X-Ray Transmissive (XRT) sorters installed in the
new Coarse Recovery Plant will ensure improved recovery of the high
value type II diamonds; and personnel X-Ray scanners and
significantly improved surveillance, together with fully hands-free
and auditable diamond recovery, will result in the significant
security improvements expected from this project. No further major
capital project expenditure is anticipated at Letšeng for the
foreseeable future.
Of the total ore treated at Letšeng's Plants 1 and 2, 33% of the
material was sourced from the Satellite pipe and 67% from the Main
pipe. The ramp up of Satellite pipe ore treated to 1.65 million
tonnes in 2015 is on track to be achieved as reported in the
optimised Life of Mine plan. The balance of the ore (0.5 million
tonnes) was treated through the Alluvial Ventures contractor plant,
80% of which was sourced from the Main pipe and 20% from
stockpiles. Certain process improvement modifications were also
undertaken during the Period at the Alluvial Ventures contractor
plant which should see minor improvements in both tonnages treated
and grade recovered going forward.
Waste mining for the Period was 14% higher than in H1 2014 and
is on target to achieve the full year 2015 guidance of 22 to 24
million tonnes per annum. Additional larger mining equipment is
being mobilised to achieve these targets.
Electricity at the Letšeng mine is supplied from South Africa by
Eskom via the Lesotho Electricity Company. With increased
load-shedding events by Eskom, the on-site back-up power generators
have proved to be a worthwhile investment as they have greatly
minimised the impact of power outages on production during the
Period, without significantly impacting total operating costs.
Details of overall costs and capital expenditure incurred at
Letšeng during the Period are included in the Group Financial
Performance section.
OPTIMISED LIFE OF MINE PLAN
On 22 May 2015, Gem Diamonds released a presentation on the
optimised Life of Mine plan for Letšeng on the Company's website
www.gemdiamonds.com. This plan allows for an increased contribution
of higher value material from the Satellite pipe, resulting in a
significantly improved NPV over the life of mine.
Key features of the revised plan are as follows:
-- Steeper pit slopes made possible by improved blasting
practices
-- Increased plant treatment capacity from the Plant 2 Phase 1
upgrade
-- Smoother waste profile, peaking at 36 mtpa
-- Satellite ore tonnage increase to 1.65 mtpa in 2015 to 2019,
and 2.00 mtpa from 2020 onwards
DIAMOND SALES
Letšeng H1 2015 H2 2014
----------------------- ------- -------
Carats sold* 46 961 53 799
----------------------- ------- -------
Average US$ per carat* 2 264 2 747
----------------------- ------- -------
*includes carats extracted for manufacturing at rough
valuation.
Letšeng's rough diamond production is sold on tender in Antwerp
by Gem Diamonds Marketing Services BVBA (Gem Diamonds Marketing
Services), a wholly owned Gem Diamonds subsidiary. During the
Period, Letšeng held four tenders, achieving an average price of
US$ 2 264* per carat resulting in total rough tender revenue of US$
106.3 million*, bringing the 12 month rolling US$ per carat average
to US$ 2 304* per carat.
HSSE
No LTIs were recorded at Letšeng during the Period, resulting in
an LTIFR of 0.00. The AIFR for the Period was 2.29. Letšeng has
performed well from an HSSE perspective and continues to build on
the culture of safety it has created, as well as implementing
various initiatives aimed at integrating its approach to HSSE
management. A Behaviour Based Safety Campaign aimed at proactively
managing health and safety on site has been effectively rolled
out.
Environmental rehabilitation trials through re-vegetation have
successfully commenced on key areas of the mine. The results from
these trials will assist the operation when tailoring
rehabilitation initiative requirements.
Letšeng has spent approximately US$ 0.2 million on social
initiatives over the Period and continues with the implementation
of its three-year Corporate Social Investment (CSI) plan (which
commenced in 2014) aimed at uplifting communities, locally and
beyond. One such CSI project being implemented is the Butha Buthe
vegetable project which is aimed at assisting local subsistence
farmers to provide for their families and to generate an income by
selling fresh produce to various corporations within Lesotho.
No significant or major environmental or stakeholder incidents
were recorded in the Period.
H2 2015 AND ONWARDS
The focus at Letšeng will be on the following key areas:
-- Optimising the newly commissioned Plant 2 to ensure diamond
damage is decreased
-- Optimising the new Coarse Recovery Plant to achieve the
envisaged security and recovery benefits
-- Managing the increase in mining fleet to meet the increased
annual waste stripping target
-- Optimising the Alluvial Ventures plant to improve throughput
and recovery of fine diamonds
-- Evaluating optimal timing for underground mining
OPERATING REVIEW:
Ghaghoo
The Ghaghoo diamond mine in Botswana is currently being
developed by the Company's wholly owned subsidiary, Gem Diamonds
Botswana, which is the holder of a 25 year mining licence awarded
in January 2011. Phase 1 of the development is intended to confirm
the grade, diamond prices and recovery processes required to
optimise diamond liberation and recovery. This will form the basis
of the anticipated Phase 2 expansion study as sufficient data
becomes available. For accounting purposes, Ghaghoo had not reached
commercial production during the Period which resulted in all
revenue achieved and costs incurred in the Period being capitalised
to the carrying value of the asset.
OPERATIONAL HIGHLIGHTS
-- Five development tunnels completed
-- Slot tunnel completed between Tunnels 1 and 5 allowing
retreat stoping to commence
-- Average recovered grade during May and June consistently
above the reserve estimate of 27.8 cpht
-- 13 diamonds greater than 10 carats each recovered during H1
2015
-- A 48 carat diamond recovered in May 2015 (largest diamond
recovered at the mine to date)
SUSTAINABILITY HIGHLIGHTS
-- Zero LTIs
-- LTIFR 0.00
-- AIFR 8.22
-- Zero significant stakeholder and environmental incidents
OPERATIONAL PERFORMANCE
During the first half of 2015, 132 125 tonnes of ore were
treated at Ghaghoo with 35 283 carats being recovered. This ore was
sourced mainly from a trial section on Level 0, which is now fully
mined out. Mining has now moved to the first production level
(Level 1) with the May and June average grade recovered increasing
to 29.1cpht, above the reserve grade of 27.8cpht.
The ramp-up of production continues to progress, albeit slower
than anticipated due to difficult localised ground conditions
within the orebody. A slot tunnel along the northern contact
together with five stoping tunnels have been completed which now
allow the production faces to retreat back across the orebody.
Development of a further two tunnels west of Tunnel 5 has also
commenced.
(MORE TO FOLLOW) Dow Jones Newswires
August 19, 2015 02:00 ET (06:00 GMT)
As the tonnage of ore from underground increases, the processing
plant will continue to ramp up to the name plate capacity of 60 000
tonnes per month. Processing optimisation and recovery efficiencies
within the plant are on-going.
With the increased tonnage being treated and the plant running
more consistently, the gaps in the larger sizes of the size
frequency distribution model have begun to be filled. During the
Period, 13 diamonds larger than 10 carats each were recovered,
including a 35 carat diamond recovered in March 2015 and a 48 carat
diamond recovered in May 2015 (being the largest diamond recovered
at Ghaghoo to date). Importantly, a number of fancy colour
diamonds, ranging from blues, pinks, oranges, lilacs and yellows,
although predominantly in the smaller sieve sizes, were recovered
during the Period.
Mining production will continue on Level 1 for the rest of the
year whilst the main decline and the Level 1 rim tunnel are
progressed in order to access the next production sections.
Progress in developing the decline and the rim tunnel has been
impeded by the presence of water-bearing fissures. Specialists have
been deployed to ensure that the fissures are fully sealed prior to
the tunnels advancing and work is progressing slowly and carefully
in order to avoid any further major ingress of water.
The Company is planning a feasibility study to determine the
appropriate time to expand the mine in order to benefit from
economies of scale.
Details of overall costs and capital expenditure incurred at
Ghaghoo during the Period are included in the Group Financial
Performance section.
DIAMOND SALES
The first sale of 10 096 carats of Ghaghoo commissioning
production was held in February 2015, achieving an average price of
US$ 210 per carat (total value of US$ 2.1 million).
Subsequent to Period end, a second sale of 29 891 carats of
Ghaghoo commissioning production took place in July 2015, achieving
a total value of US$ 4.9 million (US$ 165 per carat). Although this
was below the average price achieved for the first sale, the
production was not comparable from a quality perspective and this,
together with a declining market for these goods, had a negative
effect on the price achieved.
It is anticipated that the next Ghaghoo sale will take place
before the end of the year and will include a higher proportion of
diamonds from the main body of the VKSE phase of the kimberlite
ore.
HSSE
No LTIs were recorded during the Period, resulting in an LTIFR
of 0.00. The AIFR for the Period was 8.22.
Ghaghoo continues with initiatives to improve and build on its
Health, Safety and Environmental systems on site and during the
Period various campaigns aimed at increasing health and safety
awareness were introduced. The operation has made great progress
with the implementation of social initiatives in various
communities within Botswana and has spent approximately US$ 30 000
towards community initiatives. Corporate Social Initiatives have
mainly focused on educational initiatives within various schools in
the project affected communities, but have also included projects
aimed at addressing health concerns within communities and
providing infrastructure where required.
No major or significant environmental or stakeholder incidents
were recorded in the Period.
H2 2015 AND ONWARDS
The focus at Ghaghoo will be on the following key areas:
-- Ramp up of production to a steady state rate of 60 000 tonnes
per month
-- Continuing underground development to ensure sustainable
production at the planned rates
-- Design and development of long term underground
infrastructure to support production
-- Implementation of a water management strategy to deal with
the excess water from the mine
-- Management of costs to ensure profitability at full
production rates
-- Commence with a feasibility study with regards to expanding
the mine to a higher level of production
OPERATING REVIEW:
Gem Diamonds SALES, Marketing & Manufacturing
Gem Diamonds Marketing Services was formed in 2010 and is
responsible for managing the Group's sales and marketing
strategies. The Group maximises revenue from its production by
actively marketing its rough diamonds through competitive tenders
and other appropriate sales and marketing channels to respected
international diamantaires.
As part of the strategic objective to increase revenue for its
rough diamonds and to access additional margins further along the
diamond pipeline, the Group established Baobab Technologies
(Baobab) in 2012, an advanced analytical and manufacturing facility
in Antwerp.
HIGHLIGHTS SUMMARY
-- US$ 106.3 million* with an average price of US$ 2 264* per
carat was achieved for Letšeng's high-value production
-- 13* rough diamonds sold for greater than US$ 1.0 million each
during the Period
-- Polished sales through the manufacturing division and
partnership arrangements contributed US$ 3.3 million in additional
revenue to the Group and US$ 2.6 million to Underlying EBITDA
*includes carats extracted for manufacturing at rough
valuation.
SALES AND MARKETING
The Group's rough diamond production is marketed by Gem Diamonds
Marketing Services and sold 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 tender viewings of the Group'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 tender is managed, as well as the
high-calibre clients who participate in the tenders, contributes to
the achievement of the highest market-driven prices for the Group's
rough diamond production from both Letšeng and Ghaghoo.
In the first half of 2015, a revision to the number, composition
and timing of the Letšeng tenders was made. The number of tenders
has been revised to eight (instead of 10) tenders during the
year.
Rough diamonds selected for own polishing are manufactured at
Baobab and the final polished diamonds are sold by Gem Diamonds
Marketing Services through direct selling channels to prominent
high-end clients.
ANALYSIS AND MANUFACTURING
Baobab Technologies' advanced mapping and analysis of Letšeng's
exceptional rough diamonds assists the Group in assessing
appropriate true values of its rough diamonds that are presented
for sale. This ensures that robust reserve prices are set for its
diamonds at each tender and assists in the making of strategic
selling, partnering or manufacturing decisions.
In order to access the highest value for its top-quality
diamonds, the Group also selectively manufactures some of its own
high-value rough diamonds through Baobab and places other
exceptional diamonds into strategic partnership arrangements with
select clients.
GROUP FINANCIAL PERFORMANCE
HIGHLIGHTS SUMMARY
-- Revenue US$ 118.0 million
-- Underlying EBITDA US$ 46.1 million
-- Attributable net profit US$ 15.4 million
-- Basic EPS 10.69 US cents
-- Cash on hand US$ 83.8 million
6 months 6 months
ended ended
30 June 30 June
(US$ millions) 2015 2014
------------------------------------------------- -------- --------
Revenue 118.0 148.9
================================================= ======== ========
Royalty and selling costs (9.7) (13.4)
================================================= ======== ========
Cost of sales(1) (56.1) (65.8)
================================================= ======== ========
Corporate expenses (6.1) (6.2)
------------------------------------------------- -------- --------
Underlying EBITDA 46.1 63.5
================================================= ======== ========
Depreciation and mining asset amortisation (5.6) (7.8)
================================================= ======== ========
Share-based payments (0.8) (0.8)
================================================= ======== ========
Other income 0.3 0.1
================================================= ======== ========
Foreign exchange gain 1.3 1.3
================================================= ======== ========
Net finance costs (0.6) (0.1)
------------------------------------------------- -------- --------
Profit before tax for the Period from continuing
operations 40.7 56.2
================================================= ======== ========
Income tax expense (15.1) (20.4)
------------------------------------------------- -------- --------
Profit for the Period from continuing operations 25.6 35.8
================================================= ======== ========
Discontinued operations 0.7 (1.4)
================================================= ======== ========
Profit for the Period 26.3 34.4
================================================= ======== ========
Non--controlling interests (10.9) (14.7)
------------------------------------------------- -------- --------
Attributable profit 15.4 19.7
================================================= ======== ========
(MORE TO FOLLOW) Dow Jones Newswires
August 19, 2015 02:00 ET (06:00 GMT)
Earnings per share for continuing operations (US
cents) 10.69 15.30
------------------------------------------------- -------- --------
1. Including waste stripping costs amortisation but excluding
depreciation and mining asset amortisation.
REVENUE
The first six months of the year were influenced by the
continued cautious approach adopted by the diamond traders since Q3
2014, causing a decrease in demand for both rough and polished
diamonds. The Group's revenue in H1 2015 is primarily derived from
its two business activities, namely its mining operation at Letšeng
and its rough diamond manufacturing operation in Antwerp. Letšeng,
renowned for its large, high value diamonds continued its strong
performance against this difficult backdrop and although proved
resilient to the downward market pressures, its revenue was lower
than the exceptional results achieved in H1 2014. Influencing the
decline in revenue of 21% from H1 2014 was 13% lower volume of
rough carat sales as a result of lower recoveries and an overall
lower US$ per carat achieved of US$ 2 264*.
The Ghaghoo mining operation held its first sale during the
Period which achieved US$ 2.1 million (US$ 210 per carat). This
revenue is not included in the Group revenue, and has been set off
against operating and development costs capitalised to the carrying
value of the asset as the mine has not reached full commercial
production for accounting purposes by the end of the Period. The
difficult market conditions had a negative effect on prices
achieved for the more commercial Ghaghoo production.
Mining operations revenue - Letšeng
The Satellite to Main pipe ore ratio through Letšeng Plants 1
and 2 was 33:67 during the Period, compared to 36:64 in H1 2014.
The slight decrease in contribution of ore from the higher-grade
Satellite pipe ore, together with the requirement to shut down
Letšeng's Plant 2 for 19 days during its upgrade, resulted in
Letšeng recovering 50 019 carats, a 9% decrease from H1 2014.
Furthermore, an increase in diamond inventory levels at the end of
the current Period, due to the timing of production cut-off for
tender purposes, contributed to the lower revenue achieved during
the Period. Letšeng's US$ per carat achieved in H1 2015 of US$ 2
264* was 3% lower than that achieved in H2 2014 of US$ 2 338*, and
18% lower than the exceptional US$ 2 747* achieved in H1 2014.
*includes carats extracted for manufacturing at rough
valuation.
6 months 6 months
ended ended
30 June 30 June
Letšeng 2015 2014
--------------------------------- -------- --------
Average price per carat (US$)(1) 2 264 2 747
================================= ======== ========
Carats sold(2) 46 961 53 799
================================= ======== ========
6 months 6 months
ended ended
Group revenue summary 30 June 30 June
US$ (millions) 2015 2014
------------------------------------------------- -------- --------
Sales - rough 106.3 147.8
================================================= ======== ========
Sales - polished margin 3.3 2.8
================================================= ======== ========
Sales - other 0.3 0.3
================================================= ======== ========
Impact of movement in own manufactured inventory 8.1 (2.0)
================================================= ======== ========
Group revenue 118.0 148.9
================================================= ======== ========
(1) Includes carats extracted for manufacturing at rough
valuation.
(2) Represents all goods sold to Gem Diamonds Marketing Services
in the year.
Diamond manufacturing operation
Manufacturing and partnership arrangement activities contributed
US$ 3.3 million to Group revenue (through additional polished
margin and uplift generated) and US$ 2.6 million to Underlying
EBITDA during the Period. During the Period 237 carats valued at a
rough market value of US$ 3.0 million were extracted from the
Letšeng exports for manufacturing. In total, polished diamonds with
an initial rough value of US$ 11.1 million were sold during the
Period and US$ 6.9 million remained in inventory at the end of the
Period, compared to US$ 15.0 million at 31 December 2014. The
year-on-year polished inventory movement increased the Group
revenue by US$ 8.1 million.
ROYALTIES AND SELLING COSTS
Royalties and selling costs in the Group of US$ 9.7 million
mainly comprise mineral extraction costs paid to the Lesotho
Revenue Authority of 8% on the sale of diamonds, and diamond
marketing related expenses.
COST OF SALES
Operational excellence through cost reductions and enhancing
production efficiency remained a key focus area for the Period.
Cost of sales for the Period was US$ 56.1 million, compared to
US$ 66.0 million in H1 2014, the majority of which was incurred at
Letšeng, and includes waste stripping costs amortised of US$ 24.4
million (2014: US$ 24.4 million).
6 months 6 months
ended ended
30 June 30 June
Exchange rates 2015 2014 Variance
------------------------------------- -------- -------- --------
LSL per US$1.00
===================================== ======== ======== ========
Average exchange rate for the Period 11.92 10.70 11%
===================================== ======== ======== ========
Period end exchange rate 12.14 10.64 14%
===================================== ======== ======== ========
BWP per US$1.00
===================================== ======== ======== ========
Average exchange rate for the Period 9.79 8.84 11%
===================================== ======== ======== ========
Period end exchange rate 9.87 8.80 12%
===================================== ======== ======== ========
US$ per GBP
===================================== ======== ======== ========
Average exchange rate for the Period 1.52 1.67 (9%)
===================================== ======== ======== ========
Period end exchange rate 1.57 1.71 (8%)
===================================== ======== ======== ========
The Lesotho loti (LSL) (pegged to the South African rand),
Botswana pula (BWP) and British pound (GBP) were all weaker against
the US dollar during the Period, positively impacting the
operations' US dollar reported costs.
6 months 6 months
ended ended
30 June 30 June
Letšeng costs 2015 2014
----------------------------------------------------- -------- --------
US$ (per unit)
===================================================== ======== ========
Direct cash cost (before waste) per tonne treated(1) 11.96 12.44
===================================================== ======== ========
Operating cost per tonne treated(2) 17.56 20.05
===================================================== ======== ========
Waste cash cost per waste tonne mined 2.17 2.30
----------------------------------------------------- -------- --------
Local currency (per unit) LSL
===================================================== ======== ========
Direct cash cost (before waste) per tonne treated(1) 142.60 133.13
===================================================== ======== ========
Operating cost per tonne treated(2) 209.33 214.46
===================================================== ======== ========
Waste cash cost per waste tonne mined 25.84 24.64
----------------------------------------------------- -------- --------
(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.
At Letšeng, total direct cash costs (before waste costs) in
local currency increased by 3.2% from LSL 429.9 million in H1 2014
to LSL 443.5 million in H1 2015. This resulted in unit costs per
tonne treated for the Period of LSL 142.60 relative to the prior
comparative Period of LSL 133.13, representing an effective
increase of 7.1% of which c.50% was influenced by the lower volume
of tonnes treated. Further cost saving initiatives contributed to
the balance of the increase being lower than general in-country
inflation of approximately 6% and fuel and power increases
experienced of above general inflation.
Operating costs per tonne treated for the Period decreased to
LSL 209.33 per tonne compared to LSL 214.46 per tonne. These costs
are driven by the direct cash costs above, the waste stripping cost
amortised (which is influenced by the different waste to ore strip
ratios for the particular ore processed) and inventory movements.
In H1 2015, similar Satellite and Main pipe ore areas and ratios
were mined compared to H1 2014 resulting in similar amortisation
charges. The net decrease in overall operating costs was influenced
by the higher volume of closing inventory at the end of the
Period.
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August 19, 2015 02:00 ET (06:00 GMT)
The increase in the local currency waste cash cost per waste
tonne mined of 4.9% is lower than in-country inflation, positively
impacted by higher tonnages of waste mined and efficiencies from
the larger fleet being deployed to meet the optimised mine plan
profile.
6 months 6 months
ended ended
Other operating information - Letšeng (US$ 30 June 30 June
millions) 2015 2014
------------------------------------------------ -------- --------
Waste cost capitalised 28.5 26.8
================================================ ======== ========
Waste stripping cost amortised 24.4 24.4
================================================ ======== ========
Depreciation and mining asset amortisation 5.6 7.2
================================================ ======== ========
Capital expenditure 8.5 3.8
------------------------------------------------ -------- --------
At Ghaghoo, operating costs of US$ 10.5 million and development
costs of US$ 4.5 million were incurred during commissioning in H1
2015, whilst 132 125 tonnes were treated and 825 metres were
developed. These costs are not included in the Group cost of sales,
and together with the revenue achieved from the first sale during
the Period, have been capitalised to the carrying value of the
mining asset. Once the mine achieves sustainable mining and
processing rates, and is deemed to have reached commercial
production for accounting purposes, the ongoing operating costs
will form part of the Group's reported cost of sales.
CORPORATE EXPENSES
Corporate costs relate to central costs incurred by the Group
and are incurred in both South African rand and British pounds.
Corporate expenses of US$ 6.1 million were kept in line with that
of the previous period and were positively impacted by the stronger
US dollar during the Period, notwithstanding inflationary
increases.
SHARE-BASED PAYMENTS
Share-based payment costs for the year amounted to US$ 0.8
million. A new Long-term Incentive Plan (LTIP) option was granted
during April 2015 whereby 1 407 500 nil-cost options were granted
to certain key employees and Executive Directors. 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
share-based payment cost associated with the new award had a US$
0.2 million impact on the current year charge.
NET FINANCE COSTS
Net finance costs comprise the unwinding of the current
environmental provisions and costs on interest-bearing liabilities;
partially offset by interest received from surplus cash from the
Letšeng operation.
INCOME TAX EXPENSE
The effective tax rate for the Period for the Group was 37.2%,
above the UK statutory tax rate of 20.25%. The tax rate of the
Group is driven by tax of 25% on profits generated by Letšeng
Diamonds and deferred tax assets not recognised on losses incurred
in non-trading operations.
UNDERLYING EBITDA AND ATTRIBUTABLE PROFIT
Based on the above trading results, the Group generated an
Underlying EBITDA of US$ 46.1 million. The profit attributable to
shareholders for the Period was US$ 15.4 million equating to 10.69
US cents per share on a weighted average number of shares in issue
of 138 million.
FINANCIAL POSITION AND FUNDING REVIEW
The Group maintained a strong cash position with US$ 83.8
million cash on hand (net cash position of US$ 49.6 million after
debt) at the Period end of which US$ 70.5 million is attributable
to Gem Diamonds and US$ 0.2 million is restricted. Notwithstanding
difficult diamond market conditions, the Group generated positive
cash of US$ 38.7 million from operating activities before
investment in waste stripping costs at Letšeng of US$ 28.5 million,
capital expenditure throughout the Group of US$ 11.5 million and
Ghaghoo development and commissioning costs of US$ 15.0 million. In
addition the Group paid its maiden dividend of US$ 6.9 million.
The LSL 250.0 million, three-year unsecured revolving working
capital facility at Letšeng was successfully renewed for an
additional three-year term to June 2018. The LSL 140.0 million
facility at Letšeng is currently being repaid in 10 equal quarterly
instalments and will be fully repaid by June 2017. The US$ 25.0
million facility for the completion of the Ghaghoo Phase 1
development is currently being extended into a six year, secured
facility, with repayments due to commence in 2016. There has been
no further change to the debt facilities reported at 31 December
2014.
OUTLOOK
In the current depressed diamond market and due to the slower
than expected ramp up at Ghaghoo, capital and cash management
discipline will be of high priority in the short-term.
Focus will be on converting the Ghaghoo mine from its
commissioning phase into sustaining operational activities and
achieving steady state production.
At Letšeng, the potential added value benefits following the
completion of its current projects are expected to materialise and
generate positive return on capital invested. Operationally,
Letšeng is geared to continue to mine a higher percentage of the
higher grade, higher value Satellite pipe ore in line with the
optimised mine plan.
With cost control and operational efficiencies the ultimate
focus for H2 2015, the Company is on track to pay its next dividend
in 2016 based on the 2015 full year results.
RISKS TO OUR BUSINESS
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.
A reassessment of the risks, which have been previously reported
in the Business Review in the 2014 Annual Report, has identified
that the principal risks and uncertainties have not changed. These
may impact the Group over the medium to long term; however the
following key risks have been identified which may impact the Group
over the next six months.
Short term demand and prices (Market and Price Risk)
Whilst the medium to long term fundamentals of the diamond
market remain intact, with demand forecast to significantly outpace
supply, in the short term the prevailing climate of global economic
uncertainty may cause some volatility in rough diamond pricing.
Although the Group cannot materially influence the situation,
market conditions are constantly monitored to identify current
trends that will pose a threat or create an opportunity for the
Group. In this regard, management have taken all reasonable
measures to preserve its cash position and to have flexibility in
its sales processes and in reassessing its capital projects and
operational strategies.
Exchange Rates (Financial Risk)
The Group receives its revenue in US dollars while its cost base
arises in the local currencies of the various countries within
which the Group operates (mainly in Lesotho, Botswana and South
Africa). The volatility of these currencies against the US dollar
will impact the Group's profitability. In order to mitigate
currency risk, these fluctuations are closely monitored and where
appropriate and at relevant currency levels, the Group enters into
exchange rate contracts to protect future cash flows.
Expansion and Project delivery
The Group's growth strategy is based on delivery of expansion
projects, premised on various studies, cost indications and future
market assumptions. In assessing the viability, costs and
implementation of these projects, risks concerning cost overruns
and/or delays may affect the effective implementation and execution
thereof.
Letšeng:
The Group remains highly focused on delivering on its phased
approach of implementing expansion projects at Letšeng. The Plant 2
Phase 1 Upgrade and the Coarse Recovery Plant projects have both
been successfully completed.
Ghaghoo
The ramp-up to full production at Ghaghoo continues to be
hampered by technical challenges. The main risks to achieving full
production in H2 2015 are considered to be:
-- Availability of ore from underground due to difficult ground conditions, and
-- Traversing the main water fissure that was previously encountered on Level 1.
Additional support as required is being installed and
underground conditions are continually monitored. With the slot
development between Tunnels 1 to 5 on Level 1 now being completed,
the increased availability of loading faces will improve the
availability of ore.
The decline to Level 2 as well as the rim tunnel on Level 1 will
need to pass through the water fissure to enable development to
continue to allow access to the second production section.
Specialists have been deployed to ensure that the fissure is fully
sealed prior to the tunnels advancing and work is progressing
slowly and carefully in order to avoid any further major ingress of
water.
Political risks
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 are potentially subject to rapid change. Changes to the
political environment and regulatory developments are closely
monitored. Where necessary, the Group engages in dialogue with
relevant government representatives in order to remain well
informed of all legal and regulatory developments impacting its
operations and to build relationships.
Mineral Resource risks
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August 19, 2015 02:00 ET (06:00 GMT)
The Group's mineral resources influence the operational mine
plans and affect the generation of sufficient margins. Variability
of its mineral resources could affect the Group's profitability in
the short-term, mitigated by flexibility in the mining faces and
improved in-pit geological controls.
Production interruption
The Group may experience material mine and/or plant shut downs
or periods of decreased production due to a number of different
events. Any such event could negatively affect the Group's
operations and impact both profitability and cash flows. The
likelihood of possible interruption events is continually reviewed
and the appropriate management controls, processes and business
continuity plans are in place to mitigate this risk.
Clifford Elphick
Chief Executive Officer
18 August 2015
GEM DIAMONDS LIMITED
HALF-YEARLY FINANCIAL STATEMENTS
30 JUNE 2015
CONTENTS
Responsibility Statement of the Directors in Respect of the Half-yearly
Report and the Financial Statements 16
Independent Auditor's Report to the Members of Gem Diamonds Limited 17
Interim Consolidated Income Statement 18
Interim Consolidated Statement of Comprehensive Income 19
Interim Consolidated Statement of Financial Position 20
Interim Consolidated Statement of Changes in Equity 21
Interim Consolidated Statement of Cash Flows 22
Condensed Notes to the Consolidated Interim Financial Statements 23
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
2014.
The names and functions of the Directors of Gem Diamonds are
listed in the Annual Report for the year ended 31 December 2014.
Two of the non Executive Directors, namely Dave Elzas and Richard
Williams, resigned from the Board on 2 June 2015.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
18 August 2015
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 2015 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, the annual financial statements of
the Group are prepared in accordance with International Financial
Reporting Standards (IFRSs). The condensed consolidated set of
financial statements included in this Half-yearly Report has 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 Ireland) 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 2015 is 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
18 August 2015
interim cONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2015
30 June 30 June
2015(1) 2014*(1)
Notes US$'000 US$'000
------------------------------------------------- ----- ---------------- ---------
CONTINUING OPERATIONS
================================================= ===== ================ =========
148
Revenue 3 118 014 929
================================================= ===== ================ =========
(73
Cost of sales (61 526) 533)
------------------------------------------------- ----- ---------------- ---------
GROSS PROFIT 56 488 75 396
================================================= ===== ================ =========
Other operating income 339 46
================================================= ===== ================ =========
(13
Royalties and selling costs (9 724) 372)
================================================= ===== ================ =========
Corporate expenses (6 209) (6 171)
================================================= ===== ================ =========
Share-based payments 13 (828) (834)
================================================= ===== ================ =========
Foreign exchange gain 1 273 1 297
================================================= ===== ================ =========
OPERATING PROFIT 3 41 339 56 362
================================================= ===== ================ =========
Net finance costs (595) (102)
================================================= ===== ---------------- ---------
Finance income 11 913 1 493
================================================= ===== ================ =========
Finance costs 11 (1 508) (1 595)
------------------------------------------------- ----- ---------------- ---------
PROFIT BEFORE TAX FOR THE PERIOD FROM CONTINUING
OPERATIONS 40 744 56 260
================================================= ===== ================ =========
(20
Income tax expense 7 (15 137) 404)
------------------------------------------------- ----- ---------------- ---------
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS 25 607 35 856
------------------------------------------------- ----- ---------------- ---------
DISCONTINUED OPERATIONS
================================================= ===== ================ =========
Profit/(loss) after tax for the period from
discontinued operations 5 668 (1 414)
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August 19, 2015 02:00 ET (06:00 GMT)
------------------------------------------------- ----- ---------------- ---------
PROFIT FOR THE PERIOD 26 275 34 442
================================================= ===== ================ =========
Attributable to:
================================================= ===== ================ =========
Equity holders of parent 15 440 19 732
================================================= ===== ================ =========
Non-controlling interests 10 835 14 710
------------------------------------------------- ----- ---------------- ---------
PROFIT FOR THE PERIOD
================================================= ===== ================ =========
Earnings per share (cents)
------------------------------------------------- ----- ---------------- ---------
- Basic earnings for the Period attributable
to ordinary equity holders of the
parent 11.17 14.28
================================================= ===== ================ =========
- Diluted earnings for the Period attributable
to ordinary equity holders of the parent 11.01 14.21
================================================= ===== ================ =========
Earnings per share for continuing operations
(cents)
------------------------------------------------- ----- ---------------- ---------
- Basic earnings from continuing operations
for the Period attributable to ordinary equity
holders of the parent 10.69 15.30
================================================= ===== ================ =========
- Diluted earnings from continuing operations
for the Period attributable to
ordinary equity holders of the parent 10.53 15.23
------------------------------------------------- ----- ---------------- ---------
1 Unaudited
* Prior period figures have been restated for the
reclassification impact of accounting for the discontinued
operation (Refer to Note 5, Disposal of subsidiary)
interim consolidated statement of comprehensive income
For the six months ended 30 June 2015
30 June 30 June
2015(1) 2014*(1)
US$'000 US$'000
---------------------------------------------------- ---------------- ---------
PROFIT FOR THE PERIOD 26 275 34 442
===================================================== ================ =========
Other comprehensive income that could be classified
to the income statement in subsequent periods:
==================================================== ================ =========
Exchange differences on translation of foreign
operations (14 642) (7 063)
----------------------------------------------------- ---------------- ---------
Recycling of exchange differences on discontinued
operations (988) -
----------------------------------------------------- ---------------- ---------
Other comprehensive loss for the Period, net
of tax (15 630) (7 063)
===================================================== ================ =========
Total comprehensive income for the Period 10 645 27 379
----------------------------------------------------- ---------------- ---------
Attributable to:
==================================================== ================ =========
Equity holders of parent 806 14 123
===================================================== ================ =========
Non-controlling interests 9 839 13 256
----------------------------------------------------- ---------------- ---------
Total comprehensive income for the Period,
net of tax 10 645 27 379
----------------------------------------------------- ---------------- ---------
1 Unaudited
* Prior period figures have been restated for the
reclassification impact of accounting for the discontinued
operation (Refer to Note 5, Disposal of subsidiary)
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
30 June 31 December
2015(1) 2014(2)
Notes US$'000 US$'000
--------------------------------------------- ----- --------------- -----------
ASSETS
============================================= ===== =============== ===========
Non-current assets
============================================= ===== =============== ===========
Property, plant and equipment 9 385 236 374 927
============================================= ===== =============== ===========
Investment property 615 615
============================================= ===== =============== ===========
Intangible assets 17 267 18 181
============================================= ===== =============== ===========
Receivables and other assets 10 2 893 2 877
============================================= ===== =============== ===========
Other financial assets 5 10
--------------------------------------------- ----- --------------- -----------
406 016 396 610
--------------------------------------------- ----- --------------- -----------
Current assets
--------------------------------------------- ----- --------------- -----------
Inventories 37 176 28 770
============================================= ===== =============== ===========
Receivables and other assets 10 10 591 7 598
============================================= ===== =============== ===========
Other financial assets 11 4
============================================= ===== =============== ===========
Income tax receivable 436 353
============================================= ===== =============== ===========
Cash and short-term deposits 11 83 783 110 738
--------------------------------------------- ----- --------------- -----------
131 997 147 463
--------------------------------------------- ----- --------------- -----------
TOTAL ASSETS 538 013 544 073
--------------------------------------------- ----- --------------- -----------
EQUITY AND LIABILITIES
============================================= ===== =============== ===========
Equity attributable to equity holders of the
parent
--------------------------------------------- ----- --------------- -----------
Issued capital 12 1 383 1 383
============================================= ===== =============== ===========
Share premium 885 648 885 648
============================================= ===== =============== ===========
Treasury shares(3) (1) (1)
============================================= ===== =============== ===========
Other reserves (111 456) (97 753)
============================================= ===== =============== ===========
Accumulated losses (476 349) (484 874)
--------------------------------------------- ----- --------------- -----------
299 225 304 403
============================================= ===== =============== ===========
Non-controlling interests 70 853 61 014
--------------------------------------------- ----- --------------- -----------
TOTAL EQUITY 370 078 365 417
--------------------------------------------- ----- --------------- -----------
Non-current liabilities
--------------------------------------------- ----- --------------- -----------
Interest-bearing loans and borrowings 14 4 614 7 261
============================================= ===== =============== ===========
Trade and other payables 1 425 1 274
============================================= ===== =============== ===========
Provisions 19 334 19 543
============================================= ===== =============== ===========
Deferred tax liabilities 61 943 57 467
--------------------------------------------- ----- --------------- -----------
87 316 85 545
--------------------------------------------- ----- --------------- -----------
Current liabilities
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============================================= ===== =============== ===========
Interest-bearing loans and borrowings 14 29 614 29 841
============================================= ===== =============== ===========
Other financial liabilities - 249
============================================= ===== =============== ===========
Trade and other payables 47 575 43 711
============================================= ===== =============== ===========
Income tax payable 3 430 19 310
============================================= ===== =============== ===========
80 619 93 111
--------------------------------------------- ----- --------------- -----------
TOTAL LIABILITIES 167 935 178 656
--------------------------------------------- ----- --------------- -----------
TOTAL EQUITY AND LIABILITIES 538 013 544 073
--------------------------------------------- ----- --------------- -----------
(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 2015
Attributable to equity
holders of the parent
---------------------------------
Other
Reserves
-----------
Foreign Share Accumulated
currency based (losses)/
Issued Share Own translation equity retained Non-controlling Total
capital premium Shares(2) reserve reserve earnings Total interests equity
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Balance at 1 (146
January 2015 1 383 885 648 (1) 549) 48 796 (484 874) 304 403 61 014 365 417
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Profit for the
Period - - - - - 15 440 15 440 10 835 26 275
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Other
comprehensive
loss - - - (14 634) - - (14 634) (996) (15 630)
================ ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Total
comprehensive
(loss)/income - - - (14 634) - 15 440 806 9 839 10 645
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Share-based
payments (Note
13) - - - - 931 - 931 - 931
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Dividend paid
to equity
holders
of the parent - - - - - (6 915) (6 915) - (6 915)
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Balance at 885 (161
30 June 2015(1) 1 383 648 (1) 183) 49 727 (476 349) 299 225 70 853 370 078
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Balance at 1 (116
January 2014 1 383 885 648 (1) 241) 46 833 (518 091) 299 531 70 879 370 410
================ ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Profit for the
Period - - - - - 19 732 19 732 14 710 34 442
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Other
comprehensive
loss - - - (5 609) - - (5 609) (1 454) (7 063)
------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Total
comprehensive
(loss)/income - - - (5 609) - 19 732 14 123 13 256 27 379
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Share-based
payments (Note
13) - - - - 986 - 986 - 986
================ ======= ======= ========= =========== ======= =========== ========== =============== ========
Dividend paid
to
non-controlling
interests - - - - - - - (10 754) (10 754)
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
Balance at (121
30 June 2014(1) 1 383 885 648 (1) 850) 47 819 (498 359) 314 640 73 381 388 021
---------------- ------- ------- --------- ----------- ------- ----------- ---------- --------------- --------
(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 2015
30 June
30 June 2014(1)
2015(1)
Notes US$'000 US$'000
----------------------------------------------------- ----- -------------- -------------------
CASHFLOWS FROM OPERATING ACTIVITIES 38 701 81 399
===================================================== ===== -------------- -------------------
Cash generated by operations 15.1 70 663 86 089
===================================================== ===== ============== ===================
Working capital adjustments 15.2 (9 393) 5 943
----------------------------------------------------- ----- -------------- -------------------
61 270 92 032
===================================================== ===== ============== ===================
Interest received 913 1 015
===================================================== ===== ============== ===================
Interest paid (101) (259)
===================================================== ===== ============== ===================
Income tax paid (23 381) (11 389)
----------------------------------------------------- ----- -------------- -------------------
CASHFLOWS USED IN INVESTING ACTIVITIES (54 592) (43 372)
===================================================== ===== -------------- -------------------
Purchase of property, plant and equipment 9 (11 453) (4 995)
===================================================== ===== ============== ===================
Development costs capitalised 9 (4 521) (11 585)
===================================================== ===== ============== ===================
Commissioning costs capitalised 9 (10 519) -
===================================================== ===== ============== ===================
Waste cost capitalised 9 (28 487) (26 812)
===================================================== ===== ============== ===================
Proceeds from sale of property, plant and
equipment 422 20
===================================================== ===== ============== ===================
Cash disposed of from disposal of subsidiary 5 (34) -
----------------------------------------------------- ----- -------------- -------------------
CASHFLOWS USED IN FINANCING ACTIVITIES (9 264) 5 173
===================================================== ===== -------------- -------------------
Financial liabilities (repaid)/raised (2 349) 15 927
----------------------------------------------------- ----- -------------- -------------------
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August 19, 2015 02:00 ET (06:00 GMT)
Dividend paid to equity holders of the parent (6 915) -
===================================================== ===== ============== ===================
Dividends paid to non-controlling interests - (10 754)
----------------------------------------------------- ----- -------------- -------------------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (25 155) 43 200
===================================================== ===== ============== ===================
Cash and cash equivalents at the beginning
of the Period - continuing operations 110 704 71 144
===================================================== ===== ============== ===================
Cash and cash equivalents at the beginning
of the Period - discontinuing operations 34 34
===================================================== ===== ============== ===================
Foreign exchange differences (1 800) (466)
----------------------------------------------------- ----- -------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 83 783 113 912
===================================================== ===== -------------- -------------------
Cash and cash equivalents at end of the Period
held with banks 83 611 113 734
===================================================== ===== ============== ===================
Restricted cash at end of the Period 172 178
===================================================== ===== ============== ===================
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 11 83 783 113 912
----------------------------------------------------- ----- -------------- -------------------
(1) Unaudited
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
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 18 August 2015, is unaudited and does not
constitute statutory financial statements. The report of the
auditors on the Group's 2014 Annual Report and Accounts was
unqualified.
The Group is principally engaged in the development and
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 2015 (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
2014.
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 3 to 14. The
financial position of the Group, its cashflows and liquidity
position are described in the Interim Business Review on pages 9 to
14.
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 2014, except
for the adoption of new Standards and Amendments as of 1 January
2015. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
The nature and the effect of these changes are disclosed below.
Although these new standards and amendments apply for the first
time in 2015, they do not have a material impact on the annual
consolidated financial statements of the Group or the interim
condensed consolidated financial statements of the Group.
The nature and the impact of each new standard or amendment are
described below:
Amendments to IAS 19 Defined Benefit Plans: Employee
Contributions
IAS 19 requires an entity to consider contributions from
employees or third parties when accounting for defined benefit
plans. Where the contributions are linked to service, they should
be attributed to periods of service as a negative benefit. These
amendments clarify that, if the amount of the contributions is
independent of the number of years of service, an entity is
permitted to recognise such contributions as a reduction in the
service cost in the period in which the service is rendered,
instead of allocating the contributions to the periods of service.
This amendment is effective for annual periods beginning on or
after 1 July 2014. This amendment is not relevant to the Group,
since none of the entities within the Group have defined benefit
plans with contributions from employees or third parties.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
Annual Improvements 2010-2012 Cycle
These improvements are effective from 1 July 2014 and the Group
has applied these amendments in these interim condensed
consolidated financial statements.
Annual Improvements 2011-2013 Cycle
These improvements are effective from 1July 2014 and the Group
has applied these amendments in these interim condensed
consolidated financial statements.
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
or interpretation Effective date*
-------------------- -------------------------- -------------------------------------------------------
IFRS 9 Financial Instruments Classification and measurement 1 January 2018
of financial assets and financial
liabilities as defined in IAS
39. The Group is still currently
assessing the impact.
IFRS 15 Revenue from The new revenue standard introduces 1 January 2017
Contracts with Customer a single, 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
still currently assessing the
impact.
IAS 16 / IAS Clarification of The amendments clarify the principle 1 January 2016
38 Acceptable Methods in IAS 16 Property, Plant and
of Depreciation Equipment and IAS 38 Intangible
and Amortisation Assets that revenue reflects
a pattern of economic benefits
that are generated from operating
a business rather than the economic
benefits that are consumed through
use of an asset. As such, the
ratio of revenue generated to
total revenue expected to be
generated cannot be used to
depreciate property, plant and
equipment and may only be used
in very limited circumstances
to amortise intangible assets.
As this revenue ratio is not
currently used as a method of
depreciation it is anticipated
that this standard will not
impact the Group. Should the
Group's policies change in this
regard, the Group will assess
the impact at that time.
* Annual periods beginning on or after.
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condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
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)
-- Belgium (sales, marketing and manufacturing of diamonds)
-- Mauritius (manufacturing of diamonds) - discontinued operation in current Period
-- 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. The Mauritius operation,
which was disposed of in the current Period, was previously
aggregated with the Belgium operation into one segment, as
management monitored these two operations as one, due to the
similarity of their services provided.
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 table presents revenue and profit, asset and
liability information from operations regarding the Group's
geographical segments:
BVI, RSA Total continuing Discontinued
6 months ended Lesotho Botswana Belgium and UK operations operations Total
30 June 2015(1) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000)
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
Revenue
================ ========== ================ ========== ========== ================ ================ ==========
Total revenue 107 823 - 119 413 4 298 231 534 85 231 619
================ ========== ================ ========== ========== ================ ================ ==========
Inter-segment (106 649) - (2 725) (4 146) (113 520) - (113 520)
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
External
customers 1 174 - 116 688 152(2) 118 014 85 118 099
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
Segment
operating
profit/(loss) 48 111 (149) (529) (6 094) 41 339 (1 002) 40 337
================ ========== ================ ========== ========== ================ ================ ==========
Net finance
income/(costs) 176 6 - (777) (595) - (594)
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
Profit before
tax 40 744 (1 002) 39 742
================ ========== ================ ========== ========== ================ ================ ==========
Income tax
expense (15 137) - (15 137)
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
Gain on disposal
of subsidiary - 1 670 1 670
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
Profit for the
Period 25 607 668 26 275
---------------- ---------- ---------------- ---------- ---------- ---------------- ---------------- ----------
(1) Unaudited
(2) No revenue was generated in BVI
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
3. Segment information (continued)
BVI, RSA Total Discontinued
6 months ended Lesotho Botswana Belgium and UK continuing operations Total
30 June 2014(1) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000)
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Revenue
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Total revenue 148 124 - 148 213 4 026 300 363 3 300 366
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Inter-segment (146 644) - (914) (3 876) (151 434) - (151 434)
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
External
customers 1 480 - 147 299 150(3) 148 929 3 148 932
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Segment
operating
profit/(loss) 64 200 (357) 476 (7 957) 56 362 (1 414) 54 948
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Net finance
income/(costs) 781 4 - (887) (102) - (102)
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Profit before
tax 56 260 - 54 846
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Income tax
expense (20 404) - (20 404)
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Profit for the
Period 35 856 (1 414) 34 442
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Total
BVI, RSA continuing Discontinued
Lesotho Botswana Belgium and UK operations operations Total
(US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000) (US$'000)
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Segment assets
=============== ========== ============ ============ ========== =========== ============ ==========
At 30 June
2015(1) 329 962 157 310 5 170 45 571 538 013 - 538 013
=============== ========== ============ ============ ========== =========== ============ ==========
At 31 December
2014(2) 321 464 139 987 6 552 75 192 543 195 878 544 073
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
Segment
liabilities
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
At 30 June
2015(1) 48 151 40 166 821 16 854 105 992 - 105 992
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
At 31 December
2014(2) 68 212 34 304 939 17 705 121 160 29 121 189
--------------- ---------- ------------ ------------ ---------- ----------- ------------ ----------
(1) Unaudited
(2) Audited
(3) No revenue was generated in BVI
Included in revenue is revenue from a single customer which
amounted to US$ 21.6 million (30 June 2014: US$ 22.3 million)
arising from sales reported in the Lesotho and Belgium
segments.
Segment liabilities do not include net deferred tax liabilities
of US$ 61.9 million (31 December 2014: US$ 57.5 million).
Operating profits have decreased compared to the corresponding
prior Period as a result of lower diamond prices achieved due to
current difficult market conditions and decreased number of carats
recovered and sold due to the shutdown to commission the Plant 2
Phase 1 upgrade. Royalties and selling costs, being variable costs,
have decreased as a direct result of the decrease in revenue. Costs
decreased mainly as a result of the strong trading of the US dollar
against the Lesotho loti which positively impacted US dollar
reported costs during the Period.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
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4. Underlying earnings before interest, tax, depreciation and
mining asset amortisation (EBITDA)
Underlying EBITDA is shown, as the Directors consider this
measure to be a relevant guide to the performance of the Group. The
reconciliation from operating profit to underlying EBITDA is as
follows:
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
--------------------------------------------------------------------------------------- -------- --------
Operating profit 41 339 56 362
======================================================================================= ======== ========
Foreign exchange gain (1 273) (1 297)
======================================================================================= ======== ========
Share-based payments 828 834
======================================================================================= ======== ========
Other operating income (339) (46)
======================================================================================= ======== ========
Depreciation and mining asset amortisation (excluding waste stripping costs amortised) 5 639 7 674
--------------------------------------------------------------------------------------- -------- --------
Underlying EBITDA 46 194 63 527
--------------------------------------------------------------------------------------- -------- --------
5. Disposal of subsidiary
In 2012, the Group established a small manufacturing facility in
Mauritius through Gem Diamonds Technology Mauritius (Pty) Ltd. On
30 June 2015 the Group sold this manufacturing business. As a
result, the trading results of the operation have been classified
as part of discontinued operations. The net assets have been
derecognised and the subsidiary de-consolidated from this date.
The sale was finalised for the agreed purchase price of US$ 0.4
million, to be paid in quarterly instalments of a minimum of US$ 50
000 commencing in January 2016.The Group retained a cession over
the shares of Gem Diamonds Technology Mauritius (Pty) Ltd as
security for the due, proper and timeous payment of the deferred
proceeds. The consideration receivable has been included in
non-current and current receivables and other assets (Refer Note
10, Receivables and other assets).
The results of the Mauritius operation for the Periods ended 30
June 2015 and 30 June 2014 are as follows:
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
-------------------------------------------------------------- -------- --------
Revenue 85 3
============================================================== ======== ========
Cost of sales and other operating costs (443) (1 380)
-------------------------------------------------------------- -------- --------
Gross loss (358) (1 377)
============================================================== ======== ========
Foreign exchange loss (644) (37)
-------------------------------------------------------------- -------- --------
Operating loss (1 002) (1 414)
-------------------------------------------------------------- -------- --------
Gain on disposal of subsidiary 1 670 -
-------------------------------------------------------------- -------- --------
Profit/(loss) before tax from discontinued operation 668 (1 414)
-------------------------------------------------------------- -------- --------
Income tax expense - -
============================================================== ======== ========
Profit/(loss) after tax from discontinued operation 668 (1 414)
-------------------------------------------------------------- -------- --------
Earnings/(loss) per share from discontinued operation (cents)
============================================================== ======== ========
Basic 0.48 (1.02)
============================================================== ======== ========
Diluted 0.48 (1.02)
-------------------------------------------------------------- -------- --------
(1) Unaudited
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
5. Disposal of subsidiary (continued)
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
============================================================================== ======== ========
The net cash flows attributable to the discontinued operation are as follows:
============================================================================== ======== ========
Operating (293) (1 272)
============================================================================== ======== ========
Investing 444 -
============================================================================== ======== ========
Financing (151) 1 247
============================================================================== ======== ========
Foreign exchange loss on translation of cash balance (4) (1)
------------------------------------------------------------------------------ -------- --------
Net cash outflow (4) (26)
------------------------------------------------------------------------------ -------- --------
The net liabilities disposed of are as follows:
30 June
2015(1)
US$'000
-------------------------------------------------- --------
Assets
================================================== ========
Property, plant and equipment 269
=================================================== ========
Inventories 4
=================================================== ========
Receivables and other assets 119
=================================================== ========
Cash and short term deposits 34
=================================================== ========
Liabilities
================================================== ========
Trade and other payables (732)
=================================================== ========
Provisions (26)
--------------------------------------------------- --------
Net identifiable liabilities disposed of (332)
--------------------------------------------------- --------
Recycling of foreign currency translation reserve (988)
Consideration not yet received (350)
--------------------------------------------------- --------
Gain on disposal of subsidiary (1 670)
--------------------------------------------------- --------
(1) Unaudited
6. Seasonality of operations
The Group's sales environment with regards to its diamond sales
is not materially impacted by seasonal and cyclical fluctuations.
The mining operations may be impacted by seasonal weather
conditions. Appropriate mine planning and ore stockpile build-up
ensures that mining can continue during adverse weather
conditions.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
7. Income tax expense
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
----------------- -------- --------
Income statement
================= ======== ========
Current
================= ======== ========
- Overseas (7 953) (18 372)
================= ======== ========
Withholding tax
================= ======== ========
- Overseas (56) (2 895)
================= ======== ========
Deferred
================= ======== ========
- Overseas (7 128) 863
----------------- -------- --------
(15 137) (20 404)
----------------- -------- --------
(1) Unaudited
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The tax rate of the Group is driven by tax of 25% on profits
generated by Letšeng Diamonds, withholding tax of 10% on dividends
from Letšeng Diamonds and deferred tax assets not recognised on
losses incurred in non-trading operations. The forecast effective
tax rate for the full year for the Group is 37.2%, which has been
applied to the actual results of the interim Period. This is above
the UK statutory tax rate of 20.25% and is predominantly driven by
the deferred tax assets not recognised on losses incurred in
non-trading operations.
8. Dividends paid and proposed
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
------------------------------------------------------- -------- --------
Dividends on ordinary shares declared and paid
======================================================= ======== ========
Final dividend for 2014: 5 cents per share (2013: nil) 6 915 -
------------------------------------------------------- -------- --------
(1) Unaudited
The 2014 proposed dividend was approved on 2 June 2015 and a
final cash dividend of 5 US cents per share was paid to
shareholders on 9 June 2015.
Following the payment of this maiden dividend, the Directors
intend to consider applying a consistent dividend policy based on
the full year 2015 results. This dividend policy is dependent on
the results of the Group's operations, its financial condition,
cash requirements, future prospects, profits available for
distribution and other factors deemed to be relevant at that
time.
9. Property, plant and equipment
During the Period, the Group acquired property, plant and
equipment of US$ 11.5 million (30 June 2014: US$ 5.0 million), the
majority of which related to the completion of Letšeng's Coarse
Recovery Plant (US$ 4.7 million) and the Plant 2 Phase 1 upgrade
(US$ 2.3 million).
Letšeng further invested US$ 28.5 million (30 June 2014: US$
26.8 million) in deferred stripping costs which were
capitalised.
Ghaghoo's development costs of US$ 4.5 million and investment in
property, plant and equipment of US$ 4.7 million were capitalised
to the development asset. In addition US$ 10.5 million of operating
costs were capitalised until such time as the mine reaches
sustainable levels of operation.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
9. Property, plant and equipment (continued)
Borrowing costs of US$ 0.6 million (30 June 2014: nil) incurred
in respect of the LSL 140.0 million bank loan facility for the
total funding of the new Coarse Recovery plant at Letšeng (Refer to
Note 14, Interest bearing loans and borrowings) have been
capitalised. The weighted average capitalisation rate used to
determine the amount of borrowing costs eligible for capitalisation
was 5.6%.
Borrowing costs of US$ 0.4 million (30 June 2014: US$ 0.1
million) incurred in respect of the US$ 25.0 million facility for
the Phase 1 Ghaghoo development (Refer to Note 14, Interest bearing
loans and borrowings) have been capitalised. The weighted average
capitalisation rate used to determine the amount of borrowing costs
eligible for capitalisation was 2.2%.
In addition to the above, foreign exchange movements on
translation were US$ (15.5) million (30 June 2014: US$ (4.1)
million).
Depreciation and mining asset amortisation of US$ 5.6 million
(30 June 2014: US$ 7.9million) was charged to the income statement
during the Period.
Amortisation of the deferred stripping asset (waste stripping
cost amortisation) of US$ 24.4 million (30 June 2014: US$ 24.4
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
2015(1) 2014(2)
US$'000 US$'000
------------------ -------- -----------
Non-current
Prepayments 2 593 2 877
================== ======== ===========
Other receivables 300 -
------------------ -------- -----------
2 893 2 877
------------------ -------- -----------
Current
Trade receivables 1 249 106
================== ======== ===========
Prepayments 931 1 250
================== ======== ===========
Deposits 269 419
================== ======== ===========
Other receivables 125 167
================== ======== ===========
VAT receivable 8 017 5 656
------------------ -------- -----------
10 591 7 598
------------------ -------- -----------
(1) Unaudited
(2) Audited
Included in total prepayments is an amount of US$ 2.9 million
(31 December 2014: US$ 3.2 million) (comprising a non-current
portion of US$ 2.6 million (31 December 2014: US$ 2.9 million) and
a current portion of US$ 0.3 million (31 December 2014: US$ 0.3
million)) relating to the balance of the value to be recovered from
the mining contractor as a result of the estimation change in
respect of the waste mined, which was disclosed in 2014. The waste
tonnes and strip ratio for future cuts have been reassessed and has
resulted in a credit to the waste amortisation charge (included in
cost of sales) of US$ 0.6 million
(31 December 2014: US$ 1.2 million) and a finance income
adjustment of US$ 0.2 million (31 December 2014: US$ 0.9 million)
in the Period.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
11. Cash and short term deposits
30 June 31 December
2015(1) 2014(2)
US$'000 US$'000
----------------------------- -------- -----------
Cash on hand 2 2
============================= ======== ===========
Short term bank deposits 66 253 53 811
----------------------------- -------- -----------
Bank balances 17 528 56 925
----------------------------- -------- -----------
Cash and short term deposits 83 783 110 738
----------------------------- -------- -----------
(1) Unaudited
(2) Audited
At 30 June 2015, the Group had restricted cash of US$ 0.2
million (31 December 2014: US$ 0.2 million).
Finance income relates to interest earned on cash and short term
deposits. The interest earned has decreased in line with the
decreased cash generation during the Period.
Finance costs include interest incurred on bank overdraft and
borrowings, provision for interest on potential tax liabilities
which are under dispute and the unwinding of rehabilitation
provisions.
12. Issued capital and reserves
30 June 2015(1) 31 December 2014(2)
--------------------------- -------------------------------
Number of
Number of shares shares
'000 US$'000 '000 US$'000
--------------------------------------------- ------------------ ------- ----------------- ------------
Authorised - ordinary shares of US$0.01 each
============================================= ================== ======= ================= ============
Balance at beginning of Period/year 200 000 2 000 200 000 2 000
--------------------------------------------- ------------------ ------- ----------------- ------------
Increase in authorised shares 50 1 - -
--------------------------------------------- ------------------ ------- ----------------- ------------
Balance at end of Period/year 200 050 2 001 200 000 2 000
--------------------------------------------- ------------------ ------- ----------------- ------------
Issued and fully paid
============================================= ================== ======= ================= ============
Balance at beginning of Period/year 138 270 1 383 138 270 1 383
--------------------------------------------- ------------------ ------- ----------------- ------------
Allotments during the Period/year 27 - - -
--------------------------------------------- ------------------ ------- ----------------- ------------
Balance at end of Period/year 138 297 1 383 138 270 1 383
--------------------------------------------- ------------------ ------- ----------------- ------------
(1) Unaudited
(2) Audited
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
13. Share-based payments
There was one option award granted during the current
Period:
Employee Share Option Plan for April 2015
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In April 2015, 667 500 nil-cost options were granted to certain
key employees under the Long-term Incentive Plan (LTIP) of the
Company. The vesting of the options will be subject to the
satisfaction of certain performance as well as service conditions
classified as non-market conditions. The options which vest after a
three year period are exercisable between 1 April 2018 and 31 March
2025. If the performance or service conditions are not met, the
options lapse. As the performance conditions are non-market based
they 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 GBP 1.33 (US$ 1.97).
In addition 740 000 nil-cost options were granted to the
Executive Directors under the LTIP 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. Of
the 740 000 nil-cost options, 185 000 relate to market conditions
with the remaining 555 000 relating to non-market conditions. The
options which vest are exercisable between 1 April 2018 and 31
March 2025. 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. At each financial year end, the Company will
assess the likelihood of these conditions being met with a relevant
adjustment to the cumulative charge as required. The fair value of
the nil-cost options relating to non-market conditions is GBP 1.33
(US$ 1.97). The fair value of the options granted, relating to the
market conditions, is estimated at the date of the grant using a
Monte Carlo simulation model, taking into account the terms and
conditions upon which the options were granted, projected
dividends, share price fluctuations, the expected volatility, the
risk-free interest rate, expected life of the options in years and
the weighted average share price of the Company.
The following table illustrates the inputs to the model used for
the market condition awards:
LTIP
April
2015(1)
------------------------------------- -----------
Employee Share-Option Plan
===================================== ===========
Dividend yield (%) 2.00
===================================== ===========
Expected volatility (%) 37.18
===================================== ===========
Risk-free interest rate (%) 1.16
===================================== ===========
Expected life of option (years) 3
===================================== ===========
Weighted average share price (US$) 2.10
===================================== ===========
Fair value of nil-cost options (US$) 1.97
===================================== ===========
Model used Monte Carlo
------------------------------------- -----------
(1) Unaudited
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
13. Share-based payments (continued)
The expense disclosed in the interim consolidated income
statement is made up as follows:
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
---------------------------------------------------------------------------------- -------- --------
Equity-settled share based payment transactions - charged to the income statement 905 834
================================================================================== ======== ========
Reversal of previous expense due to forfeiture - credited to the income statement (77) -
---------------------------------------------------------------------------------- -------- --------
828 834
================================================================================== ======== ========
Equity-settled share based payment transactions - capitalised 103 152
---------------------------------------------------------------------------------- -------- --------
931 986
---------------------------------------------------------------------------------- -------- --------
(1) Unaudited
14. Interest bearing loans and borrowings
30 June 31 December
Effective 2015(1) 2014(2)
interest
rate % Maturity US$'000 US$'000
------------------------------------- --------------- ------------- -------- -----------
Non-current
South African
LSL 140.0 million bank loan facility JIBAR + 4.95% 30 June 2017 4 614 7 261
------------------------------------- --------------- ------------- -------- -----------
4 614 7 261
------------------------------------------------------------------- -------- -----------
Current
South African
LSL 140.0 million bank loan facility JIBAR +4.95% 30 June 2017 4 614 4 841
===================================== =============== ============= ======== ===========
London US$
three-month 20 October
US$ 25.0 million bank loan facility LIBOR +4% 2015(3) 25 000 25 000
------------------------------------- --------------- ------------- -------- -----------
29 614 29 841
------------------------------------------------------------------- -------- -----------
(1) Unaudited
(2) Audited
(3) Currently being refinanced to mature on 31 December 2020, with repayments commencing in 2016
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
14. Interest bearing loans and borrowings (continued)
LSL 140.0 million bank loan facility at Letšeng Diamonds
This loan is a three-year unsecured Project debt facility signed
jointly with Standard Lesotho Bank and Nedbank Limited on 26 June
2014 for the total funding of the new Coarse Recovery Plant. The
loan is repayable in ten quarterly payments which commenced on 31
March 2015 with a final payment due on 30 June 2017. The interest
rate for the facility at 30 June 2015 is 11.06% (31 December 2014:
11.08%).
US$ 25.0 million bank loan facility at the Company
This loan is an unsecured facility which was signed with Nedbank
Capital on 16 January 2014 for the remaining spend on the Ghaghoo
Phase 1 development. The loan expired in October 2014, but has been
extended in the interim to 20 October 2015 to cater for the process
of concluding the refinancing thereof into a six-year secured
project debt facility which will expire on 31 December 2020. At the
time of finalisation, this facility will be split into its
short-term and long-term component. The interest rate for the
facility at 30 June 2015 is 4.28% (31 December 2014 is 4.26%).
Total interest for the Period on the interest-bearing loans and
borrowings was US$ 1.0 million (30 June 2014: US$ 0.1 million)
which has been capitalised to the carrying value of the assets as
borrowing costs.
In addition, at 30 June 2015, the Group has the following
available facilities which remain unchanged from that disclosed in
the 2014 Annual Report:
-- US$ 20.0 million three-year unsecured revolving credit
facility with Nedbank Capital which is due for renewal in January
2016. No amounts have been drawn down during the Period.
-- Through its subsidiary Letšeng Diamonds, a LSL 250.0 million
(US$ 20.6 million) three-year revolving working capital facility
jointly with Standard Lesotho Bank and Nedbank Capital which was
refinanced for a further three years up to July 2017. No amounts
have been drawn down during the Period.
15. Cashflow notes
15.1 Cash generated by operations
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
------------------------------------------------------------------ ------------ --------
Profit before tax for the Period from continuing operations 40 744 56 260
=================================================================== ============ ========
Profit/(loss) before tax for the year from discontinued operation 668 (1 414)
=================================================================== ============ ========
Adjustments for:
================================================================== ============ ========
Depreciation and amortisation on property, plant and equipment 5 639 7 851
=================================================================== ============ ========
Waste amortisation 24 414 24 386
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=================================================================== ============ ========
Finance income (913) (1 493)
=================================================================== ============ ========
Finance costs 1 508 1 595
=================================================================== ============ ========
Mark to market revaluations(*) (238) -
=================================================================== ============ ========
Unrealised foreign exchange differences (289) (3 426)
=================================================================== ============ ========
Profit on disposal of property, plant and equipment (256) (20)
=================================================================== ============ ========
Gain on disposal of subsidiary (1 670) -
=================================================================== ============ ========
Movements in prepayments 73 78
=================================================================== ============ ========
Other non-cash movements 155 1 438
=================================================================== ============ ========
Share-based equity transaction 828 834
------------------------------------------------------------------- ------------ --------
70 663 86 089
------------------------------------------------------------------ ------------ --------
*This relates to the revaluation of mark to market forward
exchange contracts.
(1) Unaudited
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
15. Cashflow notes (continued)
15.2 Working capital adjustments
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
------------------------------------- ------------- --------
(Increase)/decrease in inventories (9 429) 1 195
====================================== ============= ========
(Increase)/decrease in receivables (4 766) 2 862
====================================== ============= ========
Increase in trade and other payables 4 802 1 886
-------------------------------------- ------------- --------
(9 393) 5 943
------------------------------------- ------------- --------
(1) Unaudited
16. Commitments and contingencies
The Board has approved capital projects of US$ 7.6 million (31
December 2014: US$ 16.0 million) of which US$ 3.5 million
(31 December 2014: US$ 10.8 million) have been contracted at 30
June 2015.
The Group has conducted its operations in the ordinary course of
business in accordance with its understanding and interpretation of
commercial arrangements and applicable legislation in the countries
where the Group has operations. In certain specific transactions
however, the relevant third party or authorities could have a
different interpretation of those laws and regulations that could
lead to contingencies or additional liabilities for the Group.
Having consulted professional advisers, the Group has identified
possible disputes approximating US$ 0.4 million (31 December 2014:
US$ 3.5 million) and tax claims within the various jurisdictions in
which the Group operates approximating US$ 1.4 million (31 December
2014: US$ 1.4 million).
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
17. Financial instruments
Set out below is an overview of financial instruments, other
than the non-current and current portions of the prepayment
disclosed in Note 11, Receivables and other assets which do not
meet the criteria of a financial asset. These prepayments are
carried at amortised cost.
30 June 31 December
2015(1) 2014(2)
US$'000 US$'000
-------------------------------------- -------- -----------
Financial assets
====================================== ======== ===========
Cash (net of overdraft) 83 783 110 738
======================================= ======== ===========
Receivables and other assets 13 482 10 475
======================================= ======== ===========
Other financial assets 16 14
--------------------------------------- -------- -----------
97 281 121 227
-------------------------------------- -------- -----------
Total non-current 2 898 2 887
======================================= ======== ===========
Total current 94 383 118 340
======================================= ======== ===========
Financial liabilities
====================================== ======== ===========
Interest bearing loans and borrowings 34 228 37 102
======================================= ======== ===========
Forward exchange contract(3) - 249
======================================= ======== ===========
Trade and other payables 49 000 44 985
--------------------------------------- -------- -----------
83 228 82 336
-------------------------------------- -------- -----------
Total non-current 6 039 8 535
======================================= ======== ===========
Total current 77 189 73 801
--------------------------------------- -------- -----------
(1) Unaudited
(2) Audited
(3) The forward exchange contracts are measured using a Level 2
input in terms of the fair value hierarchy, thus basing its fair
value on observable spot exchange rates, the
yield curves of the respective currencies as well as the
currency basis spreads between the respective currencies
The carrying amounts of the Group's financial instruments held
approximate their fair value.
Fair value hierarchy
All financial instruments for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, based on the lowest level input that is
significant to the fair value measurement as a whole, as
follows:
Level 1 - Quoted (unadjusted) market prices in active markets
for identical assets or liabilities.
Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
There were no transfers between Level 1 and Level 2 fair value
measurements or any transfers into or out of Level 3 fair value
measurements during the Period.
Other risk management activities
The Group is exposed to foreign currency risk on future sales of
diamonds at Letšeng Diamonds. In order to reduce this risk, the
Group enters into forward exchange contracts to hedge this
exposure. The Group performs no hedge accounting. During the
current Period the Group did not enter into any new forward
exchange contracts due to the strong US dollar being favourable to
the Group's revenue.
condensed notes to the consolidated interim financial
statements
For the six months ended 30 June 2015
18. 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
=================================================================== ==========================
Geneva Management Group (UK) Limited Common director
=================================================================== ==========================
30 June 30 June
2015(1) 2014(1)
US$'000 US$'000
------------------------------------------------------------------- ------------ ------------
Compensation to key management personnel (including Directors)
=================================================================== ============ ============
Share-based equity transactions 721 687
=================================================================== ============ ============
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