TIDMGEMD
RNS Number : 2770W
Gem Diamonds Limited
06 November 2014
6 November 2014
GEM DIAMONDS LIMITED
Interim Management Statement for Q3 2014
Continued strong operational performance in Q3 2014 at Letšeng.
Ghaghoo ramp-up progressing.
Gem Diamonds Limited (LSE: GEMD) reports an interim management
statement detailing the Company's operational and sales performance
for the Period 1 July 2014 to 30 September 2014 (Q3 2014).
Highlights:
Letšeng:
Continued strong performance at Letšeng
-- 28 365 carats were recovered in Q3 2014 (28 623 carats in Q2 2014).
-- An average value of US$2 603* per carat was achieved in Q3
2014 (US$ 2 582* per carat in Q2 2014).
-- An exceptional 197.6 carat diamond recovered in July 2014 was
sold during the Period for US$ 10.6 million
*Includes carats extracted at rough valuation for polishing.
Ghaghoo:
Ghaghoo mine officially opened by President Seretse Khama Ian
Khama on 5 September 2014
-- The major ingress of water has been managed effectively.
Final sealing operations are underway.
-- Development is progressing in the first four production tunnels on Level 1.
-- Trial stope on Level 0 prepared for training purposes.
-- Work continues with minor refinements to the treatment plant
in readiness for full production.
-- 4 028 carats recovered as at the end of the Period, with the
first sale now planned for early 2015.
Financial:
Robust financial position and cashflows providing financial
flexibility to meet medium to long-term objectives
-- The Group increased its strong cash position to US$ 128
million cash as at 30 September 2014, of which US$ 106 million is
attributable to Gem Diamonds.
-- The US$ 25 million facility for Ghaghoo Phase 1 has been fully drawn down.
-- The Letšeng Maloti 140 million (US$ 12.5 million) debt
facility for the full cost of the new Coarse Recovery plant has
been drawn down by Maloti 135 million (US$ 12.1 million) during the
Period.
-- In March 2014, Gem Diamonds' Board of Directors announced its
intention to pay a maiden dividend to shareholders based on the
2014 financial year results. The Group remains on track to meet
this objective.
Gem Diamonds' CEO, Clifford Elphick commented:
"The third quarter of 2014 saw continued strong operational
performance at Letšeng as well as the opening of the Ghaghoo mine.
The two Letšeng tenders conducted during this Period saw an
improvement in the dollar per carat prices achieved when compared
to the prior quarter.
The official opening of the Ghaghoo mine was an important
milestone for the Company. We are pleased to have completed the
construction of the mine on time and within budget and to have
overcome the challenges posed by developing a decline through some
80 meters of sand. The first sale of the Ghaghoo production will
occur in February 2015 to coincide with the first Letšeng sale in
2015."
1. Diamond Market
Diamantaires are cautious in the period leading up to Christmas
following the Hong Kong Diamond and Jewellery Show in September.
Prices achieved for Letšeng's high value production have remained
healthy, as illustrated by the strong average price of US$ 2 603
per carat achieved in Q3 2014. The market for both rough and
polished diamonds has declined towards October, however, we remain
optimistic that prices for Letšeng's high value production will be
resilient for the remaining sales of 2014.
2. Lesotho
Gem Diamonds holds a 70% shareholding in Letšeng Diamonds (Pty)
Ltd (Letšeng) in partnership with the Government of the Kingdom of
Lesotho which owns the remaining 30%.
2.1 Production
Q3 2014 Q2 2014 % Change 9 months to 30 Sept 2014
------------------------- ----------- ----------- --------- -------------------------
Waste stripped (tonnes) 4 787 791 4 548 513 5% 14 809 222
------------------------- ----------- ----------- --------- -------------------------
Ore treated (tonnes) 1 601 758 1 648 712 -3% 4 830 849
------------------------- ----------- ----------- --------- -------------------------
Carats recovered 28 365 28 623 -1% 83 043
------------------------- ----------- ----------- --------- -------------------------
Grade recovered (cpht) 1.77 1.74 2% 1.72
------------------------- ----------- ----------- --------- -------------------------
The commissioning of new, larger earthmoving equipment at
Letšeng earlier in the year has resulted in a 5% increase in waste
mined in Q3 2014 over that mined in Q2 2014.
Letšeng's Plants 1 and 2 treated a total of 1.3 million tonnes
of ore in Q3 2014, 33% of which was sourced from the Satellite pipe
and 67% from the Main pipe. The balance of ore was treated through
the Alluvial Ventures plant, 37% of which was sourced from
stockpiles and 63% from the Main pipe.
Letšeng produced 28 365 carats in Q3 2014, representing a 1%
decrease from Q2 2014. This was due to lower tonnes treated as a
result of replacing a vertical conveyor on Plant 2, as well as a
higher percentage of ore being sourced from the Main pipe during Q3
2014.
2.2 Rough Diamond Sales and Diamonds Extracted for Manufacturing
Q3 2014* Q2 2014* % Change 9 months to 30 Sept 2014*
(2 tenders) (3 tenders)
---------------------------- ------------- ------------- --------- --------------------------
Carats sold 23 550 34 510 -32% 77 349
---------------------------- ------------- ------------- --------- --------------------------
Total value (US$ millions) 61.3 89.1 -31% 209
---------------------------- ------------- ------------- --------- --------------------------
Achieved US$/ct 2 603 2 582 1% 2 703
---------------------------- ------------- ------------- --------- --------------------------
*Includes carats extracted at rough valuation for polishing.
Two Letšeng tenders were held in the Period, achieving a robust
average price of US$ 2 603* per carat (compared to three tenders in
Q2 2014, achieving US$ 2 582* per carat) and bringing the 12 month
rolling average to 30 September of US$ 2 656* per carat.
*Includes carats extracted at rough valuation for polishing.
During Q3 2014, nine exceptional rough diamonds achieved prices
greater than US$ 1 million each, including the 197.6 carat white
diamond which, as previously announced, was recovered in July 2014
and sold on tender in September for US$ 10.6 million (US$ 53 746
per carat). 447 carats were extracted during Q3 2014 for own
manufacturing at a rough value of US$ 6.6 million, and at the end
of the Period a total of US$ 10.7 million (at rough value) remained
in manufacturing inventory, compared to US$ 4.9 million at the end
of Q2 2014.
2.3 Projects
The new Coarse Recovery Plant project remains on track for
completion in Q2 2015 for a total budget of Maloti 140.0 million
(approximately US$ 12.5 million), of which Maloti 90.0 million is
expected to be spent in 2014. The X-Ray Transmissive (XRT) sorters,
which are expected to improve recovery of the high value Type II
diamonds, arrived in South Africa in late October 2014. The design
of the Personnel Control Centre (PCC) is well advanced and includes
an X-ray scanner which has been tested for accuracy of diamond
detection and the health and safety of employees. It is expected
that this scanner, together with the improved surveillance and
fully hands-free and auditable diamond recovery, will result in
significant security improvements. The civil contractor has
commenced work as planned and the structural, mechanical, piping
& platework contractor is scheduled to mobilise in Q4 2014.
The Plant 2 Phase 1 upgrade project has been approved for
implementation. The project commenced in Q3 2014 and is on track to
be completed in Q1 2015. It is planned to deliver an increase in
treatment capacity of 250 000 tonnes per annum as well as further
reducing diamond damage at a capital cost of Maloti 50.0 million
(US$ 4.5 million) of which, approximately Maloti 17.0 million (US$
1.5 million) will be spent in 2014. Subsequent phases of the Plant
2 upgrade project will be considered once Phase 1 has been
successfully implemented.
3. Botswana
Gem Diamonds' wholly-owned subsidiary, Gem Diamonds Botswana, is
currently developing the Ghaghoo mine (Ghaghoo) in Botswana.
Ghaghoo has entered an important phase as it transitions from a
capital project to an operating mine.
Development is currently progressing in four production tunnels
within the kimberlite on Level 1. The significant volume of water
flowing in from a fissure within the basalt country rock on Level 1
has been managed efficiently and the final sealing of the fissure
is in progress.
The tunnels in the old sampling level (140m below surface) were
intersected during August 2014. These tunnels are now accessible
and have been dewatered, fully inspected and made safe in the
targeted VKSE part of the orebody. The second ventilation hole has
been completed and work is progressing to link the first and second
ventilation holes.
The significant ingress of water has impacted planned
development rates and as such, it is now envisaged that the monthly
production rate is likely to be achieved by the end of Q1 2015. A
training stope has been developed on Level 0 which will be used to
provide ore to complete the optimisation of the treatment plant
during the latter part of 2014 as planned. This optimisation
process will improve liberation and recovery efficiencies in
readiness for full production. The plant has so far demonstrated
its capability to treat at greater than 90% of planned feed
rate.
As at the end of the Period, 4 028 carats have been recovered at
Ghaghoo and it has been decided to hold the initial sale alongside
the Letšeng sale in February 2015 to allow existing customers to
participate.
4. Health, Safety, Security and Environment (HSSE):
The Group continues to strive toward its goal of zero harm to
its people and environment and to operate within the Group's
sustainable development framework.
To the end of the Period, the Group-wide Lost Time Injury
Frequency Rate (LTIFR) was 0.05 and the Group All Injury Frequency
Rate (AIFR) was 2.92.
Gem Diamonds continues to work closely with its project affected
communities to ensure that the social projects implemented continue
to be sustainable.
Zero major or significant environmental incidents have occurred
across the Group.
For further information:
Gem Diamonds Limited
Sherryn Tedder, Investor Relations
Tel: +44 (0) 203 0430 2080
Mob: +44 (0) 7778 246 321
Bell Pottinger
Daniel Thöle / Joanna Boon
Tel: +44 (0) 203 772 2555
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
This information is provided by RNS
The company news service from the London Stock Exchange
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