Full Year 2020 Results

RNS Number : 9223R

Gem Diamonds Limited

11 March 2021

 

Thursday, 11 March 2021

Gem Diamonds Limited

Full Year 2020 Results

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Full Year Results for the year ending 31 December 2020 (the "Period").

FINANCIAL RESULTS:

· Revenue of US$189.6 million (US$182.0 million in 2019)

· Underlying EBITDA from continuing operations of US$53.2 million (US$41.0 million in 2019)

· Profit for the year from continuing operations US$27.5 million (US$15.0 million in 2019)

· Attributable profit from continuing operations US$16.9 million (US$7.1 million in 2019)

· Earnings per share from continuing operations 12.1 US cents (5.1 US cents in 2019)

· Cash on hand of US$49.8 million as at 31 December 2020 (US$36.2 million attributable to Gem Diamonds)

DIVIDEND

· Ordinary dividends of 2.5 US cents per share proposed by the Directors and subject to approval by the shareholders at the 2021 AGM

· These dividends will be paid on 15 June 2021 to shareholders who are on the register of members on the record date of 14 May 2021 (ex-div date 13 May 2021)

OPERATIONAL RESULTS:

Letšeng

· Carats recovered of 100 780 (113 974 carats in 2019)

· Waste tonnes mined of 15.6 million tonnes (24.0 million tonnes in 2019)

· Ore treated of 5.4 million tonnes (6.7 million tonnes in 2019)

· Average value of US$1 908 per carat achieved (US$1 637 in 2019)

· Sixteen diamonds larger than 100 carats each recovered (eleven in 2019)

· The highest dollar per carat achieved for a white rough diamond during the year was US$38 827 per carat

COVID-19

The Group's priority in 2020 was, and continues to be, to safeguard its employees, contractors and surrounding communities from COVID-19. The implemented measures include thermal screening, X-ray screening, Rapid Anti-body and Anti-gen Diagnostic screening and Polymerase Chain Reaction (PCR) testing, promotion of sanitation measures, appropriate social distancing, compulsory wearing of face masks and the provision of Personal Protective Equipment. As part of the COVID-19 management strategy, all suspected positive cases are safely transferred to their respective residences, or national health facilities if determined medically necessary, for quarantining, thus limiting suspected positive cases on mine site.

Commenting on the results today, Clifford Elphick, Chief Executive Officer of Gem Diamonds, said:

"Gem Diamonds has delivered positive operational and financial results during a very challenging year. Our first priority remains the safety of our employees, contractors and surrounding communities and we have taken steps to support the Lesotho Government in securing COVID-19 vaccinations for our workforce and surrounding communities.

The operational results were characterised by strong cash flows, the achievement of all revised operational metrics and the recovery of 16 diamonds greater than 100 carats each, the highest number recovered in a single year. The stronger prices achieved in the second half of 2020, reaffirms the recovery of the diamond market and the unique quality of the Letšeng production.  

The Group has proven its ability to respond to an unprecedented global crisis in an agile and effective manner. This, together with the cost containment and cash preservation initiatives implemented, positions the Company well for the ongoing recovery of the diamond market in the coming years.

We are pleased to announce that based on the results achieved in 2020, the Board has recommended the payment of an ordinary dividend of 2.5 US cents per share." 

The Company will host a live audio webcast presentation of the full year results today, 11 March 2021, at 9:30 GMT. This can be viewed on the Company's website: www.gemdiamonds.com

The page references in this announcement refer to the Annual Report and Accounts 2020, which can be found on the Company's website: www.gemdiamonds.com .

The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67

FOR FURTHER INFORMATION:

Gem Diamonds Limited

[e-mail]

Celicourt Communications

Mark Antelme / Ollie Mills

Tel: [phone]

ABOUT GEM DIAMONDS:

Gem Diamonds is a leading global diamond producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho. The Letšeng mine is famous for the production of large, top colour, exceptional white diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.

 

CHAIRPERSON'S STATEMENT

"The Group moved swiftly and resolutely during extremely challenging and uncertain circumstances."

- Harry Kenyon-Slaney -

Dear shareholders,

On behalf of the Board, it gives me great pleasure to present the Gem Diamonds Annual Report and Accounts 2020. The Report and Accounts provide an overview of the progress we have made in delivering on the Group's strategic objectives in a year when the economic, social and personal lives of so many people and organisations have been profoundly affected by the COVID-19 pandemic.

OUR VISION:

To support, develop and empower our employees so that they can benefit and develop in a company of which they are proud, we can make a meaningful, sustainable contribution to the countries and communities in which we operate and deliver sustainable value to our shareholders.

Since its emergence as a problem of global significance in early 2020, the COVID-19 pandemic has demanded an enormous amount of management time and effort. Our primary objective has been to ensure the safety and health of our employees, their families and the communities surrounding our operations as well as making a material contribution to Lesotho's national effort to contain the spread of the virus. In parallel, however, it was imperative that economic activity continued and we devoted extensive efforts to ensuring that our Letšeng operation, which is a significant earner of foreign currency in Lesotho, was able to restart operations safely and in line with the strict guidelines implemented by the government. This twin-track approach of contributing meaningfully to local priorities while continuing to operate the Letšeng mine directly aligns with our corporate vision.

Despite the prolonged absence of certain required skills and individuals during the lockdown, our operational teams made important decisions while running a complex and technically demanding process. Their ability to take responsibility and act autonomously is testament to the work we have done to develop and empower our people. As it unfolded, the continued impact of the pandemic required management to take urgent and decisive action and make critical and difficult decisions across the Group to control costs, continue operations in a responsible and safe manner and stabilise the business. We are extremely grateful to the significant proportion of the workforce who agreed to take a material but temporary salary cut, with no decrease in motivation, to support cash preservation in the Group. Following the positive sales results and cash flow generation in September, we were able to repay these salary cuts at an effective rate of 96% to all affected employees.

DIAMOND SUPPLY/DEMAND FUNDAMENTALS SUPPORT HIGHER PRICES

While there was significant uncertainty regarding the impact of COVID-19 on the diamond market at the start of the pandemic, apart from a relatively short initial period, demand for diamonds returned and prices achieved remained relatively strong. Supply has been affected by the closure of Rio Tinto's Argyle mine, operational and COVID-19-related production interruptions in various major producers during the year, and the closure of some smaller mines. China has emerged from the pandemic well and continues to show signs of a return to strong economic growth. Rising living standards will continue to support China's growth as a significant consumer of diamonds and especially of the large high-value diamonds produced by Letšeng. US stock markets, long seen as closely correlated with diamond demand, performed well; and this supported the progressively more positive economic outlook as the year drew to a close. India will emerge as an important polished diamond consumer market in the medium to long term and the manufacturing sector is emerging from its COVID-19-related challenges.

CONTRIBUTION TO COMMUNITY AND COUNTRY

At Gem Diamonds we regard ourselves as guests in the countries where we operate and we endeavour at all times to maintain strong and constructive relationships, both with the populace and with regional and national governments. We engage with government and local communities on a regular basis to seek mutually beneficial solutions to challenges that arise. We work closely with these communities, providing both financial and practical support on a range of projects they consider important.

MAIN AREAS OF FOCUS FOR THE BOARD IN 2020:

1.  Ensuring sustainable operations, keeping employees and local communities safe and supporting the Lesotho Government during COVID-19.

2.  Ensuring delivery of the objectives of the BT programme.

3.  Enhancing risk management systems and processes.

4.  Maintaining disciplined financial control to increase cash generation and repay debt.

5.  Considering an appropriate return to shareholders.

GOVERNANCE TO SUPPORT SUSTAINABLE VALUE CREATION

The Group's governance systems and processes performed well during the year. While face-to-face contact tends to lead to deeper discussions of issues during and around Board meetings, the remote interaction necessitated by COVID-19 nevertheless proved effective. We have increased the time allocated for the quarterly Board and Committee meetings to allow for longer discussions, which facilitates a deeper understanding of the issues. In addition, the Board added a stand-alone quarterly risk review meeting to ensure time is available for a detailed review and discussion of the Group's key risks and to test management's mitigating actions.

The appointment of an experienced non-Executive Director to take responsibility for engaging with stakeholders in Lesotho has proven beneficial. Mazvi has deep local knowledge of political, social and community issues in Lesotho and the feedback from her engagement with employees provides valuable feedback to the Board to inform our decision-making.

SAFE AND RESPONSIBLE OPERATIONS

Workplace safety is an absolute priority for the Board and management. We passionately believe it is possible for every employee to come to work and return home safely every day and we are constantly looking at improving our safety systems and processes to ensure this is achieved. We are pleased with the improvement in safety performance this year.

The Board is similarly strongly committed to environmental responsibility and I am pleased to report that there were no major or significant environmental incidents reported at any of our operations during the year. Gem Diamonds' inclusion in the FTSE4Good index recognises the high standards of environmental, social and governance practices in place.

During the year we launched the first rolling three-year cycle to further integrate the UN Sustainable Development Goals (SDGs) into the Group's systems and processes. The project aims to embed the objectives of the goals in our decision-making and thereby further enhance Gem Diamonds' positive impact in line with relevant UN recommendations.

GENERATING SUSTAINABLE RETURNS FOR OUR SHAREHOLDERS

The focus on cash generation and preservation during the year saw the Group move from a net debt position of US$10.2 million at the start of the year to a net cash position of US$34.6 million at year end. While some of the longer-term development capital expenditure was postponed, this represents a prudent approach to expenditure in a time of heightened uncertainty.

In line with our commitment to delivering sustainable shareholder returns, the Board's policy is to pay a dividend to shareholders when the financial strength of the Group permits.

As a result of the Group's strong cash generation during the year and improved financial position, the Board is pleased to recommend that a dividend of 2.5 US cents be declared in respect of the 2020 financial year. The Board is committed to sustaining shareholder value through the implementation of appropriate dividend policies.

OUTLOOK

Although the supply/demand dynamics of the diamond market remain positive, particularly for the unique high-value diamonds produced at Letšeng, our immediate concern remains the ongoing protection of our people from the COVID-19 pandemic, which continues to cast a shadow over southern Africa. Our immediate priorities for 2021 therefore remain the provision of a safe operating environment for all our employees and support to the Lesotho Government in securing vaccines for our workforce and local communities.

The work we did in prior years to reduce costs, lower overheads, streamline systems and improve efficiencies stood us in good stead in 2020 and has provided an excellent foundation for the year ahead. We will build on this momentum and make the most of the opportunities we have created through the BT and CI programmes. In addition, we need to unlock the commercial potential in the pioneering work being done to reduce diamond damage through our technology and innovation projects and to advance the use of blockchain technology in providing a full and transparent record of origin for every diamond produced at Letšeng.

FINAL REMARKS

I would like to thank my fellow Board members for their valuable and extensive contributions during the past year. On behalf of the Board, I would also like to thank our long-standing partners at Letšeng, the Lesotho Government, and the leaders of our host communities, all of whom have helped us to navigate what has been a challenging year.

The Group's management and employees deserve a special note of appreciation for their commitment and tenacity during 2020. The Group moved swiftly and resolutely during extremely challenging and uncertain circumstances to contain the spread and impact of a devastating pandemic that could have had an equally devastating impact on our business. I have been tremendously impressed by the resilience and capability of management and employees throughout the organisation to run a technically, commercially and physically complex business, often with remote leadership.

I want to extend my condolences to the families and friends of colleagues who have lost loved ones as a result of the pandemic or related complications. The COVID-19 pandemic is far from over and, at the time of writing, things continue to be extremely difficult in southern Africa. Until vaccinations have been rolled out to a large part of the population, we must remain extremely vigilant.

Harry Kenyon-Slaney

Chairperson

10 March 2021

PRINCIPAL RISKS AND UNCERTAINTIES

HOW WE APPROACH RISK

The Group's risk management framework aims to identify, manage and mitigate the risks and uncertainties to which the Group is exposed. Effective risk management and mitigation reduce the likelihood that financial, operational and compliance impacts could materially affect the Group's performance, reputation and long-term growth.

The risk management framework combines top-down and bottom-up approaches with appropriate governance and oversight, as shown in the table below.

Oversight	BOARD OF DIRECTORS The Board is responsible for risk management in the Group and provides stakeholders with assurance that key risks are properly identified, assessed, mitigated and monitored. The Board maintains a formal risk management policy for the Group and evaluates the effectiveness of the Group's risk management process accordingly. It confirms that the process is accurately aligned to the Group's strategy and performance objectives.		Top-down approach - sets the risk appetite and tolerances, strategic objectives and accountability for the management of the framework
Governance	AUDIT COMMITTEE The Audit Committee monitors the Group's risk management processes, reviews the status of risk management, and reports on a biannual basis. It is responsible for addressing the corporate governance requirements of risk management and for monitoring each operational site's performance.	SUSTAINABILITY COMMITTEE The Sustainability Committee provides assurance to the Board that appropriate systems are in place to identify and manage health, safety, social and environmental risks. It monitors the Group's performance within these categories and drives proactive risk mitigation strategies to secure the social licence to operate in the future.
Responsibility	MANAGEMENT Management is accountable to the Board for developing, implementing, communicating and monitoring risk management processes and integrating them into the Group's day-to-day activities. It identifies risks affecting the Group, including internal and external, current and emerging risks. It implements appropriate risk responses consistent with the Group's risk appetite and tolerance.		Bottom-up approach - ensures a sound risk management process and establishes formal reporting structures
	GROUP INTERNAL AUDIT Group Internal Audit formally reviews the effectiveness of the Group's risk management processes. The outputs of risk assessments are used to compile the strategic three-year rolling and annual internal audit coverage plan and evaluate the effectiveness of controls.

Prior to 2020, risk was an agenda item in Board meetings, but from the start of 2020 a stand-alone risk review meeting was added to the quarterly Board and Committee meetings to allow sufficient time to explore the risks fully and to assess management's scenarios and plans. The Board reviews the risk register and interrogates the most critical risks in detail, debating mitigating plans with management.

Risk Management Framework

The Board and its Committees have identified the most material risks facing the Group, including strategic, operational and external risks, both current and emerging. These risks are actively monitored and managed as their impact, individually or collectively, could affect the Group's ability to operate profitably and generate positive cash flows in the medium to long term. The risk disclosures follow guidelines from the IIRC's <IR> Framework to clarify the distinction between inherent and residual risk, indicate risk movements, and link the areas of the business model and strategy to each risk.

While Gem Diamonds' risk management framework focuses on risk identification and mitigation, many factors that give rise to these risks also offer opportunities. The Group monitors existing and emerging opportunities and incorporates them into the strategy where they support the Group's vision.

How COVID-19 made us re-evaluate risk

COVID-19 has increased the emphasis on identifying the possible implications of external macro risks and low-probability/high-consequence events to inform appropriate contingency plans. These risks can be mitigated by ensuring we continue to build resilience and flexibility into our leadership and operational processes and our leaders are equipped to quickly quantify the size and scale of the emerging issue and adapt accordingly.

Insurance cover is an important aspect of risk mitigation. It transfers potential financial implications due to any primary risk of the Group materialising. The COVID-19 pandemic led to an increased risk perception in the insurance market as a result of increasing claims and a declining premium pool. Insurers have decreased their exposure to the mining industry. As a result, the renewal of appropriate insurance has become challenging leading to additional exclusions, reduced cover, increasing deductibles/excesses payable and increasing premiums.

Although insurance cover does not eliminate the operational controls needed to manage and mitigate risk, it offsets the potential financial loss should the risk materialise. Reduced cover consequently directly impacts the Group's cash management risk.

The Group is considering various options to minimise risk in the absence of insurance cover, including a self-insurance structure and enhanced business continuity procedures.

Risk type	Operational	Operational	Strategic and operational	Operational	Operational and external	Operational and external	External	Operational and external
Description	Cash management	Diamond damage	Knowledge of the resource	Security of product	Information Technology (IT) and Operational Technology (OT) systems, and cybersecurity	Detrimental effect of COVID-19 on all spheres of the business	Rough diamond demand and prices	Production interruption
Impact	Reduced cash flows may negatively affect the Group's ability to effectively operate, repay debt and fund capital projects. The risk is directly impacted by other principal risks such as rough diamond demand and prices, diamond damage, knowledge of the resource, security of product and the detrimental effect of COVID-19 on all spheres of the business.	Letšeng's valuable Type II diamonds are highly susceptible to damage during the mining and recovery process. This affects the demand for the Group's large high-value diamonds and the prices achieved resulting in reduced cashflow and profitability.	Letšeng's low-grade orebodies (average carats recovered per tonne of ore processed) and its dependence on the regular recovery of large high-quality diamonds make the operation sensitive to resource variability. Mineral resource underperformance could affect the Group's ability to operate profitably.	Theft is an inherent risk in the diamond industry. The high-value nature of the product at Letšeng could result in theft and significant losses which would negatively affect revenue and cash flows.	The Group's operations rely on secure IT and OT systems to process and record financial and operating data in its information management systems. If these systems are compromised, there could be a material adverse impact on the Group.	COVID-19 not only caused infections and deaths worldwide but also wreaked havoc on the mining sector, leading to the closure of mines and marketing channels during the global lockdowns. Gem Diamonds' main priority is the welfare of its employees, contractors and all those around its operations and corporate offices. The Company is taking all necessary precautions to protect its people and to ensure the sustainability of the business.	Numerous factors beyond the control of the Group may affect the price and demand for diamonds. These factors include international economic and political trends, as well as consumer trends. Even though the medium- to long-term demand is forecast to outpace supply, in the short term the prevailing climate of global economic uncertainty and liquidity constraints within the diamond sector is causing pressure in rough diamond pricing. These trends are discussed on page 13 and directly affect Gem Diamonds' cash flows and EBITDA and its ability to fund operations, projects and growth plans.	Material mine and/or plant shutdowns or periods of decreased production could arise due to various events. These events could lead to personal injury or death, environmental impacts, damage to infrastructure and delays in mining and processing activities and could potentially result in financial losses and possible legal liability. The Group relies on the use of external contractors in its mining and processing activities. Disputes with these contractors could materially impact the Group's operations.
Opportunity if managed	Cash constraints drive more efficient capital expenditure and cost disciplines.	Improvements to blasting techniques and the introduction of new technology can reduce damage, thereby improving value recovered.	Improving knowledge of the orebody through bulk sampling, geological mapping and ahead of face drilling supports effective forecasting and the ability to plan accurately and optimally, which will improve operating efficiencies and cash flows.	Advanced security control measures increase employee and product safety and improve revenue.	IT solutions such as machine learning and artificial intelligence could provide an opportunity to assess mining and processing practices, which could improve efficiencies and diamond recoveries. Technologies such as blockchain offer opportunities to create value in the Group's sales and marketing channels (see page 47).	Successfully navigating the crisis improves the Group's competitive position. Closure of marginal mines reduces supply of rough diamonds and could support diamond prices. Ensuring we protect the wellbeing of our employees and contractors and playing an active role in community and government initiatives, we strengthen our relationships with these key stakeholders.	Additional viewings in new areas could introduce new clients and improve prices realised. New channels to market could increase the price the Group achieves on certain diamonds.	Operating at or near steady-state levels improves efficiencies due to stability of production. Focused contract management impacts positively on cash generation through improved procurement and contract renegotiation practices.
Key priorities	Extracting maximum value Preparing for our future	Extracting maximum value Preparing for our future	Extracting maximum value Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence	Extracting maximum value Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence	Extracting maximum value Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence
Area of business model affected	· Funding the business model	· Increased diamond pricing · Outputs of carats recovered · Reduced financial inputs · Increased financial outputs	· Natural capital inputs and outputs of carats recovered · LoM affects the long-term viability of the business model	· Outputs of carats recovered · Increased financial outputs · Human capital and safety outcomes	· Entire business model	· Entire business model	· Funding the business model · Sales and marketing activities · Chosen distribution channels	· Reduced operational activity could lead to a decline in financial capital and outputs · Negative outcomes decline natural and human capital
Mitigation	· Reassessment of capital expenditure and operational strategies · Treasury management practices in place · Weekly cashflow reviews · Foreign exchange management · Access to available facilities · Delivering of BT targets · Regular review of the mine plan to optimise cash flow and to identify rescheduling opportunities · Early engagement with lenders to renew facility agreements · The ability to reduce operating costs in times of uncertainty	· Continuous diamond damage monitoring and analysis to identify opportunities to reduce diamond damage · Breakage and value loss studies at the mine and in Antwerp · Optimisation of blast design and fragmentation results · Online system in place to monitor plant parameters and evaluate trends within the treatment process · Evaluation of new technology to detect diamonds within kimberlite · Review and update of current diamond breakage initiative plan and implementation of diamond damage project plan · On-mine Diamond Value Management Committee to oversee and drive the focus of overall value recovery	· Furthering orebody knowledge through various bulk sampling programmes, combined with geological mapping and modelling methods · Improving confidence in ore volumes and grades per rock type through grade control, reduced ore blending, increased bulk sampling, measuring (density and moisture content), regularly updating geological models, monitoring and controlling external and internal dilution and waste rafts and focusing on waste management · Improving understanding of diamond populations, size frequency distribution and value profiles per kimberlite type through rigorous daily and monthly data plotting and trend analysis	· Advanced security access control and surveillance system in place, complemented by off-site surveillance · Zero tolerance on nonconformance to policy and regulations · Monitoring of security process effectiveness by the Diamond Recovery Protection Committee (a subcommittee of the Letšeng Board) · Appropriate diamond specie insurance cover in place · Regular vulnerability assessments complemented with internal and independent third-party assurance audits undertaken	· Application of technical and process IT controls in line with industry-accepted standards · Appropriate back-up procedures in place · Firewalls and other appropriate security applications in place · Regular testing of back-up restorations · Consultations with professional external advisers when needed to better understand evolving risks and any mitigating factors to be implemented · IT management policies	· Detection and prevention strategies developed and implemented at all mines and offices · Various flexible strategies available for a successful tender process · Cash preservation, cost management and cash flow planning initiatives in place · Ongoing negotiations with bankers to ensure access to facilities on a needs basis · COVID-19 protocols to minimise disruptions as a result of infection and procurement strategies to ensure availability of spares, equipment, etc. · Community initiatives including provision of PPE and food parcels, awareness programmes and ongoing training and support	· Monitoring of market conditions and trends · Flexibility in sales processes and utilisation of multiple sales and marketing channels, and increased viewing opportunities · Virtual viewing opportunities · Ability to enter into partnership agreements with manufacturers to share in the upside of the polished diamonds · Maintaining the integrity of the tender process · Reduction in supply in the market with greater demand for Letšeng goods caused by current offtake agreement between a diamond trader and a mine · Reduced sales opportunities in 2020 resulting in decreased supply of high-value diamonds	· Continuous review of business continuity plans · Bespoke contract management role fulfilled to ensure proper contract management and minimise potential for disputes and disruptions · Appropriate insurance maintained · Appropriate levels of resources maintained (fuel, stockpiles, etc.) to mitigate certain production interruptions · Improvements implemented in the management of contractors' procurement practices.
Heatmap key	1	2	3	4	5	6	7	8
Risk exposure	Increased	Unchanged	Unchanged	Increased	Increased	New risk	Decreased	Increased

Risk type	Strategic	Strategic and operational	External and operational	Strategic and operational	Strategic and operational	Strategic and operational	External
Description	Limited opportunities for growth	Workforce	Environmental	Social licence to operate	Health and safety	Sustainability of Business Transformation	Currency volatility
Impact	The volatility of the Group's share price and lack of growth negatively impacts the Group's market capitalisation. Constrained cash flows also add pressure on returns to shareholders. The Group currently relies on a single mine for its revenues, profits and cash flows.	Achieving the Group's objectives and sustainable growth depends on the ability to attract and retain key suitably qualified and experienced personnel. Gem Diamonds operates in an environment and industry where shortages in experience and skills are prevalent, and in jurisdictions with localisation policies.	Climate and environmental issues, such as the recent dam failures reported by other companies, are recognised as top global risks by the World Economic Forum and investors are increasingly focused on environmental performance. Failure to manage climate and environmental issues will impact on compliance to mining lease and debt facility agreements. Environmental regulations, pressure from surrounding communities and failure to manage vital natural resources can affect the Group's ability to operate sustainably.	Gem Diamonds' social licence to operate arises from the approval of its stakeholders, particularly employees, regulators, project- affected communities and society, to conduct its business. This approval is an outcome of the way the Group manages issues such as ethics, labour practices and sustainability in our wider environment, as well as our risk management and engagement activities with stakeholders.	The risk that a major health or safety incident, such as a dam failure, may occur within the Group is inherent in mining operations. These risks could impact the wellbeing of employees, project- affected communities, our licence to operate, the Company's reputation and compliance with its mining lease agreement.	The BT process identified savings and efficiencies of US$100 million over four years from 2018, with ongoing sustainable benefit of US$30 million per annum from 2022 onwards. The sustainability of the BT benefit is highly dependent on organisational health, change management, skills, workforce motivation and behaviour and contract renegotiations. Failure to sustain the savings identified could impact the Group's cash resources.	The Group receives its revenue in US dollars, and costs are incurred in the local currency of the countries in which the Group operates. Exchange rate volatility between these currencies and the US dollar impacts the Group's profitability and cash flow.
Opportunity if managed	Focusing on existing operations could unlock further value through rationalisation and efficiency improvements.	Skills retention and continuous improvement initiatives build the Group's human capital and can create a competitive advantage.	Responsible environmental stewardship improves relationships with regulators and communities while strengthening our brand. Increased investor focus on environmental responsibility could translate into a competitive advantage.	Realising the Group's vision to make a meaningful and sustainable contribution to the countries in which we operate builds Gem Diamonds' reputation with employees, government, regulators, communities and investors.	Improving employee health and wellness can increase morale, reduce absenteeism and improve productivity. Ensuring that effective safety policies and processes are in place reduces risk to our workforce, strengthens our relationships with employees and regulators, and safeguards the Group's reputation.	Delivery of the BT target improves cash flow and credibility and positions the Group ahead of the industry.	Earning capability in currencies stronger than currencies in which operational costs are incurred results in maximum financial benefit to Letšeng.
Key priorities	Working responsibly and maintaining our social licence Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence Preparing for our future	Working responsibly and maintaining our social licence Preparing for our future	Extracting maximum value Working responsibly and maintaining our social licence	Extracting maximum value Working responsibly and maintaining our social licence Preparing for our future	Extracting maximum value
Area of business model affected	· Entire business model	· Human, intellectual and financial capital inputs into the business model	· Natural capital inputs into the business model and negative outcomes in the case of environmental incidents	· Social capital and viability of business model	· Social, relational and human capital and viability of business model if outcomes are negative	· Entire business model	· Financial capital inputs and outcomes
Mitigation	· Group strategy review performed with objective of improving the share price through: · Delivering the BT target · Advancing early identification and anti-breakage technology · Assessing M&A and diversification opportunities	· Human resources practices are designed to identify skills shortages and implement development programmes and succession planning for employees · Incentives are in place to retain key individuals through performance-based bonuses and long-term share awards · Remuneration Committees are set up at a GDL and Letšeng level. They review current remuneration policies, skills and succession planning	· Appropriate sustainability and environmental policies, subject to continuous improvement review, implemented · Behaviour-based care programme, which instils environmental stewardship, implemented · Climate change adaptation plan implemented · Dam safety management framework implemented · Annual social and environmental management plan (SEMP) audit programme implemented · ISO 14001 accreditation obtained · UN SDG framework adopted · Rehabilitation and closure management strategy adopted and updated annually · Water management framework completed · Concurrent rehabilitation strategy implemented · Group shared natural resources management strategy implemented	· Appropriate health, safety and sustainability policies in place which are subject to continuous improvement reviews · Appropriate CSI spend catered for within the new mining lease agreement · UN SDG framework adopted · Regular engagement with relevant Government Department Ministries · Dam safety management framework implemented	· Appropriate health and safety policies and practices, subject to continuous improvement reviews, implemented · Corrective actions identified from incident investigations and internal and external audits implemented timeously · Dam safety management framework implemented · ISO 45001 accreditation obtained · Verification module developed for the Electronic Business Management System that will improve management and implementation of recommended corrective actions · Safety management and leadership programme (focusing on behaviour-based safety culture) implemented	· Dedicated BT task team · Ongoing monitoring through regular review meetings · Delivered US$79million to date, with medium/low risk of delivering remaining balance · CI roll out commenced at Letšeng with pilot in the Mining department completed	· A framework to enter into short-term hedging instruments is in place · Appropriate treasury management procedures are in place
Heatmap key	9	10	11	12	13	14	15
Risk exposure	New risk	Decreased	Decreased	Decreased	Unchanged	Decreased	Decreased

EMERGING RISKS

The assessment of emerging risks is embedded within the risk management function of the Group. Emerging risks identified during these assessments are reported to the subsidiary boards on a structured quarterly basis and to the corporate office as they are identified.

Management evaluates emerging risks and presents them to the Board for consideration and evaluation.

Emerging risks are risks that:

· are likely to materialise or impact over a longer time frame than existing risks;

· do not have much reference from prior experience; and

· are likely to be assessed and monitored against vulnerability, velocity and preparedness when determining likelihood and impact.

The current emerging risks on the Group's radar are:

· lab-grown diamonds (16);

· generational shifts in consumer preferences - social influencers (17);

· the rate of advancement of digital technologies such as blockchain (18); and

· future workforce (automation, skills for the future, etc.) (19).

VIABILITY STATEMENT

The Board has assessed the viability of the Group over a period significantly longer than 12 months from the approval of the financial statements in accordance with the UK Corporate Governance Code. The Board considers three years from the approval of the financial statements to be the most relevant period for consideration for this assessment, given the Group's current position and the potential impact of the principal risks documented on pages 25 to 35 that could impact the Group's viability.

While the Group maintains a full business model, based predominantly on the life of mine (LoM) plan for Letšeng, the Group's annual business and strategic planning process also uses a three-year time horizon. This process is led by the CEO and involves all relevant functions including operations, technology and innovation, sales and marketing, finance, treasury and risk. The Board participates in the annual review process through structured Board meetings and annual strategic sessions. A three-year period provides sufficient and realistic visibility in the context of the industry and environment in which the Group operates, even though the LoM, the mining lease tenure and available estimated reserves exceed three years.

The business and strategic plan reflects the Directors' best estimate of the Group's prospects. The Directors evaluated several additional scenarios to assess the potential impact on the Group by quantifying their financial impact and overlaying this on the detailed financial forecasts in the plan.

The Board's assessment of the Group's viability focused on the critical principal risks categorised within the strategic, external and operational risk types, together with the effectiveness of the potential mitigations that management reasonably believes would be available to the Company over this period.

The Group's credit facilities (excluding project term loans) total US$70.8 million when fully unutilised, with US$34.0 million expiring on 18 July 2021, US$30.0 million expiring on 31 December 2021 and the balance of US$6.8 million being a general banking facility with no set expiry date (refer Note 18, Interest-bearing loans and borrowings). The Group's viability assessment assumes that these facilities will be successfully restructured, and their expiry dates extended, based on advanced discussions with lenders and previous successful renewals.

COVID-19

Uncertainty exists around the ongoing impact of the pandemic on the Group. The Group is in a good position to mitigate the impact of any operational disruption that may be caused by potential further COVID-19-related lockdowns. International travel restrictions could have an impact on the frequency of diamond tenders and the ability to generate revenue on its regular tender cycles.

STRESS TESTS

The scenarios tested considered the Group's revenue, EBITDA¹, cash flows and other key financial ratios over the three-year period. The scenarios tested included the compounding effect of the factors below and were applied independently of each other.

Effect	Extent of sensitivity analysis	Related principal risks	Area of business model affected
A decrease in forecast rough diamond revenue from reduced market prices or production volumes	32%	· Rough diamond demand and prices · Production interruption · Knowledge of the resource · Detrimental effect of COVID-19 on all spheres of the business	· Entire business model i.e. inputs, activities, outputs and outcomes
A strengthening of local currencies to the US dollar from expected market forecasts	32%	· Currency volatility · Detrimental effect of COVID-19 on all spheres of the business	· Financial capital inputs and outcomes

The Group's current net cash² position of US$34.6 million as at 31 December 2020 and available facilities of US$60.8 million would enable it to withstand the impact of these scenarios over the three-year period. This position is supported by the cash-generating nature of the Group's core asset, Letšeng, and its flexibility in adjusting its operating plans within the normal course of business.

Based on the robust assessment of the principal risks, prospects and viability of the Group, the Board confirms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending March 2024.

1 Refer Note 4, Operating profit on page 145, for the definition of non-GAAP measures.

2 Net cash is calculated as cash and short-term deposits less drawndown bank facilities (excluding asset-based finance facility and insurance premium financing).

CHIEF EXECUTIVE'S REVIEW

"In the face of the significant disruption caused by COVID-19, the fundamentals of Gem Diamonds' business remain sound and our strategy intact."

- Clifford Elphick -

In the face of the significant disruption caused by COVID-19, the fundamentals of Gem Diamonds' business remain sound and our strategy intact. Despite the extreme uncertainty at the start of the pandemic the fast and decisive action we took, combined with the organisational improvements of the last few years and strong stakeholder relationships, supported a good operational performance, strong cash flows and an improved financial cash position at the end of the year.

Our first priority was to make sure our people were safe. We took the potential threat to their health extremely seriously and acted quickly to do what we could to protect them, which included immediately establishing a testing laboratory on site at Letšeng.

Following the Lesotho Government's lockdown order, as soon as it was safe to restart operations and we had the necessary authorisations, we worked hard to get back to full production as fast as we could. We managed to ramp up well ahead of many operations in similar positions, greatly reducing the loss of production. This success was in no small part due to the in-country skills and expertise we have developed at Letšeng, since certain required skills and individuals were unable to be physically at the mine.

The quick return to production, Letšeng's top-quality diamonds and our excellent relationships with our customers allowed us to sell diamonds and generate revenue when many other producers could not. Despite the pressure on the diamond market, these factors helped us to achieve a 17% higher overall average price per carat than in 2019.

Most of the BT cost-efficiency initiatives are now fully embedded in day-to-day operations and the CI initiative is being rolled out. The changed working conditions during COVID-19 and extensive engagements with our contractors and suppliers identified additional efficiencies and new ways of working that helped to further reduce costs, which contributed to strong operating cashflows. It is pleasing to announce that the Board has recommended a dividend of 2.5 US cents per share.

While we are pleased with the Group's performance for the year in the face of these challenges, we are deeply saddened and offer our condolences to the families of the seven employees who passed away to date from suspected COVID-19-related complications.

STRATEGIC FOCUS: WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE

The Group's COVID-19 response included a significant contribution to ensuring the health of members of surrounding communities and supporting the Lesotho Government's programmes, as described on page 50.

We aim to create and sustain a workplace safety culture that is underpinned by a deep sense of mutual care and collaboration across the workforce. We are pleased with the improvement in our safety statistics this year but remain diligent in implementing our safety protocols in line with our commitment to promoting a culture of zero harm and responsible care. There were no fatalities and one LTI during the year, compared to one fatality and seven LTIs in 2019. The Group-wide LTIFR decreased to 0.04 (2019: 0.28) and the lowest AIFR in a decade was recorded.

Our strategic focus on working responsibly includes our commitment to environmental responsibility, which is discussed in detail on pages 48 to 50. A rigorous ongoing monitoring and management programme is in place to ensure any risks regarding Letšeng's freshwater dam and two tailings storage facilities (TSFs), which are designed and managed to international best practice, are timeously identified and mitigated. We are currently assessing our TSF management process against the Global Industry Standard on Tailings Management launched in August 2020 and developing an action plan to ensure conformance. A technical visit to the mine was undertaken in November 2020 by an independent expert and the compilation of a draft Independent Tailings Review Board (ITRB) structure and Terms of Reference is underway.

Supporting local communities and contributing to national priorities

Gem Diamonds invests in surrounding communities to improve educational outcomes, develop infrastructure and stimulate local enterprises to create self-sustaining employment independent of the mine. Some of these projects were delayed due to disruptions caused by COVID-19 and we continue to engage with stakeholders regarding project status, any further COVID-19 impact on progress and alternative projects to address immediate needs in current circumstances.

In addition to community support, the Letšeng mine makes a substantial contribution to the Lesotho economy, providing jobs for more than 1 702¹ people and supporting the local economy and the broader population of Lesotho through local procurement initiatives. In 2020, due to the reduced production and the 30-day shutdown period, in-country procurement decreased 23% to US$126.9 million (2019: US$164.6 million), of which US$2.2 million was procured directly from PACs (2019: US$2.4 million) and US$27.4 million (2019: US$30.5 million) from regional communities around Letšeng. The Company's investment in training also improves individual skills in the area.

No major or significant stakeholder incidents were reported at any of Gem Diamonds' operations during the year (2019: none) and there were also no incidents involving any violation of the rights of the indigenous people on whose land the Group operates (2019: none).

STRATEGIC FOCUS: EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS

Despite the challenging operating environment, Gem Diamonds produced solid results that included the recovery of 16 diamonds greater than 100 carats (2019: 11). Exceptional recoveries during the year include a 439 carat white Type IIa diamond, a 183 carat white Type IIa diamond and a 166 carat white Type IIa diamond reaffirming the quality of the mine's production.

While the overall diamond market was under extreme pressure, our proactive steps to ensure the safety of customers and provide additional analysis of the diamonds on tender resulted in the average price achieved increasing 17% to US$1 908 per carat (2019: US$1 637 per carat) from the sale of 99 172 carats (2019: 111 292).

Tonnes treated for the year decreased 19% year on year impacted by the 30-day shutdown at Letšeng and subsequent phased ramp-up of the two plants and we continue to focus on enhancing value over volume in our treatment of ore through the plants. Carats recovered decreased 12% to 100 780 (2019: 113 974), which was in line with the reduced tonnes treated due to the COVID-19-related shutdown in Q2. Letšeng's operational performance is discussed in detail on page 43.

Revenue increased 4% to US$189.6 million (2019: US$182.0 million), which translates to underlying EBITDA² of US$53.2 million and earnings per share of 9.8 US cents. Cash flow was a key focus given the crisis conditions prevalent for most of the year and cash flow from operations increased 73% to US$96.2 million for the year, allowing the Group to move from a net debt position of US$10.2 million at the start of the year to a net cash³ position of US$34.6 million at the end of 2020. More information regarding the Group's financial results is available in the Chief Financial Officer's report on page 36.

The process to sell the Ghaghoo mine, which remains on care and maintenance, continues, but was significantly delayed during the year due to the impact of COVID-19. Management remains committed to the sale and will conclude the process in 2021.

1 Includes contractors.

2 Refer Note 4, Operating profit on page 145, for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.

3 Net cash/(debt) is a non-GAAP measure and calculated as cash and short-term deposits less drawn down bank facilities (excluding the asset-based finance facility and insurance premium financing).

STRATEGIC FOCUS: PREPARING FOR THE FUTURE

The Group's improved balance sheet at year end provides a sound platform from which to navigate the current uncertain environment. The reduced costs and improved efficiencies realised through the BT initiatives were critical in maximising operational cash flows during the year and the operational benefits from the CI initiative currently being rolled out are already evident. These initiatives are discussed on page 46.

Non-essential capital expenditure was deferred wherever possible to preserve cash, but not at the expense of projects necessary to sustain operations.

We continue to advance two key technologies to identify locked diamonds within kimberlite and to liberate diamonds using a non-mechanical process. While the pilot project was hindered largely by the COVID-19-related lockdown and travel restrictions and did not make the progress during the year we would have liked, we have identified new technical partners to advance the pilot and believe that the benefits in reduced diamond damage and lower operating costs will be realised in time.

Gem Diamonds is cognisant of the risks presented by climate change and conscious of the need to minimise emissions and our environmental impact more broadly. The immediate climate-related challenge at Letšeng remains water management. Effective water management is crucial for the viability of our business. This refers not only to the preservation of natural resources for the benefit of host communities but also to the cost implications of water consumption on our business.

OUTLOOK

In the year ahead, our immediate focus will be on ensuring the health of our employees and contractors during the COVID-19 second and possible future waves. We will also continue to support surrounding communities and assist the Lesotho Government in its efforts to manage the impact of the pandemic, including doing what we can to facilitate access to effective vaccination programmes.

At an operational level, we will continue to realise the benefits of the BT programme and roll out the CI project, drive efficiencies and cost-reduction initiatives to maximise cash flows and maintain our status as a responsible, safe and low-cost operation.

APPRECIATION

I would like to thank the Board and our Chairperson for their support and guidance during the year. A special thanks goes to the management teams for their energy and tenacity in implementing the strategy in extremely challenging conditions.

My appreciation also extends to the Lesotho Government for its help in allowing us to restart our operation. Our customers bought our product at good prices during uncertain times and we thank them for their support and trust. In closing, thank you to our shareholders for their confidence and belief in our vision.

Clifford Elphick

Chief Executive Officer

10 March 2021

CHIEF FINANCIAL OFFICER'S REVIEW

"Management was able to normalise operations and maintain cash reserves through effective sales processes and cash preservation initiatives."

- Michael Michael -

FINANCIAL OVERVIEW 2020

The Group's immediate focus in the first half of the year was to manage the severe operational challenges brought on by the swift onset of the COVID-19 pandemic. Management was able to normalise operations and maintain cash reserves through effective sales processes and cash-preservation initiatives. in the short to medium term the focus moved to optimising cash generation through further operational efficiencies to ensure the continued sustainability of the business in a challenging environment.

Significant operating and capital cost reduction and deferment measures were implemented in the second quarter which, together with the ability to successfully hold tenders and generate revenue, contributed to positive cash generation. Following the forced shutdown of operations at Letšeng due to the Lesotho Government's lockdown order in March and April, planned waste mining activities was successfully deferred to resume in July; and in the second half of the year the primary focus was on continued and safe operations, curbing the spread of COVID-19 on site and cash generation.

Although tender revenues initially tracked the weaker market for rough diamonds following the onset of COVID-19, there was a marked improvement in sentiment in the second half of the year. With the focus on the higher-value satellite ore, Letšeng produced good high-quality large diamonds, which included 16 diamonds greater than 100 carats during the year, compared to 11 in 2019.

Underlying EBITDA² from continuing operations increased to US$53.2 million (after COVID-19 standing costs of US$3.9 million incurred during the lockdown period) from US$41.0 million in 2019. Profit attributable to shareholders from continuing operations for the year was US$16.9 million, equating to earnings per share from continuing operations of 12.1 US cents on a weighted average number of shares in issue of 139.3 million. After including the loss of US$3.3 million from the Ghaghoo discontinued operation, the Group's attributable profit was US$13.6 million with earnings per share after discontinued operations of 9.8 US cents.

The Group ended the year with a cash balance of US$49.8 million and drawndown facilities of US$15.2 million, resulting in a net cash position of US$34.6 million (2019: net debt of US$10.2 million) and unutilised available facilities of US$60.8 million.

Summary of financial performance

Please refer to the full annual financial statements starting on page 113.

US$ million	2020	2019
Revenue	189.6	182.0
Royalty and selling costs	(19.8)	(16.9)
Cost of sales1	(104.7)	(114.7)
COVID-19 Standing costs	(3.9)	-
Corporate expenses	(8.0)	(9.4)
Underlying EBITDA2 from continuing operations	53.2	41.0
Depreciation and mining asset amortisation	(9.1)	(14.7)
Share-based payments	(0.6)	(0.8)
Other income	-	1.1
Other expenses	-	(0.3)
Foreign exchange (loss)/gain	(0.9)	3.6
Net finance costs	(4.4)	(5.8)
Profit before tax from continuing operations	38.2	24.1
Income tax expense	(10.7)	(9.0)
Profit for the year from continuing operations	27.5	15.1
Non-controlling interests	(10.6)	(8.0)
Attributable profit from continuing operations	16.9	7.1
Loss from discontinued operations	(3.3)	(4.5)
Attributable net profit	13.6	2.6
Earnings per share from continuing operations (US cents)	12.1	5.1
Loss per share from discontinued operations (US cents)	(2.3)	(3.2)
Dividends per share (US cents)	2.5	-

1 Including waste stripping costs amortisation but excluding depreciation and mining asset amortisation.

2 Underlying EBITDA as defined in note 4, Operating profit, of the notes to the consolidated financial statements.

Revenue

Revenue of US$189.6 million was generated at Letšeng, achieving an average price of US$1 908 per carat¹ (2019: US$1 637 per carat). The Group sold 34 diamonds for more than US$1.0 million each, contributing US$77.6 million to revenue.

The Group's increased revenue was mainly driven by achievement of a higher average price per carat and increased large diamond recoveries.

Letseng 12-month rolling average (US$ per carat)
Q4 2019	1 637
Q1 2020	1 568
Q2 2020	1 636
Q3 2020	1 850
Q4 2020	1 908

US$ million	2020	2019
Group revenue summary
Letšeng sales - rough	189.2	182.1
Sales - polished margin	0.6	-
Impact of movement in inventory	(0.2)	(0.1)
Group revenue	189.6	182.0

Extracted diamond inventory on hand at the end of the year decreased to US$0.6 million (2019: US$0.9 million).

1 Includes carats extracted at rough valuation and carry-over inventory.

Expenditure

Operating expenditure and COVID-19 standing costs

Group cost of sales decreased by 9% to US$104.7 million from US$114.7 million in 2019 as a result of the cash preservation measures and the continued focus to reduce costs in line with the BT initiatives. Total waste-stripping costs amortised were US$43.4 million compared to US$43.1 million in 2019.

Certain standing charges that were incurred during the shutdown and ramp-up periods where normal waste stripping and carat production levels were disrupted , were recognised as abnormal costs, and in terms of IAS 2 Inventories have been expensed immediately and disclosed separately from cost of sales. These costs amount to Lesotho loti LSL48.5 million (US$2.9 million). In addition, US$1.0 million was incurred to implement protocols to address the risk and contain the spread of COVID-19 at the operations and Letseng's surrounding communities.

Total operating costs in local currency increased by 6% to LSL1 740.8 million compared to LSL1 649.6 million in 2019 and includes the impact of non-cash accounting charges. The unit cost per tonne increased 30% to LSL320.20 per tonne from LSL245.92 per tonne treated in 2019. This increase was driven by the reduced tonnes treated and the proportionate mix of ore mined during the year. Although the total waste-stripping costs amortised during the year was similar to 2019, the increased contribution from Satellite pipe material (which carries a higher stripping ratio and associated amortisation charge) impacted the unit cost. During the year, 2.8 million tonnes of this material were treated (2019: 1.6 million) which increased the total amortisation charge to LSL131.56 per tonne treated compared to LSL92.88 in 2019. The increase in the non-cash accounting charges per tonne treated, impacted by waste-stripping amortisation, was offset by the timing differences of the inventory and stockpile movements during the year.

Letšeng Unit Cost Analysis
Unit cost per tonne treated	Direct cash costs	Plant 3  operator costs	Subtotal	BT & CI associated costs	Total direct cash costs	Non-cash accounting charges	Total operating cost	Waste cash costs per waste tonnes mined
2020 (LSL)	183.94	15.73	199.67	1.79	201.46	118.74	320.20	43.70
2019 (LSL)	150.61	20.40	171.01	10.15	181.16	64.76	245.92	38.62
% change			17		11		30	13
2020 (US$)	11.17	0.95	12.12	0.11	12.23	7.21	19.44	2.65
2019 (US$)	10.42	1.41	11.83	0.71	12.54	4.48	17.02	2.67
% change			2		(2)		(2)	0

Direct cash cost per tonne treated is LSL201.46, representing an 11% increase from 2019. Waste cash cost per waste tonne mined increased by 13% to LSL43.70 (2019: LSL38.62). These cash cost increases are a direct result of the lower volumes treated (5.4 million tonnes compared to 6.7 million tonnes in 2019) and waste tonnes mined (15.6 million tonnes compared to 24.0 million tonnes in 2019) during the year respectively. Total direct cash costs, including waste cash costs, decreased by 18% to LSL 1 775.7 million from LSL2 158.8 million in 2019 as a result of the lower volume of mining activities and cash preservation and deferment measures implemented during the year.

Letšeng pays the third plant operator contractor according to the revenue generated by the sales from diamonds recovered through the contractor plant. In 2020, the cash costs in local currency decreased by 23% in line with the reduction in carats recovered and sold.

BT and CI associated costs of US$0.6 million were incurred relating to initiatives implemented during the year, resulting a unit cost impact of LSL1.79 per tonne treated.

Exchange rate influences

Revenue is generated in US dollars, while the majority of operational expenses are incurred in the relevant local currency in the operational jurisdictions. Local currency rates for the Lesotho loti (LSL) (pegged to the South African rand) and Botswana pula (BWP) were weaker against the US dollar during the year (compared to 2019), which reduced the Group's US dollar-reported costs.

Exchange rates	2020	2019	% change
LSL per US$1.00
Average exchange rate	16.47	14.45	14
Year end exchange rate	14.69	13.98	5
BWP per US$1.00
Average exchange rate	11.45	10.76	6
Year end exchange rate	10.80	10.58	2
GBP per US$1.00
Average exchange rate	0.78	0.78	-
Year end exchange rate	0.73	0.75	(3)

1 Non-cash accounting charges include waste stripping cost amortised, inventory and ore stockpile adjustments, and the impact of adopting IFRS 16 Leases, and exclude depreciation and mining asset amortisation.

2 Direct mine cash costs represent all operating costs, excluding royalty and selling costs.

Royalties and marketing costs

Royalties are paid to the Government of the Kingdom of Lesotho on the value of rough diamonds sold by Letšeng in terms of the operation's mining lease. The Group's sales and marketing operation in Belgium incurs costs relating to diamond selling and marketing. During the year, royalties and selling costs increased by 17% to US$19.8 million (2019: US$16.9 million) in line with the increase in revenue and the increase in royalties from October 2019 from 8% to 10%.

Rough diamond extractions and partnership sales

Letšeng entered into partnership arrangements during the year for the sale of four rough diamonds totalling 240 carats. The partnership arrangements allow for Letšeng to share in the margin uplift on the sale of the resultant polished diamonds, which added revenue to the Group of US$0.6 million in 2020.

Corporate expenses

Central costs are incurred by the Group to provide expertise in all areas of the business model to realise maximum value from the Group's assets. These costs are incurred at the technical and administrative offices in South Africa (in South African rand) and head office in the UK (in British pounds).

Baseline corporate costs for the year were US$7.9 million, a 4% increase compared to 2019 of US$7.7 million. The benefits from the corporate cost initiatives implemented through BT continue to be realised. During the year, US$0.1 million in costs were incurred relating to BT and ad hoc projects (2019: US$1.7 million), resulting in an overall saving of US$1.4 million compared to 2019. The saving is largely due to the suspension of all ad hoc projects during the COVID-19 pandemic.

Historical corporate costs data (US$ milllion)
	2015	2016	2017	2018	2019	2020
Baseline costs	11.6	10.5	9.0	9.3	7.7	7.9
Project costs	0.1	0.5	0.2	0.7	1.7	0.1

Underlying EBITDA¹ and attributable profit

Group underlying EBITDA¹ from continuing operations increased by 30% to US$53.2 million (2019: US$41.0 million) as a result of the increase in revenue and the reduction in costs through cash preservation initiatives. Profit attributable to shareholders was US$13.6 million, which translates to 9.8 US cents per share based on a weighted average number of shares in issue of 139.3 million.

1 Refer Note 4, Operating profit on page 145, for the definition of non-GAAP measures.

Statement of financial position - selected indicators

US$ million	2020	2019
Property, plant and equipment	304 003	323 853
Receivables and other assets	5 839	6 337
Inventory	26 740	32 517
Cash and short-term deposits	49 821	11 303
Assets held for sale	3 528	3 943
Non-current: interest-bearing loans and borrowings	(1 701)	(6 009)
Current: interest-bearing loans and borrowings	(14 385)	(16 332)
Liabilities associated with assets held for sale	(4 224)	(4 221)
Deferred tax	(78 209)	(83 124)
Provisions	(12 331)	(15 588)
Income tax (payable)/receivable	(11 834)	8 176

Capital expenditure

The Group's focus on cash preservation during COVID-19 resulted in limited capital spend and the deferral of a number of capital projects. Letšeng's capital spend was incurred mainly on continued core drilling; micro diamond analysis and mineral resource studies to firm up the existing mineral resource base (US$0.7 million) (2019: US$0.5 million); and the studies and engineering designs for the construction of the replacement Primary Crusher Area of US$0.3 million (2019: US$0.7 million). In addition, US$0.1 million was spent on COVID-19 screening equipment and hardware.

Total capital expenditure (excluding waste stripping) decreased to US$1.6 million during the year (2019: US$9.7 million).

Cash at hand

The Group generated cash from operating activities (before capital and waste investment of US$48.7 million) of US$96.2 million. The Group ended the year with cash on hand of US$49.8 million (2019: US$11.4 million), of which US$36.2 million is attributable to Gem Diamonds. All scheduled debt repayments during the year were made, totalling US$13.5 million. The overall result is a net increase in cash of US$44.8 million year on year.

Letšeng declared a dividend of LSL400.0 million (US$27.0 million) in 2020 of which LSL250.0 million (US$16.8 million) was paid during 2020, with a further LSL150.0 million (US$10.2 million) payable in March 2021.

Cash movement (US$ million)

Cash and facilities December 2019	81
Letšeng - cash generated	105
Net income tax received	6
Letšeng - waste costs capitalised	(47)
Net Financial liabilities repaid (incl. IFRS 16)	(8)
Corporate costs	(8)
Dividends to NCIs	(5)
Net finance costs	(3)
Ghaghoo costs	(3)
Investment in PPE	(2)
FCTR	4
Cash and facilities December 2020	111

Loans and borrowings

At year end, the Group had utilised facilities of US$15.2 million, resulting in a net cash position of US$34.6 million and available facilities of US$60.8 million, comprising a net debt position of US$5.7 million (after US$10.0 million drawdown) at Gem Diamonds and a net cash position of US$40.3 million at Letšeng.

The Group optimised the capital structure to ensure Letšeng's debts were fully repaid at the end of the year, even under COVID-19 circumstances, to ensure lower overall gearing in the medium term should the pandemic have extended implications. The Group has renegotiated the Gem Diamonds' three-year revolving credit facility that expired in December 2020 for a further 12 months up to 31 December 2021. The Group engages regularly with lenders and credit providers to ensure continued access to funding and to manage the Group's cash flow requirements during these current turbulent times.

Repayment of the remaining US$10.0 million balance on the Gem Diamonds Limited facility, relating to the Ghaghoo US$25.0 million debt, was repaid in quarterly instalments during the year, with the final repayment made in December 2020. During 2020, Gem Diamonds accessed US$14.0 million of its three-year RCF. A capital repayment of US$6.0 million was made on the RCF facility in December 2020, ending the year with a US$10.0 million outstanding balance.

Letšeng made repayments of LSL57.3 million (US$3.5 million) on its project debt facility for the construction of the mining workshop complex. The outstanding balance of LSL76.3 million (US$5.2 million) will be repaid by September 2022.

Funding discussions for the replacement PCA continues while the appropriate timing for the commencement of the project is being considered.

The Group has commenced a consolidated debt refinancing of its key credit facilities and has appointed Nedbank Corporate and Investment Banking as the sole mandated lead arranger to drive this process on its behalf.

Summary of loan facilities as at 31 December 2020

Company	Term/ description	Lender	Expiry	Interest rate1	Amount US$ million	Drawn down US$ million	Available US$ million
Existing facilities
Gem Diamonds Limited2	12-Month RCF	Nedbank	December 2021	London US$ three-month London Interbank Offered Rate (LIBOR) + 5.0%	30.0	10.0	20.0
Letšeng Diamonds	Three-year RCF	Standard Lesotho Bank and Nedbank Lesotho	July 2021	Lesotho prime rate minus 1.5%	34.0	-	34.0
Letšeng Diamonds	Five-and-a-half-year project facility	Nedbank/ Export Credit Insurance Corporation	March 2022	Tranche 1 (R180 million) South African Johannesburg Interbank Average Rate (JIBAR) + 3.15%	12.3	4.1	-
			September 2022	Tranche 2 (LSL35 million) South African JIBAR + 6.75%	2.3	1.1	-
Letšeng Diamonds	Overdraft facility	Nedbank	Annual review in March	South African prime rate minus 0.7%	6.8	-	6.8
Total					85.4	15.2	60.8

1 At 31 December 2020 LIBOR was 0.24% and JIBAR was 3.65%.

2 Refer Note 18 of the Annual Financial Statements for the reconciliation of the US$30 million facility.

Discontinued operation

In line with the strategic objective to dispose of non-core assets, the Board and management remain committed to the sale of Ghaghoo. The binding agreement that Gem Diamonds entered into in June 2019 for the sale of 100% of the share capital of Gem Diamonds Botswana Proprietary Limited lapsed due to certain suspensive conditions not being met, however the process was again opened to other prospective buyers during the year and has entered into an exclusivity agreement with an interested party with whom potential sale discussins are continuing.

The sales process faced considerable delays in 2020 largely due to the impact of COVID-19 and in particular the related travel restrictions that prohibited site visits for due diligence purposes. The process is expected to be concluded in 2021.

The operation remains on care and maintenance and is classified as a discontinued operation in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Care and maintenance costs were significantly reduced to US$3.3 million (2019: US$4.5 million) and have been recognised and disclosed separately in the Consolidated Statement of Profit or Loss. The reduction in costs was mainly due to the renegotiation of key contracts following the suspension of the de-watering programme. The suspension realised savings relating to reduced fuel consumption on site and ancillary costs associated with de-watering. Further cost reductions were driven by insurance premium decreases, termination of a transport contract, reducing the workforce in line with reduced care and maintenance operations and renegotiation of a generator rental contract.

Share-based payment

The share-based payment charge for the year was US$0.6 million (2019: US$0.8 million). On 9 June, 1 249 000 nil-cost options were granted to certain key employees and Executive Directors under the long-term incentive plan of the Group with similar conditions as previous awards granted under this scheme.

DIVIDEND

As a result of the Group's disciplined capital and cash management, and its strong cash generation during the year in a challenging environment, the Board is pleased to recommend the payment of an ordinary cash dividend of 2.5 US cents in respect of the 2020 financial year. The dividend is subject to shareholder approval at the scheduled AGM to be held on 2 June 2021.

TAXATION

The Group has applied all relevant principles in accordance with prevailing legislation in assessing its tax obligations.

The Group's effective tax rate was 28%. Most of the Group's taxes are incurred in Lesotho, which has a corporate tax rate of 25%. The effective tax rate is above the Lesotho corporate tax rate as a result of deferred tax assets not recognised on losses incurred in operations during the year, partially offset by a reduction in the deferred tax liability on unremitted earnings. Governments in various countries introduced certain tax payment deferment measures to reduce the impact of COVID-19 on companies during the lockdown period, and where applicable all taxes were paid before year-end, in line with the deferrals offered. 

During the year the Group received a net tax refund of US$5.9 million in taxes. The US$7.6 million of overpaid taxes relating to the 2019 tax year at Letšeng was refunded during the year. Following the solid financial results at Letšeng, a further tax obligation of US$11.3 million relating to the 2020 tax year is due for payment by March 2021.

As disclosed in the 2019 Annual Report and Accounts, an amended tax assessment was issued to Letšeng by the Lesotho Revenue Authority (LRA) in December 2019, contradicting the application of certain tax treatments in the current Income Tax Act. An objection was lodged by Letšeng in March, which was supported by the opinion of senior counsel, together with an application for the suspension of any payment deemed due. The application for suspension of payment was accepted. The LRA has subsequently lodged an application to the Lesotho High Court pertaining to this matter, which Letšeng is opposing and a court date has been set for 3 August 2021. There has therefore been no change in the judgement applied and the accounting treatment for this matter (refer Note 1.2.28, Critical accounting estimates and judgment for further detail.)

SENSITIVITIES

The Group is exposed to a range of external factors that are outside of its control in the conduct of its business. The Group has the necessary resilience, balance sheet strength and access to funds to adjust for shifts in these factors. The graph below illustrates the sensitivity of 2020's EBITDA to various factors that have the most significant impact on our ability to create value.

SENSITIVITY IMPACT OF 1% CHANGE (US$ MILLION)

Royalties rate change (absolute)	1.8
Average selling price for rough diamonds sold	1.7
Operating cost per tonne - direct cash cost	1.1
Exchange differences	1.1
Diesel price or volume	0.1
Corporate expenses	0.1

OUTLOOK

While the full impact of COVID-19 on the diamond industry and the Group's operations is still unfolding, the Group expects that in the medium to long term, rough diamond prices will be supported by favourable demand and supply fundamentals. These include continued growth in demand from markets such as China and India, supported by a projected fall-off in rough diamond supply. This dynamic is expected to benefit high-quality diamonds in particular, where shortages of certain categories of these rough diamonds were already evident during the year.

The Group's business priorities were quickly adapted to the new reality created by COVID-19 and numerous operational projects were deferred to focus on normalising the business. The Group continues to monitor developments and considers the potential primary risks to be disruptions in production resulting in lower throughput and the risk of reduced revenue due to downward pressure on diamond prices and/or decreased demand.

The Group's focus remains on areas of optimisation and cash preservation through re-evaluation of all operational and financial management initiatives, while keeping employees and surrounding communities safe. Effective capital allocation and cost reductions aim to ensure the financial and funding resilience needed to operate in extremely challenging times and to achieve the Group's strategic objectives.

Michael Michael

Chief Financial Officer

10 March 2021

OPERATIONAL REVIEW

HIGHLIGHTS

· Zero fatalities and one LTI

· Group AIFR at 0.76, the lowest in a decade

· Recovered 16 diamonds greater than 100 carats, including a 439 carat, a 183 carat and a 166 carat Type IIa white diamond

· Sold 34 diamonds for more than US$1.0 million each

· Average price of US$1 908 per carat achieved despite the impact of COVID-19 (2019: US$1 637)

· The Group effectively handled an unprecedented crisis

· Continued benefits and savings realised from BT initiatives and CI programme successfully rolled out in mining operations

· Excellent collaboration with contractors and suppliers ensured safe and responsible continued operations and the sustainability of the business

· Fourth consecutive year of ISO 14001 and 45001 certifications

CHALLENGES

· COVID-19 and the 30-day shutdown at Letšeng mine

· COVID-19 disruptions affected haul truck and other critical equipment, and spares availability

· Processing at Letšeng plants below budget due to (i) an increase in planned maintenance to improve equipment reliability and plant stability; and (ii) intermittent power interruptions

KEY PROJECTS 2020

· Implemented a Safety Turnaround Strategy, adopted at the end of 2019

· Ensured the safety and wellbeing of our workforce and PACs during COVID-19 while adapting operations and strategic priorities for the changed operating environment

· Enhanced customer engagement to realise maximum sales opportunities

· Ensured transitioning of BT into CI (see page 46)

· Completed feasibility study to replace and upgrade the PCA facility

· Investigated further options to reduce waste mining

· Reduced diamond damage through changing blasting patterns successfully rolled out at Letšeng

· Reduced processing throughput to improve plant stability through more consistent feed rate

· Progressd studies and core drilling relating to the updating of the Resource and Reserve Statement

PERFORMANCE

Line managers at Letšeng report to the COO on a weekly basis. This was increased to daily meetings at Letšeng and weekly meetings at Ghaghoo following the onset of the pandemic and the resultant operational impacts.

Weekly meetings were held with contractors, line management and the COO to ensure alignment and understand challenges in addressing COVID-19 impacts.

Over and above quarterly reports to the Board, the COO and CFO meet with a non-Executive Director about operational governance on a weekly basis.

Weekly cash flow meetings with Letšeng are held and line managers submit a monthly operational report to both the COO and CFO, which provides performance feedback on metrics involving:

· health and safety;

· COVID-19 testing and management;

· production and operational performance;

· TSF management and monitoring; and

· current projects' progress discussions.

Safety

Letšeng's approach to safety is built on the culture of behaviour-based care at work and a commitment to zero harm. The Group's intensified focus on safety and the benefits of visible leadership and training is evident in the positive operational safety trends seen in 2020. One LTI was recorded at Letšeng during 2020 (2019: seven); and the LTIFR decreased to 0.04 (2019: 0.28). The Group reported the lowest AIFR in a decade after the AIFR improved to 0.76 (2019: 0.97). Although the focus on the Safety Turnaround Strategy implemented in 2020 saw a decrease in LTIs during 2020, management has also implemented pro-active actions to prevent the recurrence of certain near-miss incidents that could potentially have severe outcomes. Letšeng is putting into effect a strategy to reduce LTIs, and to ensure behaviour-based care is integrated at the operation to continue to reduce all safety incidents. There were no LTIs during 2020 at Ghaghoo or anywhere else in the Group.

KPI	Unit	2020	2019	% change
Fatalities	Number	0	1	(100)
LTIFR	200 000 man hours	0.04	0.28	(86)
AIFR	200 000 man hours	0.76	0.93	(19)

Operations

KPI	Unit	2020	2019	% change
Ore mined	tonnes	5 594 639	6 297 805	(11)
Ore treated	tonnes	5 436 396	6 707 791	(19)
Carats recovered1	carats	100 780	113 974	(12)
Carats sold	carats	99 172	111 292	(11)
Average price per carat	US$/carat	1 908	1 637	17

1 Includes carats produced from the Letšeng plants, the Alluvial Ventures (AV) plant and the tailings treatment plant.

Letšeng suspended operations and placed the mine on care and maintenance from 28 March to 26 April in compliance with the Government of Lesotho's lockdown order. Mining and ore treatment restarted in a phased approach in April and ramp-up to full production at both treatment plants was achieved in May, with waste mining recommencing in July, in accordance with a revised 2020 mine plan.

Waste tonnes mined decreased 35% to 15.6 million tonnes from 24.0 million tonnes in 2019, impacted by the shutdown of operations in Q2, the focus on cash preservation and based on a revised 2020 mining plan. Availability of primary waste diggers and waste hauling trucks was lower than call due to reduced availability of critical spares and maintenance services, largely as a result of the imposed COVID-19-related lockdowns and travel restrictions.

Ore tonnes treated during 2020 of 5.4 million tonnes comprised 4.5 million tonnes treated by Letšeng's plants (2019: 5.6 million) and 0.9 million tonnes treated by the third-party processing contractor Alluvial Ventures (AV) (2019: 1.1 million). Of the total ore treated, 2.6 million was sourced from the Main pipe, 2.8 million from the Satellite pipe with only a negligible number of tonnes from the Main pipe stockpiles. Ore tonnes treated was impacted by the shutdown and phased ramp-up, the planned reduction in processing feed rates to improve plant stability with the aim of increasing diamond recoveries, electricity supply interruptions, and and an increase in planned maintenance to ensure equiment reliability. Due mainly to the lost processing time during the shutdown period and phased ramp-up in Q2, a higher proportion of Satellite pipe ore was treated in 2020 to maximise revenue and cash generation, particularly in the second half of the year. The coarser and harder Satellite pipe material, however, negatively impacts throughput capacity in the plants.

Total carats recovered in 2020 decreased 12% to 100 780 (2019: 113 974), largely as a result of no tonnes being treated during the 30-day shutdown period and reduced tonnes during the ramp-up phase.

The BT initiative to re-treat historic and current recovery tailings through the mobile XRT sorting machine yielded 1 341 carats in 2020 (2019: 5 420 carats). The decrease compared to 2019 is largely due to improved recoveries within the coarse recovery system and the depletion of historic coarse recovery tailings material.

Overall grade for 2020 was 1.85cpht, an increase of 9% on the 1.70cpht realised in 2019 due to the higher contribution of Satellite pipe ore in 2020, which has a higher grade relative to Main pipe ore. The grade for the ore processed during the year was in line with its expected reserve grade.

Large diamond recoveries

In 2020 Letšeng recovered 16 diamonds greater than 100 carats each (2019:11); and total diamonds recovered greater than 10 carats increased by 5% year on year.

Number of large diamond recoveries	2020	2019	FY average 2009 - 2019
> 100 carats	16	11	8
60 - 100 carats	29	20	18
30 - 60 carats	102	82	72
20 - 30 carats	115	139	114
10 - 20 carats	500	472	426
Total diamonds > 10 carats	762	724	639

Letšeng +100 carat diamonds recovered
2012	3
2013	6
2014	9
2015	11
2016	5
2017	7
2018	15
2019	11
2020	16

Mineral resources and reserves

While studies related to the updating of Letšeng's Resource and Reserve Statement continued throughout 2020, there were considerable delays due to the lockdowns in Lesotho, South Africa and Canada. Analysis and interpretation of results progressed, including comprehensive petrography, mineral chemistry (Mantle Mapper and chromite microprobe test work) and microdiamond analysis of drill core and grab samples, all of which complement the core logging data and guide the 3D geological modelling process.

Bulk sampling of the various volumetrically significant subdomains is ongoing within the mining and treatment production schedules. The low grades of all kimberlites at Letšeng mean that substantial bulk samples are required to collect sufficient diamond data to confidently estimate grade and diamond value.

The timeline for updating the Resource and Reserve Statement was further impacted by the relatively internal geology recognised during the detailed petrographic studies on historical and new core obtained during the 2017-2018 drilling programme. As a result, additional core drilling is required to confirm the classification of certain portions of the Resource as Indicated.

The necessary additional core drilling commenced with a new drill rig purchased in November 2020. This drilling programme was designed to increase drillhole density in certain areas and confirm internal contacts. Logging and sampling of the core will be carried out at Letšeng in parallel with external petrographic analysis to complete the work required for the Resource and Reserve Statement and the supporting technical report.

Diamond sales

Travel and other COVID-19-related restrictions implemented in many countries worldwide, and particularly in Belgium, Israel and India, impacted on the Group's sales process. Flexible tender processes were successfully introduced in strict compliance with COVID-19 health and safety protocols, including appropriate social distancing guidelines and sanitation measures. This allowed for sales to be conducted by limited tender and/or allowing clients to view diamonds virtually before tendering. Additional rough diamond analysis information of selected large high-value diamonds was provided to assist clients who could not physically attend the tenders to virtually view the diamonds prior to bidding on the tender platform.

Six rough diamond tender viewings were held in Antwerp and one in Tel Aviv during the year. A total of 99 172 carats were sold by Gem Diamonds Marketing Services (2019: 111 292). Letšeng generated rough diamond revenue of US$189.2 million (2019: US$182.0 million), at an average price of US$1 908 per carat (2019: US$1 637).

Capital projects

Capital requirements for 2020 were reviewed as a result of COVID-19 with savings realised and a portion of planned capital expenditure deferred to future years. During the year, the limited capital spend related to the progress of the resource and reserve statement, the expansion of the Patiseng Tailings Storage Facility and the initial design work to replace the ageing primary crushing area (PCA). Details of overall costs and capital expenditure incurred at Letšeng during the period are included in CFO report on pages 36 to 42.

Business Transformation (BT) and Continuous Improvement (CI)

The Group's Business Transformation (BT) programme started in 2018, with the goal of delivering US$100 million in revenue, productivity and cost savings (against the 2017 base) by the end of 2021. 325 initiatives were identified to create a step change in efficiency, productivity and cost management, and to position Gem Diamonds favourably in its peer group. The BT programme included four primary workstreams - mining, processing, working capital and overheads, and corporate activities.

The target included US$7.1 million in once-off savings and US$92.9 million in cumulative recurring annualised benefits over the four-year period. This target is stated net of implementation costs, consultant fees and an employee incentive plan that rewarded the successful delivery of initiatives contributing to the overall target.

The successful implementation of the underlying initiatives over the past three years created a solid operational, financial and cultural platform for the Group to navigate the challenging operating environment over the past few years and more recently to absorb the external shock of the COVID-19 pandemic. The process underpinning the material initiatives that contribute to the US$100 million target are embedded and sustainable and, notwithstanding the 30-day shutdown and reduced operations in Q2 2020 which negatively impacted certain of the initiatives, the full delivery of the target by end 2021 remains on track. By the end of the year, the BT programme delivered US$79.2 million of the target.

· 14 employees from across the levels part of CI Steering Committee

· 15 champions trained

· 25 employees making up taskforces

· 12 eomplyees up skilled and accredited as trainers through 'train the trainer' principle

· 4 300 hours of CI, leadership, visual management and problem solving

· 700 employees introduced to CI

BT programme annual cash saving (US$ million)

	2018	2019	2020	2021
Cumulative saving	21	55	79	100
Mining	5	17	16	11
Processing	13	12	2	4
Working capital and overheads	1	2	3	2
Corporate activities	2	3	3	4

Many of the BT processes focused on improved efficiencies in the use of our natural resources, which also mitigate the operational impact on the natural environment. This supports the Group's strategy of maximising benefit for our communities and minimising our impact on the environment.

The transition from BT to CI at Letšeng is progressing well. CI focuses on behavioural strategies and the implementation of meaningful key performance indicators for effective visual management and problem solving (using the 5-WHY methodology) at all levels. CI, supported by software training, enables the Group to continuously improve efficiencies by unlocking the inherent capabilities of employees at all levels to implement CI best practices, build effective teams, drive incremental improvements and create a high-performance culture. The successful implementation of CI in the Mining area at Letšeng has resulted in marked operational efficiencies, such as improved adherence to drilling parameters and blasting quality during 2020. Roll-out to the Treatment and Services areas has commenced. Taskforce members in Treatment have been identified and they have undergone the introductory training.

Dam safety and integrity

Tailings dam integrity is an ongoing area of focus for mining companies and investors, in recognition of the possible adverse impact that a failure at one of these facilities may have on human lives and the natural environment. Letšeng has three dams on site - (i) the Patiseng tailings storage facility (TSF), which is currently in use for the deposition of coarse and fine slimes tailings, (ii) the old TSF, which is a semi-dormant facility currently used only for emergency deposition of fines tailings, and (iii) the Mothusi Dam, which is the mine's freshwater supply resource. These dams were constructed using the 'centre line and downstream tipping' method¹. Most recent dam failures reported in the mining industry were related to dams built using 'upstream' construction methods.

The relevant details of these facilities are available in Gem Diamonds' voluntary disclosure as part of the Investor Mining & Tailings Safety initiative set up by the Church of England, which can be found under the Company's name at http://tailing.grida.no/. Read more about progress in 2020 on page 50.

Reducing diamond damage

The unique diamond distribution in Letšeng's orebody comprises a high proportion of larger high-value Type II diamonds that are more susceptible to damage in mining and processing. Reducing diamond damage therefore provides an important opportunity for Gem Diamonds to significantly enhance revenue.

Opportunities to reduce diamond damage that show the most potential include:

· early identification of diamonds within kimberlite; and

· non-mechanical means of liberating these diamonds within kimberlite.

Over the last five years, Gem Diamonds has made significant progress in identifying, validating and testing technologies from various industries that show potential for early detection and non-mechanical liberation of diamonds.

Following the successful proof of concept, the Group's wholly owned subsidiary, Gem Diamonds Innovation Solutions, constructed and commissioned a pilot plant at Letšeng in 2019 to test the technology under operating conditions. The pilot plant combines scanning technology that uses proprietary imaging and sorting algorithms to detect diamonds within kimberlite with high-voltage pulse power for non-mechanical fragmentation of composite materials to liberate the encapsulated diamonds.

A steering committee is in place to oversee the project, chaired by the CEO. Advancing of the pilot during the year was negatively impacted by COVID-19, the revised capital expenditure plan, inconstant electricity and water supply, and challenges with the reliability of certain key components. The work done to date demonstrates the potential of the technology to reduce diamond damage and the Group remains committed to the project. New partners were identified to advance the pilot processing plant to detect diamonds within kimberlite and further enhancement and testing will continue in 2021.

Providing clarity for customers

Increasing consumer interest in social and environmental factors when making buying decisions, particularly among younger consumers, provides an opportunity for ethical and responsible producers like Gem Diamonds. Blockchain technology is a way to securely link the source of rough diamonds with the final polished diamonds, proving their authenticity, provenance and traceability, and supporting ethical sourcing and processing in the diamond value chain. Solutions currently available offer consumers information about the country of origin of their diamonds, as well as the positive impact the mine and the broader industry have on the communities and countries in which they operate. We have been participating in the GIA's Diamond Origin programme since the start of 2020 and have been sending large, high-value diamonds for rough analysis as time and lockdown regulations allow.

FUTURE FOCUS AREAS 2021

Our focus to further reduce waste stripping will continue. An analysis was completed in 2020 to further steepen pit slope angles. A trial to further steepen the west side of the Satellite pipe is scheduled to commence in H1 2021.

Following the completion of the design work of the replacement PCA, the application for funding continues while the appropriate timing for the commencement of the project is being considered.

1 A discussion of the construction and applicability of the various types of tailings facilities is available on the International Council of Mining and Metals website at www.icmm.com/en-gb/environment/tailings.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with International Financial Reporting Standards (IFRS). Having taken advice from the Audit Committee, the Board considers the report and accounts taken as a whole, are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

The Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

PREPARATION OF THE FINANCIAL STATEMENTS

The Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group, and of their profit or loss for that period. In preparing the Group financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS;

· state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Group financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose, with reasonable accuracy at any time, the financial position of the Group. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole. In addition, suitable accounting policies have been selected and applied consistently.

Information, including accounting policies, has been presented in a manner that provides relevant, reliable, comparable and understandable information, and additional disclosures have been provided when compliance with the specific requirements in IFRS have been insufficient to enable users to understand the financial impact of particular transactions, other events and conditions on the Group's financial position and financial performance. Where necessary, the Directors have made judgements and estimates that are reasonable.

The Directors of the Company have elected to comply with the Companies Act, 2006, in particular the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013 of the United Kingdom pertaining to Directors' remuneration which would otherwise only apply to companies incorporated in the UK.

Michael Michael

Chief Financial Officer

10 March 2021

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Gem Diamonds Limited

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Opinion

We have audited the consolidated financial statements of Gem Diamonds Limited and its subsidiaries (the Group) set out on pages 118 to 173, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss, consolidated statement of other comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements of the Group and in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits of the Group and in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards).  We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated financial statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Key audit matter

How the matter was addressed in the audit

COVID-19 impact: Uncertainty with assumptions used to forecast the prospective financial information applied in the impairment and going concern models. Management performs an annual impairment test on goodwill as required by IAS 36 Impairment of Assets and an annual going concern assessment using discounted and undiscounted cash flows. Goodwill relates to the Group's investment in the Letšeng Diamond mine. During the year, the Covid-19 pandemic and the resulting lockdown restrictions halted production at the Group's Letšeng mine for a period. It further impacted trading and reduced the number of tenders due to the availability of goods and lockdown restrictions. There is an inherent uncertainty in forecasting and discounting future cash flows, which forms the basis of the Group's value in use calculations used in the impairment model and the going concern assessment.  This was amplified due to the economic and other effects of the Covid-19 pandemic including uncertainty around the duration of the pandemic and timing of the recovery of the various world economies. The recent volatility in diamond prices, exchange rates and discount rates resulted in additional audit work in assessing the Group's impairment model and ability to continue as a going concern. As disclosed in Note 12 Impairment testing and Note 1.2.2 Going Concern, the Group uses discounted and undiscounted cash flows to determine the value in use for each cash generating unit and also Group's ability to continue as a going concern, on the basis of the following key assumptions: · Diamond prices; · Inflation rates; · Production costs and volumes; · Capital expenditure; · Renewal of borrowing facilities; · Discount rates; and · Exchange rates Given the above factors, the goodwill impairment and the assessment of cash flows in the going concern model, particularly in the diamond mining industry, required significant audit attention in the current year through extended sensitivity and stress testings with different scenarios including the use of our valuation experts.

Our audit procedures included amongst others the following: · We involved the EY internal valuation specialists as part of our team to assist in evaluating management's impairment methodology and key assumptions used in the impairment calculations; · Our valuation specialists calculated an independent weighted average cost of capital (WACC) to compare to management's WACC's. Our independent WACC recalculation was based on publicly available market data for comparable companies for the Letšeng Cash Generating Unit (CGU); · Our valuation specialists calculated an independent net present value (NPV) to compare to management's NPV; · Our valuation specialists assessed the reasonability of the significant inputs and assumptions used in the impairment and going concern models, such as diamond prices, exchange rates, inflation rates, by comparing them to independent sources; · We have performed sensitivity analyses around the key assumptions used in the impairment and going concern models. We did this by increasing and decreasing the following assumptions in the model to determine the impact on the headroom between the value of the recorded assets of the CGU and the value in use as calculated and the ability to continue as a going concern.  These included: o  Exchange rates o  Diamond prices o  Carats sold · We have compared FY2020 budgeted results utilised, against latest actual results available to understand management's ability to accurately estimate future cash flows; · We evaluated the progress on the renewal of the borrowing facilities through inquiry and inspection of communications with lenders; · We assessed the adequacy of the Group's disclosures in terms of IAS 36 and IAS 1 in terms of the Going Concern, in the notes to the consolidated financial statements.

Other information

Management is responsible for the other information. The other information comprises the information included in the 185-page document titled "Gem Diamonds Limited Annual report and accounts 2020". The other information does not include the consolidated financial statements and our auditor's reports thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance, for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor's responsibilities for the audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identity during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young Inc.

Director - Philippus Dawid Grobbelaar

Registered Auditor

Chartered Accountant (SA)

10 March 2021

102 Rivonia Road

Sandton

Private Bag X14

Sandton

2146

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31 DECEMBER 2020

	Notes	2020 US$'000	2019 US$'000
CONTINUING OPERATIONS
Revenue from contracts with customers	2	189 647	182 047
Cost of sales		(113 802)	(129 482)
Gross profit		75 845	52 565
Other operating (expense)/income	3	(3 911)	845
Royalties and selling costs		(19 843)	(16 904)
Corporate expenses		(7 992)	(9 418)
Share-based payments	28	(555)	(784)
Foreign exchange (loss)/gain	4	(880)	3 550
Reclassification of foreign currency translation reserve	5	-	4
Operating profit	4	42 664	29 858
Net finance costs	6	(4 411)	(5 808)
- Finance income		382	668
- Finance costs		(4 793)	(6 476)
Profit before tax for the year from continuing operations		38 253	24 050
Income tax expense	7	(10 711)	(9 020)
Profit after tax for the year from continuing operations		27 542	15 030
DISCONTINUED OPERATION
Loss after tax from discontinued operation	16	(3 264)	(4 454)
Profit for the year		24 278	10 576
Attributable to:
Equity holders of parent		13 641	2 617
Non-controlling interests		10 637	7 959
Earnings per share (cents)	8
- Basic earnings for the year attributable to ordinary equity holders of the parent		9.8	1.9
- Diluted earnings for the year attributable to ordinary equity holders of the parent		9.6	1.8
Earnings per share (cents) for continuing operations
- Basic earnings for the year attributable to ordinary equity holders of the parent		12.1	5.1
- Diluted earnings for the year attributable to ordinary equity holders of the parent		11.9	5.0

 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

	Notes	2020 US$'000	2019 US$'000
Profit for the year		24 278	10 576
Other comprehensive income that will be reclassified to the Consolidated Statement of Profit or Loss in subsequent periods
Reclassification of foreign currency translation reserve, net of tax	5	-	(4)
Exchange differences on translation of foreign operations, net of tax		(14 049)	4 512
Other comprehensive (loss)/income for the year, net of tax		(14 049)	4 508
Total comprehensive income for the year, net of tax		10 229	15 084
Attributable to:
Equity holders of the parent		3 779	1 763
Non-controlling interests		6 450	13 321

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2020

	Notes	2020 US$'000	2019 US$'000
ASSETS
Non-current assets
Property, plant and equipment	9	304 005	323 853
Right-of-use asset	10	4 823	8 454
Intangible assets	11	12 997	13 653
Receivables and other assets	13	153	-
Deferred tax assets	23	6 346	7 871
		328 324	353 831
Current assets
Inventories	14	26 741	32 517
Receivables and other assets	13	5 686	6 337
Income tax receivable	21	106	8 189
Cash and short-term deposits	15	49 820	11 303
		82 353	58 346
Assets held for sale	16	3 528	3 943
Total assets		414 205	416 120
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital	17	1 397	1 391
Share premium		885 648	885 648
Other reserves	17	(212 164)	(202 857)
Accumulated losses		(511 808)	(525 449)
		163 073	158 733
Non-controlling interests		84 422	85 424
Total equity		247 495	244 157
Non-current liabilities
Interest-bearing loans and borrowings	18	1 702	6 009
Lease liabilities	19	4 902	8 539
Trade and other payables	20	2 029	1 936
Provisions	22	12 331	15 588
Deferred tax liabilities	23	84 538	90 995
		105 502	123 067
Current liabilities
Interest-bearing loans and borrowings	18	14 385	16 332
Lease liabilities	19	1 836	1 940
Trade and other payables	20	28 823	26 390
Income tax payable	21	11 940	13
		56 984	44 675
Liabilities directly associated with the assets held for sale	16	4 224	4 221
Total liabilities		166 710	171 963
Total equity and liabilities		414 205	416 120

Approved by the Board of Directors on 10 March 2021 and signed on its behalf by:

C Elphick   M Michael

Director   Director

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2020

Attributable to the equity holders of the parent
	Issued capital US$'000	Share premium US$'000	Other reserves1 US$'000	Accumulated (losses)/ retained earnings US$'000	Total US$'000	Non-controlling interests U5$'000	Total equity US$'000
Balance at 1 January 2020	1 391	885 648	(202 857)	(525 449)	158 733	85 424	244 157
Total comprehensive loss	-	-	(9 862)	13 641	3 779	6 450	10 229
Profit for the year	-	-	-	13 641	13 641	10 637	24 278
Other comprehensive loss	-	-	(9 862)	-	(9 862)	(4 187)	(14 049)
Share capital issued (Note 17)	6	-	(6)	-	-	-	-
Share-based payments (Note 28)	-	-	561	-	561	-	561
Dividends declared	-	-	-	-	-	(7 452)	(7 452)
Balance at 31 December 2020	1 397	885 648	(212 164)	(511 808)	163 073	84 422	247 495
Attributable to discontinued operation (Note 16)	-	-	(53 046)	(192 252)	(245 298)	-	(245 298)
Balance at 1 January 2019	1 390	885 648	(152 029)	(578 834)	156 175	72 103	228 278
Total comprehensive income (loss)/income	-	-	(854)	2 617	1 763	13 321	15 084
Profit for the year	-	-	-	2 617	2 617	7 959	10 576
Other comprehensive income (loss)/income	-	-	(854)	-	(854)	5 362	4 508
Share capital issued (Note 17)	1	-	-	-	1	-	1
Transfer between reserves2	-	-	(50 768)	50 768	-	-	-
Share-based payments (Note 28)	-	-	794	-	794	-	794
Balance at 31 December 2019	1 391	885 648	(202 857)	(525 449)	158 733	85 424	244 157
Attributable to discontinued operation (Note 16)	-	-	(51 916)	(190 107)	(242 023)	-	(242 023)

1 Other reserves relate to Foreign currency translation reserves and Share based equity reserves. Refer Note 17, Issued capital and reserves for further detail.

2 In 2019 the Company elected to release share-based equity reserve relating to lapsed and exercised options to accumulated (losses)/retained earnings.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2020

	Notes	2020 US$'000	2019 US$'000
Cash flows from operating activities		96 227	55 490
Cash generated by operations	24.1	93 050	81 644
Working capital adjustments	24.2	464	(2 854)
Interest received		382	668
Interest paid		(3 558)	(5 181)
Income tax received/(paid)	21	5 889	(18 787)
Cash flows used in investing activities		(48 718)	(80 769)
Purchase of property, plant and equipment	9	(1 571)	(9 671)
Waste stripping costs capitalised	9	(47 167)	(73 175)
Proceeds from sale of property, plant and equipment		20	2 077
Cash flows from financing activities		(12 995)	(14 076)
Lease liabilities repaid	19	(1 906)	(1 901)
Net financial liabilities repaid	24.3	(6 431)	(12 175)
Financial liabilities repaid		(55 638)	(47 056)
Financial liabilities raised		49 207	34 881
Dividends paid to non-controlling interests		(4 658)	-
Net increase/(decrease) in cash and cash equivalents		34 514	(39 355)
Cash and cash equivalents at beginning of year		11 443	50 812
Foreign exchange differences		3 870	(24)
Cash and cash equivalents		49 827	11 443
Cash and cash equivalents at end of year - continuing operation	15	49 820	11 303
Cash and cash equivalents held at banks		49 820	11 188
Restricted cash		-	115
Cash and cash equivalents at end of year - discontinued operation	16	7	140
Cash and cash equivalents held at banks		7	83
Restricted cash		-	57

 

NOTES TO THE ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1.	NOTES TO THE ANNUAL FINANCIAL STATEMENTS
1.1	Corporate information
1.1.1	Incorporation The holding company, Gem Diamonds Limited (the Company), was incorporated on 29 July 2005 in the British Virgin Islands (BVI) and is domiciled in the United Kingdom (UK). The Company's registration number is 669758. These financial statements were authorised for issue by the Board on 10 March 2021. The Group is principally engaged in operating diamond mines.
1.1.2	Operational information The Company has the following investments directly and indirectly in subsidiaries at 31 December 2020:
	Name and registered address of company	Share-holding			Cost of investment¹		Country of incorporation			Nature of business
	Subsidiaries
	Gem Diamond Technical Services (Proprietary) Limited2 Illovo Corner 24 Fricker Road Illovo Boulevard Johannesburg South Africa	100%			US$17		RSA			Technical, financial and management consulting services.
	Gem Equity Group Limited3 2nd Floor, Coastal Building Wickhams Cay II PO Box 2221 Roadtown Tortola British Virgin Islands	100%			US$52 277		BVI			Dormant holding investment company in process of being voluntarily liquidated.
	Letšeng Diamonds (Proprietary) Limited2 Letšeng Diamonds House Corner Kingsway and Old School Roads Maseru Lesotho	70%			US$126 000 303		Lesotho			Diamond mining and holder of mining rights. Letšeng Diamonds (Proprietary) Limited holds 100% of the A class shares and 70% of the B class shares in Letšeng Diamonds Manufacturing (Proprietary) Limited, which is a dormant company established in Lesotho to operate the in-country diamond cutting and polishing.
	Gem Diamonds Botswana (Proprietary) Limited2,4 Suite 103, GIA Centre Diamond Technology Park Plot 67782, Block 8 Gaborone Botswana	100%			US$5 844 579		Botswana			Diamond mining; evaluation and development; and holder of mining licences and concessions4.
	Gem Diamonds Investments Limited2 Suite 1, 3rd Floor, 11-12 St. James Square, London SW1Y 4LB United Kingdom	100%			US$17 531 316		UK			Investment holding company holding 100% in each of Calibrated Diamonds Investment Holdings (Proprietary) Limited; Gem Diamonds Innovation Solutions CY Limited; Baobab Technologies BVBA; and Gem Diamonds Marketing Services BVBA, a marketing company that sells the Group's diamonds on tender in Antwerp.
	1  The cost of investment represents original cost of investments at acquisition dates. 2  No change in the shareholding since the prior year. 3  During the year Gem Equity Group (GEG) sold its investments, 2% in Gem Diamonds Marketing Services BVBA and 1% in Baobab Technologies investments, to Gem Diamonds Investments Limited. Following the sale of GEG's investments the GEG Board of Directors resolved to voluntarily liquidate GEG. As the operation is being closed and not sold the closure has been classified as an abandonment by the Company. 4 The Ghaghoo Diamond Mine, which is in the process of being sold, has been classified as a discontinued operation held for sale since 30 June 2019 and disclosed separately (refer Note 16, Asset held for sale).
1.1.3	Segment information For management purposes, the Group is organised into geographical units as its risks and required rates of return are affected predominantly by differences in the geographical regions of the mines and areas in which the Group operates or areas in which operations are managed. The below measures of profit or loss, assets and liabilities are reviewed by the Chief Operating Decision-Maker, ie Board of Directors. The main geographical regions and the type of products and services from which each reporting segment derives its revenue from are: · Lesotho (diamond mining activities); · Belgium (sales, marketing and manufacturing of diamonds); · BVI, RSA, UK and Cyprus (technical and administrative services); and · Botswana (diamond mining activities), classified as discontinued operation held for sale since 30 June 2019. Management monitors the operating results of the geographical units separately for the purpose of making decisions about resource allocation and performance assessment. Gem Diamonds Botswana (Ghaghoo Diamond Mine), which during the prior year was classified as a discontinued operation held for sale and separately disclosed, continues to be classified as such as management remain committed to the sales process. Refer Note 16, Asset held for sale. During the year GEG, a dormant investment company, was abandoned. Following the sale of its investments the Board of Directors of GEG resolved to voluntarily liquidate the operation, which remains an ongoing process and is expected to be concluded subsequent to year end 31 December 2020. GEG is classified as part of the BVI, RSA, UK and Cyprus segment. Segment performance is evaluated based on operating profit or loss. Intersegment transactions are entered into under normal arm's length terms in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment results include transactions between segments. Those transactions are eliminated on consolidation. Segment revenue is derived from mining activities, polished manufacturing margins, and Group services. The following tables presents revenue from contracts with customers, profit/(loss) for the year, EBITDA and asset and liability information from operations regarding the Group's geographical segments:
	Year ended 31 December 2020		Lesotho US$'000		Belgium US$'000		BVI, RSA UK and Cyprus1 US$'000		Total Continuing operations US$'000			Discontinued operation US$'000		Total US$'000
	Revenue from contracts with customers
	Total revenue		186 801		189 825		5 997		382 623			-		382 623
	Intersegment		(186 183)		(796)		(5 997)		(192 976)			-		(192 976)
	External customers		618		189 028		-		189 647			-		189 647
	Depreciation and amortisation		50 636		391		1 463		52 490			-		52 490
	- Depreciation and mining asset amortisation		7 216		391		1 463		9 070			-		9 070
	- Waste stripping cost amortisation		43 420		-		-		43 420			-		43 420
	Share-based equity transactions		157		6		392		555			6		561
	Segment operating profit/(loss)		49 061		1 354		(7 751)		42 664			(3 062)		39 602
	Net finance costs		(2 742)		(6)		(1 663)		(4 411)			(202)		(4 613)
	Profit/(loss) before tax		46 319		1 348		(9 414)		38 253			(3 264)		34 989
	Income tax (expense)/income		(10 790)		(179)		258		(10 711)			-		(10 711)
	Profit/(loss) for the year		35 529		1 169		(9 156)		27 542			(3 264)		24 278
	EBITDA		59 038		1 748		(7 588)		53 198			(2 943)		50 255
	Segment assets		396 040		1 694		6 597		404 331			3 528		407 856
	Segment liabilities		63 733		496		13 719		77 948			4 224		82 172
	Other segment information
	Net cash and short-term deposits2		40 311		877		6 565		34 623			7		34 630
	Capital expenditure
	- Property, plant and equipment		1 535		7		29		1 571			-		1 571
	- Net movement in rehabilitation asset3		(3 125)		-		-		(3 125)			-		(3 125)
	- Waste cost capitalised		47 167		-		-		47 167			-		47 167
	Total capital expenditure		45 577		7		29		45 613			-		45 613
	Average number of employees employed under contracts of service		323		6		21		350			31		381
	1  No revenue was generated in BVI and Cyprus. 2  Calculated as cash and short-term deposits less drawndown bank facilities (excluding the asset-based finance facility, insurance premium financing and rolling fees capitalised to the Company's US$30.0 million bank loan facility. Refer Note 18, Interest-bearing loans and borrowings). 3 Non-cash movements in rehabilitation assets relating to changes in rehabilitation estimates for the Lesotho segment.
	Included in revenue for the current year is revenue from six customers which amounted to US$66.9 million arising from sales reported in the Belgium segments. Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.3 million and US$84.5 million respectively. Total revenue for the year is higher than that of the prior year mainly due to higher sales prices achieved of US$1 908 (2019: US$1 637). During the year, COVID-19 had the following impact on revenue: · Production volumes were negatively impacted as a result of Letšeng's production ceasing on 28 March - 26 April 2020, in line with the COVID-19 lockdown restrictions instituted by the Government of Lesotho. · Six sales tenders were held compared to eight sales tenders during the prior year.
	Year ended 31 December 2019	Lesotho US$'000		Belgium US$'000		BVI, RSA UK and Cyprus1 US$'000		Total Continuing operations US$'000			Discontinued operation2 US$'000		Total US$'000
	Revenue from contracts with customers
	Total revenue	179 313		182 788		8 440		370 541			-		370 541
	Intersegment	(179 313)		(741)		(8 440)		(188 494)			-		(188 494)
	External customers	-		182 047		-		182 047			-		182 047
	Depreciation and amortisation	57 293		374		539		58 206			-		58 206
	- Depreciation and mining asset amortisation	14 164		374		539		15 077			-		15 077
	- Waste stripping cost amortisation	43 129		-		-		43 129			-		43 129
	Share-based equity transactions	264		6		514		784			10		794
	Segment operating profit/(loss)	38 524		863		(9 529)		29 858			(4 274)		25 584
	Net finance costs	(3 792)		(262)		(1 754)		(5 808)			(180)		(5 988)
	Profit/(loss) before tax	34 732		601		(11 283)		24 050			(4 454)		19 596
	Income tax expense	(8 228)		(151)		(641)		(9 020)			-		(9 020)
	Profit/(loss) for the year							15 030			(4 454)		10 576
	EBITDA	49 014		1 206		(9 221)		(40 999)			(4 389)		36 610
	Segment assets	393 107		2 477		8 722		404 306			3 943		408 249
	Segment liabilities	59 854		600		16 293		76 747			4 221		80 968
	Other segment information
	Net cash and short-term deposits3	(2 964)		1 505		(8 881)		(10 340)			140		(10 200)
	Capital expenditure
	- Property, plant and equipment	8 166		324		1 196		9 843			-		9 843
	- Net movement in rehabilitation4	157		-		-		157			-		157
	- Waste cost capitalised	73 175		-		-		73 175			-		73 175
	Total capital expenditure	81 498		324		1 196		83 018			-		83 018
	Average number of employees employed under contracts of service	362		6		24		392			33		425
	1  No revenue was generated in BVI and Cyprus. 2  The results of Gem Diamonds Botswana, which has been classified as a discontinued operation held for sale and which was previously included in the Botswana segment, has been reclassified to the discontinued operation segment. 3 Calculated as cash and short-term deposits less drawndown bank facilities (excluding the asset-based finance facility, insurance premium financing and rolling fees capitalised to the Company's US$30.0 million bank loan facility. Refer Note 18, Interest-bearing loans and borrowings). 4 Non-cash movements in rehabilitation assets relating to changes in rehabilitation estimates for the Lesotho segment.
	Included in annual revenue for the 2019 year is revenue from one customer which amounted to US$21.1 million arising from sales reported in the Belgium segments. Segment assets and liabilities do not include deferred tax assets and liabilities of US$7.9 million and US$91.0 million respectively.

1.2	Summary of significant accounting policies
1.2.1	Basis of preparation The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). These financial statements have been prepared under the historical cost basis except for assets and liabilities measured at fair value. The accounting policies have been consistently applied except for the adoption of the new standards and interpretations detailed on the following pages. The functional currency of the Company and certain of its subsidiaries is US dollar, which is the currency of the primary economic environment in which the entities operate. All amounts are presented in US dollar and rounded to the nearest thousand. The financial results of subsidiaries whose functional and reporting currency is in currencies other than US dollar have been converted into US dollar on the basis as set out in Note 1.2.16, Foreign currency translations. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 1.2.28, Critical accounting estimates and judgements. Changes in accounting policies and disclosures New and amended standards and interpretations The Group adopted certain standards and amendments for the first time, which are effective for annual periods beginning on or after 1 January 2020 and are listed in the table. The adoption of these new accounting pronouncements has not had a significant impact on the consolidated financial statements of the Group nor on the accounting policies, methods of computation or presentation applied by the Group.
	Amendments and New Standards		Description
	The Conceptual Framework for Financial Reporting		Revised Conceptual Framework for Financial Reporting
	Amendments to IFRS 3		Definition of a business
	Amendments to IAS 1 and IAS 8		Definition of material
	Amendments to IFRS 9, IAS 39 and IFRS 7		Interest rate benchmark reform - Phase 1
	Amendments to IFRS 16		COVID-19 Related Rent Concessions
	Amendment to IFRS 16 - COVID-19 Related Rent Concessions The amendment to IFRS 16, COVID-19 Related Rent Concessions, which is effective for annual financial reporting periods beginning on or after 1 June 2020 has been early adopted by the Group during the current financial reporting period. The amendment in the form of a practical expedient, provides optional relief to lessees on the treatment of rent concessions occurring as a direct consequence of the COVID-19 pandemic. The expedient allows lessees to account for such rent concessions as if they were not lease modifications if all of the following conditions are met: (a)  the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; (b)  any reduction in lease payments affects only payments originally due on or before 30 June 2021; and (c)  there is no substantive change to other terms and conditions of the lease. The practical expedient was applied to all leases where there was a change in lease payments granted by lessors as a direct consequence of COVID-19 related rental concessions. For leases where concessions have been given in the form of forgiveness, the Group included the forgiveness as negative variable lease payments in the Consolidated Statement of Profit or Loss. For leases where concessions have been given in the form of payment deferrals, the Group continued to account for the lease liability and right-of-use asset using the rights and obligations of the existing lease, with a separate lease payable being recognised for the payment deferred in the period when the allocated lease cash payment is due. This adoption did not have a material impact on the Group. Refer Note 10, Right-of-use assets and Note 19, Lease liabilities. New standards issued but not yet effective The new standards, amendments and improvements that are issued, but not yet effective, up to the date of issuance of the Group's consolidated financial statements are listed in the table below. These standards, amendments and improvements have not been early adopted and it is expected that, where applicable, these standards, amendments and improvements will be adopted on each respective effective date. The impact of the adoption of these standards cannot be reasonably assessed at this stage.
	New standards, amendments, and improvements	Description			Effective date*
	IFRS 17	Insurance contracts			1 January 2023
	Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16	Interest Rate Benchmark Reform - Phase 2			1 January 2021
	Amendments to IAS 37	Onerous contracts - cost of fulfilling a contract			1 January 2022
	Amendments to IFRS 3	Reference to the Conceptual Framework			1 January 2022
	Amendments to IAS 16	Property, plant and equipment proceeds before intended use			1 January 2022
	Amendments to IAS 1	Classification of liabilities as current or non-current			1 January 2023
	Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture			Pending
	Improvement IFRS 1	Subsidiary as a first-time adopter			1 January 2022
	Improvement IFRS 9	Fees in the '10 per cent' test for derecognition of financial liabilities			1 January 2022
	Improvement IAS 41	Agriculture - Taxation in fair value measurements			1 January 2022
	* Annual periods beginning on or after.
	Interest Rate Benchmark Reform - Phase 2 The amendment addresses issues that might affect financial reporting when an existing interest rate benchmark is replaced with an alternative benchmark interest rate. The Group and its funders have commenced a comprehensive debt refinancing programme of the Group's facilities. The refinancing programme incorporates the consideration of any risk posed to the Group by phase two of the IBOR reform, which is effective from 1 January 2021. The IBOR reform may potentially have an impact on the JIBAR and LIBOR linked interest-bearing loans and borrowings, which includes the LSL215.0 million unsecured project debt facility between Letšeng Diamonds and Nedbank Limited and the Export Credit Insurance Corporation (ECIC) and the US$30.0 million revolving credit facility between Gem Diamonds Limited and Nedbank Capital. Refer Note 18, Interest-bearing loans and borrowings for more information regarding the maturities and the related benchmark rates subject to the IBOR reform on these loans. The Group will continue to assess the impact of these amendments on the Group's Consolidated Annual Financial Statements until initial application. Business environment and country risk The Group's operations are subject to country risk being the economic, political and social risks inherent in doing business in certain areas of Africa and Europe. These risks include matters arising out of the policies of the government, economic conditions, imposition of or changes to taxes and regulations, foreign exchange rate fluctuations and the enforceability of contract rights. The consolidated financial information reflects management's assessment of the impact of these business environments and country risks on the operations and the financial position of the Group. The future business environment may differ from management's assessment.
1.2.2	Going concern The Company's business activities, together with the factors likely to affect its future development, performance and position have been assessed by management. The financial position of the Company, its cash flows and liquidity position are presented in the Annual Report and Accounts. In addition, Note 27, Financial risk management, includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to market risk, credit risk and liquidity risk. The Group's net cash at 31 December 2020 was US$34.6 million (31 December 2019: net debt US$10.2 million) and with its undrawn facilities of US$60.8 million, its liquidity (defined as net cash and undrawn facilities) of US$95.4 million remains strong. However, the Group's Revolving Credit facilities, which total US$70.8 million when fully unutilised, mature within the next 12 months, with US$34.0 million maturing in July 2021, US$30.0 million expiring on 31 December 2021 and the balance of US$6.8 million being a general banking facility with no set expiry date (Refer Note 18, Interest-bearing loans and borrowings). Management have commenced discussions with lenders to restructure and extend the maturity dates of these facilities and are confident that the facilities will be restructured as per previous successful renewals. The uncertainty that exists around the ongoing impact of COVID-19 on future cashflows was considered by performing sensitivities on diamond pricing and diamond production volumes and continued strengthening of the US$ against the Lesotho Loti. 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 the Annual Report and Accounts of the Company. These financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its liabilities as they fall due for the foreseeable future.
1.2.3	Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company as at 31 December 2020. Subsidiaries Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To meet the definition of control in IFRS 10, all three of the following criteria must be met: (a) an investor has power over an investee; (b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and (c) the investor has the ability to use its power over the investee to affect the amount of the investor's returns. The financial statements of subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting year as the parent company and are based on consistent accounting policies. All intragroup balances and transactions, including unrealised gains and losses arising from them, are eliminated in full. Non-controlling interests Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to the parent company and is presented separately within equity in the consolidated statement of financial position, separately from equity attributable to owners of the parent. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.
1.2.4	Exploration and evaluation expenditure Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource. Exploration and evaluation activity includes: · acquisition of rights to explore; · researching and analysing historical exploration data; · gathering exploration data through topographical, geochemical and geophysical studies; · exploratory drilling, trenching and sampling; · determining and examining the volume and grade of the resource; · surveying transportation and infrastructure requirements; and · conducting market and finance studies. Administration costs that are not directly attributable to a specific exploration area are charged to the statement of profit or loss. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised, as a component of property, plant and equipment, and amortised over the term of the permit. Exploration and evaluation expenditure is capitalised as incurred. Capitalised exploration expenditure is recorded as a component of property, plant and equipment, as an exploration and development asset, at cost less accumulated impairment charges. As the asset is not available for use, it is not depreciated. All capitalised exploration and evaluation expenditure is monitored for indications of impairment. Where a potential impairment is indicated, assessments are performed for each area of interest in conjunction with the group of operating assets (representing a cash-generating unit (CGU)) to which the exploration is attributed. To the extent that exploration expenditure is not expected to be recovered, it is charged to the statement of profit or loss. Exploration areas where reserves have been discovered, but require major capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist or to ensure that additional exploration work is under way as planned. Management is required to make certain estimates and judgements when determining whether the commercial viability of an identified resource has been met and when determining whether indicators of impairment exist as referred under Note 1.2.28, Critical accounting estimates and judgements.
1.2.5	Development expenditure When proved reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is reclassified from exploration phase to development phase. As the asset is not available for use, during the development phase, it is not depreciated. On completion of the development phase, any capitalised exploration and evaluation expenditure already capitalised to a development asset, together with the subsequent development expenditure, is reclassified within property, plant and equipment to mining assets and depreciated on the basis as laid out in Note 9, Property, plant and equipment. All development expenditure is monitored for indicators of impairment annually. Management is required to make certain estimates and judgements when determining whether indicators of impairment exist as referred under Note 1.2.28, Critical accounting estimates and judgements.
1.2.6	Property, plant and equipment Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition and construction of the items, to get the asset in its condition and location for its intended use among others, professional fees, and for qualifying assets, borrowing costs capitalised in accordance with the Group's accounting policies. Subsequent costs to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalised when the cost of the item can be measured reliably, with the carrying amount of the original component being written off. All repairs and maintenance are charged to the statement of profit or loss during the financial period in which they are incurred. Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable amount of the asset to its residual value over its estimated useful life, using a method that reflects the pattern in which the asset's future economic benefits are expected to be consumed by the Group.
	Item	Method		Useful life1
	Mining assets	Straight line		Lesser of life of mine or period of mining lease
	Decommissioning assets	Straight line		Lesser of life of mine or period of mining lease
	Leasehold improvements	Straight line		Three years; or lesser of life of mine or period of mining lease
	Plant and equipment	Straight line		Three to 15 years
	Other assets	Straight line		Two to eight years
	1 Certain asset classes are depreciated over the lesser of life of mine, or period of mining lease. Prior to 1 January 2020, the period of mining lease was shorter than the life of mine. On 1 January 2020 a reassessment of assets' useful lives was performed at Letšeng which resulted in a revision of assets' useful lives being made from a remaining useful life of five years (original period of mining lease) to 15 years (life of mine) due to the extension of the Letšeng mining lease. Furthermore, the useful life of plant and equipment was reassessed from a useful life of 10 years to the remaining life of mine (15 years); and the useful life of vehicles, categorised within the "Other assets category", were reassessed from five years to eight years.
	An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss when the asset is derecognised. The asset's residual values, useful lives and methods of depreciation are reviewed annually. Changes in the expected residual values, expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the depreciation period or method, as appropriate, and are treated as changes in accounting estimates, and adjusted for prospectively, if appropriate. Pre-production and in production stripping costs Costs associated with removal of waste overburden are classified as stripping costs. Stripping activities that are undertaken during the production phase of a surface mine may create two benefits, being either the production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those inventories. Where production stripping costs are incurred and where the benefit is the creation of mining flexibility and improved access to ore to be mined in the future, the costs are recognised as a non-current asset if: (a)  future economic benefits (being improved access to the orebody) are probable; (b)  the component of the orebody for which access will be improved can be accurately identified; and (c)  the costs associated with the improved access can be reliably measured. The non-current asset recognised is referred to as a 'stripping activity asset' and is separately disclosed in Note 9, Property, plant and equipment. If all the criteria are not met, the production stripping costs are charged to the statement of profit or loss as operating costs. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs. If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. If the costs of the stripping activity asset and the inventory produced are not separately identifiable, a relevant production measure is used to allocate the production stripping costs between the inventory produced and the stripping activity asset. The stripping activity asset is subsequently amortised over the expected useful life of the identified component of the orebody that became more accessible as a result of the stripping activity. Based on proven and probable reserves, the expected average stripping ratio over the average life of the area being mined is used to amortise the stripping activity asset. As a result, the stripping activity asset is carried at cost less amortisation and any impairment losses. The average life of area cost per tonne is calculated as the total expected costs to be incurred to mine the orebody divided by the number of tonnes expected to be mined. The average life of area stripping ratio and the average life of area cost per tonne are recalculated annually in light of additional knowledge and changes in estimates. Changes in the stripping ratio are accounted for prospectively as a change in estimate. Management applies judgement to calculate and allocate the production stripping costs to inventory and/or the stripping activity asset(s) as referred under Note 1.2.28, Critical accounting estimates and judgements.
1.2.7	Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
1.2.8	Non-current assets held for sale and discontinued operations The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Such non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding the finance costs and income tax expense. The criteria for held-for-sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that it will be withdrawn. Management must be committed to the sale expected within one year from the date of the classification. Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position. A disposal group qualifies as a discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and: a)  represents a separate major line of business or geographical area of operations; b)  is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or c)  is a subsidiary acquired exclusively with a view to re-sale. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 16, Assets held for sale. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise.
1.2.9	Goodwill Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree) over the fair value of the net identifiable amounts of the assets acquired and the liabilities assumed in the business combination. Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements, are accounted for separately from the business combination in accordance with their nature and applicable IFRS. Identifiable intangible assets, meeting either the contractual legal or separability criterion are recognised separately from goodwill. Contingent liabilities representing a present obligation are recognised if the acquisition date fair value can be measured reliably. If the aggregate of the acquisition date fair value of the consideration transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree) is lower than the fair value of the net identifiable amounts of the assets acquired and the liabilities assumed in the business combination, the difference is recognised in profit and loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's CGUs (or groups of CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity at which the goodwill is monitored for internal management purposes, and shall not be larger than an operating segment before aggregation. Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the CGU retained.
1.2.10	Financial instruments The Group shall only recognise a financial instrument when the Group becomes a party to the contractual provisions of the instrument. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date based on the business model for managing these financial assets and the contractual cash flow characteristics. Currently the Group only has financial assets at amortised cost which consist of receivables and other assets, and cash and short-term deposits which is held within a business model to collect contractual cash flows and for which the contractual cash flow characteristics are solely payments of principal interest. When financial assets are recognised initially, they are measured at fair value plus (in the case of financial assets not at fair value through profit or loss) directly attributable transaction costs. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date. Financial assets at amortised cost Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those with maturities greater than 12 months after the reporting date. These are classified as non-current assets. Such assets are carried at amortised cost using the effective interest rate method, if the time value of money is significant, less any allowance for impairment. Gains and losses are recognised in the statement of profit or loss when the financial assets at amortised cost are derecognised or impaired, as well as through the amortisation process. Derecognition A financial asset is primarily derecognised when the rights to receive cash flows from the asset have expired or the Group has transferred its rights to receive cash flows from the asset. Gains or losses from derecognition of financial assets are recognised in the statement of profit or loss. Financial liabilities Financial liabilities are subsequently stated at amortised cost using the effective interest rate method, with any difference between proceeds (net of transaction costs) and the redemption value being recognised in the statement of profit or loss, unless capitalised in accordance with Note 1.2.7, Borrowing costs, over the contractual period of the financial liability. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Gains or losses from derecognition of financial liabilities are recognised in the statement of profit or loss.
1.2.11	Fair value measurement The Group measures financial instruments at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: · in the principal market for the asset or liability; or · in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: 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. For assets and liabilities that are recognised in the financial statements that are measured at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the fair hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
1.2.12	Impairments Non-financial assets The Group assesses, at each reporting date, whether there is an indication that an asset (or CGU) may be impaired in accordance with IAS 36. Goodwill is assessed for impairment on an annual basis and when circumstances indicate that the carrying value may be impaired. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Non-financial assets that were previously impaired are reviewed for possible reversal of the impairment at each reporting date. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such a reversal is recognised in the statement of profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Impairment losses relating to goodwill cannot be reversed in future periods. Financial assets Assets carried at amortised cost The Group recognises an allowance for expected credit losses (ECLs) for all financial assets at amortised costs in the statement of profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
1.2.13	Inventories Inventories, which include rough diamonds, ore stockpiles and consumables, are measured at the lower of cost and net realisable value. The amount of any write-down of inventories to net realisable value and all losses, is recognised in the period the write-down or loss occurs. Cost is determined as the average cost of production, using the weighted average method. Cost includes directly attributable mining overheads, but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs to be incurred in marketing, selling and distribution.
1.2.14	Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at amortised cost. Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other short-term, highly liquid investments with original maturities of three months or less. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
1.2.15	Issued share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
1.2.16	Foreign currency translations Presentation currency The results and financial position of the Group's subsidiaries which have a functional currency different from the Group's presentation currency are translated into the Group's presentation currency as follows: · statement of financial position items are translated at the closing rate at the reporting date; · income and expenses for each statement of profit or loss are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and · resulting exchange differences are recognised as a separate component of equity. Details of the rates applied at the respective reporting dates and for the statement of profit or loss transactions are detailed in Note 17, Issued capital and reserves. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at the period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss. Non-monetary items that are measured in terms of cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Monetary items for each statement of financial position presented are translated at the closing rate at the reporting date.
1.2.17	Share-based payments Employees (including Senior Executives) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity-settled transactions). In situations where some or all of the goods or services received by the entity as consideration for equity instruments cannot be specifically identified, they are measured as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or services received at the grant date. Equity-settled transactions The cost of equity-settled transactions with employees are measured by reference to the fair value of the equity instruments at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions). No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement of the vesting conditions or otherwise of the non-market vesting conditions and of the number of equity instruments that is expected to ultimately vest or, in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous reporting date is recognised in the statement of profit or loss, with a corresponding entry in equity. Where the terms of an equity-settled award are modified, or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative, due to the fact that it would not be beneficial to the employees. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the statement of profit or loss for the award is expensed immediately. Where an equity-settled award is forfeited, it is treated as if vesting conditions had not been met and all costs previously recognised are reversed and recognised in income immediately within the year of forfeiture. Management applies judgement when determining whether share options relating to employees who resigned before the end of the service condition period are cancelled or forfeited as referred under Note 1.2.28, Critical accounting estimates and judgements. The Group periodically releases the share-based equity reserve to retained earnings in relation to lapsed, forfeited and exercised options.
1.2.18	Provisions Provisions are recognised when: · the Group has a present legal or constructive obligation as a result of a past event; and · a reliable estimate can be made of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.
1.2.19	Restoration and rehabilitation provision The mining, extraction and processing activities of the Group normally give rise to obligations for site restoration and rehabilitation. Rehabilitation works can include facility decommissioning and dismantling, removal and treatment of waste materials, land rehabilitation, and site restoration. The extent of the work required and the estimated cost of final rehabilitation, comprising liabilities for decommissioning and restoration, are based on current legal requirements, existing technology and the Group's environmental policies, and is reassessed annually. Cost estimates are not reduced by the potential proceeds from the sale of property, plant and equipment. Provisions for the cost of each restoration and rehabilitation program are recognised at the time the environmental disturbance occurs. When the extent of the disturbance increases over the life of the operation, the provision and associated asset is increased accordingly. Costs included in the provision encompass all restoration and rehabilitation activity expected to occur. The restoration and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value, using a pre-tax discount rate. Discount rates used are specific to the country in which the operation is located or reasonable alternatives if in-country information is not available. The value of the provision is progressively increased over time as the effect of the discounting unwinds, which is recognised in finance charges. Restoration and rehabilitation provisions are also adjusted for changes in estimates. When provisions for restoration and rehabilitation are initially recognised, the corresponding cost is capitalised as a decommissioning asset where it gives rise to a future benefit and depreciated over future production from the operation to which it relates. Management is required to make significant estimates and assumptions when determining the amount of the restoration and rehabilitation provisions as referred under Note 1.2.28, Critical accounting estimates and judgements.
1.2.20	Taxation Income tax for the period comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to the extent that it relates to items charged or credited directly to equity or to other comprehensive income, in which case the tax consequences are recognised directly in equity and other comprehensive income respectively. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The Group offsets deferred income tax assets and deferred income tax liabilities if, and only if, it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred income tax assets and deferred income tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. In respect of taxable temporary differences associated with investments in subsidiaries, associates and jointly controlled entities, deferred tax is provided except where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future. In respect of deductible temporary differences associated with investments in subsidiaries, associates and jointly controlled entities, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. Withholding tax is recognised in the statement of profit or loss when dividends or other services which give rise to that withholding tax are declared or accrued respectively. Withholding tax is disclosed as part of current tax. Royalties Royalties incurred by the Group comprise mineral extraction costs based on a percentage of sales paid to the local revenue authorities. These obligations arising from royalty arrangements are recognised as current payables and disclosed as part of royalty and selling costs in the statement of profit or loss. Royalties and revenue-based taxes are accounted for under IAS 12 when they have the characteristics of an income tax. This is considered to be the case when they are imposed under government authority and the amount payable is based on taxable income - rather than based on quantity produced or as a percentage of revenue. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of taxation. The royalties incurred by the Group are considered not to meet the criteria to be treated as part of income tax.
1.2.21	Employee benefits Provision is made in the financial statements for all short-term employee benefits. Liabilities for wages and salaries, including non-monetary benefits, benefits required by legislation, annual leave, retirement benefits and accumulating sick leave obliged to be settled within 12 months of the reporting date, are recognised in trade and other payables and are measured at the amounts expected to be paid when the liabilities are settled. Benefits falling due more than 12 months after the reporting date are measured at the amount the obligation is expected to be settled or discounted to present value using a pre-tax discount rate where relevant or where time value of money is expected to be significant. The Group recognises an expense for contributions to the defined contribution pension fund in the period in which the employees render the related service. Bonus plans The Group recognises a liability and an expense for bonuses. The Group recognises a liability where contractually obliged or where there is a past practice that has created a constructive obligation. These liabilities are recognised in trade and other payables and are measured at the amounts expected to be paid when the liabilities are settled.
1.2.22	Leases At inception, the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement whether it depends on a specified asset, whether the Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to direct the use of the asset. For leases that contain one lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The lease component is accounted for under the requirements of IFRS 16 and the non-lease component is accounted for using the relevant standard based on the nature of the non-lease component. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (ie, the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, costs to dismantle, restore and remove the right-of-use asset, and lease payments made at or before the commencement date less any lease incentives received. After the commencement date, the right-of-use assets are measured using a cost model. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. Right-of-use assets are subject to impairment. Refer Note 1.2.12, Impairments. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification to the terms and conditions of the lease or if there a lease reassessment. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases (ie, those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be qualitatively and quantitatively of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Group as a lessor Where the Group is a lessor, it determines at inception whether the lease is a finance or operating lease. When a lease transfers substantially all the risks and rewards of ownership of the underlying asset then the lease is a finance lease; otherwise the lease is an operating lease. Where the Group is an intermediate lessor, the interest in the head lease and the sub-lease is accounted for separately and the lease classification of a sub-lease is determined by reference to the Right-of-use-asset arising from the head lease. Income from operating leases is recognised on a straight-line basis over the lease term.
1.2.23	Revenue from contracts with customers Revenue comprises net invoiced diamond sales to customers excluding VAT. Diamond sales are made through a competitive tender process and recognised when the Group's performance obligations have been satisfied at the time the buyer obtains control of the diamond(s), at an amount that the Group expects to be entitled in exchange for the diamond(s). Where the Group makes rough diamond sales to customers and retains a right to an interest in their future sale as polished diamonds, the Group records the sale of the rough diamonds but such contingent revenue on the onward sale is only recognised at the date when the polished diamonds are sold or when polished sales prices are mutually agreed between the customer and the Group. The following revenue streams are recognised: · rough diamonds which are sold through a competitive tender process, partnership agreements and joint operation arrangements; · polished diamonds and other products which are sold through direct sales channels; · additional uplift (on the value from rough to polished) on partnership arrangements; and · additional uplift (on the value from rough to polished) on joint operation arrangements. The sale of rough diamonds is the core business of the Group, with other revenue streams contributing marginally to total revenue. Revenue through joint operation arrangements is recognised for the sale of the rough diamond according to each party's percentage entitlement as per the joint operation arrangement. Contractual agreements are entered into between the Group and the joint operation partner whereby both parties control jointly the cutting and polishing activities relating to the diamond. All decisions pertaining to the cutting and polishing of the diamonds require unanimous consent from both parties. Once these activities are complete, the polished diamond is sold, after which the revenue on the remaining percentage of the rough diamond is recognised, together with additional uplift on the joint operation arrangement. The Group portion of inventories related to these transactions is included in the total inventories balance. Revenue through partnership arrangements is recognised for the sale of the rough diamond, with an additional uplift based on the polished margin achieved. Management recognises the revenue on the sale of the rough diamond when it is sold to a third party, as there is no continuing involvement by management in the cutting and polishing process and control has passed to the third party. Revenue from additional uplift is considered to be a variable consideration. This variable consideration will generally be significantly constrained. This is on the basis that the ultimate additional uplift received will depend on a range of factors that are highly susceptible to factors outside the Group's influence. Management recognises revenue on the additional uplift when the polished diamond is sold by the third party or the polished sales prices are mutually agreed between the third party and the Group and the additional uplift is guaranteed. Rendering of service Revenue from services relating to third-party diamond manufacturing is recognised in the accounting period in which the services are rendered, when the Group's performance obligations have been satisfied, at an amount that the Group expects to be entitled to in exchange for the services. Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group transfers goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to consideration occurs within a short period of time and all rights to consideration are unconditional. Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs under the contract. The Group does not have any contract liabilities as the transfer of goods or services performance occurs within a short period of time of receiving the consideration.
1.2.24	Interest income Interest income is recognised on a time proportion basis using the effective interest rate method.
1.2.25	Dividends Dividends are recognised when the amount of the dividend can be reliably measured and the Group's right to receive payment is established.
1.2.26	Finance costs Finance costs are recognised on a time proportion basis using the effective interest rate method.
1.2.27	Dividend distribution Dividend distributions to the Group's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Group's shareholders.
1.2.28	Critical accounting estimates and judgements The preparation of the consolidated financial statements requires management to make estimates and judgements and form assumptions that affect the reported amounts of the assets and liabilities, the reported income and expenses during the periods presented therein, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future and the resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the financial results or the financial position reported in future periods are discussed below. COVID-19 The Group has considered the impact of COVID-19 on its significant accounting judgements and estimates. The Group's main source of estimation uncertainty is in relation to assumptions used for the assessment of impairment and impairment reversal of assets. No further significant estimates have been identified as a result of COVID-19, although the pandemic has increased the level of uncertainty inherent in all future cash flow forecasts. Estimates Ore reserves and associated life of mine (LoM) There are numerous uncertainties inherent in estimating ore reserves and the associated LoM. Therefore, the Group must make a number of assumptions in making those estimations, including assumptions as to the prices of diamonds, exchange rates, production costs and recovery rates. Assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of diamonds, exchange rates, production costs or recovery rates may change the economic status of ore reserves and may, ultimately, result in the ore reserves being restated. Where assumptions change the LoM estimates, the associated depreciation rates, residual values, waste stripping and amortisation ratios, and environmental provisions are reassessed to take into account the revised LoM estimate. Refer Note 9, Property, plant and equipment. Exploration and evaluation expenditure This policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular whether economically viable extraction operations are viable where reserves have been discovered and whether indications of impairment exist. Any such estimates and assumptions may change as new information becomes available. Refer Note 9, Property, plant and equipment. Provision for restoration and rehabilitation Significant estimates and assumptions are made in determining the amount of the restoration and rehabilitation provisions. These deal with uncertainties such as changes to the legal and regulatory framework, magnitude of possible contamination, and the timing, extent and costs of required restoration and rehabilitation activity. Refer Note 22, Provisions, for further detail. Judgement Impairment reviews The Group determines if goodwill is impaired at least on an annual basis, while all other significant operations are tested for impairment when there are potential indicators which may require impairment review. This requires an estimation of the recoverable amount of the relevant CGU under review. Recoverable amount is the higher of fair value less costs to sell and value in use. While conducting an impairment review of its assets using value-in-use impairment models, the Group exercises judgement in making assumptions about future rough diamond prices, exchange rates, volumes of production, ore reserves and resources included in the current LoM plans, production costs and macro-economic factors such as inflation and discount rates. Changes in estimates used can result in significant changes to the consolidated statement of profit or loss and consolidated statement of financial position. The results of the impairment testing performed did not indicate any impairments in the current year. Refer Note 12, Impairment testing, for further estimates and judgements applied. The key assumptions used in the recoverable amount calculations, determined on a value-in-use basis, are listed below: Valuation basis Discounted present value of future cash flows. LoM and recoverable value of reserves and resources Economically recoverable reserves and resources, carats recoverable and grades achievable are based on management's expectations of the availability of reserves and resources at mine sites and technical studies undertaken by in-house and third-party specialists. Reserves remaining after the current LoM plan have not been included in determining the value in use of the operations. Cost and inflation rate Operating costs for Letšeng are determined based on management's experience and the use of contractors over a period of time whose costs are fairly reasonably determinable. Mining and processing costs in the short to medium term have been based on the agreements with the relevant contractors. In the longer term, management has applied local inflation rates of 4% to 5.3% (2019: 4% to 6%) for operating costs in addition to a depth escalation factor for mining costs as a result of mining in deeper areas within both pits. Capital costs in the short-term has been based on management's capital program after which a fixed percentage of operating costs have been applied to determine the capital costs necessary to maintain current levels of operations. Exchange rates Exchange rates are estimated based on an assessment at current market fundamentals and long-term expectations. The US dollar/Lesotho loti (LSL) exchange rate used was determined with reference to the closing rate at 31 December 2020 of LSL14.69 (31 December 2019: LSL13.98). Diamond prices The diamond prices used in the impairment test have been set with reference to recent prices achieved, recent market trends and the Group's medium-term forecast. Long-term diamond price escalation reflects the Group's assessment of market supply/demand fundamentals. Discount rate The discount rate of 10.8% for revenue (2019: 11.2%) and 14.3% for costs (2019: 14.7%) used for Letšeng represents the before-tax risk-free rate adjusted for market risk, volatility and risks specific to the asset and its operating jurisdiction. Market capitalisation In the instance where the Group's asset carrying values exceed market capitalisation, this results in an indicator of impairment. The Group believes that this position does not represent an impairment as all significant operations were assessed for impairment during the year and no impairments were recognised. Sensitivity The value in use for Letšeng indicated sufficient headroom, and the further changes to key assumptions which could result in impairment are disclosed in Note 12, Impairment testing. Capitalised stripping costs (deferred waste) Waste removal costs (stripping costs) are incurred during the development and production phases at surface mining operations. Furthermore, during the production phase, stripping costs are incurred in i) the production of inventory and ii) in the creation of future benefits by improving access and mining flexibility in respect of the ore to be mined, (the 'stripping activity asset'). Judgement is required to distinguish between these two activities at Letšeng. The orebody needs to be identified in its various separately identifiable components. An identifiable component is a specific volume of the orebody that is made more accessible by the stripping activity. Judgement is required to identify and define these components (referred to as 'cuts'), and also to determine the expected volumes (tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments are based on a combination of information available in the mine plans, specific characteristics of the orebody and the milestones relating to major capital investment decisions. Judgement is also required to identify a suitable production measure that can be applied in the calculation and allocation of production stripping costs between inventory and the stripping activity asset. The ratio of expected volume (tonnes) of waste to be stripped for an expected volume (tonnes) of ore to be mined for a specific component of the orebody, compared to the current period ratio of actual volume (tonnes) of waste stripped to the volume (tonnes) of ore mined is considered to determine the most suitable production measure. These judgements and estimates are used to calculate and allocate the production stripping costs to inventory and/or the stripping activity asset(s). Furthermore, judgements and estimates are also used to apply the stripping ratio calculation in determining the amortisation of the stripping activity asset. Refer Note 9, Property, plant and equipment, for further detail. Share-based payments Judgement is applied by management in determining whether the share options relating to employees who resigned before the end of the service condition period have been cancelled or forfeited in light of their leaving status. Where employees do not meet the requirements of a good leaver as per the rules of the long-term incentive plan (LTIP), no award will vest and this will be treated as cancellation by forfeiture. The expenses relating to these charges previously recognised are then reversed. Where employees do meet the requirements of a good leaver as per the rules of the LTIP, some or all of an award will vest and this will be treated as a modification to the original award. The future expenses relating to these awards are accelerated and recognised as an expense immediately. Refer Note 28, Share-based payments, for further detail. Identifying uncertainties over tax treatments An amended tax assessment was issued to Letšeng by the Lesotho Revenue Authority (LRA) in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. In March 2020, Letšeng lodged an objection to the assessment, which was supported by the opinion of senior counsel, together with an application for the suspension of payment. The suspension of payment was accepted. The LRA has subsequently lodged an application to the Lesotho High Court pertaining to this matter, to which Letšeng is opposing. The matter has been set down for hearing in August 2021. Management do not believe an uncertain tax position exists as: · there is no ambiguity in the application of the Lesotho Income Tax Act; · there has been no change in the application of the Income Tax Act and resulting tax; and · senior counsel advice, which is legally privileged, has been obtained and reflects good prospects of success in setting aside the amended tax assessment. No provision or contingent liability, relating to the amended tax assessment in question, is required to be raised in the 2020 Annual Financial Statements. Equipment and service lease The major components of Letšeng's ore-extraction mining activities are outsourced to a mining contractor. The mining contractor performs these functions using their own equipment. Management applied judgement when evaluating whether the contract between Letšeng and the mining contractor contained a lease. While it was concluded there was a lease, lease payments are variable in nature as the lease payment vary based on the tonnes of ore and waste mined and hence no right of use asset or liability could be measured. A portion of the lease payment is expensed in the consolidated statement of profit or loss and the portion relating to waste removal/stripping costs is capitalised to the waste stripping asset in the proportions referred to under the estimate and judgements applied to the Capitalised stripping costs (deferred waste) above. Refer Note 25, Commitments and contingencies.

		2020 US$'000	2019 US$'000
2.	REVENUE FROM CONTRACTS WITH CUSTOMERS
	Sale of goods	189 028	182 046
	Partnership arrangements	618	-
	Rendering of services	1	1
		189 647	182 047
	The revenue from the sale of goods represents the sale of rough diamonds, for which revenue is recognised at the point in time at which control transfers. The revenue from partnership arrangements of US$0.6 million represents the additional uplift from partnership arrangements for which revenue is recognised when the amount is guaranteed (2019: Nil). The revenue from the rendering of services mainly represents the services rendered on third-party diamond analysis and manufacturing, for which the revenue is recognised over time as the services are rendered. No revenue was generated from joint operation arrangements during the current or prior year.

		2020 US$'000	2019 US$'000
3.	OTHER OPERATING (EXPENSES)/INCOME
	Sundry income	26	90
	Sundry expenses	(23)	(7)
	(Loss)/profit on disposal and scrapping of property, plant and equipment	(30)	762
	COVID-19 Standing costs	(3 884)	-
		(3 911)	845
	COVID-19 standing costs In compliance with the Government of Lesotho's lockdown order, Letšeng temporarily suspended operations between 28 March and 26 April and placed the mine on care and maintenance. After successfully engaging with the Government of Lesotho to designate mining as an essential service, a restart and ramp-up plan was implemented commencing in May, whereby normal production levels for both treatment plants were achieved by 27 May, with incidental waste mining commencing in May and reaching normal levels in July. During the care and maintenance and ramp-up periods where normal waste stripping and carat production levels were disrupted, certain standing fixed mining contract and ore stockpile movement costs incurred were recognised as abnormal costs and have been expensed immediately in the Statement of profit or loss. Of these costs, US$1.0 million related to costs incurred to implement protocols throughout the Group to address the risk and curb the spread of COVID-19.

		2020 US$'000	2019 US$'000
4.	OPERATING PROFIT
	Operating profit includes such non-operating costs and income as listed below:
	Depreciation and amortisation
	Depreciation and amortisation excluding waste stripping costs	(7 046)	(12 400)
	Depreciation of right-of-use assets	(2 043)	(2 526)
	Waste stripping costs amortised	(43 420)	(43 129)
		(52 509)	(58 055)
	(Less): Depreciation and mining asset amortisation capitalised to inventory	19	(151)
		(52 490)	(58 206)
	Inventories
	Cost of inventories recognised as an expense	(105 524)	(114 678)
	Foreign exchange (loss)/gain
	Foreign exchange (loss)/gain	(880)	3 550
	Lease expenses not included in lease liability
	Mine site property	(69)	(146)
	Equipment and service lease	(7 280)	(6 377)1
	Contingent rental - Alluvial Ventures	(5 190)	(9 472)
	Leased premises	-	(152)
		(12 537)	(16 147)1
	Auditor's remuneration - EY
	Group financial statements	(296)	(296)
	Statutory	(176)	(155)
		(472)	(451)
	Auditor's remuneration - other audit firms
	Statutory	(17)	(17)
	Other non-audit fees - EY
	Tax compliance	(5)	(34)
	Tax services advisory and consultancy	(13)	(9)
	Other services2	-	(15)
		(18)	(58)
	Other non-audit fees - other audit firms
	Internal audit	-	(2)
	Tax services advisory and consultancy	(15)	-
		(15)	(2)
	Employee benefits expense
	Salaries and wages3	(15 782)	(20 467)4
	Underlying earnings before interest, tax, depreciation and mining asset amortisation (underlying EBITDA) before discontinued operation
	Underlying EBITDA is shown, as the Directors consider this measure to be a relevant guide to the operational performance of the Group and excludes such non-operating costs and income as listed below. The reconciliation from operating profit to underlying EBITDA is as follows:
	Operating profit	42 664	29 858
	Other operating income5	27	(845)
	Foreign exchange loss/(gain)	880	(3 550)
	Share-based payments	555	784
	Depreciation and amortisation (excluding waste stripping cost amortised)	9 070	14 752
	Underlying EBITDA before discontinued operation	53 196	40 999
	1 These expenses consist of mining activities outsourced to a mining contractor. In 2019 the expense incorrectly included the portion of expenses which are capitalised to the Stripping Actvity Asset, the comparatives have been corrected to exclude the capitalised expenses. This did not impact the totals included within the Consolidated Annual Financial Statements nor the earnings per share of 2019. Refer Significant accounting policies Note 1.2.6, Property Plant and equipment, Note 1.2.28, Critical accounting estimates and judgements, Note 9, Property, plant and equipment and Note 19, Lease liabilities. 2 Includes services related to the sale of assets. 3  Includes contributions to defined contribution plan of US$0.5 million (31 December 2019: US$0.5 million). An average of 381 employees excluding contractors were employed during the period (2019: 425). 4  In 2019 the discontinued operation salaries and wages were incorrectly included in this disclosure, however this did not impact the totals included within the Consolidated Annual Financial Statements nor the Earnings per share of 2019. The comparative has been corrected to exclude the salaries and wages related to the discontinued operation. 5 Excludes COVID-19 standing costs which are considered as operating costs.

5.

RECLASSIFICATION OF FOREIGN CURRENCY TRANSLATION RESERVE During the prior year the Group abandoned Gem Diamonds Marketing Botswana (Proprietary) Limited, the sales and marketing office for Ghaghoo's diamonds and Gem Diamonds Technology DMCC. As the operations were closed and not sold the closure was classified as an abandonment, which resulted in the recycling of the foreign currency translation reserve. There was no profit or loss on the abandonment.

		2020 US$'000	2019 US$'000
6.	NET FINANCE COSTS
	Finance income
	Bank deposits	358	668
	Other	24	-
	Total finance income	382	668
	Finance costs
	Bank overdraft	-	(459)
	Finance costs on borrowings	(3 297)	(3 981)
	Finance costs on lease liabilities	(608)	(1 087)
	Finance costs on unwinding of rehabilitation and decommissioning provision	(888)	(949)
	Total finance costs	(4 793)	(6 476)
		(4 411)	(5 808)

		2020 US$'000	2019 US$'000
7.	INCOME TAX EXPENSE
	Current
	- Foreign	(11 593)	(1 805)
	Withholding tax
	- Foreign	(529)	(143)
	Deferred
	- Foreign	1 411	(7 072)
	Income tax expense	(10 711)	(9 020)
	Profit before taxation from continuing operations	38 253	24 050
		%	%
	Reconciliation of tax rate
	Applicable income tax rate	25.0	25.0
	Permanent differences	(3.0)	0.8
	Unrecognised deferred tax assets	3.0	7.9
	Effect of foreign tax at different rates	1.7	3.2
	Withholding tax	1.3	0.6
	Effective income tax rate	28.0	37.5
	The tax rate reconciles to the statutory Lesotho corporation tax rate of 25.0% rather than the statutory UK corporation tax rate of 19.0% as this is the jurisdiction in which the majority of the Group's taxes are incurred.

		2020 US$'000	2019 US$'000
8.	EARNINGS PER SHARE
	The following reflects the income and share data used in the basic and diluted earnings per share computations:
	Profit for the year:	24 278	10 576
	- Continuing operations	27 542	15 030
	- Discontinued operation	(3 264)	(4 454)
	Less: Non-controlling interests	(10 637)	(7 959)
	Net profit attributable to ordinary equity holders of the parent for basic and diluted earnings	13 641	2 617
	Weighted average number of ordinary shares outstanding during the year ('000)	139 273	138 964
	Earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year after taking into account future potential conversion and issue rights associated with the ordinary shares.
		2020 Number of shares	2019 Number of shares
	Weighted average number of ordinary shares outstanding during the year	139 273	138 964
	Effect of dilution:
	- Future share awards under the Employee Share Option Plan	2 341	2 640
	Weighted average number of ordinary shares outstanding during the year adjusted for the effect of dilution	141 614	141 604
	There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

9.	PROPERTY, PLANT AND EQUIPMENT
		Stripping activity asset US$'000	Mining asset US$'000	Exploration and develop-ment assets US$'000	Decom-missioning assets US$'000	Leasehold Improvement US$'000	Plant and equipment US$'000	Other assets1 US$'000	Total US$'000
	As at 31 December 2020
	Cost
	Balance at 1 January 2020	562 583	122 061	-	5 822	58 219	84 757	6 999	840 441
	Additions	47 167	-	-	-	7	1 561	3	48 738
	Net movement in rehabilitation provision	(990)	-	-	(1 373)	(381)	(381)	-	(3 125)
	Disposals		-	-	-	-	-	(85)	(85)
	Scrapping2	-	(2 929)	-	-	(610)	(993)	(444)	(4 976)
	Reclassifications		504	-	-	674	(1 751)	573	-
	Foreign exchange differences	(21 405)	(4 586)	-	(330)	(1 954)	(3 725)	555	(31 445)
	Balance at 31 December 2020	587 355	115 050	-	4 119	55 955	79 468	7 601	849 548
	Accumulated depreciation/ amortisation/impairment
	Balance at 1 January 2020	369 388	53 936	-	4 102	23 901	60 128	5 133	516 588
	Charge for the year3	43 420	1 174	-	88	2 834	2 513	458	50 487
	Disposals	-	-	-	-	-	-	(41)	(41)
	Scrapping2	-	(2 929)	-	-	(567)	(987)	(488)	(4 971)
	Foreign exchange differences	(11 365)	(2 992)	-	(71)	36	(2 504)	377	(16 520)
	Balance at 31 December 2020	401 443	49 189	-	4 119	26 204	59 150	5 439	545 543
	Net book value at 31 December 2020	185 912	65 861	-	-	29 751	20 318	2 162	304 005
	1 Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment. 2 Certain assets at Letšeng that were no longer in use were scrapped. 3 A reassessment of assets' useful lives was undertaken at Letšeng with certain assets' useful lives being realigned from the period of mining lease to the life of mine. The reduction in depreciation charge of US$3.4 million is expected to continue into the future.  Refer Note 1.2.6 Property, plant and equipment.
		Stripping activity asset US$'000	Mining asset US$'000	Exploration and develop-ment assets US$'000	Decom-missioning assets US$'000	Lease-hold Improvement1 US$'000	Plant and equipment US$'000	Other assets1 US$'000	Total US$'000
	As at 31 December 2019
	Cost
	Balance at 1 January 2019	473 395	117 913	148 890	5 494	55 197	95 365	19 899	916 153
	Additions	73 175	434	-	-	19	8 727	506	82 861
	Net movement in rehabilitation provision	-	-	-	157	-	-	-	157
	Disposals	-	-	-	-	-	(292)	(343)	(635)
	Reclassifications	-	2 634	-	-	8 085	(11 328)	609	-
	Assets held for sale (Note 16)	-	-	(150 911)2	-	(6 821)	(10 195)	(14 683)	(173 230)
	Foreign exchange differences	16 013	1 080	2 021	171	1 739	2 480	1 011	24 515
	Balance at 31 December 2019	562 583	122 061	-2	5 822	58 219	84 757	6 999	849 821
	Accumulated depreciation/ amortisation/impairment
	Balance at 1 January 2019	316 412	51 652	147 441	3 669	24 639	64 233	18 467	626 513
	Charge for the year	43 129	1 963	-	310	5 279	4 223	625	55 529
	Disposals	-	-	-	-	-	-	(320)	(320)
	Assets held for sale (Note 16)	-	-	(149 441)2	-	(6 821)	(10 195)	(14 683)	(171 661)
	Foreign exchange differences	9 847	321	2 000	123	768	1 867	981	15 907
	Balance at 31 December 2019	369 388	53 936	-2	4 102	23 901	60 128	5 133	525 968
	Net book value at 31 December 2019	193 195	68 125	-2	1 720	34 318	24 629	1 866	323 853
	1  Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment. 2  In 2019 only a portion of the exploration and development asset cost and accumulated depreciation was allocated to the asset held for sale, however  this asset only related to the asset held for sale. The previously incorrectly unallocated portion of cost and accumulated depreciation of US$9.4 million, which had a net book value of nil, has been corrected in the prior period property, plant and equipment reconciliation and allocated to asset held for sale.  This correction did not impact the totals included within the Consolidated Annual Financial Statements nor the reported earnings per share.

		Right-of-use assets
		Plant and equipment US$'000	Motor vehicles US$'000		Buildings US$'000	Total US$'000
10.	RIGHT-OF-USE ASSETS
	As at 31 December 2020
	Cost
	Balance at 1 January 2020	2 012	1 656		7 318	10 986
	Additions	821	-		354	1 175
	Derecognition of lease	(585)	(1 019)		(988)	(2 592)
	Foreign exchange differences	(31)	(273)		(240)	(544)
	Balance at 31 December 2020	2 217	364		6 444	9 025
	Accumulated depreciation
	Balance at 1 January 2020	980	361		1 191	2 532
	Charge for the year	793	114		1 136	2 043
	Derecognition of lease	(115)	(175)		(196)	(486)
	Foreign exchange differences	79	(45)		79	113
	Balance at 31 December 2020	1 737	255		2 210	4 202
	Net book value at 31 December 2020	480	109		4 234	4 823
	As at 31 December 2019
	Cost
	Balance at 1 January 2019	1 350	1 620		6 642	9 612
	Additions	616	-		540	1 156
	Foreign exchange differences	46	36		136	218
	Balance at 31 December 2019	2 012	1 656		7 318	10 986
	Accumulated depreciation
	Balance at 1 January 2019
	Charge for the year	977	360		1 189	2 526
	Foreign exchange differences	3	1		2	6
	Balance at 31 December 2019	980	361		1 191	2 532
	Net book value at 31 December 2019	1 032	1 295		6 127	8 454
	Buildings comprise office buildings in Maseru, Antwerp, London and Johannesburg. Plant and equipment mainly comprise back-up power generating equipment utilised at Letšeng. Motor vehicles mainly comprise vehicles utilised by contractors at Letšeng. Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. During the year, Letšeng entered into a new contract with its existing ore processing contractor. The original contract, which was assessed as containing a lease on adoption on 1 January 2019, was cancelled. The new contract was assessed as not containing a lease, as Letšeng no longer retained the right to control the use of the assets associated with the contract. All assets and liabilities associated with the original lease were derecognised. Furthermore, Gem Diamonds Limited (GDL) entered into a new contract for the rental of its office space in London. The new contract was assessed as containing a lease resulting in the recognition of the associated assets and liabilities. The original contract was cancelled, and the associated assets and liabilities were derecognised. Total gains of US$0.2 million relating to the derecognition of leases in the Group have been recognised in the Consolidated Statement of Profit or Loss. Refer Note 19, Lease Liabilities and Note 24.1, Cash generated by operations. During the year the Group recognised income of US$0.3 million (2019: US$0.6 million) from the sub-leasing of office buildings in Maseru. The Group expects to receive the following lease payments from the operating sub-leasing in the following years:
				US$ '000's
	2021			105
	2022			111
	2023			117
	2024			123
	2025			96
	The Group early adopted IFRS 16 - COVID-19 Related Rent Concessions and applied the practical expedient to all rental concessions received as a direct consequence of the COVID-19 pandemic. This adoption did not have a material impact on the Group. Refer Note 1.2.1, Basis of preparation.

		Intangibles US$'000	Goodwill1 US$'000	Total US$'000
11.	INTANGIBLE ASSETS
	As at 31 December 2020
	Cost
	Balance at 1 January 2020	791	13 653	14 444
	Foreign exchange difference	-	(656)	(656)
	Balance at 31 December 2020	791	12 997	13 788
	Accumulated amortisation
	Balance at 1 January 2020	791	-	791
	Amortisation	-	-	-
	Balance at 31 December 2020	791	-	791
	Net book value at 31 December 2020	-	12 997	12 997
	As at 31 December 2019
	Cost
	Balance at 1 January 2019	791	13 272	14 063
	Foreign exchange difference	-	381	381
	Balance at 31 December 2019	791	13 653	14 444
	Accumulated amortisation
	Balance at 1 January 2019	791	-	791
	Amortisation	-	-	-
	Balance at 31 December 2019	791	-	791
	Net book value at 31 December 2019	-	13 653	13 653
	1 Goodwill allocated to Letšeng Diamonds. Refer Note 12, Impairment for impairment testing.

		2020 US$'000	2019 US$'000
12.	IMPAIRMENT TESTING
	Impairment testing
	Goodwill impairment testing is undertaken on Letšeng Diamonds annually and when there are indications of impairment. The most recent test was undertaken at 31 December 2020. In assessing whether goodwill has been impaired, the carrying amount of Letšeng Diamonds is compared with its recoverable amount. For the purpose of goodwill impairment testing in 2020, the recoverable amount for Letšeng Diamonds has been determined based on a value-in-use model, similar to that adopted in the past.
	Goodwill
	Letšeng Diamonds	12 997	13 653
	Balance at end of year	12 997	13 653
	Movement in goodwill relates to foreign exchange translation from functional to presentation currency, as disclosed within Note 11, Intangible assets.
	The discount rate is outlined below and represents the nominal pre-tax rate. This rate is based on the weighted average cost of capital (WACC) of the Group and adjusted accordingly at a risk premium for Letšeng Diamonds, taking into account risks associated therein.
		2020 %	2019 %
	Discount rate - Letšeng Diamonds
	Applied to revenue	10.8	11.2
	Applied to costs	14.3	14.7
	Value in use Cash flows are projected for a period up to the date that the open pit mining is expected to cease in 2034. This is based on the latest available mine plan and is shorter than the mining lease period which extends to 2029 with an exclusive option to renew for a further 10 years to 2039. This mine plan takes into account the available reserves and other relevant inputs such as diamond pricing, costs and geotechnical parameters. Sensitivity to changes in assumptions The Group will continue to test its assets for impairment where indications are identified. Refer Note 1.2.28, Critical accounting estimates and judgements, for further details on impairment testing policies. The diamond prices used in the impairment test have been set with reference to recent prices achieved, recent market trends and anticipated market supply and the Group's medium-term forecast. Long-term diamond price escalation reflects the Group's assessment of market supply/demand fundamentals. The valuation of Letšeng at 31 December 2020 exceeded the carrying value by US$83.0 million (31 December 2019: US$86.0 million). The valuation is sensitive to input assumptions particularly in relation to the foreign exchange assumption of the US dollar (US$) to the Lesotho loti (LSL) and the future price growth for diamonds. The Group has assumed an appropriate price increase for its diamonds following the market improvement noted in the diamond prices in the second half of the year. A range of alternative scenarios have been considered in determining whether there is a reasonably possible change in the foreign exchange rates in conjunction with a reasonably possible change in the diamond price recovery, which would result in the recoverable amount equating to the carrying amount. A 10% strengthening of the LSL to the US$ to US$1:LSL13.20 or a further reduction of 9% to the starting diamond prices would result in the recoverable amount equating to the carrying value, with other valuation assumptions remaining the same. As a result, no impairment charge was recognised during the year.

		2020 US$'000	2019 US$'000
13.	RECEIVABLES AND OTHER ASSETS
	Non-current
	Deposits	153	-
	Current
	Trade receivables	22	89
	Prepayments	1 349	1 087
	Deposits	-	94
	Other receivables	135	797
	VAT receivable	4 180	4 270
		5 686	6 243
	The carrying amounts above approximate their fair value due to the short-term maturities of the instruments.
	Analysis of trade receivables based on their terms and conditions
	Neither past due nor impaired	-	39
	Past due but not impaired:
	Less than 30 days	22	50
	30 to 60 days	-	-
	60 to 90 days	-	-
	90 to 120 days	-	-
		22	89
	Based on the nature of the Group's client base, other financial assets and the negligible exposure to credit risk, the expected credit loss is insiginificant and has no impact on the Group.

			2020 US$'000	2019 US$'000
14	INVENTORIES Diamonds on hand Ore stockpiles Consumable stores
			15 558	21 743
			2 365	1 816
			8 818	8 958
			26 741	32 517
	Inventory is carried at the lower of cost or net realisable value. During the year no write‑downs to net realisable value were recorded.

		2020 US$'000	2019 US$'000
15.	CASH AND SHORT-TERM DEPOSITS
	Cash on hand	4	1
	Bank balances	35 456	10 971
	Short-term bank deposit	14 360	331
		49 820	11 303
	The amounts reflected in the financial statements approximate fair value due to the short-term maturity and nature of cash and short-term deposits. Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are generally call deposit accounts and earn interest at the respective short-term deposit rates. The Group's cash surpluses are deposited with major financial institutions of high-quality credit standing predominantly within Lesotho and the United Kingdom. At 31 December 2020, the Group had US$60.8 million (31 December 2019: US$69.9 million) of undrawn facilities, representing the LSL500.0 million (US$34.0 million) three-year unsecured revolving working capital facility at Letšeng, the Letšeng ZAR100.0 million (US$6.8 million) working capital facility and US$20.0 million from the Company's 12 month unsecured revolving credit facility. For further details on these facilities, refer Note 18, Interest-bearing loans and borrowings.

16.	ASSETS HELD FOR SALE In line with the strategic objective to dispose of non-core assets, the Board and Management remain committed to the sale of Gem Diamonds Botswana (Pty) Ltd which owns the Ghaghoo Diamond Mine. The binding agreement that Gem Diamonds entered into in June 2019 for the sale of 100% of the share capital of GDB lapsed due to certain suspensive conditions not having been met, however Management again opened the process to other prospective buyers during the year and has entered into an exclusivity arrangement with an interested party with whom potential sale discussions are continuing. The sales process faced considerable delays in 2020 largely due to the impact of COVID-19 and in particular the related travel restrictions that prohibited site visits which had been requested for due diligence purposes. This process is expected to be concluded in 2021. During the year, some consumable inventory items were written off relating to expired explosives and plant consumables; and spares and accessories for automotives no longer on site. The asset held for sale is carried at carrying value which is lower than fair value less costs to sell. The fair value is based on unobservable market offers from potential buyers for the disposal group, accordingly the non-recurring fair value measurement is included in level 3 of the fair value hierarchy. The trading results of the operation continue to be classified as a discontinued operation held for sale and are presented as follows:
		2020 US$'000	2019 US$'000
	Gross profit	-	-
	Other costs	(2 816)	(4 389)
	Inventory write-down	(240)	-
	Share-based payments	(6)	(10)
	Foreign exchange gain	-	125
	Operating loss	(3 062)	(4 274)
	Net finance costs	(202)	(180)
	Loss before tax from discontinued operation	(3 264)	(4 454)
	Income tax expense	-	-
	Loss after tax from discontinued operation attributable to equity holders of the parent	(3 264)	(4 454)
	Loss per share from discontinued operation (cents)
	Basic	(2.3)	(3.2)
	Diluted	(2.3)	(3.1)
	Gem Diamonds Botswana incurred rental expenses from short-term leases of US$0.9 million (31 December 2019: US$1.6 million) during the year. Gem Diamonds Botswana has estimated tax losses of US$185.2 million (31 December 2019: US$184.9 million) for which no deferred tax asset has been recognised. Deferred tax assets of US$0.3 million were recognised to the extent of the deferred tax liabilities. These have been offset in the table below.
		2020 US$'000	2019 US$'000
	ASSETS
	Non-current assets
	Property, plant and equipment	1 533	1 568
	Current assets
	Inventories	1 774	2 136
	Receivables and other assets	214	99
	Cash and short-term deposits	7	140
		1 995	2 375
	Total assets	3 528	3 943
	LIABILITIES
	Non-current liabilities
	Provisions	3 753	3 613
	Current liabilities
	Trade and other payables	471	608
	Total liabilities	4 224	4 221
	The net cash flows attributable to the discontinued operation held for sale are as follows:
	Operating cash outflows	(2 920)	(4 323)
	Investing	-	-
	Financing cash inflows1	2 850	4 384
	Foreign exchange (loss)/gain on translation of cash balance	(63)	2
	Net cash (outflow)/inflow	(133)	63
	1 Financing provided by Gem Diamonds Botswana (Pty) Ltd's holding company, being Gem Diamonds Limited, to fund care and maintenance costs.

17.	ISSUED SHARE CAPITAL AND RESERVES
	Share capital
			31 December 2020			31 December 2019
			Number of shares US$'000		US$'000	Number of shares US$'000		US$'000
	Authorised - ordinary shares of US$0.01 each
	As at year end		200 000		2 000	200 000		2 000
	Issued and fully paid balance at beginning of year		138 984		1 391	138 896		1 390
	Allotments during the year		628		6	88		1
	Balance at end of year		139 612		1 397	138 984		1 391
	Share premium
	Share premium comprises the excess value recognised from the issue of ordinary shares above its par value.
	Other reserves
		Foreign currency translation reserve US$'000		Share-based equity reserve US$'000			Total US$'000
	Balance at 1 January 2020	(208 493)		5 636			(202 857)
	Other comprehensive income	(9 862)		-			(9 862)
	Total comprehensive income	(9 862)		-			(9 862)
	Share capital issue	-		(6)			(6)
	Share-based payments	-		561			561
	Balance at 31 December 2020	(218 355)		6 191			(212 164)
	Balance at 1 January 2019	(207 639)		55 610			(152 029)
	Other comprehensive expense	(854)		-			(854)
	Total comprehensive expense	(854)		-			(854)
	Share-based payments	-		794			794
	Transfer between reserves1	-		(50 768)			(50 768)
	Balance at 31 December 2019	(208 493)		5 636			(202 857)
	1 In the prior year the Company elected to release share-based equity reserve relating to lapsed and exercised options to accumulated (losses)/retained earnings.
	Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of foreign entities. The South African, Lesotho and Botswana (2019: United Arab Emirates operation abandoned in 2019) subsidiaries' functional currencies are different to the Group's presentation currency of US dollar. The rates used to convert the operating functional currency into US dollar are as follows:
		Currency		2020			2019
	Average rate	ZAR/LSL to US$1		16.47			14.45
	Year end	ZAR/LSL to US$1		14.69			13.98
	Average rate	Pula to US$1		11.45			10.76
	Year end	Pula to US$1		10.80			10.58
	Average rate	Dirham to US$1		-			3.67
	Year end	Dirham to US$1		-			3.67
	Share-based equity reserves For details on the share-based equity reserve, refer Note 28, Share-based payments. Capital management For details on capital management, refer Note 27, Financial risk management.

18.	INTEREST-BEARING LOANS AND BORROWINGS
		Effective interest rate	Maturity	2020 US$'000	2019 US$'000
	Non-current
	LSL215.0 million bank loan facility
	Tranche 1	South African JIBAR + 3.15%	31 March 2022	477	4 291
	Tranche 2	South African JIBAR + 6.50%	30 September 2022	817	1 168
	ZAR12.8 million asset-based finance facility	South African Prime Lending Rate	1 January 2024	408	550
				1 702	6 009
	Current
	LSL215.0 million bank loan facility
	Tranche 1	South African JIBAR + 3.15%	31 March 2022	635	3 433
	Tranche 2	South African JIBAR + 6.75%	30 September 2022	3 268	667
	LSL14.5 million insurance premium finance	2.95% fixed interest	30 June 2021	542	-
	US$30.0 million bank loan facility	London US$ three-month LIBOR + 5.0%	31 December 2021	9 700	-
	US$45.0 million bank loan facility
	Tranche 1	London US$ three-month LIBOR + 4.5%	31 December 2020	-	10 000
	Tranche 2	London US$ three-month LIBOR +4.5%	31 December 2020	-	2 000
	ZAR12.8 million asset-based finance facility	South African Prime Lending Rate	1 January 2024	176	232
	ZAR1.8 million insurance premium finance	2.5% fixed interest	1 May 2021	64	-
				14 385	16 332
	LSL215.0 million (US$14.6 million) bank loan facility at Letšeng Diamonds This loan comprises two tranches of debt as follows: · Tranche 1: South African rand denominated ZAR180.0 million (US$12.2 million) debt facility supported by the Export Credit Insurance Corporation (ECIC) (five years tenure); and · Tranche 2: Lesotho loti denominated LSL35.0 million (US$2.4 million) term loan facility without ECIC support (five years and six months tenure). The loan is an unsecured project debt facility which was signed jointly with Nedbank and the ECIC on 22 March 2017 to fund the construction of the Letšeng mining support services complex. The loan is repayable in equal quarterly payments which commenced in September 2018. At year end LSL76.3 million (US$5.2 million) (31 December 2019: LSL133.7 million (US$9.6 million)) remains outstanding. The South African rand-based interest rates for the facility at 31 December 2020 are: · Tranche 1: 10.10% (31 December 2019: 9.95%); and · Tranche 2: 6.50% (31 December 2019: 13.55%). The South African prime lending rate has reduced materially during the year due to the South African Reserve Bank reducing the repo rate to provide relief during the COVID-19 pandemic. Total interest for the year on this interest-bearing loan was US$0.6 million (31 December 2019: US$2.2 million). US$30.0 million (2019: US$45.0 million) bank loan facility at Gem Diamonds Limited This facility was a three-and-a-half-year revolving credit facility (RCF) with Nedbank Capital which consisted of two tranches: · Tranche 1: related to the Ghaghoo US$25.0 million debt whereby capital repayments commenced in September 2018 with final repayment made on 31 December 2020; and · Tranche 2: this tranche of US$20.0 million related to an RCF which included an upsize mechanism whereby the tranche increased by a ratio of 0.6:1 for every repayment made under Tranche 1. Upon expiry of the RCF on 31 December 2020, it was rolled into a US$30.0 million facility with no tranches for a period of 12 months. The facility will expire on 31 December 2021. At year end US$Nil million (31 December 2019: US$10.0 million) had been drawn down under the facility under Tranche 1 and US$10.0 million (31 December 2019: US$2.0 million) under Tranche 2 which was rolled into a new US$30.0 million RCF. This resulted in US$20.0 million remaining undrawn under the new RCF. Facility rolling fees of US$0.3 million were incurred, which were capitalised to the loan balance, resulting in the disclosure of a net US$9.7 million loan balance. The capitalised rolling fees will be amortised and accounted for as finance costs within profit or loss over the period of the facility (2020: nil). The US dollar-based interest rate for this facility at 31 December 2020 is 4.72% (31 December 2019: 6.44%). Total interest for the year on this interest-bearing RCF was US$1.2 million (31 December 2019: US$1.7 million). ZAR12.8 million (US$0.9 million) Asset-Based Finance facility In January 2019, the Group, through its subsidiary, Gem Diamond Technical Services, entered into a ZAR12.8 million (US$0.9 million) Asset Based Finance (ABF) facility with Nedbank Limited for the purchase of a mobile X-Ray transmission machine (the asset). The asset serves as security for the facility. At year end ZAR8.6 million (US$0.6 million) remains outstanding (31 December 2019: ZAR 10.9 million, US$0.8 million). The facility is repayable over five years and bears interest at the South African Prime Lending rate, which was 7.00% at 31 December 2020 (31 December 2019: 10.00%). Total interest for the year on this interest-bearing ABF was US$0.1 million (31 December 2019: US$0.1 million). ZAR14.5 million insurance premium finance The Group through its subsidiary Letšeng Diamonds, entered into a LSL14.5 million (US$1.0 million) 12-month funding agreement with Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All Risk insurance premium. At year end LSL7.5 million (US$0.5 million) remains outstanding. The funding is repayable in 12-monthly instalments and bears a fixed interest rate of 2.95%. Total interest on this funding is LSL0.4 million (US$25.9 thousand) of which LSL0.3 million (US$18.9 thousand) was paid during the year. ZAR1.8 million insurance premium finance The Group through its subsidiary Gem Diamonds Technical Services, entered into a ZAR1.8 million (US$0.1 million) 12-month funding agreement with Premium Finance Partners (Proprietary) Limited for its annual Group Umbrella Liability insurance premium. At year end US$64.3 thousand remains outstanding. The funding is repayable in 10-monthly instalments and bears interest at a fixed rate of 2.50%. Total interest on this funding is ZAR45.2 thousand (US$2.7 thousand) of which ZAR18.3 thousand (US$1.1 thousand) interest was paid during the year. Other facilities The Group through its subsidiary Letšeng Diamonds, has a LSL500.0 million (US$34.0 million) three-year unsecured revolving working capital facility jointly with Standard Lesotho Bank and Nedbank Capital, which was renewed in July 2018 and expires in July 2021. The facility is expected to be renewed during 2021. There was no draw down of this facility at year end. The Group, through its subsidiary, Letšeng Diamonds, has a ZAR100.0 million (US$6.8 million) overdraft facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division). There was no draw down of this facility at year end.

		2020 US$'000	2019 US$'000
19.	LEASE LIABILITIES
	Non-current	4 902	8 539
	Current	1 836	1 940
	Total lease liabilities	6 738	10 479
	Reconciliation of movement in lease liabilities
	As at 1 January	10 479	11 043
	Additions	1 175	1 156
	Interest expense	608	1 087
	Lease payments	(2 522)	(2 988)
	Derecognition of lease	(2 296)	-
	Foreign exchange differences	(705)	181
	As at 31 December	6 739	10 479
	Lease payments comprise payments in principle of US$1.9 million (31 December 2019: US$1.9 million) and repayments of interest US$0.6 million (31 December 2019: US$1.1 million). The Group recognised variable lease payments of US$41.4 million (31 December 2019: US$53.6 million) for the year ended 31 December 2020 which consist of mining activities outsourced to a mining contractor. Total costs incurred for the year amount to US$41.4 million (31 December 2019: US$53.6 million) of which US$34.1 million (31 December 2019: US$47.2 million) has been capitalised to the Stripping Asset. Refer Note 1.2.6, Property Plant and equipment, Note 1.2.28, Critical accounting estimates and judgements, Equipment and service lease, Note 4, Operating profit. Residual value guarantees of US$0.1 million (31 December 2019: US$0.1 million) exist on leases for backup power generating equipment at Letšeng, which represents the cost to decommission and return the power generating equipment to the supplier at the end of the lease term.

		2020 US$'000	2019 US$'000
20.	TRADE AND OTHER PAYABLES
	Non-current
	Severance pay benefits1	2 029	1 936
	Current
	Trade payables2	12 892	13 368
	Accrued expenses2	8 169	8 817
	Leave benefits	685	615
	Royalties and withholding taxes2	3 955	3 573
	Dividend payable to non-controlling interest	3 064	-
	Other	58	17
		28 823	26 390
	1  The severance pay benefits arise due to legislation within the Lesotho jurisdiction, requiring that two weeks of severance pay be provided for every completed year of service, payable on retirement. 2  These amounts are mainly non-interest bearing and are settled in accordance with terms agreed between the parties. Royalties consist of a levy paid to the Government of the Kingdom of Lesotho on the value of diamonds sold by Letšeng. In November, Letšeng declared a LSL400.0 million dividend (US$24.8 million), of which LSL150.0 million remains unpaid at year end (US$10.2 million). The dividend payable to the Non-controlling interest represents 30% of the unpaid dividend, payable to the Government of Lesotho. The carrying amounts above approximate fair value.

		2020 US$'000	2019 US$'000
21.	INCOME TAX PAYABLE/(RECEIVABLE)
	Reconciliation of movement in income tax payable
	Balance at 1 January	(8 176)	8 964
	Payments received/(made) during the year	5 889	(18 787)
	Income tax charge	11 593	1 948
	Foreign exchange differences	2 528	(301)
	Balance at 31 December	11 834	(8 176)
	Split as follows
	Income tax receivable	(106)	(8 189)
	Income tax payable	11 940	13

		2020 US$'000	2019 US$'000
22.	PROVISIONS
	Rehabilitation provisions	12 331	15 588
	Reconciliation of movement in rehabilitation provisions
	Balance at 1 January	15 588	17 876
	Decrease during the year	(3 125)	(295)
	Unwinding of discount rate	888	1 130
	Transferred to liabilities directly associated with the asset held for sale (Note 16)	-	(3 613)
	Foreign exchange differences	(1 020)	490
	Balance at 31 December	12 331	15 588
	Rehabilitation provisions The provisions have been recognised as the Group has an obligation for rehabilitation of the mining areas. The provisions have been calculated based on total estimated rehabilitation costs, discounted back to their present values over the LoM at the mining operations. The pre-tax discount rates are adjusted annually and reflect current market assessments. In determining the amounts attributable to the rehabilitation provision at the Lesotho mining area, management used a discount rate of 9.7% (31 December 2019: 6.7%), estimated rehabilitation timing of 15 years (31 December 2019: 17 years) and an inflation rate of 5.3% (31 December 2019: 5.0%). At the Botswana mining area, management used the available estimated costs to rehabilitate, considering its care and maintenance state. In addition to the changes in the discount rates, inflation and rehabilitation timing, the (decrease)/increase in the provision at Letšeng and Ghaghoo (Refer Note 16, Asset held for sale) respectively is attributable to the annual reassessment of the estimated closure costs performed at the operations together with the ongoing rehabilitation spend during the year at Letšeng.

		2020 US$'000	2019 US$'000
23.	DEFERRED TAXATION
	Deferred tax assets
	Lease liabilities	1 683	2 705
	Accrued leave	263	52
	Provisions	4 400	5 114
		6 346	7 871
	Deferred tax liabilities
	Property, plant and equipment	(79 902)	(84 532)
	Right-of-use assets	(1 236)	(2 174)
	Prepayments	(218)	(251)
	Unremitted earnings	(3 182)	(4 038)
		(84 538)	(90 995)
	Net deferred tax liability	(78 192)	(83 124)
	Reconciliation of net deferred tax liability
	Balance at beginning of year	(83 124)	(74 054)
	Movement in current period:
	- Accelerated depreciation for tax purposes	548	(6 914)
	- Accrued leave	21	(4)
	- Operating lease liability	-	(351)
	- Unremitted earnings	857	-
	- Prepayments	29	41
	- Provisions	12	(351)
	- Lease liabilities	(582)	2 626
	- Right-of-use assets	527	(2 112)
	- Foreign exchange differences	3 520	(2 005)
	Balance at end of year	(78 192)	(83 124)
	The Group has not recognised a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries because it is able to control the timing of dividends and only part of the temporary difference is expected to reverse in the foreseeable future. The gross temporary difference in respect of the undistributed reserves of the Group's subsidiaries for which a deferred tax liability has not been recognised is US$97.1 million (31 December 2019: US$127.9 million). The Group has estimated tax losses of US$34.0 million (31 December 2019: US$27.5 million). All tax losses are generated in jurisdictions where tax losses do not expire. No deferred tax assets were recognised on these losses.

		Notes	2020 US$'000	2019 US$'000
24.	CASH FLOW NOTES
24.1	Cash generated by operations
	Profit before tax for the year - continuing operations		38 253	24 050
	Loss for the year - discontinued operation		(3 264)	(4 454)
	Adjustments for:
	Depreciation and amortisation excluding waste stripping	4	7 027	12 551
	Depreciation on right-of-use assets	10	2043	2 526
	Waste stripping cost amortised	4	43 420
	Finance income	6	(382)	43 129
	Finance costs	6, 16	4 994	(668)
	Unrealised foreign exchange differences		(4 019)	6 656
	Loss/(profit) on disposal and scrapping of property, plant and equipment		30	(4 184)
	Gain on derecognition of leases		(150)	(762)
	Inventory write down	16	240	-
	Reclassification of foreign currency translation reserve		-	-
	Movement in prepayment		-	(4)
	Bonus, leave and severance provisions raised		4 317	(647)
	Share-based payments		561	3 1081
	Adjustments for:			794
	Environmental rehabilitation realignment		-	(451)1
	Gain on abandoment		(20)	-
			93 050	81 644
24.2	Working capital adjustment
	Decrease/(Increase) in inventory		3 489	(851)
	Decrease in receivables		1 316	1 596
	Decrease in payables		(4 341)	(3 599)
			464	(2 854)
24.3	Cash flows from financing activities (excluding lease liabilities)
	Balance at beginning of year		22 341	34 166
	Net cash used in financing activities		(6 431)	(12 175)
	- Financial liabilities repaid		(55 638)	(47 056)
	- Financial liabilities raised		49 207	34 881
	Interest paid		(2 884)	(4 094)
	Non-cash movements		3 060	4 444
	- Interest accrued		2 884	4 094
	- Financial liabilities raised2		1 047	-
	- Foreign exchange differences		(871)	350
	Balance at year end	18	16 086	22 341
	1  These amounts have been disaggregated in the current year for comparative purposes, and were previously grouped and disclosed as other non-cash movements in 2019. 2 This amount relates to funding obtained for insurance premium finance. The funding was paid directly by the lender to the third party and is being repaid by the Group in monthly installments to the lender. Refer Note 18, Interest bearing loans and borrowings.

		2020 US$'000	2019 US$'000
25.	COMMITMENTS AND CONTINGENCIES
	Commitments
	Mining leases
	Mining lease commitments represent the Group's future obligation arising from agreements entered into with local authorities in the mining areas that the Group operates.
	The period of these commitments is determined as the lesser of the term of the agreement, including renewable periods, or the LoM. The estimated lease obligation regarding the future lease period, accepting stable inflation and exchange rates, is as follows:
	- Within one year	162	149
	- After one year but not more than five years	695	862
	- More than five years	993	1 821
		1 850	2 832
	Equipment and service lease
	The Group has entered into lease arrangements for the provision of loading, hauling and other transportation services payable at a fixed rate per tonne of ore and waste mined; power generator equipment payable based on a consumption basis; and rental agreements for various mining equipment based on the fleet utilised. All lease payments relating to this lease are variable in nature. A portion of the lease payment is therefore expensed in the Consolidated statement of profit or loss and the portion relating to waste removal/stripping costs is capitalised to the waste stripping asset in the proportions referred to under the estimate and judgements applied to the Capitalised stripping costs (deferred waste). Refer Note 1.2.28, Critical accounting estimates. The terms of this lease are negotiated during the extension option periods catered for in the agreements or at any time sooner if agreed by both parties.
	- Within one year	52 855	59 267
	- After one year but not more than five years	181 904	254 218
		234 759	313 485
	Letšeng Diamonds Educational Fund
	In terms of the mining agreement entered into between the Group and the Government of the Kingdom of Lesotho, the Group has an obligation to provide funding for education and training scholarships. The quantum of such funding is at the discretion of the Letšeng Diamonds Education Fund Committee.
	- Within one year	37	39
	- After one year but not more than five years	50	69
		87	108
	Capital expenditure
	Approved but not contracted for	1 091	3 299
	Approved and contracted for	372	1 490
		1 463	4 789
	The main capital expenditure approved relates to investment in continued tailings storage extension of US$1.0 million (31 December 2019: US$0.6 million), investment at the mining fleet maintenance workshop of US$0.3 million (31 December 2019: nil) and the purchase of safety equipment and vehicles US$0.1 million. The expenditure is expected to be incurred over the next 12 months but will be assessed in line with the uncertainty presented by the COVID-19 pandemic. Contingent rentals - Alluvial Ventures The contingent rentals represent the Group's obligation to a third party (Alluvial Ventures) for operating a third plant on the Group's mining property at Letšeng Diamonds. The rental is determined when the actual diamonds mined by Alluvial Ventures are sold. The agreement is based on 39.5% to 60% of the value (after costs) of the diamonds recovered by Alluvial Ventures and is limited to US$1.4 million per individual diamond. As at the reporting date, such future sales cannot be determined. Contingencies 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$0.2 million (December 2019: US$0.2 million). The Group monitors possible tax claims within the various jurisdictions in which the Group operates. Management applies judgement in identifying uncertainties over tax treatments and concluded that there were no uncertain tax treatments relating to the current year. Refer Note 1.2.28, Critical accounting estimates and judgements. There remains a risk that further tax liabilities may potentially arise. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate that there will be any material impact on the Group's results, financial position or liquidity.

26.	RELATED PARTIES
	Related party			Relationship
	Jemax Management (Proprietary) Limited			Common director
	Government of the Kingdom of Lesotho			Non-controlling interest
	Refer Note 1.1.2, Operational information, for information regarding shareholding in subsidiaries.
				2020 US$'000	2019 US$'000
	Compensation to key management personnel (including Directors)
	Share-based equity transactions			344	440
	Short-term employee benefits			3 612	3 063
				3 956	3 503
	Fees paid to related parties
	Jemax Management (Proprietary) Limited			(83)	(83)
	Royalties paid to related parties
	Government of the Kingdom of Lesotho			(18 425)	(15 459)
	Lease and licence payments to related parties
	Government of the Kingdom of Lesotho			(132)	(146)
	Sales to/(purchases from) related parties
	Jemax Management (Proprietary) Limited			(4)	(5)
	Amount included in trade payables owing to related parties
	Jemax Management (Proprietary) Limited			(9)	(9)
	Amounts owing to related party
	Government of the Kingdom of Lesotho			(3 955)	(3 537)
	Dividends declared
	Government of the Kingdom of Lesotho			(7 452)	-
	Dividends payable
	Government of the Kingdom of Lesotho			(3 064)	-
	Jemax Management (Proprietary) Limited provided administrative services with regard to the mining activities undertaken by the Group. A controlling interest is held by an Executive Director of the Company. The above transactions were made on terms agreed between the parties and were made on terms that prevail in arm's length transactions.
27.	FINANCIAL RISK MANAGEMENT Financial risk factors The Group's activities expose it to a variety of financial risks: · market risk (including commodity price risk, foreign exchange risk and interest rate risk); · credit risk; and · liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out under policies approved by the Board of Directors. The Board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investing excess liquidity. There have been no changes to the financial risk management policy since the prior year. Capital management For the purpose of the Group's capital management, capital includes the issued share capital, share premium and liabilities on the Group's statement of financial position. The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may issue new shares or restructure its debt facilities. The management of the Group's capital is performed by the Board. The Group's capital management, among other things, aims to ensure that it meets financial covenants attached to its interest-bearing loans and borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches of the financial covenants in the current year. At 31 December 2020, the Group had US$60.8 million (31 December 2019: US$69.9 million) of undrawn debt facilities and continues to have the flexibility to manage the capital structure more efficiently by the use of these debt facilities, thus ensuring that an appropriate gearing ratio is achieved. Refer Note 18, Interest bearing loans and borrowings for detail on the debt facilities in the Group.
	a)	Market risk
		(i)	Commodity price risk The Group is subject to diamond price risk. Diamonds are not homogeneous products and the price of rough diamonds is not monitored on a public index system. The fluctuation of prices is related to certain features of diamonds such as quality and size. Diamond prices are marketed in US dollar and long-term US dollar per carat prices are based on external market consensus forecasts and contracted sales arrangements adjusted for the Group's specific operations. The Group does not have any financial instruments that may fluctuate as a result of commodity price movements.
		(ii)	Foreign exchange risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Lesotho loti, South African rand and Botswana pula. Foreign exchange risk arises when future commercial transactions, recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. The Group's sales are denominated in US dollar which is the functional currency of the Company, but not the functional currency of the operations. The currency sensitivity analysis below is based on the following assumptions: · Differences resulting from the translation of the financial statements of the subsidiaries into the Group's presentation currency of US dollar, are not taken into consideration. · The major currency exposures for the Group relate to the US dollar and local currencies of subsidiaries. Foreign currency exposures between two currencies where one is not the US dollar are deemed insignificant to the Group and have therefore been excluded from the sensitivity analysis. · The analysis of the currency risk arises because of financial instruments which are denominated in a currency that is not the functional currency of the relevant Group entity. The sensitivity has been based on financial assets and liabilities at 31 December 2020. There has  been no change in the assumptions or method applied from the prior year. Sensitivity analysis At year end, Letšeng had US$31.1 million cash on hand. If the US dollar had appreciated/(depreciated) by 10% against the LSL, the Group profit before tax at 31 December 2020 would have been US$2.8 million (lower)/higher (31 December 2019: immaterial).
		(iii)	Forward exchange contracts The Group enters into forward exchange contracts to hedge the exposure to changes in foreign currency of future sales of diamonds at Letšeng Diamonds. The Group performs no hedge accounting. At 31 December 2020, the Group had no forward exchange contracts outstanding (31 December 2019: US$nil).
		(iv)	Interest rate risk The Group's income and operating cash flows are substantially independent of changes in market interest rates. The Group's cash flow interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. At the time of taking new loans or borrowings, management uses its judgement to decide whether it believes that a fixed or variable rate borrowing would be more favourable to the Group over the expected period until maturity.   Sensitivity analysis If the interest rates on the interest-bearing loans and borrowings (increased)/decreased by 80 basis points (2019: 60 basis points) during the year, profit before tax and equity would have been US$0.1 million (lower)/higher (31 December 2019: US$0.2 million). The assumed movement in basis points is based on the currently observable market environment, which has been impacted by the COVID-19 pandemic.
	b)	Credit risk The Group's potential concentration of credit risk consists mainly of cash deposits with banks, trade receivables and other receivables. The Group's short-term cash surpluses are placed with banks that have investment grade ratings, to minimise the exposure to credit risk to the lowest level possible from the perspective of the Group's cash and cash equivalents. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the reporting dates. The Group considers the credit standing of counterparties when making deposits to manage the credit risk. Considering the nature of the Group's ultimate customers and the relevant terms and conditions entered into with such customers, the Group believes that credit risk is limited as the customers pay and settle their accounts on the date of receipt of goods. No other financial assets are impaired or past due and accordingly, no additional analysis has been provided. The Group did not hold any form of collateral or credit enhancements for its credit exposures during the 31 December 2020 and 31 December 2019 financial reporting periods.
	c)	Liquidity risk Liquidity risk arises from the Group's inability to obtain the funds it requires to comply with its commitments including the inability to sell a financial asset quickly at a price close to its fair value. Management manages the risk by maintaining sufficient cash, marketable securities and ensuring access to financial institutions and shareholding funding. This ensures flexibility in maintaining business operations and maximises opportunities. The Group has available debt facilities of US$60.8 million at year end (2019: US$69.9 million). The table below summarises the maturity profile of the Group's financial liabilities at 31 December based on contractual undiscounted payments, excluding discontinued operation:
				2020 US$'000	2019 US$'000
		Floating interest rates
		Interest-bearing loans and borrowings
		- Within one year		14 960	17 734
		- After one year but not more than five years		1 750	6 636
		Total		16 710	24 370
		Lease liabilities
		- Within one year		2 375	2 895
		- After one year but not more than five years		5 880	10 416
		Total		8 255	13 311
		Trade and other payables
		- Within one year		28 823	26 390
		- After one year but not more than five years		2 029	1 936
		Total		30 852	28 326

					2020 US$'000			2019 US$'000
28.	SHARE-BASED PAYMENTS
	The expense recognised for employee services received during the year is shown in the following table:
	Equity-settled share-based payment transactions charged to the statement of profit or loss - continuing operation				555			784
	Equity-settled share-based payment transactions charged to the statement of profit or loss - discontinued operation				6			10
					561			794
	The long-term incentive plans are described below: Long-term incentive plan (LTIP) Certain key employees are entitled to a grant of options, under the LTIP of the Company. The vesting of the options is dependent on employees remaining in service for a prescribed period (normally three years) from the date of grant. The fair value of share options granted is estimated at the date of the grant using an appropriate simulation model, taking into account the terms and conditions upon which the options were granted. It takes into account projected dividends and share price fluctuation co-variances of the Company. There is a nil or nominal exercise price for the options granted. The contractual life of the options is 10 years and there are no cash settlement alternatives. The Company has no past practice of cash settlement. The Company's LTIP policy is reviewed every 10 years. LTIP 2007 Award Under the 2007 LTIP rules, there are four awards where options are still outstanding. All four awards were awarded on the following basis: To key employees (excluding Executive Directors): · the awards vest over a three-year period in tranches of a third of the award each year; · the vesting of the award is dependent on service conditions and certain performance targets being met for the same three-year period (classified as non-market conditions); · 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; · once the awards vest, they are exercisable for seven years (ie. contractual term is 10 years); and · the vested awards are equity settled. To Executive Directors: · the awards vest over a three-year period; · the vesting of the award is dependent on service conditions and both market and non-market performance conditions; · 75% of the awards granted are subject to non-market conditions and 25% to market conditions by reference to the Company's total shareholder return (TSR) as compared to a group of principal competitors; · 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; · once the awards vest, they are exercisable for seven years (ie. contractual term is 10 years); and · the vested awards are equity settled. The fair value of the Nil value awards is based on the observable Gem Diamonds Limited share price on the date of award with no adjustments to the price made. The following table reflects details of all the awards within the 2007 LTIP that remain outstanding:
		LTIP March 2016	LTIP April 2015	LTIP June 2014		LTIP March 2014			LTIP September 2012
	Number of options granted - Nil value	1 215 000	1 215 000	456 750		625 000			312 000
	Number of options granted - Market value	185 000	185 000	152 250		-			624 000
	Date exercisable	15 March 2019	1 April 2018	10 June 2017		19 March 2017			1 January 2016
	Options outstanding	146 451	53 114	58 209		15 000			-
	Dividend yield (%)	2.00	2.00	0.00		0.00			0.00
	Expected volatility1 (%)	39.71	37.18	37.25		-			42.10
	Risk-free interest rate2 (%)	0.97	1.16	1.94		-			0.33
	Expected life of option (years)	3.00	3.00	3.00		3.00			3.00
	Exercise price (US$)	nil	nil	nil		nil			2.85
	Exercise price (GBP)	nil	nil	nil		nil			1.78
	Weighted average share price (US$)	1.56	2.10	2.70		2.87			2.85
	Fair value of nil value options (US$)	1.40	1.97	2.70		2.87			2.85
	Fair value of nil value options (GBP)	0.99	1.33	1.61		1.74			1.78
	Fair value of market value options (US$)	0.69	1.18	1.83		-			1.66
	Fair value of market value options (GBP)	0.49	0.80	1.09		-			1.04
	Model used	Monte Carlo	Monte Carlo	Monte Carlo		-			Monte Carlo
	1 Expected volatility was based on the average annual historic volatility of the Company's share price over the previous three years. 2 The relevant risk-free interest rate is taken from a UK Treasury Bond issued which closely matches the lifetime of the option.
	LTIP 2017 Award Under the 2017 LTIP rules, there are four awards where options are still outstanding. All the awards were issued on the same basis as the 2007 LTIP. During the current year, one new award was made as follows: LTIP 2017 Award - June 2020 On 9 June, 1 249 000 nil-cost options were granted to certain key employees and Executive Directors. 180 000 of the options granted relate to market conditions. The options vest after a three-year period and are exercisable between 9 June 2023 and 8 June 2030. If the performance or service conditions are not met, the options lapse. The performance conditions relating to the non-market conditions are not reflected in the fair value of the award at grant date, and therefore the Company will assess the likelihood of these conditions being met with a relevant adjustment to the cumulative charge as required at each financial year end. The fair value of the nil-cost options is £0.15 (US$0.19). Of the 1 249 000 options originally granted, 1 229 356 are still outstanding following the resignation of a number of employees, the lapsing of awards due to certain performance conditions not having been met and management's estimates of the vesting of the remaining tranches. The following table reflects details of all the awards within the 2017 LTIP that remain outstanding:
		LTIP June 2020	LTIP March 2019		LTIP March 2018		LTIP July 2017
	Number of options granted - nil value	1 069 000	1 160 500		1 265 000		1 150 000
	Number of options granted - market value	180 000	142 500		185 000		185 000
	Date exercisable	9 June 2023	20 March 2022		20 March 2021		4 July 2020
	Options outstanding	1 229 356	1 102 732		1 034 136		248 584
	Dividend yield (%)	0.00	0.00		0.00		2.00
	Expected volatility1 (%)	47.00	43.00		40.00		40.21
	Risk-free interest rate2 (%)	0.34	1.2		1.2		0.67
	Expected life of option (years)	3.00	3.00		3.00		3.00
	Exercise price (US$)	nil	nil		nil		nil
	Exercise price (GBP)	nil	nil		nil		nil
	Weighted average share price (US$)	0.39	1.20		1.35		1.24
	Fair value of nil value options (US$)	0.39	1.20		1.35		1.11
	Fair value of nil value options (GBP)	0.31	0.90		0.96		0.86
	Fair value of market value options (US$)	0.19	0.58		0.74		0.72
	Fair value of market value options (GBP)	0.15	0.44		0.53		0.56
	Model used	Monte Carlo	Monte Carlo		Monte Carlo		Monte Carlo
	The following table illustrates the number ('000) and movement in the outstanding share options during the year:
					2020 US$'000			2019 US$'000
	Outstanding at beginning of year				4 002			3 538
	Granted during the year				1 249			1 303
	Exercised during the year3				(480)			(81)
	Forfeited				(884)			(758)
	Balance at end of year				3 887			4 002
	Exercisable at end of year				535			613
	1  Expected volatility was based on the average annual historic volatility of the Company's share price over the previous three years. 2  The relevant risk-free interest rate is taken from a UK Treasury Bond issued which closely matches the lifetime of the option. 3  Options were exercised regularly throughout the year. The weighted average share price during the year was £0.39 (US$0.50). (2019: £0.80 (US$1.02))
	The weighted average remaining contractual life for the share options outstanding as at 31 December 2020 was 7.5 years (2019: 8.0 years). The weighted average fair value of the share options outstanding as at 31 December 2020 was US$0.79 (2019: US$1.02). ESOP In September 2017, 47 200 shares which were previously held in the Company Employee Share Trust were granted to certain key employees involved in the Business Transformation of the Group. The Company Employee Share Trust was deregistered in 2017 following the grant of these shares. The fair value of the award was valued at the share price of the Company at the date of the award of £0.71 (US$0.96). These shares vested on 18 March 2019 and became immediately exercisable. The fair value of these outstanding awards at 31 December 2020 was £0.41 (2019: £0.41). The shares outstanding at the end of the year are as follows:
					2020 US$'000			2019 US$'000
	Outstanding at beginning of year				47			47
	Granted during the year				-			-
	Exercised during the year				(30)			-
	Balance at end of year				17			47
	Exercisable at end of year				17			47

29.	FINANCIAL INSTRUMENTS Set out below is an overview of financial instruments, other than the current portions of the prepayment disclosed in Note 13, Receivables and other assets, which do not meet the criteria of a financial asset. These prepayments are carried at amortised cost.
		Notes	2020 US$'000	2019 US$'000
	Financial assets at amortised cost
	Cash (net of overdraft) - continuing operations	16	49 821	11 303
	Cash - discontinued operation	17	7	140
	Receivables and other assets - continuing operations	14	4 490	4 735
	Receivables and other assets - discontinued operation	17	195	99
	Total		54 513	16 277
	Total non-current		153	-
	Total current		54 360	16 277
	Financial liabilities at amortised cost
	Interest-bearing loans and borrowings	19	16 087	22 341
	Trade and other payables - continuing operations	21	30 852	28 325
	Trade and other payables - discontinued operation	17	471	608
	Total		47 410	51 274
	Total non-current		3 730	16 484
	Total current		43 680	45 269
	The carrying amounts of the Group's financial instruments held approximate their fair value. There were no open hedges at year end (2019: nil).
30.	PROPOSED DIVIDENDS ON ORDINARY SHARES
	Proposed ordinary cash dividend of US$3.5 million for 2020 based on 2.5 US cents per share (2019: US$ nil). Proposed dividends on ordinary shares are subject to approval at the AGM to be held on 2 June 2021 and are not recognised as a liability as at 31 December.
31.	EVENTS AFTER THE REPORTING PERIOD No fact or circumstance has taken place between the end of the reporting period and the approval of the financial statements which, in our opinion, is of significance in assessing the state of the Group's affairs or requires adjustments or disclosures.
32.	MATERIAL PARTLY OWNED SUBSIDIARY Financial information of Letšeng Diamonds, a 70% held subsidiary which has a material non-controlling interest, with the remaining 30% being held by the Government of the Kingdom of Lesotho, is provided below.
	Name	Country of incorporation and operation	2020 US$'000	2019 US$'000
	Letšeng Diamonds (Proprietary) Limited	Lesotho
	Accumulated balances of material non-controlling interest		79 906	76 427
	Profit allocated to material non-controlling interest		10 683	8 319
	The summarised financial information of this subsidiary is provided below. This information is based on amounts before intercompany eliminations.
	Summarised statement of profit or loss for the year ended
	31 December
	Revenue		186 579	179 785
	Cost of sales		(112 081)	(127 244)
	Gross profit		74 498	52 541
	Royalties and selling costs		(19 043)	(15 715)
	Other (expenses)/income		(6 695)	3 333
	Operating profit		48 760	40 159
	Net finance costs		(2 840)	(3 792)
	Profit before tax		45 920	36 367
	Income tax expense		(10 307)	(8 637)
	Profit for the year		35 613	27 730
	Total comprehensive income		35 613	27 730
	Attributable to non-controlling interest		10 683	8 319
	Dividends paid to non-controlling interest		(4 658)	-
	Dividends payable to non-controlling interest		(3 064)	-
	Summarised statement of financial position as at 31 December
	Assets
	Non-current assets
	Property, plant and equipment, deferred tax assets, intangible assets and receivables and other assets		325 009	340 646
	Current assets
	Inventories, receivables and other assets, and cash and short-term deposits		78 098	53 476
	Total assets		403 107	394 122
	Non-current liabilities
	Interest-bearing loans and borrowings, trade and other payables, provisions, lease liabilities and deferred tax liabilities		101 203	109 385
	Current liabilities
	Interest-bearing loans and borrowings and trade and other payables		35 553	29 981
	Total liabilities		136 756	139 366
	Total equity		266 351	254 756
	Attributable to:
	Equity holders of parent		186 446	178 329
	Non-controlling interest		79 906	76 427
	Summarised cash flow information for the year ended
	31 December
	Operating cash inflows		105 471	70 108
	Investing cash outflows		(48 700)	(81 314)
	Financing cash outflows		(20 640)	(6 701)
	Foreign exchange differences		2 787	(15)
	Net increase/(decrease) in cash and cash equivalents		38 918	(17 922)

REPORT ON PAYMENTS TO GOVERNMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

INTRODUCTION

This report provides an overview of the payments made to governments by Gem Diamonds Limited and its subsidiaries (the Group) for the 31 December 2020 financial year, as required under the United Kingdom's (UK) Report on Payments to Governments Regulations 2014 (as amended December 2015). These UK Regulations enact domestic rules in line with Directive 2013/34/EU (the EU Accounting Directive (2013) and apply

to companies that are involved in extractive activities.

This Report is also filed with the National Storage Mechanism intended to satisfy the requirements of the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority in the UK.

The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67.

BASIS FOR PREPARATION

Reporting entities

This report includes payments to governments made by subsidiaries in the Group that are engaged in extractive activities. During the 2020 financial reporting period, extractive activities were conducted in Lesotho while the operation in Botswana was under care and maintenance. All payments made in relation to the Botswana entity were under the materiality level and therefore not reported.

Extractive activities

Extractive activities relate to the exploration, prospection, discovery, development and extraction of minerals, oil, natural gas deposits or other materials. Gem Diamonds Limited, through its subsidiaries, is engaged in diamond mining activities.

Scope of payments

The report discloses only those significant payments made to governments arising from extractive activities.

Government

Government includes any national, regional, or local authority of a country. It includes a department, agency or undertaking (ie corporation) controlled by that authority.

Payment types disclosed at legal entity level

Production entitlements

There were no payments of this nature for the year ended 31 December 2020.

Taxes

These are payments on the entity's income, production, or profits, excluding taxes levied on consumption such as value added taxes, personal income taxes or sales taxes in line with in-country legislation.

Royalties

These are payments for the right to extract diamonds and are determined on percentage of sales in terms of in-country legislation and/or mining lease agreements.

Dividends

These are dividend payments, other than dividends paid to a government as an ordinary shareholder of an entity unless paid in lieu of production entitlements or royalties. There were no dividend payments of this nature to governments for the year ended 31 December 2020.

Signature, discovery, and production bonuses

There were no payments of this nature to governments for the year ended 31 December 2020.

Licence fees

These are fees paid for acquisition of leases and licences, including annual renewal fees, in order to obtain and maintain access to the areas in which extractive activities are performed.

Payments for infrastructure improvements

There were no payments of this nature to governments for the year ended 31 December 2020.

Cash flow basis

Payments reported are on a cash flow basis and may differ to amounts reported in the Gem Diamonds Limited 2020 Annual Report and Accounts, which are prepared on an accrual basis.

Materiality level

In line with the guidance provided in the Report on Payments to Governments Regulations, payments made as a single payment, or as a series of related payments, that are equal to or exceed US$110 000 (£86 000), are disclosed in this report. All payments below this threshold have been excluded.

Reporting currency

The payments to government have been reported in US dollar.

Payments made in currencies other than US dollar were translated at the relevant annual average rate for the year ended 31 December 2020.

SUMMARY REPORT

Operation	Country	Taxes US$'000	Royalties US$'000	Licence fee US$'000	Total US$'000
Letšeng Diamonds (Proprietary) Limited	Lesotho	(8 707)1	18 236	144	9 673
Total		(8 707)	18 236	144	9 673

1 Letšeng Diamonds (Proprietary) Limited was in a net refund position during the year due to refunds on income taxes received which was paid in 2019.

Lesotho Letšeng Diamonds (Proprietary) Limited		Taxes US$'000	Royalties US$'000	Licence fee US$'000	Total US$'000
Lesotho Revenue Authority		(8 707)	-	-	(8 707)
Government of Kingdom of Lesotho		-	18 236	144	18 380

1 Letšeng Diamonds (Proprietary) Limited was in a net refund position during the year due to refunds on income taxes received which was paid in 2019.

 

END

 

 

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