Full Year 2023 Results

Gem Diamonds Limited

14 March 2024

Thursday, 14 March 2024

Gem Diamonds Limited

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Full Year Results for the year ending 31 December 2023 (the "Period").

FINANCIAL RESULTS:

· Revenue of US$140.3 million (US$188.9 million in 2022)

· Underlying EBITDA of US$15.2 million (US$43.7 million in 2022)

· Profit for the year of US$1.6 million (US$20.2 million in 2022)

· Attributable loss of US$2.1 million (profit of US$10.2 million in 2022)

· Loss per share of 1.5 US cents (earnings per share of 7.3 US cents in 2022)

· Cash on hand of US$16.5 million as at 31 December 2023 (US$12.3 million attributable to Gem Diamonds)

OPERATIONAL RESULTS:

Letšeng

· Carats recovered of 109 656 (106 704 carats in 2022)

· Waste tonnes mined of 8.8 million tonnes (10.2 million tonnes in 2022)

· Ore treated of 5.0 million tonnes (5.5 million tonnes in 2022)

· Average value of US$1 334 per carat achieved (US$1 755 in 2022)

· The highest dollar per carat achieved for a white rough diamond during the year was US$36 399 per carat

Safety performance

Letšeng's safety performance in 2023 was excellent with zero fatalities (2022: zero), two LTIs (2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our lowest AIFR on record of 0.67 (2022: 0.70).

Financial performance

The turbulent global economic conditions from the previous year continued into 2023 with high inflation, interest rate hikes and slow overall economic growth in major economies which impacted the diamond market. The pressure experienced on the diamond market significantly impacted rough and polished diamond prices which resulted in a 26% decrease in revenue. Despite the implementation of numerous cost containment measures, EBITDA decreased by 65%.

Operational performance

Significant changes were made to management, workforce and operating methodologies at Letšeng and Ghaghoo in 2023 to meet the challenges of lower revenues and increasing costs. The implementation of a number of initiatives in H2 2023 to slow down the rate at which ore is fed into the treatment plants significantly improved overall stability which materially improved the consistency of higher daily overall plant utilisation.

TCFD and Climate

The Group concluded the final phase of its three-year TCFD roadmap in 2023. The Group achieved a 26% reduction of its scope 1 and scope 2 carbon emissions compared to its target of a 30% reduction by 2030.

Resource & Reserve Statement

Following an in-depth resource development programme that involved extensive core resource drilling, pit surface mapping, 3D-modelling, and petrography, the Group has concluded its NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement which will be available on the Group's website at www.gemdiamonds.com.

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

"2023 was a challenging year globally with surging inflation and interest rate increases in major economies, two international conflicts and a subdued overall global economic outlook which had a significant negative impact on the diamond industry. Our financial results suffered primarily as a result of a decrease in revenue because of lower diamond prices. We have relentlessly focused on cost control measures, enhanced operational efficiencies, rigorous evaluation of capital projects and the deferment of non-essential longer-term projects.

We are proud of our excellent safety performance in 2023 which is a testament to the focus and dedication of our workforce to mature the organisational safety culture, a programme that commenced in 2021.

We also released Letšeng's 2024 Resource and Reserve statement today, the result of a lot of hard work over the past number of years. We will continue to optimise our mine plan to ensure sustainable returns for our stakeholders.

The pressure on the diamond market has persisted into 2024, although there have been some signs of price recovery. We are cautiously optimistic that prices will stabilise and that there will be some growth towards the end of 2024."

The Company will host a live audio webcast of the full year results today, 14 March 2024, at 9:00 GMT. If you would like to attend the webcast please register here: 2023 Full Year results webcast

The page references in this announcement refer to the Annual Report and Accounts 2023 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

Kiki Constantopoulos, Company Secretary

ir@gemdiamonds.com

Celicourt Communications

Mark Antelme / Felicity Winkles

Tel: +44 (0) 207 777 6424

ABOUT GEM DIAMONDS:

Gem Diamonds is a leading global 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, exceptional white

diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.

CHAIRPERSON'S STATEMENT

The Board steered the Group through another challenging year in the face of the global cost-of-living crisis, international conflicts and the resultant downturn in the natural diamond market.

Dear shareholders,

On behalf of the Board of Directors, I am pleased to share with you the Gem Diamonds Annual Report and Accounts for 2023, which outlines the Group's performance over the past year and highlights some of our focus areas for the year ahead.

We entered 2023 with the ongoing Russian invasion of Ukraine and the cost-of-living crisis which saw global economies grappling with accelerating inflation, rising interest rates and continued supply chain challenges. The slowdown of global economic growth in 2023 was further impacted by the conflict in Gaza that began in October 2023, and in early 2024, the attacks launched by Yemen's Houthi rebels on cargo vessels in the Red Sea.

The diamond industry suffered in the face of these challenges. Demand and prices for rough and polished diamonds exhibited material weakness and, as reported by some of the world's major diamond producers, declined year-on-year by as much as 40% in certain categories of diamonds.

The past four years, starting with the COVID-19 pandemic, have been difficult for our business, with the result that our workforce, their families and the wider communities within which we operate have all had to adapt to the new economic environment. The resilience and fortitude they have displayed has been inspiring and commendable.

At Letšeng, the impact of a wide array of operating costs rising at a rate markedly higher than inflation put enormous strain on the business. In particular, the fact that Letšeng is reliant on South African grid electricity supplier Eskom, which is currently plagued with poor operating performance leading to frequent load shedding, resulted in a sharp rise in our use of more expensive diesel-powered generators. These higher input costs, combined with a 26% decrease in revenue due to lower diamond prices, led to EBITDA reducing by 65% compared to 2022. Management moved swiftly to address these external challenges by tightening cost controls even further and by taking a range of tough decisions to align the organisational structure with the market conditions. The financial results are discussed in the CFO Review on page 34 and the financial statements are available from page 118.

Letšeng performed well operationally, especially in the second half of the year, with ore throughput in the plants being steady and consistent. The COO review on page 41 contains the full details of Letšeng's operational performance during 2023.

The sale, closure and/or handover options for Ghaghoo continue to be actively managed while the site is being appropriately maintained and safeguarded, and we will continue to support management through this process.

We are pleased to report that there were no major or significant environmental or social incidents reported at any of our operations during the year.

GOVERNANCE MATTERS IN 2023

The Governance section from page 62 provides full details of all corporate governance matters relevant to the Group in 2023.

I can report that there were no changes to the makeup of the Board of Directors during 2023, and that the current governance structure is aligned with the independence requirements of the UK Corporate Governance Code and is fully representative with respect to both gender and minority groups.

The findings from the external Board evaluation concluded at the end of 2022 were reviewed. It is encouraging that the report was complimentary of the functioning of the Board, offering only minor improvement opportunities which we implemented during 2023.

In line with past practice, Gem Diamonds was again able to derive 99% of the workforce at Letšeng from within Lesotho. Increasing female representation in our workforce remains a priority, and we have implemented various initiatives in local communities and schools to create awareness of the many possible careers that exist within the mining sector, and to promote Letšeng as an employer of choice for women.

Shareholders will be aware that Matekane Mining Investment Company (Proprietary) Limited (MMIC) has held the contract to conduct mining operations at the Letšeng mine since 2005. In October 2022, Mr Sam Matekane (the ultimate owner of MMIC) was elected as the new Prime Minister of Lesotho. In order to avoid any potential conflicts of interest between Mr Matekane's political appointment and his business with Letšeng, we concluded a mutually agreed early termination of the mining services agreement and all mining activities were taken over by Letšeng. I would like to take this opportunity to thank both the Prime Minister and Letšeng's management for the professionalism with which this important transition was undertaken.

The financial and operational details of this transaction are included in the CFO Review on page 34 and the COO Review on page 41.

THE BOARD'S PRIORITIES IN 2023

· Considering the way forward for the Letšeng orebody, including the finalisation of the 2024 Resource and Reserve Statement

· Overseeing the implementation of initiatives to improve the maturity of the Group's organisational safety culture

· Overseeing the execution of the Group's decarbonisation strategy and the completion of its TCFD adoption roadmap

· Advancing efforts to sell or exit the Ghaghoo mine in Botswana, which remains on care and maintenance

· Implementing the opportunities identified by the external Board evaluation concluded in 2022

· Considering external growth opportunities

IMPROVEMENT IN SAFETY PERFORMANCE AND CULTURE

We regard the safety and health of our employees as our single most important priority, and I am very pleased to report that in 2023 Letšeng reported its best All Injury Frequency Rate on record at 0.67. We would like to congratulate and thank Letšeng's management and workforce for this notable accomplishment. The Board would like to express its gratitude for the effort and commitment that was applied to drive forward the various initiatives that were developed following the 24-hour stop-for-safety shutdown in June 2021. We recognise that it requires relentless focus and close attention to detail to achieve these results. Despite this achievement we all appreciate the need to remain constantly vigilant and alert to existing and new hazards and risks, and to continue to build a mature and collaborative safety culture where employees and management actively look out for each other's safety and health at all times.

The COO Review on page 41 contains full details of Letšeng's safety performance during 2023.

THE FUTURE DEVELOPMENT OF LETŠENG

With the Letšeng open pit mine progressing deeper every year, the Board carefully considered the future development of Letšeng's orebodies during 2023. An underground study carried out during the year indicated that underground mining of the Satellite pipe is not currently an economically viable option and we therefore continue with optimising open pit mining at Letšeng.

Following an in-depth resource development programme that involved extensive core resource drilling, pit surface mapping, 3D modelling, and petrography, we have concluded our NI 43-101 Technical Report. The report contains Letšeng's 2024 Resource and Reserve Statement and will be published on the Group's website at www.gemdiamonds.com.

Refer to the COO Review for more details on the underground study on page 44 and the 2024 Resource and Reserve Statement on page 45.

DECARBONISATION STRATEGY

During 2023 we made notable progress on our decarbonisation strategy with the Group completing its three-year TCFD adoption roadmap as planned. At the beginning of 2023, we also announced that our decarbonisation target would be a commitment to reduce our Scope 1 and Scope 2 carbon emissions by 30% (as measured against our 2021 emissions) by 2030.

Our primary focus is now on identifying and implementing ways to reduce our energy usage and at the same time searching for ways to lower our dependence on the unreliable and high-carbon grid electricity supplied by Eskom. We continue to actively investigate alternative large-scale, long-term energy solutions that will not only underpin the sustainability of the business but also contribute to offsetting the wider suite of climate change risks. The energy consumption of the Group in 2023 is detailed in the Climate change report on page 51.

COMMUNITY AND GOVERNMENT ENGAGEMENT

The Lesotho Government is a significant shareholder in the Letšeng mine and we seek at all times to maintain sound and constructive relationships with government departments and officials. Accordingly, I am very pleased that during the past year we were able work constructively with the new government following the elections in Lesotho in late 2022. Honest communication with all stakeholders is crucial, and has been particularly so during the political and economic challenges of recent years. Their ongoing support will be tremendously important as we seek to steer Letšeng's operations through the current period of challenging market conditions.

We consider all stakeholders' concerns and inform them about our business and the broader political, social and operational environment that we require in order to thrive. This dialogue is conducted through a range of stakeholder engagement forums which meet regularly and which routinely pass details of the issues discussed to the Board for its consideration.

LOOKING TO THE FUTURE

At the time of writing, it would seem that many of the challenges we faced during 2023 will be evident again during the coming year - a difficult economic environment with slow economic growth impeded by several international conflicts. The prospect of declining inflation and early indications of a reduction in interest rates in major economies suggest a stabilisation of the global economy towards the end of 2024. Until then, we will have to remain resilient through effective cost control and delivery of further operational efficiencies.

We will define the future development pathway for the Letšeng orebody based on the 2024 Resource and Reserve Statement, and we will communicate widely and consult as necessary with all relevant stakeholders.

Our exit from the Ghaghoo mine remains a priority, and negotiations are continuing with the Government of Botswana on closure, handover and/or rehabilitation should a sale not be possible.

The Group's revolving credit facilities are expiring at the end of 2024, and we will actively oversee the extension of these facilities with the Group's lenders.

We will stay abreast of developments in the diamond market and respond appropriately by selling Letšeng's rough diamonds through appropriate channels and available diamond centres in order to achieve the highest obtainable market prices.

APPRECIATION

On behalf of the Board, I would like to thank every single person who has contributed to the Group's performance in 2023, especially our executive and senior management for steering the Group through a very challenging year. We thank our employees, contractors, community partners, the Government of the Kingdom of Lesotho and our shareholders for their ongoing support. I also wish to thank my fellow Directors for their commitment and valuable contributions during 2023.

Harry Kenyon-Slaney

Chairperson

13 March 2024

RISK MANAGEMENT

HOW WE APPROACH RISK

The Group's risk management framework, which is fully integrated with strategic and operational planning, aims to identify, manage and respond to the Group's risks and uncertainties. The framework combines top-down and bottom-up approaches with appropriate governance and oversight.

Risk management framework


Oversight	Board of Directors The Board is responsible for the overall approach to risk management for the Group and provides stakeholders with assurance that key risks are properly identified, assessed, mitigated and monitored. The Board maintains a formal Group risk management framework, assesses and approves the overall risk appetite and tolerance, and formally evaluates the effectiveness of the Group's risk management and internal control processes. It confirms that the process is appropriately aligned with the Group's strategy and performance objectives. At the quarterly risk review meeting, the Board reviews the risk register, assesses management's scenarios and plans, interrogates the most critical risks in detail, and challenges mitigating plans with management.		Top-down approach - the Board sets the risk appetite and tolerances, strategic objectives and accountability for the management of the framework
Oversight

Governance	Audit Committee The Audit Committee monitors the Group's risk management processes, reviews the status of risk management, and reports to the Board on a quarterly basis. It is responsible for addressing the corporate governance requirements of risk management.	Sustainability Committee The Sustainability Committee provides assurance to the Board that appropriate systems are in place to identify and manage health, safety, social, environmental and climate change-related risks. It monitors the Group's performance within these categories and drives proactive risk mitigation strategies to secure safe and responsible operations and our social licence to operate in the future.
Governance
Responsibility	Management Management develops, implements, communicates and monitors risk management processes and integrates 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. 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.		Bottom-up approach - ensures a sound risk management process and establishes formal reporting structures
Responsibility

The Board is ultimately responsible and accountable for the Group's risk management function. It is supported by its subcommittees and senior management in overseeing the Group's most relevant and significant current and emerging risks. These risks are actively identified, assessed, prioritised, managed and mitigated as much as reasonably possible, as they could negatively impact the Group's ability to execute its strategy.

While the Group's risk management framework focuses on risk identification and mitigation, many of the factors that give rise to these risks also present opportunities. Gem Diamonds tracks these opportunities and incorporates them into the strategy where they appropriately support the Group's purpose.

The Board and its subcommittees have identified the following key strategic, operational and external risks, which have been set out in no order of priority.

1.Variability in cash generation

Risk:

Marginal cash resources and variability of cash flows could negatively affect the Group's ability to effectively operate, repay debt and fund capital projects, and impacts strategic short and long-term decision-making. The risk is directly impacted by other principal risks such as rough diamond demand and prices, variability of the resource, economic viability of reserves and volatility of exchange rate.

Risk response:

•Rigorous cost and capital discipline is in place

•Funding facilities are in place to manage variability in the short to medium term

•Focus on cost discipline to achieve greater operational efficiencies

•Ongoing drive for continuous improvement to deliver operational efficiencies

Strategic impact:

Extracting maximum value from our operations

Preparing for our future

2.Diamond resources and
reserves

Risk:

Letšeng's low-grade orebodies make the operation sensitive to resource variability. Unexpected variability in key resource/reserve criteria, such as volume, tonnage, grade and price, could significantly impact mine planning, forecasting and financial stability, both in the short and medium term, and could influence decisions regarding future growth.

Risk response:

•Gathering geological evidence on variations within the resource (lithology, density, volume/tonnage, grade, diamond population size and value distribution), applying industry best practice and engaging independent experts to audit and provide advice

•Optimised mine plan

•Ongoing pit mapping, petrography, drilling and 3D modelling

•Grade control, bulk sampling, density and moisture content measurements (on-site and independent lab verification), dilution control, stockpile management, data management, quality control and internal auditing of production data (including geological, processing, recovery and sales data)

•Managing the Diamond Accounting System and Mineral Resource Management (MRM) database, and monitoring recovery data on a daily and monthly basis, as well as per export period, to follow trends in diamond distributions, large stone recovery frequencies and average diamond prices per kimberlite domain

Strategic impact:

Extracting maximum value from our operations

Preparing for our future

3.Rough diamond demand and prices

Risk:

Numerous factors beyond our control could affect the price and demand for diamonds. These factors include geopolitical tension, macro-economic conditions, global diamond production levels and consumer trends. Medium to long-term demand is forecast to outpace supply, but short-term uncertainty and liquidity constraints within the diamond sector may negatively impact rough diamond pricing.

Risk response:

•Monitoring market conditions and trends

•Flexibility in sales processes and utilisation of multiple sales and marketing channels including additional viewing opportunities

•Ability to enter into partnership agreements to share in the upside of polished diamonds

•Maintaining the integrity of the tender process

Strategic impact:

Extracting maximum value from our operations

Preparing for our future

4.Availability of sustainable and reliable power supply

Risk:

Regular power interruptions (load shedding by the South African power utility, Eskom) compound the need for and cost of self-generated power and escalated diesel prices. Unscheduled power interruptions and poor quality of power supply reduce the available processing time and negatively influence the reliability and stability of plant equipment.

Risk response:

•Exploring solutions with the Lesotho Electricity Company (LEC) for grid and/or renewable power

•Assessing the potential to generate renewable energy for own use

•Prioritisation of load and allocation of power

•Identification and implementation of consumption-reduction initiatives

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

Preparing for our future

5.Growth and access to capital

Risk:

The volatility of the Group's share price and lack of growth opportunities negatively impact the Group's market capitalisation. Constrained cash flows add pressure on returns to shareholders. The Group currently relies on a single mine with a finite life for its revenues, profits and cash flows.

Risk response:

The Group's strategic objectives are to drive share price growth through:

•Assessing mergers and acquisitions and diversification opportunities

•Focusing on existing operations to unlock further value through rationalisation and efficiency improvements

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

Preparing for our future

6.Workforce

Risk:

Achieving the Group's objectives and sustainable growth depend on the ability to attract and retain suitably qualified, experienced and ethical employees. Gem Diamonds operates in an environment and industry where shortages in experience and skills are prevalent.

Risk response:

•Human resource practices are designed to identify skills shortages and implement development programmes and succession planning for employees

•Remuneration practices and incentives are in place to appropriately remunerate and retain skills

•Training and coaching plans are in place to address skills and experience shortages

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

Preparing for our future

7.Information Technology (IT) and Operational Technology (OT) systems, and cybersecurity

Risk:

The Group's operations rely on secure OT and IT systems to process financial and operating data in its information management systems. If these systems are compromised, there could be a material adverse impact on the Group through a lack of production and/or compromised recovery parameters.

Risk response:

•Application of technical and process IT controls and policies in line with industry-accepted standards

•Appropriate back-up procedures, firewalls and other appropriate security applications in place

•Vulnerability assessments to define gaps and devise corrective actions

Strategic impact:

Extracting maximum value from our operations

Preparing for our future

8.Production interruption

Risk:

Material mine and/or plant shutdowns, pit closures 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 result in financial losses and possible legal liability.

Risk response:

•Robust business continuity plans are in place to ensure limited delays due to disruptions

•Appropriate levels of critical resources (fuel, ore stockpiles, etc) are maintained to mitigate the impact of any production interruptions

•Appropriate insurance is maintained

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

9.Health, safety and wellness

Risk:

The probability of a major health or safety incident occurring is inherent to mining operations. Such incidents could impact the well-being of employees, PACs, our licence to operate, the Group's reputation, and compliance with our mining lease agreement. The health and safety of our people is critical to the business.

Risk response:

•Appropriate health and safety policies and practices and training and awareness campaigns are in place

•Dam safety management framework has been implemented in alignment with the ICMM's GISTM

•ISO 45001 accreditation is maintained

•A safety management and leadership programme, visible felt leadership, and detection and prevention strategies have been developed and implemented

•We continually assess the organisational safety culture maturity to address current and emerging issues

Strategic impact:

Extracting maximum value from our operations

Preparing for our future

10.Security of product

Risk:

Theft is an inherent risk in the diamond industry. The high-value nature of the product at Letšeng makes it susceptible to theft and could result in significant losses that would negatively affect revenue, cash flows and strategic short and long-term mine plan decision-making.

Risk response:

•Zero tolerance of non-conformance to diamond security policies and regulations

•Advanced security access control and surveillance system is in place.

•Monitoring of security process effectiveness is performed by the Executive Committee and the Board

•Appropriate diamond specie insurance cover is in place

•Vulnerability assessments and assurance audits are conducted by internal and independent third parties

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

Preparing for our future

11.Social licence to operate

Risk:

The Group's social licence to operate is underpinned by the support of its stakeholders, particularly employees, regulators, PACs and society. This support 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.

Risk response:

•The implementation of an appropriate CSI strategy based on a community needs analysis that provides infrastructure and access to education and healthcare and supports local economic development

•Adoption of relevant standards, best practices and strategies

•Appropriate governance structures across all levels of the Group, including established Employee Engagement Committee

•Regular engagement with all stakeholders, including government, regulators, community leadership and PACs

Strategic impact:

Working responsibly and maintaining our social licence

Preparing for our future

12.Climate change

Risk:

Climate change-related risks (transitional and physical risks) are recognised as top global risks and investors are increasingly focused on the management of these risks. The uncertainty of potential carbon taxes and the impact of climate change present significant current and future risks to the Group which, if not identified and managed responsibly, could negatively impact the Group's long-term operational and financial resilience.

Risk response:

•TCFD recommendations adopted and climate change strategy developed

•Adoption of a Group decarbonisation strategy and 2030 target

•Governance and management practices implemented to oversee the implementation of the adopted strategy and 2030 target

•New reporting standards adopted

•Adoption of UN SDG framework

•Carbon emissions monitoring and reporting

Strategic impact:

Working responsibly and maintaining our social licence

Preparing for our future

13.Environmental

Risk:

Failure to manage vital natural resources, environmental regulations and pressure from neighbouring communities could affect the Group's ability to operate sustainably. Furthermore, investors and stakeholders are increasingly focused on environmental practices.

Risk response:

•Appropriate sustainability and environmental policies are in place and regularly reviewed

•The current behaviour-based care programme embeds environmental stewardship

•A dam safety management framework has been implemented

•Annual social and environmental management plan audit programme has been implemented

•ISO 14001 (Environmental Management) accreditation maintained

•Adopted the UN SDG framework

•Rehabilitation and closure management strategy adopted and updated annually

•Implementation of an integrated water management framework

•Concurrent rehabilitation strategy implemented

Strategic impact:

Extracting maximum value from our operations

Working responsibly and maintaining our social licence

Preparing for our future

EMERGING RISKS

The Group risk framework includes an assessment of emerging risks, which considers those risks that:

· are likely to materialise or impact over a longer timeframe 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 that are being monitored by the Group are:

· lab-grown diamonds attracting a larger market share;

· generational shifts in consumer preferences; and

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

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 financial year end to be the most relevant period for consideration for this assessment, given the Group's current position and the potential impact on the Group's viability of the principal risks documented on pages 21 to 26.

While the Group maintains a full business model, based predominantly on the life of mine 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 CFO and involves all relevant functions including operations, sales and marketing, finance, treasury and risk. The Board participates in the annual review process through structured Board meetings and annual strategy review sessions. A three-year period provides sufficient and realistic visibility in the context of the industry, the environment in which the Group operates, and the current short-term mine plan, even though the life of mine, the mining lease tenure and available estimated reserves exceed three years.

The business and strategic plan reflects the Board's best estimate of the Group's prospects. The Board 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 Group over this period.

GROUP FACILITIES

The Group has access to US$71.0 million in RCFs when fully available. Of these RCFs, US$37.8 million was utilised at the end of the year. The Group's RCFs mature on 22 December 2024. The existing facility agreement includes an option to extend the facilities for a period of 24 months (subject to lender approval). The Group may also decide to renew these facilities for a potentially longer period of 36 months. These facilities have been in place since 2011 and have been renewed on three previous occasions through expanding the lender group and increasing the overall facility amount. In addition, there is a general banking facility of US$5.5 million with no set expiry date, but which is reviewed annually by the lenders. This facility was fully available at the end of the year.

ROUGH DIAMOND MARKET

Demand and prices for rough and polished diamonds exhibited material weakness and declined year-on-year by as much as 40% in certain categories of diamonds, as reported by some of the world's major diamond producers. The offloading of large, high-value polished diamonds by other producers has had a detrimental effect on the top end of the diamond market. All of these factors placed severe pressure on rough and polished diamond prices during 2023.

RISING COSTS

At Letšeng, the impact of a wide array of operating costs rising at a rate markedly higher than inflation put strain on the business. In particular, the fact that Letšeng is reliant upon South African grid electricity supplier Eskom, which is currently plagued with poor operating performance leading to frequent load shedding, resulted in a rise in the use of more expensive diesel-powered generators. The price of diesel also remains high which has a direct impact on costs due to the large volumes of diesel used in the loading and hauling of ore and waste tonnes. The Group strives to mitigate these rising costs through stringent cost control and efficient mining, evidenced through the recent right-sizing and insourcing initiatives.

CLIMATE CHANGE

The Board is cognisant of the risks presented by climate change and conscious of the need to minimise carbon emissions. A Group-specific climate change scenario analysis has been conducted whereby the short to medium and longer-term physical risks were assessed. The short to medium-term impacts fall within the viability period. The physical risks identified for Letšeng, such as drought, strong winds, extreme precipitation and cold, are similar to its current operating conditions. The operation is therefore well geared to manage these conditions within its current and medium-term operational activities, cost structure and business planning. Additional cash investment required in the event of these short to medium-term physical risks materialising has been assessed as low with no material impact on the current operations and viability of the Group.

In terms of transitional risks, as users of grid-supplied and fossil fuel energy, the short-term focus is on improving energy efficiencies in our operational processes and reducing the use of fossil fuels. Options are being assessed in the context of the size, nature and location of the Group's operations, the required investment and the expectations of our main stakeholders. Any material investment during the viability period is considered unlikely. Due to uncertainty around the cost and timing of implementation of carbon-related taxes, the impact of such taxes on the Group's operations and cash flows has been excluded from the viability assessment and scenario stress testing. Management and the Board will continue to assess these impacts as the information becomes more certain. The Group has adopted a carbon-pricing model that will be used to responsibly assess the potential financial impact of future projects. The Group has also adopted a decarbonisation strategy that is aimed at reducing potential future carbon tax liabilities.

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 included the compounding effect of the factors below and were applied independently of each other. In addition, the scenarios assumed the successful extension of the current RCFs.


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 caused by unforeseen production disruption due to climate-related events, electricity grid disruptions or any other events.	22%	•Rough diamond demand and prices •Production interruption •Diamond damage •Diamond resources and reserves	•Entire business model, ie inputs, activities, outputs and outcomes
A strengthening of local currencies to the US dollar from expected market forecasts.	19% (R15.25:$1)	•Variability in cash generation	•Financial capital inputs and outcomes
An increase in mine operating costs caused by volatility in diesel, explosives and other consumable prices.	27%	•Variability in cash generation	•Financial capital inputs and outcomes

1 Refer Note 4, Operating profit on page 147 for the definition of non-GAAP measures.

CONCLUSION

The Group ended the year in a net debt1 position of US$21.3 million and undrawn available credit facilities of US$45.9 million. These facilities expire on 22 December 2024 and have an option to extend the facilities for a period of 24 months (subject to lender approval). The Group will follow all necessary processes to extend the facilities for this available period or renew the facilities for an extended period, as has been the practice in the past.

During the final year of the viability period, in 2026, there will be no Satellite pipe ore available for processing which will negatively impact overall revenue and cashflows and access to RCFs will be required. It is estimated, based on the current life of mine plan, that the availability of this higher-value ore will resume in 2030.

Letšeng, the Group's core asset, is cash generative over the viability period and remains flexible in being able to adjust its operating plans within the normal course of business. In the unlikely event that the RCFs are not renewed further cost-reduction initiatives could be implemented during the viability period, and ongoing optimisation of the mine plan (as mentioned in the COO Review on page 48) may further reduce the cost profile in the period. Based on the robust assessment of the principal risks, prospects and viability of the Group, and the successful extension of the facilities, 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 31 December 2026.

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

CHIEF EXECUTIVE OFFICER'S REVIEW

Challenging macro-economic conditions negatively impacted the diamond market in 2023.

2023 was a challenging year globally, with surging inflation and interest rates in major economies, two international conflicts and a subdued overall global economic outlook. The Israel-Hamas conflict in Gaza is detrimental to the diamond market because Tel Aviv is one of the world's most important diamond trading centres. The attacks by Yemen's Houthi rebels on cargo vessels in the Red Sea from the beginning of 2024 are expected to further challenge supply chains not yet fully recovered after the COVID-19 pandemic.

In the diamond industry, aggressive overstocking post-COVID-19 led to high inventory levels resulting in an inevitable oversupply of polished diamonds. Given China's importance as a consumer of polished diamonds, the sluggish growth of its economy contributed to the decrease in demand, which was exacerbated by slow economic growth in other important consumer markets such as the US and the rest of Asia. There is evidence of below market sales of large, high-value polished diamonds by certain manufacturers that has had a detrimental effect on the top end of the diamond market. These factors have placed severe pressure on rough and polished diamond prices during 2023.

The manufacturing of lab-grown diamonds has continued to double every year since 2015 and is forecast to reach 20 million carats in 2024. Although lab-grown diamonds have increased in availability and popularity due largely to their favourable price point, we have not seen it impact the demand for Letšeng's large, high-value diamonds; these goods are on the opposite side of the spectrum when it comes to value and quality. Lab-grown diamonds have taken the place of other natural diamond look-alikes such as cubic zirconia and moissanite, and are regarded as consumer goods, not investments. Lab-grown diamonds can be compared to what "fast fashion" is to the premium clothing industry. In order to clearly differentiate them from natural diamonds, and avoid any confusion of the two by consumers, it is notable that the French Government recently ruled that these diamonds may only be referred to as "synthetic".

The Letšeng mine continued to grapple with increased operating costs, mainly because of inflation and higher diesel consumption due to Eskom's continued load shedding, which increased its reliance on diesel-powered generators. Considering these challenges, there was no choice but to relentlessly focus on cost control measures, enhance operational efficiencies, rigorously evaluate capital projects against measurable returns, and defer non-essential longer-term projects.

As reported in our Half-year Report 2023, a further right-sizing programme commenced at Letšeng in March 2023 and the workforce element of the programme was completed in June. The programme was aimed at more effectively and efficiently aligning the workforce to operational requirements.

Letšeng concluded the early termination of the mining services agreement with MMIC on 1 December. It is pleasing to report the smooth transition to owner mining, which included the transfer of all relevant equipment and employees to Letšeng. Employment was effective 1 February 2024 and MMIC employees remained on contract until this date. The process was well managed by senior management, and we are already seeing significant benefits from this transaction, both financially and operationally. The full details of the transaction are included in the CFO Review on page 34.

Several changes were made to the senior leadership structure at Letšeng. Kelebone Leisanyane retired from his position as CEO of Letšeng at the expiration of his contract at the end of June. We would like to thank Kelebone for his valuable contribution during his tenure as CEO. He was succeeded by Motooane Thinyane, previously the Head of Operations. Motooane has been a senior manager and executive of Letšeng for the past eight years. An important part of his role will be spearheading the identification and implementation of appropriate alternative energy solutions. Gideon Scheepers was appointed to the position of Operations Director. Gideon has 32 years of extensive experience in diamond mining and related processes, many of these in the Lesotho diamond mining industry.

Glenn Turner, the Chief Commercial and Legal Officer of the Group, retired at the end of April. Glenn's expertise and leadership was invaluable to the Group over the past 16 years. I have worked with Glenn for many years both at De Beers and subsequently at Gem. We have relied heavily on him as an experienced and deeply trusted colleague. His sound judgement, legal knowledge and commercial experience have helped steer the Group through challenging times and his absence will leave a huge gap. We wish him all the best with this new chapter in his life.

We continue to work well with the newly elected Lesotho Government. Three new non-Executive Directors appointed by the Lesotho Government joined the Letšeng Board during the year. We welcome them and look forward to their valuable contribution and support while we navigate a challenging macro-economic and operating environment. We would also like to thank the outgoing Directors for their dedication and commitment during the time they served on the Letšeng Board.

We concluded the implementation of our TCFD adoption strategy in 2023 and are actively working towards our decarbonisation target of a 30% reduction in Scope 1 and 2 emissions by 2030 (measured against our 2021 footprint). We are pleased to report that in 2023 we achieved a 26% reduction against the 2021 baseline of our decarbonisation target.

Letšeng's underground pre-feasibility study was completed during the year and the results show that underground mining in the Satellite pipe is not currently economically viable. These options for both the Main and Satellite pipes may be revisited when macro-economic and diamond market conditions improve. Letšeng will therefore, on current and foreseeable economics, continue with open pit mining and pursue mine plan optimisation options to ensure maximum value for all stakeholders.

Our NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement will be published following an in-depth resource development programme over the past number of years. The detailed documents will be available on the Group's website at www.gemdiamonds.com.

Refer to the COO Review for more details on the underground study on page 44 and the 2024 Resource and Reserve statement on page 45.

EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS

We have operated safely, responsibly and efficiently during the year with an ongoing focus on cost containment and control and enhancing operational efficiencies. Production stabilised and volumes of ore treated increased in H2 2023 compared to H1 2023, with the implementation of targeted initiatives to improve plant stabilisation and increase diamond recoveries.

Five diamonds greater than 100 carats were recovered during the year. Exceptional sales during the year included a 7 carat pink diamond that was sold for US$282 889 per carat, the third-highest dollar per carat achieved for a Letšeng diamond. In addition, three large high-quality Type IIa white diamonds of 58 carats each were sold for US$36 399 per carat, US$34 441 per carat and US$34 252 per carat, respectively.

We have an effective, transparent and competitive tender sales process in Antwerp. The limited supply agreement that was concluded in 2022 with two important diamond manufacturing customers who supply polished diamonds to some of the world's most premium luxury brands has continued. These diamonds are polished to precise specifications required by the brands and additional value is realised for the Group. This is a further step in the Group's strategy of focused delivery of top-quality diamonds to promote Letšeng as an exceptional diamond brand, Lesotho as the origin and therefore to achieve premium prices for its diamonds.

The operational performance of the Letšeng mine is discussed in more detail in the COO Review on page 41.

The challenging macro-economic environment and downturn in the diamond market resulted in pressure on rough diamond prices, which had a direct and significant impact on our financial results. The average price achieved decreased to US$1 334 per carat compared to US$1 755 per carat in 2022. The lower prices achieved resulted in total revenue of US$140.3 million and underlying EBITDA1 of US$15.2 million. The Group ended the year in a net debt2 position of US$21.3 million.

Full details of the Group's financial performance are included in the CFO Review on page 34.

1 Refer Note 4, Operating profit on page 147 or the definition of non-GAAP (Generally Accepted Accounting Principles) measures.

2 Net debt is a non-GAAP measure and calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing).

WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE

One of our proudest accomplishments in 2023 was the Group's safety performance. There were no fatalities for the fourth consecutive year, two LTIs (2022: three), and we achieved an overall AIFR of 0.67 (2022: 0.70), our lowest AIFR on record. The drive to mature the organisational safety culture since June 2021 has yielded positive results of which we are very proud. We will continue to entrench a workplace safety culture founded on individual responsibility, mutual care and collaboration.

We adhere to the highest environmental management standards. We are proud to report that Gem Diamonds' work in sustainable water treatment and community water initiatives during 2022 was recognised by the award in the Water category conferred by the Mining Indaba Sustainability Committee Junior ESG Awards Committee in February 2023.

In order to improve the quality of water from the mine, we introduced two small-scale mobile bioremediation plants in 2023. Results from these plants indicate an effective reduction in nitrates in the water flowing through these plants. Construction of a ∼300 kilolitre per day plant was completed in December 2023 and commissioned in February 2024.

Our residue storage facility management process aligns with the ICMM's GISTM. Our residue storage and freshwater facilities are subject to regular inspections by external experts. These professional external reviews, together with the internal governance, management, monitoring and reporting processes, ensure that our residue storage and freshwater dam management is both effective and closely monitored.

In 2023, we adopted two additional UN SDGs, being Zero Hunger and Climate Action. Our CSI activities are focused on supporting infrastructure development, education and health while assisting and stimulating small businesses. In 2023, we supported small agricultural operations including those in egg, vegetable and dairy production, provided scholarships for tertiary education, and constructed classrooms at schools. From 2016 to 2023 the Group invested US$4.8 million in sustainable CSI initiatives.

In 2023, Letšeng contributed a total of US$15.5 million (LSL285.8 million) to the Lesotho fiscus in the form of taxes and royalties alone. We are proud of our contribution to this developing economy and our position as a significant taxpayer and employer.

PREPARING FOR THE FUTURE

In 2024, we aim to deliver the business plan approved by the Board. This includes achieving our financial and operational targets with a focus on cost control measures and improved operational efficiencies. Every single contract, capital project and expense is being interrogated and scrubbed for absolute necessity. We will continue to focus on our safety performance by maintaining the cadence of safety interventions, critical control management, visual safety leadership and communication with the workforce.

The increase in load shedding and consequent reliance on diesel-powered generators with their associated costs have intensified our need to identify and implement alternative energy solutions for the short, medium and long term. The criteria for these solutions are that they must be renewable, reliable and reduce costs. We are making progress on this important workstream.

Our capital plans include funding for projects that will sustain growth and value creation. The planned capital-intensive projects in 2024, although not financially significant, include recovery plant and sort house enhancements, the required extension of the Patiseng coarse residue storage facility to align its capacity with future mining activities, and necessary screen replacements in both the treatment plants.

Now that the NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement will be published, we will carefully consider our long-term mine plan to ensure the delivery of sustainable value for all stakeholders.

OUTLOOK

Pressure on the diamond market has persisted into 2024, although there have been some signs of price recovery at the top and bottom end. We are cautiously optimistic that prices will stabilise and that there will be some growth towards the end of 2024. Global economic growth outlooks for major economies and important diamond consumer markets such as the US and China remain uncertain. It is worth noting that almost half of the global population is expected to participate in national elections during 2024, which will likely cause further economic and geopolitical uncertainty.

It is pleasing to note that the global luxury market continued to grow in 2023 and remains poised to expand further in 2024. The luxury market appears well positioned to cope with economic turbulence, with a larger and more resilient consumer base.

In the medium to long term, rough diamond prices should be supported by favourable demand and supply fundamentals, with a projected further decrease in natural rough diamond supply. This dynamic of rising demand and constrained supply is expected to benefit high-quality rough diamonds in particular. The fundamentals that underpin our business are sound and strongly position Gem Diamonds for success.

APPRECIATION

I would like to thank the Board for their support and commitment in 2023. We are grateful for our workforce and appreciate the dedication required to deliver the safety performance we saw in 2023. We also appreciate their commitment to delivering our strategic goals and to living our values. I would like to thank our customers for their continued trust in Letšeng's diamonds, and our shareholders for their support. Finally, I would like to thank the Government of the Kingdom of Lesotho for their support and open and transparent communication. We look forward to a productive 2024.

Clifford Elphick

Chief Executive Officer

13 March 2024

CHIEF FINANCIAL OFFICER'S REVIEW

The financial performance of the Group in 2023 was disappointing, driven by a downturn in the diamond market that resulted in lower diamond prices achieved.

The turbulent global economic conditions from the previous year continued into 2023 with high inflation, interest rate hikes and slow overall economic growth in major economies. The continued Russian invasion of Ukraine and the recent conflict in Gaza further impacted the global economy and specifically the diamond market. Locally, the ever-increasing load shedding by the South African grid electricity supplier, Eskom, put pressure on the operating environment and costs. These factors had a significant impact on diamond prices achieved and costs incurred during the year, resulting in lower EBITDA compared to 2022. This necessitated a renewed focus on cost containment and improvement in operational efficiencies.

Operationally, Letšeng performed in line with expectations despite several challenges posed by high rainfall and increased electricity supply disruptions (refer to the COO Review on page 41). The pressure experienced on the diamond market significantly impacted rough and polished diamond prices and resulted in an average price of US$1 334 per carat for the year, with revenue from the sale of rough diamonds of US$139.4 million. In addition, US$0.9 million of margin uplift was generated, bringing total revenue for the year to US$140.3 million.

Underlying EBITDA decreased to US$15.2 million from US$43.7 million in 2022. The Group reported a loss attributable to shareholders for the year of US$2.1 million, equating to a basic loss per share of 1.5 US cents on a weighted average number of shares in issue of 139.5 million.

The Group ended the year with a cash balance of US$16.5 million and drawn down facilities of US$37.8 million, resulting in a net debt position of US$21.3 million and available undrawn facilities of US$45.9 million.

Summary of financial performance

Refer to the full annual financial statements from page 118.


US$ million	2023	2022

Revenue from contracts with customers	140.3	188.9
Royalties and selling costs	(15.3)	(20.3)
Cost of sales1	(102.1)	(116.3)
Corporate expenses (excluding depreciation)	(7.7)	(8.6)
Underlying EBITDA2	15.2	43.7
Depreciation and mining asset amortisation	(7.3)	(8.4)
Share-based payments	(0.3)	(0.3)
Other operating income/(expenses)	-	(2.4)
Foreign exchange gain	2.8	1.9
Net finance costs	(4.7)	(4.1)
Profit before tax for the year	5.7	30.4
Income tax expense	(4.1)	(10.2)
Profit after tax for the year	1.6	20.2
Non-controlling interests	(3.7)	(10.0)
Attributable (loss)/profit	(2.1)	10.2

(Loss)/earnings per share (US cents)	(1.5)	7.3

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 decreased 26% compared to 2022, mainly due to lower prices achieved as a result of a downturn in the diamond market and a decrease of 3% in carats sold (104 520 carats compared to 107 498 in 2022). Rough diamond revenue of US$139.4 million (2022: US$188.6 million) was generated at Letšeng, achieving an average price of US$1 334 per carat (2022: US$1 755 per carat).

Additional revenue is generated through an arrangement with two diamond manufacturing customers to supply polished diamonds to some of the world's most premium luxury brands, and other partnership arrangements. These

agreements allow the Group to share in the margin uplift on the sale of polished diamonds. In 2023, additional revenue of US$0.9 million (2022: US$0.3 million) was generated from these arrangements.


US$ million	2023	2022

Group revenue summary
Rough diamond sales	139.4	188.6
Polished diamond margin	0.9	0.3
Group revenue	140.3	188.9

Insourcing of the mining activities

Effective 1 December 2023, Letšeng reached an agreement with MMIC to early terminate the mining services contract, 11 months ahead of its scheduled contractual end date of 31 October 2024, and insourced these activities. Letšeng acquired the mining fleet and support equipment that was used exclusively for Letšeng, and offered employment to those MMIC employees working exclusively for Letšeng, in line with operational requirements. Employment was effective 1 February 2024 and MMIC employees remained on contract until this date.

The total purchase price, which was determined with the assistance of external third-party valuators, was US$22.7 million. Payment terms were agreed whereby US$13.0 million was paid on the effective date, US$9.3 million was paid in January 2024, and a retainer of US$0.4 million was withheld for equipment under repair at the effective date and subsequently settled in early March 2024.

The full purchase price was capitalised to the statement of financial position and the fleet and equipment will be depreciated over the useful life of each asset based on the available production hours. The financial results for the year include one month of depreciation on the acquired fleet.

This transition to owner mining creates further opportunities for Letšeng to maximise mining efficiencies, reduce costs through eliminating contractor margins, and manage mining procurement directly, and enables further flexibility in the planning and execution of its mining activities. All these factors will contribute to a more efficient and cost-effective operation. The full benefit of the insourcing of the mining activities will be seen from 2024 onwards.

Expenditure

Energy costs

The increased load shedding by Eskom in 2023, which impacted 335 days of the year (compared to 205 in 2022), has necessitated an increase in diesel usage due to Letšeng's reliance on diesel-powered generators to operate the treatment plants uninterruptedly. This increase was partially set off by a decrease in diesel usage for mining activities due to lower volumes mined (refer to the COO Review on page 41) and the full year benefit of previously implemented lower-energy consumption initiatives.

The net impact was a 0.1 million litre increase in diesel consumption compared to the prior year. The average cost per litre of diesel decreased by 2% from 2022. Overall, it resulted in a 1% decrease in diesel costs, in local currency, to LSL336.0 million (US$18.2 million) from LSL340.6 million (US$20.8 million) in 2022.

Grid electricity usage decreased due to increased load shedding during the year. The marginal 3% decrease in cost to LSL54.9 million (US$3.0 million) was set off by a 7.9% rate increase.

Overall energy costs, including diesel and electricity, amounted to LSL390.9 million (US$21.2 million) in 2023 (2022: LSL397.0 million, US$24.3 million), a 2% decrease from 2022 in local currency. Energy costs as a percentage of direct cash costs remained unchanged at 27%, and the energy cost per tonne treated increased by 8% from LSL72.09 in 2022 to LSL77.79 in 2023, driven by lower volumes of tonnes treated.


	Letšeng Unit Cost Analysis
Unit cost per tonne treated	Direct cash costs¹	Third plant operator costs	Total direct cash operating costs	Non-cash accounting charges²	Total operating cost	Waste cash costs per waste tonne mined

2023 (LSL)	288.54	-	288.54	85.87	374.41	66.03
2022 (LSL)	252.50	10.57	263.07	82.02	345.09	66.74
% change	14	(100)	10	5	8	(1)
2023 (US$)	15.63	-	15.63	4.66	20.29	3.58
2022 (US$)	15.42	0.65	16.07	5.01	21.08	4.08
% change	1	(100)	(3)	(7)	(4)	(12)

¹ Direct cash costs represent all operating costs, excluding royalties and selling costs.

2 Non-cash accounting charges include waste stripping amortised, inventory and ore stockpile adjustments, and finance lease costs, and exclude depreciation and mining asset amortisation.

Operating expenditure

Group cost of sales (excluding depreciation) decreased by 12% in 2023 to US$102.1 million from US$116.3 million in 2022.

· Direct cash costs (excluding waste) remained virtually unchanged at LSL1 449.8 million (2022: LSL1 448.6 million). In 2023 these costs were affected by energy costs (detailed above), price increases from suppliers on explosives, equipment, spare parts and tyres, and additional once-off severance payments and related consulting fees due to the right-sizing of the Letšeng operation (refer to the COO Review on page 43). Direct cash costs per tonne treated increased by 14% to LSL288.54 from LSL252.50 in 2022, impacted by the lower volume of tonnes treated in the year. The third plant operator's (Alluvial Ventures or AV) contract expired on 30 June 2022. Ore tonnes treated decreased 9% to 5.0 million tonnes (2022: 5.5 million tonnes of which AV contributed 0.4 million tonnes). On a like-for-like basis (excluding the impact of AV), the 2022 unit costs would be LSL274.48 per tonne treated, resulting in a year-on-year increase of 11%, which is driven by the additional costs mentioned above.

· Non-cash accounting charges refers to waste amortisation, stockpile and diamond inventory movements and finance lease costs. These charges decreased 4% to LSL431.5 million (2022: LSL451.7 million), mainly due to the combination of an increase in total waste amortisation charges of LSL723.2 million (2022: LSL594.0 million), despite lower tonnes treated during the year, and the impact of the increase in stockpile tonnes on hand from 0.7 million tonnes in 2022 to 1.1 million tonnes in 2023. The increase in waste amortisation charges was mainly driven by the reduction of the anticipated future ore tonnes from SC6W as a consequence of an updated pit design (refer to the COO Review on page 47). In US dollar terms, waste amortisation charges increased by 8% to US$39.2 million compared to US$36.3 million in 2022.

· Total operating costs in local currency decreased marginally to LSL1 881.3 million (2022: LSL1 900.3 million), which includes the impact of direct cash costs and non-cash accounting charges detailed above. The unit cost per tonne treated increased 8% to LSL374.41 per tonne treated (2022: LSL345.09 per tonne treated), mainly due to the 9% decrease in tonnes treated in the year.

· Waste cash costs decreased by 14% to LSL583.8 million from LSL677.7 million in 2022, which is in line with the 13% reduction in waste tonnes mined (8.8 million tonnes compared to 10.2 million tonnes in 2022). Initiatives such as the steepening of slopes in the Main pit and decreasing of waste hauling distances, implemented in 2022, resulted in a 1% decrease in waste cash cost per waste tonne to LSL66.03 (2022: LSL66.74) despite the lower waste tonnes mined.

US dollar-reported costs

Gem Diamonds' 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 compared to 2022, which decreased the Group's US dollar-reported costs and increased local currency cash flow generation. The fluctuation of the exchange rates are set out in the table below:


Exchange rates	2023	2022	% change

LSL per US$1.00
Average exchange rate	18.45	16.37	13
Year end exchange rate	18.29	17.02	7
BWP per US$1.00
Average exchange rate	13.36	12.37	8
Year end exchange rate	13.39	12.75	5
GBP per US$1.00
Average exchange rate	0.80	0.81	(1)
Year end exchange rate	0.78	0.83	(6)

Royalties and marketing costs

In terms of Letšeng's mining lease, royalties are paid to the Government of the Kingdom of Lesotho on the value of rough diamonds sold. The Group's sales and marketing operation in Belgium incurs costs relating to diamond selling and marketing. Royalties and selling costs decreased by 25% to US$15.3 million (2022: US$20.3 million) in line with the decrease in revenue.

Corporate costs

The technical and administrative office in South Africa and head office in the UK provide expertise in all areas of the business to realise maximum value from the Group's assets. Central costs are incurred in South African rand and British pounds respectively.

Corporate costs (excluding depreciation) were US$7.7 million, representing a 10% decrease from 2022. In 2023, US$0.2 million of project costs were incurred on the ongoing sales process of Ghaghoo and investigating external growth opportunities (2022: US$0.1 million).

Underlying EBITDA1 and attributable profit

Group underlying EBITDA1 decreased by 65% to US$15.2 million (2022: US$43.7 million), mainly due to the decline in revenue in the current year. The loss attributable to shareholders was US$2.1 million, which translates to a loss of 1.5 US cents per share based on a weighted average number of shares in issue of 139.5 million.

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

Statement of financial position - selected indicators


US$ million	2023	2022

Property, plant and equipment	295.8	293.5
Non-current: receivables and other assets	4.5	2.9
Current: receivables and other assets	3.6	4.9
Inventory	37.6	30.4
Net income tax receivable	3.7	2.3
Cash and short-term deposits	16.5	8.7
Non-current: interest-bearing loans and borrowings	(5.2)	(4.4)
Current: interest-bearing loans and borrowings	(33.4)	(1.6)
Net deferred tax liabilities	(75.3)	(76.0)
Non-current: rehabilitation provisions	(14.2)	(15.4)

Capital expenditure

Total capital expenditure (excluding waste stripping) was US$30.4 million during the year (2022: US$11.9 million). The increase in 2023 was mainly due to the acquisition of the mining fleet and support equipment from MMIC for US$22.7 million, as detailed on page 35. The replacement of the PCA and the underground study that commenced in 2022 were completed. Three bioremediation plants were constructed, with the large-scale, ∼300 kilolitre per day plant being commissioned in February 2024.

Cash on hand

The Group ended the year with cash on hand of US$16.5 million (2022: US$8.7 million) and net debt of US$21.3 million, which was a decrease in net cash of US$24.6 million year on year. Group cash generated by operations was US$56.1 million before capital and waste investment of US$57.1 million.

Loans and borrowings

The Group-wide debt facilities for Letšeng (LSL450.0 million and ZAR300.0 million) and Gem Diamonds (US$30.0 million), which were concluded in December 2021 for an initial three-year period, are due to expire in December 2024. The process to extend or renew the revolving credit facilities will commence in Q2 2024.

Letšeng has a ZAR100.0 million (US$5.5 million) general banking facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division) reviewed annually. The facility was utilised from time to time during the year and was fully repaid by year end.

The funding partners to the existing facilities are Nedbank, Standard Bank and Firstrand Bank (through their respective operations). Nedbank's portion of the funding, totalling US$29.9 million, is a sustainability-linked loan (SLL), an innovative structure that links the margin and resultant interest rate on the SLL to the Group's ESG performance. The margin on the SLL will decrease subject to the Group meeting certain carbon reduction and water conservation KPIs that are aligned with the Group's sustainability strategy. These KPIs are assessed at the end of every financial year.

The two KPIs included for the SLLs both need to be met at each measurement date before the margin reduction on these loans becomes effective. At 31 December 2023, both the carbon emission and water conservation KPIs were met and therefore the margin reduction is expected to apply to any outstanding balance on these facilities in 2024.

In 2022, Letšeng implemented a four-and-a-half-year facility agreement with Nedbank for the replacement of the PCA for an amount of ZAR136.4 million (US$8.0 million). The facility is underwritten by the Export Credit Insurance Corporation of South Africa (ECIC). At the end of the availability period on 30 November 2023, an amount of LSL132.0 million (US$7.2 million) was utilised and the remaining balance expired. Quarterly repayments of this facility will commence from Q1 2024 until May 2027.

At year end, the Group had utilised facilities of US$37.8 million, resulting in a net debt position of US$21.3 million and available facilities of US$45.9 million. Gem Diamonds, the Company, ended the year with US$6.0 million of its facility drawn down (2022: nil) and US$24.0 million available. Letšeng ended the year with US$24.6 million (2022: nil ) of its revolving credit facility utilised and US$16.4 million available.

Summary of loan facilities as at 31 December 2023


Company	Term/description/expiry	Lender	Interest rate	Amount US$ million	Drawn down/ Balance due US$ million	Available US$ million

Gem Diamonds Limited	Three-year revolving credit facility Expires 22 December 2024	Nedbank Standard Bank Firstrand Bank	Facility A (US$30 million): Term SOFR + 5.26%	30.0	6.0	24.0
Letšeng Diamonds	Three-year revolving credit facility Expires 22 December 2024	Standard Lesotho Bank Nedbank Lesotho First National Bank of Lesotho Firstrand Bank	Facility B (LSL450 million): Central Bank of Lesotho rate + 3.25%	24.6	14.8	9.8
		Nedbank	Facility C (ZAR300 million): South African JIBAR + 3.05%	16.4	9.8	6.6
Letšeng Diamonds	Four-and-a-half-year project facility Expires 31 May 2027	Nedbank Export Credit Insurance Corporation	ZAR136 million South African JIBAR + 2.50%	7.2	7.2	-
Letšeng Diamonds	General banking facility Annual review in March	Nedbank	ZAR100 million South African Prime Lending Rate minus 0.70%	5.5	-	5.5
Total				83.7	37.8	45.9

Ghaghoo

The Board and management remain committed to exiting the Ghaghoo Diamond Mine in Botswana, either by sale, closure or handover of the mine. Ghaghoo ceased to be classified as a discontinued operation held for sale as at 31 December 2022 due to the highly probable requirements set out in IFRS 5 not being met.

Care and maintenance cash costs decreased to US$1.8 million in 2023 (2022: US$1.9 million), which amount is included in other operating expenses in the financial results. An additional US$0.2 million (2022: US$0.2 million) on the unwinding of the environmental rehabilitation provision resulted in a non-cash interest charge which is included in finance costs. In addition, a US$0.4 million reduction in the rehabilitation provision has been included in operating income and expenses.

A solar power solution was installed during the year. The solar plant was commissioned in January 2024 and completely replaces the existing diesel generator. This will result in future cost savings as it will eliminate costs related to generator rentals, diesel usage and transport.

The operation has also commenced site clean-up activities to prepare it for handover, the costs of which are included in the above cash costs.

Insurance

The perception of risk in the mining industry has improved, with insurers offering more competitive rates for mining companies. In 2023, insurance premiums for the Group were 15% lower compared to 2022. The Group is in the third year of a five-year multi-aggregate insurance policy to mitigate the increased risk of higher deductibles in the unlikely event of an unexpected loss.

Letšeng's insurance claim relating to diesel theft, which was identified in 2021, was settled during the year and is included in other operating income in the financial results. The business interruption claim for insured losses arising out of the COVID-19-related shutdown in 2020, where the mine was required to be placed on care and maintenance, is ongoing and we hope to receive an appropriate settlement in 2024.

Share-based payments

The share-based payment charge for the year was US$0.3 million (2022: US$0.3 million). At the AGM on 2 June 2021, shareholders approved the 2021 Remuneration Policy, which included the introduction of a post-termination shareholding, an employee pension alignment plan, as well as the new Gem Diamonds Incentive Plan (GDIP) for Executive Directors. On 21 April 2023, 1 060 055 nil-cost options were granted to certain key employees and Executive Directors under the GDIP. Refer to Note 26, Share-based payments on page 167 for more detail.

TAXATION

The Group applies all relevant principles in accordance with prevailing legislation in assessing its tax obligations. The Group's effective tax rate was 72.0%. 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 mainly due to deferred tax assets not recognised on losses incurred in other operations, the impact of the alignment of foreign tax at different rates, partially offset by withholding tax overpaid in prior periods and refunded in full by the Revenue Services Lesotho (RSL) during the year. Refer to Note 6, Income tax expense on page 148 for more detail.

The Group continues to pursue a long-standing legal matter relating to an amended tax assessment that was issued to Letšeng by the RSL in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. We expect to pursue this matter in the courts in 2024. We have sought senior legal counsel and their advice indicates good prospects for success. Refer to the accounting treatment for this matter, Note 1.2.26, Critical accounting estimates and judgements for further detail.

OUTLOOK

In light of the many external macro-economic factors negatively impacting our business, we have renewed our focus on cost containment measures, tightening capital allocation decision-making and enhancing operational efficiencies. The insourcing of the mining activities is expected to deliver significant savings. A key focus for 2024 will be the extension or renewal the Group's facilities which expire on 22 December 2024.

Michael Michael

Chief Financial Officer

13 March 2024

CHIEF OPERATING OFFICER'S REVIEW

The overall operational performance of the Group in 2023 was pleasing, driven by a focus on safety and operational efficiency.

Market conditions and the continuing pressure on revenue in 2023, coupled with the ever-rising cost of operating, including longer hauling distances due to deeper pits, and increased load shedding, necessitated a reinforcement of our focus on operational efficiencies and cost containment, while at all times ensuring that we meet our production targets safely, responsibly and sustainably.

The challenges of lower revenues and increasing costs are not always within our control. To meet these challenges head-on however, we made significant changes to management, workforce and operating methodologies at Letšeng and Ghaghoo in 2023. This required a direct focus on operating more efficiently to reduce, or at the very least contain, those operational costs that are within our control.

The implementation and integration of sustainability initiatives at our operations over the past few years, in particular our focus on reducing energy consumption and associated costs, positioned the Group well to navigate a difficult financial year in 2023. This is evident in reduced costs and decarbonisation related to waste mining in particular, and the successful implementation of several other energy-efficiency initiatives. In 2023, we recorded a 26% decrease in our Scope 1 and 2 emissions and a 25% decrease in diesel consumption-related emissions when compared to our 2021 baseline carbon emission footprint.

One of our proudest achievements in 2023 is our safety performance. The health and safety of our workforce remains paramount, and it is very pleasing to reap the rewards of a three-year safety campaign that started with a 24-hour stop-for-safety in June 2021. Achieving our lowest all injury frequency rate (AIFR) on record is testament to our commitment to achieving a zero harm operation and the relentless focus of leadership, management and each employee to achieve this.

We have also completed the NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement, which will be available on the Group's website at www.gemdiamonds.com.

PERFORMANCE

Safety


Safety performance	Unit	2023	2022	% change

Fatalities	Number	0	0	-
LTIs	Number	2	3	(33)
LTIFR	200 000 man hours	0.10	0.13	(26)
AIFR	200 000 man hours	0.67	0.70	(4)

The Group's safety culture is founded on our commitment to zero harm and our strong belief that all injuries can be prevented. Letšeng's safety performance in 2023 was of the highest standard, with zero fatalities (2022: zero), two LTIs (2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our lowest AIFR on record of 0.67 (2022: 0.70). Our improved safety performance does not happen by chance but is a direct result of the relentless effort and commitment of executive leadership and operational management in the implementation of the organisational safety maturity strategy. This strategy addresses critical safety risks, enhances safety-specific leadership visibility, and engages with the workforce to implement engineering and behaviour-focused controls to more specifically prevent safety incident reoccurrences. A focused safety programme was guided by independent subject matter experts and included mentoring senior management on best practice safety leadership and successfully implementing a critical control management strategy.

The safety of our workforce remains our highest priority and we will continue to build on the organisational safety maturity at our operations, which is founded on and entrenched in a safety culture of visible safety-focused leadership, individual responsibility and accountability, mutual care and collaboration.

Operations


KPI	Unit	2023	2022	% change

Ore mined	tonnes	5 419 033	5 732 493	(5)
Waste mined	tonnes	8 841 628	10 153 846	(13)
Ore treated	tonnes	5 024 665	5 506 576	(9)
Carats recovered1	carats	109 656	106 704	3
Grade	cpht	2.18	1.94	12
Carats sold	carats	104 520	107 498	(3)
Average price per carat	US$/carat	1 334	1 755	(24)

1 Includes carats produced from the Letšeng plants and the coarse and fines tailings treatment plants.

Operationally, 2023 was a year of two halves. Following a positive start in Q1 2023, Letšeng faced numerous challenges and changes in Q2 2023, culminating in the finalisation of the right-sizing programme and a change in senior management in June 2023. Operational challenges at Letšeng during this period included high rainfall, instability in the performance of the treatment plants and continued load shedding by Eskom, which resulted in poor overall treatment efficiencies and increased reliance on more expensive diesel generators to power operations. An intensified focus on the identification and implementation of initiatives to optimise and improve operational performance and efficiencies and to significantly reduce costs commenced in Q3 2023, resulting in a marked improvement in operational performance seen in H2 2023 compared to H1 2023.

The implementation of a number of initiatives to slow down the instantaneous rate at which ore is fed into the treatment plants significantly improved overall stability. This in turn materially improved the consistency of higher daily overall plant utilisation. The newly built Primary Crushing Area (PCA), which was commissioned in Q4 2023, further contributed to the improved performance by providing the plant with a consistent feed of well-fragmented ore. The initial benefit of these initiatives when comparing H2 2023 to H1 2023 is set out in the table below:


KPI	Unit	H2 2023	H1 2023	% change
Overall plant utilisation	%	81	75	8
Ore treated	tonnes	2 557 415	2 467 250	4
Carats recovered	carats	59 055	50 601	17
Grade	cpht	2.48	2.05	21

The 4% increase in ore treated in H2 2023 can largely be attributed to the improved plant stability and higher overall daily utilisation. Overall plant utilisation improved from 75% in H1 2023 to 81% in H2 2023. Plant stability further contributed to improved recoveries in H2 2023, with a notable 17% increase in carats recovered and a 21% improvement in the grade.

Waste tonnes mined

Total waste tonnes mined in 2023 decreased 13% to 8.8 million tonnes from 10.2 million tonnes in 2022. This was in line with the planned 2023 waste mining profile, which was further reduced in Q4 2023 to align with the ore treatment performance. Initiatives to further optimise waste mining and reduce associated costs continued to be implemented, and during 2023 this included a re-design of the Cut 4 West cutback in the Main pit to reduce waste, and the implementation of a new fleet management system that improved fleet productivity, availability and utilisation.

Ore mined

Total ore tonnes mined in 2023 decreased 5% to 5.4 million tonnes from 5.7 million tonnes in 2022. This was in line with the 2023 mine plan, taking into account the reduced ore treatment capacity in 2023 following the expiry of the Alluvial Ventures (AV) processing contract on 30 June 2022. This was partially off set by increased mining to the surface ore stockpiles in 2023.

Ore treated

Letšeng's two plants treated 5.0 million tonnes of ore during 2023 (2022: 5.5 million tonnes). The reduction in total ore tonnes treated in 2023 compared to 2022 was primarily due to the expiry of AV's processing contract, which contributed 0.4 million tonnes in 2022. The balance of the fewer tonnes treated in 2023 compared to 2022 was mainly as a result of plant performance and instability experienced in H1 2023. Of the total ore treated, 2.0 million tonnes were sourced from the Main pipe and 3.0 million from the Satellite pipe, this being in line with the planned Satellite/Main pipe ore contribution for 2023.

The biggest operational challenge in 2023 was the continued occurrence of more frequent and longer periods of load shedding by Eskom, the South African grid electricity supplier. Letšeng's generator capacity is sufficient and the synchronised switch-over from grid to generator power is effective (provided Eskom adheres to its load shedding schedule), but the additional running hours and strain on what was designed as a back-up generator system requires increased maintenance and heightens the risk of generator plant and equipment breakdowns. The increased utilisation of diesel generators, resulting in considerably higher volumes of diesel being consumed by the treatment plants in the year, had a significant negative impact on treatment operating costs.

Total carats recovered

Total carats recovered in 2023 increased 3% to 109 656 carats (2022: 106 704 carats), due primarily to differences in ore mix year on year and improvements in plant stability in H2 2023, resulting in improved recoveries.

The coarse tailings mobile XRT sorting machine recovered 367 carats in 2023 (2022: 774 carats) from re-treating current coarse recovery tailings, and an additional 5 206 carats (2022: 2 657 carats) were recovered by the fines tailings mobile XRT sorting machine, which re-treated current fines recovery tailings.

The overall grade for 2023 was 2.18 cpht, a 12% increase compared to 1.94 cpht in 2022, which was marginally better than expected. The contribution of higher grade material from the Satellite pipe accounted for 59% of ore treated during the year (2022: 55%).

Capital projects

Capital expenditure allocation during 2023 was thoroughly interrogated against necessity and applied in line with operational and cash management requirements. Material capital projects at Letšeng in 2023 included:

· completion of the PCA replacement project, which was successfully commissioned in Q4 2023;

· completion of the Satellite pipe underground study;

· final design and construction of the bioremediation plant; and

· purchase of the mining fleet and equipment in the transition to owner mining.

Details of overall costs and capital expenditure incurred at Letšeng are included in the CFO Review on page 34.

The planned capital spend at Letšeng for 2024 includes necessary modifications and upgrades to the recovery plant and final sort, the development of the next phase of the Patising coarse tailings extension project to ensure future capacity, and other smaller projects, including necessary upgrades to storage facilities, Plant 1 scrubber shell replacement and resource drilling.

Enhancing operational efficiencies

A change in operational requirements, together with significant pressure to further reduce operating expenses in line with challenging market conditions and lower rough diamond prices, required Letšeng to critically review all aspects of its business to maximise operational efficiency and effectively control costs to ensure continued business sustainability.

The right-sizing programme at Letšeng, which affected a total of 327 positions, including contractors, was completed in June. The programme was aimed at more effectively and efficiently aligning the workforce to operational requirements. In addition, a number of changes were made to the management team at Letšeng, including the appointment of Gideon Scheepers to the position of Operations Director. Gideon has 32 years of extensive experience in diamond mining, treatment and related processes, and following his appointment in June, drove the implementation of significant improvements at the operation in H2 2023, particularly in mining, treatment and site management.

A smooth transition to owner mining was concluded in Q4 2023 (refer to the CFO Review on page 35), with no interruption to production or mining activities. In addition to an immediate decrease in operating costs, there is room to further improve operational efficiencies as Letšeng management now has direct control over its mining fleet and execution of the mine plan. This will also assist in reducing "day-works" costs for other necessary projects around site, including concurrent rehabilitation.

The management of the recovery plant was brought in-house from Minopex to ensure direct control and management over what is arguably the most important part of the treatment process along with the final sort.

In addition, a revision to the catering and housekeeping contract on site resulted in the housekeeping and laundry activities being insourced, with the contractor providing the catering services only for the remainder of the contract term.

All operational contracts are undergoing rigorous reviews to ensure optimisation, efficiency and effective cost control management as a top priority.

Large diamond recoveries

In 2023, Letšeng recovered five diamonds greater than 100 carats (2022: four), including three high-quality Type IIa white diamonds of 120.43 carats, 117.47 carats and 112.46 carats, respectively. A total of 131 greater than 100 carat diamonds have been recovered at Letšeng since 2006, and we are pleased to report that three more greater than 100 carat diamonds have been recovered to date in Q1 2024. Total diamonds recovered greater than 10 carats decreased by 5% year on year, mostly in the 10 to 20 carat and 60 to 100 carat size categories. The lower number of diamonds in the larger categories can be primarily attributed to the resource domains that were mined in both the Satellite and Main pipes in 2023. 22 diamonds sold for over US$1.0 million each in 2023, generating revenue of US$40.8 million.


Number of large diamond recoveries	2023	2022	FY average 2008 - 2023

>100 carats	5	4	8
60 - 100 carats	13	18	18
30 - 60 carats	71	69	76
20 - 30 carats	107	108	114
10 - 20 carats	477	507	449
Total diamonds >10 carats	673	706	664

Diamond sales

Eight large and four small rough diamond tender viewings were held in Antwerp during the year.

A total of 104 520 carats were sold in 2023 (2022: 107 498) and Letšeng generated rough diamond revenue of US$139.4 million (2022: US$188.6 million) at an average price of US$1 334 per carat (2022: US$1 755). The significant challenges experienced in the diamond market, discussed in the CEO Review on page 30, coupled with the reduced volume of large high-value diamonds in 2023, were the primary factors behind the lower average price and revenue achieved in 2023.

The Group supports the GIA's blockchain technology to inform and assure consumers about the ethical and socially supportive footprint of our diamonds. Blockchain technology can link the source of rough diamonds to the final polished diamonds, thereby proving their authenticity, provenance and traceability, and supporting ethical sourcing and processing in the diamond value chain.

Underground study

A conceptual desktop study for an underground mining operation in the Satellite pipe post the current Cut 5 West (SC5W) open pit cutback was completed in November 2021. The outcome indicated potential for underground mining and recommended that a comprehensive Underground Feasibility Study be undertaken to confirm the feasibility thereof to most optimally and economically extend the life of mine for the Satellite pipe. The objective of the proposed study was to upgrade the desktop study to the confidence level of a feasibility study and to develop a transition model for an underground operation once the life of the Satellite pit reached maximum depth achievable through the current open pit mining. The study commenced in mid-2022 to (i) assess the viability of an earlier shift to underground mining of the Satellite pipe, and (ii) inform the trade-off between an underground mining option and the next open pit cutback in the Satellite pipe Cut 6 West (SC6W) post the completion of SC5W in 2024/5.

The project focused on the viability of the mining block within the indicated resources zone of the Satellite pipe, but also included the assessment of additional levels, to the point where the project no longer added positive financial returns. Following numerous iterations of the mining strategy, a three-level sub-level retreat was identified with the caving method as the most efficient and appropriate underground mining method for the available ore within the Satellite pit. To improve the economic viability of the mine, the study focused on several optimisation strategies, particularly with regards to mining costs. A detailed analysis of the cost breakdown was conducted to identify areas of potential savings and to explore alternative contracting models.

The economic viability and performance of the underground operation was determined through developing a detailed financial model founded on the results derived from the study and other available information. Unfortunately, at a mid-point review held in June 2023, the preliminary analysis at that time revealed a negative net present value of such an underground project in the Satellite pipe. Further sensitivity analysis was conducted in H2 2023 to ascertain the impact on project value due to potential variability in significant value drivers such as capital expenditure, diamond selling prices and operating costs. Following this analysis and a further review of capital expenditure and operating costs in particular, it was clear that the underground project for the extension of life of the Satellite pipe was not economically viable under current macro-economic conditions and the current state of the diamond market. The study was therefore halted at a pre-feasibility level to avoid spending unnecessarily on further geotechnical and hydro-technical drilling work at this time. Underground mining for both the Main and Satellite pipes may again be reconsidered should macro-economic and diamond market conditions improve.

In the meantime, various strategies to optimise open pit mining activities in both the Satellite and Main pits are continually being investigated and implemented as appropriate. A steeper conventional concept for C6W in the Satellite pit, which will significantly reduce the strip ratio, is currently under review.

Resource and Reserve Statement

Following the publication of Letšeng's 2015 SAMREC Mineral Resource and Reserve Statement, efforts were focused on improving confidence in the geological models and the predictability of the large +100 carat Type II diamonds, which contribute materially to Letšeng's value.

Initial petrography and microdiamond studies in the latter part of 2015 suggested that the geological complexity in both the Main and Satellite pipes may have been greater than that reflected in the broader resource categories at the time. What set out as an exercise to better understand the internal variability of the existing resource domains in the Main pipe (KMain, K6 and K4) and Satellite pipe (NVK and SVK), transformed into a comprehensive drilling and resource development programme spanning eight years and culminating in a new appreciation of the complexity within the Letšeng orebodies, as reflected in the current Resource and Reserve Statement.

The 2024 Mineral Resource and Reserve Statement was prepared in line with the Canadian Institute of Mining, Metallurgy and Petroleum's (CIM) Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines dated November 2019, and the Definition Standards for Mineral Resources and Mineral Reserves published May 2014, and is reported in accordance with the Canadian Securities Administrators' National Instrument 43-101 Standards of Disclosure for Mineral Projects.

Letšeng's 2024 Mineral Resource Statement is informed by a suite of geological studies that (i) enabled differentiation between the various known and newly recognised kimberlite domains, (ii) delineated the internal boundaries between the kimberlite domains, and (iii) characterised them in terms of their diamond populations, volumes, tonnages, grades and value.

The 2024 Resource and Reserve Statement and NI 43-101 Technical Report is based on an extensive drilling and resource development programme that commenced in 2015 and was completed in 2023 and included the following workstreams:

· Three phases of additional diamond core drilling: 2017-2020 (31 drillholes, 8 386 metres), 2021-2022 (24 drillholes, 8 640 metres) and 2022-2023 (8 drillholes, 2 235 metres).

· Petrographic analysis and mineral chemistry conducted between 2015 and 2023 in both the Satellite and Main pipes.

· Microdiamond analysis: initial studies in late 2015 followed by more detailed studies in 2019-2020.

· Discrete sampling, production and updated sales data was analysed for diamonds recovered from the dominant domains within each pipe.

· In-pit mapping data of internal and external domain contacts.

· 3D geological models for both the Satellite and Main pipes were updated.

· Updated Size Frequency Distributions (SFD) for each domain.

· As-built survey of the open pit topography as of 31 December 2023.

The Reserve Statement has been prepared on a Life of Mine plan including SC6W on current slope angles (refer to page 47). An opportunity to optimise this plan with a steeper conventional concept is discussed below on page 48.

The NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement will be available on the Group's website at www.gemdiamonds.com.

Letšeng's 2024 Resource and Reserve Statements are set out in the tables below (Note: the tables and accompanying notes below are presented as a direct extraction from the NI 43-101 Technical Report):


Resource statement
					Average Value
	Pipe	Domain	Density	Mass	Diamond Grade	Diamond Price	Contained Carats
			g/cm³	(kt)	(cpht)	(US$/ct)	(kct)
Indicated	Main pipe	K1A	2.52	7 109.6	1.56	2 170	110.9
		RFW-K1S-K1AS	2.52	2 781.3	1.56	2 170	43.4
		K1B-1	2.51	7 635.6	1.59	980	121.4
		RFW-K1S-K1B-1s	2.51	2 417.2	1.59	980	38.4
		K1B-2	2.51	5 177.2	1.59	980	82.3
		RFW-K1S-K1B-2	2.51	74.4	1.59	980	1.2
		K1C	2.51	959.2	1.59	980	15.3
		K2	2.54	25 793.5	1.61	1 130	415.3
		K6	2.48	5 682.1	2.47	825	140.3
	Total Main pipe		2.52	57 630.1	1.68	1 211	968.5
	Satellite pipe	NVK	2.50	5 175.6	2.19	2 185	113.3
		SVK	2.45	7 967.7	2.26	2 535	180.1
		GVK	2.45	1 746.3	3.46	970	60.4
		GVK-SVK_Mixed	2.45	1 715.7	3.11	1 420	53.4
		KIMB7	2.47	1 310.8	2.28	2 475	29.9
	Total Satellite pipe		2.47	17 916.1	2.44	2 088	437.1
	Total indicated		2.51	75 546.2	1.86	1 484	1 405.6

					Average Value
	Pipe	Domain	Density	Mass	Diamond Grade	Diamond Price	Contained Carats
			g/cm³	(kt)	(cpht)	(US$/ct)	(kct)
Inferred	Main Pipe	K1A	2.52	5 929.9	1.56	2 170	92.5
		K1B-1	2.51	7 152.9	1.59	980	113.7
		RFW-K1S-K1B-1s	2.51	396.7	1.59	980	6.3
		K1B-2	2.51	1 371.0	1.59	980	21.8
		K1C	2.51	348.7	1.59	980	5.5
		XENO-BSLT	2.66	1 154.9	0.40	1 130	4.6
		K4	2.52	697.5	1.10	360	7.7
		K6	2.48	4 952.6	2.47	825	122.3
	Total Main pipe		2.51	22 126.2	1.70	1 217	376.3
	Satellite Pipe	SVK	2.45	1 539.3	2.26	2 535	34.8
		GVK	2.45	309.7	3.46	970	10.7
		KIMB7	2.47	597.1	2.28	2 475	13.6
	Total Satellite pipe		2.45	2 446.1	2.42	2 238	59.1
	Total inferred		2.51	24 572.3	1.77	1 356	435.4

Notes:

1. The effective date of the Mineral Resource Statement is 31 December 2023. The QP for the estimate is Cliff Revering, P.Eng., an employee of SRK Consulting (Canada) Inc.

2. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All numbers have been rounded to reflect accuracy of the estimate.

3. Mineral Resources are inclusive of in-situ Mineral Reserves and are exclusive of all mine stockpile material.

4. Mineral Resources are quoted above a +2.00 mm square-mesh bottom cut-off and have been factored to account for diamond losses within the smaller sieve classes.

5. Inferred Mineral Resources are estimated on the basis of limited geological evidence and sampling, sufficient to imply but not verify geological grade and continuity. They have a lower level of confidence than that applied to an Indicated Mineral Resource and cannot be directly converted into a Mineral Reserve.

6. Average diamond value estimates are based on diamond sales data to the end of 2023 provided by Gem Diamonds Ltd.

7. Mineral Resources have been estimated with no allowance for mining dilution and mining recovery.


Reserve statement
				Average Value
	Pipe	Domain	Mass	Diamond Grade	Diamond Price	Contained Carats	Value
			(kt)	(cpht)	(US$/ct)	(kct)	(US$'000)
Probable	Main Pipe	K1A Grouping	9 450.1	1.55	2 170	146.5	317 888.3
		K1B Grouping	14 790.2	1.58	980	233.6	228 910.4
		K1C	935.0	1.57	980	14.7	14 392.6
		K2	17 512.4	1.60	1 130	279.6	315 958.5
		K6	5 250.8	2.48	825	130.2	107 432.2
	Total Main pipe		47 938.6	1.68	1 224	804.6	984 582.0
	Satellite Pipe	NVK	3 442.5	2.16	2 185	74.4	162 658.6
		SVK	6 164.0	2.22	2 535	136.6	346 341.6
		GVK	1 673.5	3.45	970	57.8	56 067.3
		GVK-SVK_Mixed	1 674.4	3.09	1 420	51.7	73 413.4
		KIMB7	1 200.9	2.20	2 475	26.4	65 248.7
	Total Satellite pipe		14 155.5	2.45	2 028	346.9	703 729.6
	Stockpiles	Live Stockpile	11.2	1.95	1 754	0.2	382.5
		Main Pipe Stockpile	900.7	1.25	1 190	11.2	13 380.2
		Satellite Pipe Stockpile	176.6	1.41	2 287	2.5	5 693.6
	Total Stockpiles		1 088.5	1.28	1 394	14.0	19 456.3
	Total probable		63 182.5	1.84	1 465	1 165.5	1 707 767.9

Notes:

1. The effective date of the Mineral Reserve Statement is 31 December 2023. The QP for the estimate is Dr Anoush Ebrahimi, P. Eng., an employee of SRK Consulting (Canada) Inc.

2. Figures have been rounded to the appropriate level of precision for reporting.

3. Due to rounding, some columns or rows may not compute exactly as shown.

4. Grades quoted as recovered and dry, pre-acid wash.

5. The Mineral Reserves are stated as in‐situ dry metric tonnes.

6. K1A Grouping includes K1A, RFW-K1S: K1AS and RFW-K1S: XENO-BSLT.

7. K1B Grouping includes K1B-1, RFW-K1S: K1B-1s, K1B-2 and RFW-K1S: K1B-2.

8. The Mineral Reserves were prepared under the guidelines of the CIM, for reporting under NI 43‐101.

9. Average diamond value estimates are based on diamond sales data to the end of 2023 provided by Gem Diamonds Ltd.

10. Modifying factors for mining recovery of 88% and waste dilution of 12% applied on pipe contact blocks.

11. Probable Mineral Reserves were derived from Indicated Mineral Resources.

12. Mineral Reserves are inclusive of Mineral Resources.

13. There are no known legal, political, environmental, or other risks that could materially affect the Probable Mineral Reserves.

14. Stockpiles comprise surface loose stocks of material including high-value, low-value and highly diluted kimberlite contact ore. Stockpiles of low-value and highly diluted kimberlite contact ore will be processed at the end of life of open pit mining.

15. The Mineral Reserves reported in this table are attributable solely to the ore to be mined (and processed or stockpiled for later processing) from the open pit mining operations at Letšeng Mine.

Long-term mine plan

Letšeng's long-term mine plan has incorporated all relevant attributes of the 2024 Resource and Reserve Statement discussed above. The previous long-term mine plan was predicated on SC5W being completed in 2024 at an extraction rate of 3.0 million tonnes of Satellite ore per annum. The extraction rate of Satellite ore from the SC5W cutback has been revised down in 2024 to c.2.0 million tonnes with the remaining c.0.9 million tonnes of ore from this cutback to be mined out by Q2 2025. Cost containment, the potentially unsafe conditions created when mining above SC5W before ore extraction is complete, and the opportunity to finalise the study of a steeper conventional concept for SC6W to avoid unnecessary waste stripping on the conventional slope angles, has necessitated that the commencement of waste stripping in SC6W be pushed out, from Q1 2024 to Q3 2025.

In addition, the anticipated ore from SC6W has been reduced, as instantaneous triple and double benches on the kimberlite basalt contact areas around the pipe had to be removed from the updated pit design. The strategy of transitioning from basalt to kimberlite was revised in the 2024 mine plan to include flatter angles around the basalt/kimberlite contact areas. The revised strategy was in response to the latest geological mapping results, which revealed the curvature and dip of the pipe contact not supporting the double and triple benching previously planned along the pipe contact. Consequently, about 1.3 million tonnes of ore of the previous SC6W mine plan can no longer be accessed safely.

During the annual review of the long-term mine plan in the first half of 2023, it was observed that the in-situ revenue per tonne for certain ore domains in the Main pipe had decreased, impacting the economics of the final cutbacks in the Main pit (MC4). The latest pit optimisation model indicated a smaller MC4 than in the previous long-term mine plan. MC4 West was therefore redesigned in line with this outcome, which resulted in reduced waste required to be mined and an estimated 10.0 million tonnes of ore no longer being economically viable to extract. The 2024 mine plan was updated to include the revised waste and ore volumes for MC4W, thereby reducing the previously published mine plan by approximately two years from 2040 to 2038.

The long-term mine plan has also been updated using the latest resource models discussed above. For most of the ore domains, except K2 (Main pipe) and NVK (Satellite pipe), the indicated and inferred resource interface levels were shallower than in the 2015 resource models. This resulted in some ore that was included as indicated in the previous mine plan now being excluded in line with the mineral reserves declaration rules. Pending possible further upgrade of the inferred resources in both the Main and Satellite pipes, the revised final pit shell has been designed to include only indicated resources with minimal inferred resources being included. This has shortened the updated life of mine plan by an additional two years, from 2038 to 2036/7. Refer to the updated long-term mine plan in the graph below.

The updated long-term mine plan includes SC5W, MC4E, a smaller MC4W and SC6W (each based on current slope angles) and an updated plant throughput rate to life of mine of 5.3 million tonnes per annum. Waste stripping of the SC6W cutback is currently scheduled to commence in 2025 with ore estimated to be available from end 2030 at an extraction rate of 2.5 million ore tonnes per annum thereafter.

Life of Mine optimisation projects

Steeper conventional pit concept in Satellite C6W

Slope steepening carried out at Letšeng in a safe and responsible way has had a significant positive effect on the economic value of open pit mining by reducing the stripping ratio. An initiative to introduce a steeper conventional design in the basalt of SC6W cutback commenced pit designs of a steeper slope concept with the final cutback commencing from within the current SC5W pit have been completed. The slope design has been approved by independent slope design experts in Q4 2023 and the requisite support design and costs are being analysed to fully evaluate the factor of safety, economics and overall feasibility of the concept. Results of this study are expected to be completed by Q3 2024. In the event that we are able to safely execute the steeper conventional concept in SC6W, with the benefit of significantly reduced waste, the above long-term mine plan adopted in our 2024 Reserve Statement will be amended accordingly.

Upgrading inferred resource

The updated long-term mine plan shown in the graph above could be extended by an additional two years (c.12.5 million tonnes) without any incremental stripping of waste by upgrading the inferred resource in the Main pipe to indicated resource. Once upgraded, the ore could then confidently be included in the long-term mine plan with no incremental stripping of waste, given the flexibility that has been incorporated in the current final pit design.

Ghaghoo

We remain committed to exiting the Ghaghoo Diamond Mine in Botswana, which has been on care and maintenance since March 2017. In the absence of a sale, closure and/or handover options are being actively pursued and affected stakeholders have been widely consulted.

The site is being well maintained in a safe and responsible manner. Employees on site have consistently demonstrated adherence to safety protocols and environmental regulations, with no instances of activities causing any disturbance to the environment being reported, and we are pleased to report that there were no LTIs recorded at Ghaghoo in 2023.

In preparation for possible closure or partial closure and handover to government, extensive site clean-up and partial rehabilitation activities commenced in H1 2023. This has been carried out in a cost-effective manner and included the removal and sale of a significant amount of scrap metal and other redundant infrastructure and materials. The salvage values received for these contributed significantly to the cost of the clean-up project. At the end of 2023, a solar power solution was implemented to power the necessary camp and reverse osmosis water plant requirements. The solar plant was fully commissioned from 1 January 2024 and has completely replaced the existing diesel generator power supply. Securing long-term power supply for the Ghaghoo operation allows for the site to be handed over without additional diesel generator associated costs, and also supports the immediate rehabilitation and decarbonisation objectives of the Group.

OUR PLANS FOR 2024

We have several operational objectives for 2024. These include:

· Optimising and improving the long-term mine plan of Letšeng with particular focus on the SC6W cutback.

· Further enhancing operational efficiencies and reducing overall operating costs.

· Investing in appropriate renewable and/or alternative energy sources. Providing a consistent source of power for the mine operations remains a challenge at Letšeng. In the meantime, the focus remains on reducing power consumption throughout the Group, and low energy-usage alternatives continue to be investigated and implemented.

DIRECTORS' REPORT

The Directors are pleased to submit the financial statements of the Group for the year ended 31 December 2023.

As a British Virgin Islands-registered company, Gem Diamonds Limited (company registration number: 669758) is not required to conform with the Companies Act, 2006. However, the Directors have elected to conform to the requirements of the Companies Act, 2006.

Accordingly, Directors must present a Strategic Report and a Directors' Report to inform shareholders of the Group's performance and prospects and help them evaluate whether the Directors performed their fiduciary duty. The 2023 Annual Report and Accounts discloses how the Directors have performed their duty to ensure the Group's continued success and sustainability, in line with the Companies Act, 2006.

In line with Disclosure Guidance and Transparency Rules (DTR 4.1.5R(3) and DTR 4.1.8R), the required content of the Management Report can be found in the Strategic Report, the Performance Review and the Directors' Report, the Governance section and other sections of the 2023 Annual Report and Accounts, indicated by a reference.

The Strategic Report can be found on pages 2 to 62. This will provide the shareholders with a balanced assessment of the Group's business including a description of its principal risks and uncertainties. It may not be relied upon by anyone, including the Company's shareholders, for any other purpose.

Forward-looking statements

The Strategic Report and other sections of this report contain forward-looking statements. Forward-looking statements, by their nature, involve several risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future. The actual results and outcomes may differ materially from those expressed or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in the Strategic Report will be realised. Statements about the Directors' expectations, beliefs, hopes, plans, intentions and strategies are subject to change and are based on expectations and assumptions about future events, circumstances and other factors which are, in many instances, outside the Company's control.

The information in the Strategic Report was prepared based on the knowledge and information available to the Directors at the time of its preparation. The Company is under no obligation to update or revise the Strategic Report during 2024. The expectations set out in the forward-looking statements are reasonable but may be influenced by several variables which could cause actual results or trends to differ materially. Forward-looking statements need to be read in context with actual historic information provided. The Company's shareholders are cautioned not to place undue reliance on the forward-looking statements. Shareholders should note that the Strategic Report has not been audited.

CORPORATE GOVERNANCE

DTR 7.2 requires certain information to be included in a corporate governance statement set out in the Directors' Report. The Group has an existing practice of issuing a separate Corporate Governance Code Compliance Report as part of its Annual Report and Accounts. The information required by the Disclosure Guidance and Transparency Rules and the UK Financial Conduct Authority's Listing Rules (LR 9.8.6) is located on pages 2 to 113.

DIRECTORS

The Directors, as at the date of this report, are listed on pages 179 to 181 together with their biographical details. Details of the Directors' interests in shares and share options of the Company can be found on page 111.

Directors who held office during the year and date of appointment


	Appointment

Executive Directors
C Elphick	20 January 2006
M Michael	22 April 2013
Non-Executive Directors
H Kenyon-Slaney	6 June 2017
M Brown	1 January 2018
M Lynch-Bell	15 December 2015
M Maharasoa	1 July 2019
R Kainyah	1 May 2021

Appointment and re-election of Directors

The Board's formal Selection and Appointment Policy ensures that the procedure for appointing new Directors is formal, rigorous and transparent, and appointments are made on merit, against objective criteria. The Nominations Committee makes appointments based on merit while considering diversity (of gender, social and ethnic background), cognitive and personal strengths and specialist skill sets.

The Articles of Association (82) provide that a third of Directors retire annually by rotation and, if eligible, offer themselves for re-election. However, in accordance with the Code, all the Directors retire at the AGM and, subject to being eligible, offer themselves for re-election.

Payments for loss of office due to change of control

The basis for payments for loss of office to Executive Directors due to a change in control can be found on page 100.

PROTECTION AVAILABLE TO DIRECTORS

By law, the Directors are ultimately responsible for most aspects of the Group's business dealings. This means they face potentially significant personal liability under criminal or civil law, or the UK Listing, Prospectus and Disclosure and Transparency Rules, and face a range of penalties including private or public censure, fines and/or imprisonment. In line with normal market practice, the Group understands that it is in its best interests to protect its Board members from the consequences of innocent error or omission. This allows the Group to attract prudent individuals to act as Directors.

The Group maintains, at its expense, a Director and Officer's liability insurance policy to provide indemnity, in certain circumstances, for the benefit of Directors and other Group employees.

Refer to the Corporate Governance statement on page 72 for further details.

DIRECTORS' INTERESTS

No Director had, at any time during the year, a material interest in any contract of significance in relation to the Company's business. The interests of Directors in the shares of the Company are included on page 111.

SUPPLIERS AND CUSTOMERS

We engage extensively with suppliers and contractors to ensure alignment, mutual understanding and the sustainability of all parties. The early termination (by mutual agreement) of the mining services contract and subsequent insourcing thereof was concluded in December 2023.

We have sound relationships with our customers. We interact with customers regularly in the normal course of business and at tenders. We continued to hold regular diamond tender viewings in Antwerp during the year. We were able to rely on the loyal customer base for support during the year while the diamond market was under significant pressure. The agreement entered in 2022 with two diamond manufacturing customers to supply polished diamonds to some of the world's most premium luxury brands remained in effect in 2023.

Refer to our stakeholder relationships section on pages 14 to 17 for more details on our engagement with suppliers, contractors and customers.

RESULTS AND DIVIDENDS

The Group's attributable loss after taxation amounted to US$2.1 million (2022: profit of US$10.2 million).

The Group's detailed financial results are set out in the financial statements on pages 118 to 173.

The Board is not proposing a dividend based on the 2023 financial results due to the volatility in the current economic outlook, the Group's available cash resources and the current business outlook.

The Group's dividend policy sets the appropriate dividend each year, and considers:

· The Group's cash resources.

· The level of free cash flow and earnings generated during the year.

· Expected funding commitments for future capital projects.

The Board will consider special dividends in the event of significant diamond recoveries and will consider further share buyback programmes if appropriate.

GOING CONCERN

The Group business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report on pages 2 to 62. The financial position of the Group, its cash flows and liquidity position are described in the Strategic Report on pages 34 to 40. In addition, Note 1.2.2, Note 25 and Note 27 to the financial statements include the Group's going concern policy and its objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit and liquidity risk.

The Directors have a reasonable expectation that the Group has adequate financial resources to continue operations for the foreseeable future. This follows a review of forecasts, budgets, timing of cash flows, the likely successful renewal of its debt facilities, various cost-reduction initiatives, sensitivity analyses and the uncertainties disclosed in this report. For this reason, the Directors continue to adopt the going concern basis in preparing the Annual Report and Accounts of the Group.

VIABILITY STATEMENT

In accordance with provision 30 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Group over a period longer than the 12 months required by the "going concern" provision. The viability statement, aligned with Provision 31 of the UK Corporate Governance Code 2018, is included in the Strategic Report on page 27.

SUBSEQUENT EVENTS

Refer to Note 29 of the financial statements for details of events subsequent to the reporting date.

SHARE CAPITAL AND VOTING RIGHTS

Details of the authorised and issued share capital of the Company, including the rights pertaining to each share class, are set out in Note 15 to the financial statements.

As at 13 March 2024, there were 139.7 million fully paid ordinary shares of US$0.01 each in issue and listed on the official list maintained by the Financial Conduct Authority in its capacity as the UK Listing Authority. In addition, the Company holds 1.5 million shares as treasury shares acquired during the share buyback programme that was launched in 2022. These treasury shares are not entitled to dividends and have no voting rights.

The Company has one class of ordinary shares. Shareholders have the right to receive notice of and attend, speak and vote at any general meeting of the Company. Shareholders may be present in person (or, being a corporation, by representative) or by proxy at a general meeting. Every shareholder present in person (or, being a corporation, by representative) or by proxy will have one vote in respect of every ordinary share they hold. The appointment of a proxy to vote at a general meeting must be received no less than 48 hours before the meeting's appointed time.

Shareholders have the right to participate in dividends and other distributions according to their respective rights and interests in the profit of the Company.

No shareholders have any special rights with regard to the control of the Company. The Company is not aware of any agreements between shareholders which may result in restrictions on transfers or voting rights, save as mentioned below.

There are no restrictions on the transfer of ordinary shares other than:

· As set out in the Company's Articles of Association.

· Certain restrictions may from time to time be imposed by laws and regulations.

· Pursuant to the Company's share dealing code whereby the Directors and employees of the Company require approval to deal in the Company's ordinary shares.

At the AGM held in June 2023, the Board noted the proportion of the votes cast against the resolution referring to the authority of Directors to allot shares (Resolution 12 passed with 69.5% of participating shareholders voting in favour). The CEO met the significant shareholder who voted against Resolution 12 to discuss their voting policy, and although the shareholder has a standing position on these resolutions, the Board will regularly consider its approach to this matter. The resolution reflected UK-listed company market practice, and the Board considers the flexibility afforded by the authority to allot shares to be in the best interest of the Company.

At the same AGM, shareholders authorised the Company to make on-market purchases of up to 14 121 018 of its ordinary shares, representing approximately 10% of the Company's issued share capital at that time. In 2022, the Company purchased 1 520 170 of its ordinary shares, which are being held as treasury shares and may be used to settle ESOP and GDIP awards.

At the 2024 AGM, shareholders will be requested to renew this authority. The Directors continue to consider various options and keep the authorisation under regular review. The 2024 Notice of AGM will set out the details regarding exercising voting rights and proxy appointments.

MAJOR INTERESTS IN SHARES

Details of the major interests (at or above 3%) in the issued ordinary shares of the Company are set out in the Strategic Report on page 15.

ARTICLES OF ASSOCIATION

Any proposed amendments to the Articles of Association of the Company need to be approved by shareholders by special resolution.

RESOURCE DEVELOPMENT

The NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve Statement will be available on the Group's website at www.gemdiamonds.com. The COO Review on page 45 provides more detail on this.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Read more about the Group's 2023 Sustainability Performance, including CSI investment, community participation and environmental management, in our Sustainability Report 2023 which is available at www.gemdiamonds.com.

POLITICAL DONATIONS

The Group made no political donations during 2023.

TCFD, CARBON EMISSIONS AND ENERGY CONSUMPTION SUMMARY

Information on the Group's decarbonisation strategy, adoption of the TCFD recommendations, carbon footprint and energy consumption in 2023 can be found in the Sustainability and Climate Change reports on pages 49 and 51 respectively.

By order of the Board

Harry Kenyon-Slaney

Non-Executive Chairperson

13 March 2024

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 that this report and financial statements taken as a whole, are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Group'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 Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces.

PREPARATION OF THE FINANCIAL STATEMENTS

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 performance, the financial position and cash flow 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 at year end and profit or loss for the year then ended 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, cash flow and financial performance. Where necessary, the Directors have made judgements and estimates that are considered reasonable and prudent.

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

13 March 2024

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 123 to 173, which comprise the consolidated statement of financial position as at 31 December 2023, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2023, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRS").

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 our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our 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 this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter 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

GOODWILL IMPAIRMENT

Management performs an annual impairment test on goodwill as required by IAS 36 Impairment of Assets using discounted future cash flows to determine the recoverable amount. Goodwill relates to the Group's investment in the Letšeng Diamond mine. The carrying value of goodwill amounts to US$11.2 million (2021:US$12.0 million).

As disclosed in Note 11 Impairment testing and Note 1.2.28 Critical accounting estimates and judgements, the Group uses discounted cash flows to determine the recoverable amount for each cash generating unit, on the basis of the following key assumptions:

· Diamond prices;

· Inflation rates;

· Production costs and volumes; and

· Discount rates

The current year impairment model further include certain assumptions that materially impact the recoverable amount - these include: next open pit cutback in Satellite pipe (C6W), optimisation and right-sizing cost savings and steeper slope angles.

Given the above factors, the goodwill impairment, required significant audit effort including the use of our valuation experts in the audit of the recoverable amount.

Our audit procedures included amongst others the following:

•We involved our 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 evaluated the valuation methodology against acceptable industry methods and accounting standards;

•Our valuation specialists calculated two independent weighted average cost of capital (WACC) rates (Revenue and costs) to compare to management's WACC's. Our independent WACC recalculations were based on publicly available market data for comparable companies for the Letšeng Cash Generating Unit (CGU);

•Our valuation specialists assessed the reasonability of the significant inputs and assumptions used in the impairment models, such as diamond prices, inflation rates, by comparing them to independent sources. Assumptions such as production costs and volumes were considered for reasonability with reference to history and the mine plan;

•We have performed sensitivity analyses around the key assumptions used in the impairment model. We did this by increasing and decreasing the following assumptions in the model to determine the impact on the headroom (difference between the carrying value of the CGU and the recoverable amount). These included:

▪WACC; and

▪Diamond prices

•We considered the appropriateness of the inclusion of next open pit cutback in Satellite pipe (C6W), optimisation and right-sizing cost savings and steeper slope angles in the recoverable amount.

•We assessed the adequacy of the Group's disclosures in terms of IAS 36, 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 183‑page document titled "Gem Diamonds Annual Report and Accounts 2023. 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 an audit opinion or 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 for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, 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 judgement and maintain professional scepticism 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 identify 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)

13 March 2024

102 Rivonia Road

Sandton

Private Bag X14

Sandton

2146

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2023


	Notes	2023	2022
		US$'000	US$'000
Revenue from contracts with customers	2	140 287	188 937
Cost of sales		(109 112)	(124 113)
Gross profit		31 175	64 824
Other operating income/(expense)	3	7	(1 937)
Royalties and selling costs		(15 340)	(20 328)
Corporate expenses		(7 905)	(8 997)
Share-based payments	26	(332)	(253)
Foreign exchange gain	4	2 775	1 914
Impairment of non-current assets	4	-	(702)
Operating profit	4	10 380	34 521
Net finance costs	5	(4 696)	(4 089)
- Finance income		617	413
- Finance costs		(5 313)	(4 502)

Profit before tax for the year		5 684	30 432
Income tax expense	6	(4 090)	(10 277)
Profit for the year		1 594	20 155
Attributable to:
Equity holders of parent		(2 125)	10 178
Non-controlling interests		3 719	9 977
Earnings per share (cents)	7
- Basic (loss)/earnings for the year attributable to ordinary equity holders of the parent		(1.5)	7.3
- Diluted (loss)/earnings for the year attributable to ordinary equity holders of the parent		(1.5)	7.2

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023


	2023	2022
	US$'000	US$'000
Profit for the year	1 594	20 155
Items that could be reclassified to profit or loss in the future:
Exchange differences on translation of foreign operations, net of tax	(16 849)	(18 534)
Other comprehensive loss for the year, net of tax	(16 849)	(18 534)
Total comprehensive (loss)/income for the year	(15 255)	1 621
Attributable to:
Equity holders of parent	(14 082)	(2 513)
Non-controlling interests	(1 173)	4 134

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023


		2023	2022
	Notes	US$'000	US$'000
ASSETS
Non-current assets
Property, plant and equipment	8	295 830	293 499
Right-of-use assets	9	4 746	6 340
Intangible assets	10	10 440	11 221
Receivables and other assets	12	4 487	2 916
Deferred tax assets	21	6 814	5 994
		322 317	319 970
Current assets
Inventories	13	37 633	30 370
Receivables and other assets	12	3 631	4 855
Income tax receivable	19	4 631	2 323
Cash and short-term deposits	14	16 503	8 721
		62 398	46 269
Total assets		384 715	366 239
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital	15	1 413	1 410
Treasury shares	15	(1 157)	(1 157)
Share premium		885 648	885 648
Other reserves	15	(250 797)	(239 169)
Accumulated losses		(496 238)	(494 113)
		138 869	152 619
Non-controlling interests		79 255	80 428
Total equity		218 124	233 047
Non-current liabilities
Interest-bearing loans and borrowings	16	5 156	4 370
Lease liabilities	17	3 786	6 021
Trade and other payables	18	1 494	2 169
Provisions	20	14 170	15 387
Deferred tax liabilities	21	82 136	82 030
		106 742	109 977
Current liabilities
Interest-bearing loans and borrowings	16	33 411	1 575
Lease liabilities	17	2 164	1 877
Trade and other payables	18	23 356	19 708
Income tax payable	19	918	55
		59 849	23 215
Total liabilities		166 591	133 192
Total equity and liabilities		384 715	366 239

Approved by the Board of Directors on 13 March 2024 and signed on its behalf by:

C Elphick M Michael

Director Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023


	Attributable to the equity holders of the parent
	Issued capital	Share premium		Treasury shares		Other reserves1		Accumulated (losses)/retained earnings		Total		Non-controlling interests		Total equity
	US$'000		US$'000		US$'000		US$'00	US$'000	US$'000		US$'000		US$'000
As at 1 January 2023	1 410		885 648		(1 157)		(239 169)	(494 113)	152 619		80 428		233 047
Total comprehensive loss	-		-		-		(11 957)	(2 125)	(14 082)		(1 173)		(15 255)
(Loss)/profit for the year	-		-		-		-	(2 125)	(2 125)		3 719		1 594
Other comprehensive loss	-		-		-		(11 957)	-	(11 957)		(4 892)		(16 849)
Share capital issued (Note 15)	3		-		-		(3)	-	-		-		-
Share-based payments (Note 26)	-		-		-		332	-	332		-		332
As at 31 December 2023	1 413		885 648		(1 157)		(250 797)	(496 238)	138 869		79 255		218 124
As at 1 January 2022	1 406		885 648		-		(226 697)	(500 550)	159 807		86 843		246 650
Total comprehensive (loss)/income	-		-		-		(12 691)	10 178	(2 513)		4 134		1 621
Profit for the year	-		-		-		-	10 178	10 178		9 977		20 155
Other comprehensive loss	-		-		-		(12 691)	-	(12 691)		(5 843)		(18 534)
Share capital issued (Note 15)	4		-		-		(4)	-	-		-		-
Share-based payments (Note 26)	-		-		-		253	-	253		-		253
Share buyback (Note 15)	-		-		(1 157)		-	-	(1 157)		-		(1 157)
Transfer between reserves	-		-		-		(30)	30	-		-		-
Dividends declared (Note 28)	-		-		-		-	(3 771)	(3 771)		(10 549)		(14 320)
As at 31 December 2022	1 410	885 648		(1 157)		(239 169)		(494 113)		152 619		80 428		233 047

1 Other reserves relate to Foreign currency translation reserves and Share-based equity reserves. Refer Note 15, Issued share capital and reserves for further detail.

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023


		2023	2022
	Notes	US$'000	US$'000
Cash flows from operating activities		35 020	63 032
Cash generated by operations	22.1	56 150	82 799
Working capital adjustments	22.2	(15 610)	(9 889)
Interest received		292	303
Interest paid		(4 216)	(2 933)
Income tax paid	19	(1 596)	(8 435)
Income tax received	19	-	1 187


Cash flows used in investing activities		(57 146)	(59 672)
Purchase of property, plant and equipment	8	(20 048)	(11 920)
Waste stripping costs capitalised	8	(37 102)	(47 948)
Proceeds from sale of property, plant and equipment		4	196


Cash flows from/(used in) financing activities		28 021	(24 909)
Lease liability capital repayment	17	(2 092)	(1 846)
Net financial liabilities raised/(repaid)	22.3	30 113	(7 734)
Financial liabilities repaid		(45 103)	(17 627)
Financial liabilities raised		75 216	9 893
Share buyback	15	-	(1 157)
Dividends paid to holders of the parent		-	(3 623)
Dividends paid to non-controlling interests		-	(10 549)


Net increase/(decrease) in cash and cash equivalents	14	5 895	(21 549)
Cash and cash equivalents at beginning of year		8 721	31 057
Foreign exchange differences		1 887	(787)
Cash and cash equivalents at end of year	14	16 503	8 721

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023

1. NOTES TO THE CONSOLIDATED 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 13 March 2024.

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 2023.


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.
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.
Gem Diamonds Botswana (Proprietary) Limited2 The Courtyard unit 7A Plot 54513 Village Gaborone Botswana	100%	US$5 844 579	Botswana	Diamond mining; evaluation and development; and holder of mining licences and concessions. Currently on care and maintenance.
Gem Diamonds Investments Limited2 6th Floor, 60 Gracechurch Street Broadway, London EC3V 0HR United Kingdom	100%	US$17 531 316	UK	Investment holding company holding 100% in each of Gem Diamonds Innovation Solutions CY Limited, a company holding intellectual property relating to development of technology to innovate mining processes; Baobab Technologies BV, a diamond analysis and valuation facility in Belgium; and Gem Diamonds Marketing Services BV, 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.

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, currently on care and maintenance)

Management monitors the operating results of the geographical units separately for the purpose of making decisions about resource allocation and performance assessment.

Segment performance is evaluated based on operating profit or loss. 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 diamond analysis and manufacturing 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:


	Lesotho	Belgium	BVI, RSA, UK and Cyprus1	Botswana	Total
Year ended 31 December 2023	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue from contracts with customers
Total revenue	140 905	140 121	6 733	-	287 759
Intersegment	(140 051)	(688)	(6 733)	-	(147 472)
External customers	854	139 433	-	-	140 287
Depreciation and amortisation	45 835	194	470	10	46 509
- Depreciation and mining asset amortisation	6 641	194	470	10	7 315
- Waste stripping cost amortisation	39 194	-	-	-	39 194
Share-based equity transactions	(21)	(2)	(309)	-	(332)
Segment operating profit/(loss)	19 573	676	(8 550)	(1 319)	10 380
Net finance costs	(3 500)	(23)	(1 000)	(173)	(4 696)
Profit/(loss) before tax	16 073	653	(9 550)	(1 492)	5 684
Income tax (expense)/income	(3 678)	5	(417)	-	(4 090)
Profit/(loss) for the year	12 395	658	(9 967)	(1 492)	1 594
EBITDA	22 129	857	(7 754)	-	15 232
Segment non-current assets	308 973	1 347	369	327	311 016
Segment assets	371 056	2 770	3 280	795	377 901
Segment liabilities	72 193	1 503	7 725	3 034	84 455
Other segment information
Net cash/(debt) and short-term deposits2	(17 908)	642	(4 082)	1	(21 347)
Capital expenditure
- Property, plant and equipment	30 014	25	34	311	30 384
- Net movement in rehabilitation asset3	(1 342)	-	-	-	(1 342)
- Waste cost capitalised	37 102	-	-	-	37 102
Total capital expenditure	65 774	25	34	311	66 144
Average number of employees employed under contracts of service	266	7	21	19	313

1 No revenue was generated in BVI and Cyprus.

2 Calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing and credit underwriting fees). Refer Note 16, 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 three customers who individually contributed 10% or more to total revenue. This revenue in total amounted to US$55.4 million arising from sales reported in the Belgium segment.

Segment non-current assets do not include deferred tax assets of US$6.8 million and financial instruments of US$4.5 million. Included in the non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current assets located in the Company's country of domicile, the UK, of US$20.7 thousand.

Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.8 million and US$82.1 million respectively.

Revenue decreased 26% compared to 2022 mainly due to lower prices achieved as a result of a downturn in the diamond market, a decrease of 3% in carats sold (104 520 carats compared to 107 498 in 2022) and lower than average recoveries of large diamonds. An average sales price of US$1 334 per carat (2022: US$1 755 per carat) was achieved.


	Lesotho	Belgium	BVI, RSA, UK and Cyprus1	Botswana	Total
Year ended 31 December 2022	US$'000	US$'000	US$'000	US$'000	US$'000
Revenue from contracts with customers
Total revenue	186 087	189 497	7 326	-	382 910
Intersegment	(185 782)	(865)	(7 326)	-	(193 973)
External customers	305	188 632	-	-	188 937
Depreciation and amortisation	43 267	263	1 081	80	44 691
- Depreciation and mining asset amortisation	6 982	263	1 081	80	8 406
- Waste stripping cost amortisation	36 285	-	-	-	36 285
Share-based equity transactions	(33)	(2)	(218)	-	(253)
Segment operating profit/(loss)	46 060	1 307	(10 158)	(2 688)	34 521
Net finance costs	(2 569)	(17)	(1 294)	(209)	(4 089)
Profit/(loss) before tax	43 491	1 290	(11 452)	(2 897)	30 432
Income tax expense	(10 236)	(195)	154	-	(10 277)
Profit/(loss) for the year	33 255	1 095	(11 298)	(2 897)	20 155
EBITDA	50 842	1 625	(8 781)	-	43 686
Segment non-current assets	308 889	1 516	627	28	311 060
Segment assets	350 640	2 411	6 676	518	360 245
Segment liabilities	43 987	1 677	2 097	3 401	51 162
Other segment information
Net cash and short-term deposits2	(2 627)	660	5 231	1	3 265
Capital expenditure
- Property, plant and equipment	11 894	7	19	-	11 920
- Net movement in rehabilitation asset3	858	-	-	(573)	285
- Waste cost capitalised	47 948	-	-	-	47 948
Total capital expenditure	60 700	7	19	(573)	60 153
Average number of employees employed under contracts of service	322	7	22	19	370

1 No revenue was generated in BVI and Cyprus.

2 Calculated as cash and short-term deposits less drawn down bank facilities (excluding the asset-based finance facility, insurance premium financing and credit underwriting fees). Refer Note 16, 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 2022 year is revenue from two customers who individually contributed 10% or more to total revenue. This revenue in total amounted to US$48.7 million arising from sales reported in the Belgium segment.

Segment non-current assets do not include deferred tax assets of US$6.0 million and financial instruments of US$2.9 million. Included in the non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current assets located in the Company's country of domicile, the UK, of US$19.4 thousand.

Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.0 million and US$82.0 million respectively.

1.2 Summary of material 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 1.2.14, 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 1.2.26, 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 became effective for the Group on 1 January 2023 and are listed in the table below. The adoption of these new accounting pronouncements has not had a significant impact on the consolidated financial statements of the Group nor the accounting policies, methods of computation or presentation applied by the Group. Other than the changes described below, the accounting policies are consistent with those of the previous financial year.


Amendments and new standards	Description
IFRS 17	Insurance contracts
Amendments to IAS 8	Definition of Accounting Estimates
Amendments to IAS 1	Disclosure of Accounting Policies
Amendments to IAS 12	Deferred Tax related to Assets and Liabilities arising from a Single Transaction
Amendments to IAS 12	International Tax Reform - Pillar Two Model Rules

Standards issued but not yet effective

The 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*
Amendments to IAS 1	Classification of liabilities as Current or Non-current and Non-current Liabilities with Covenants	1 January 2024
Amendments to IFRS 16	Lease Liability in a Sale and Leaseback	1 January 2024
Amendments to IAS 7 and IFRS 7	Supplier Finance Arrangements	1 January 2024
Amendments to IAS 21	Lack of exchangeability	1 January 2025
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	Pending

* Annual periods beginning on or after.

1.2.2 Going concern

The Group'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 Group, its cash flows and liquidity position are presented in the Annual Report and Accounts. In addition, Note 25, Financial risk management, includes the Group'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 debt at 31 December 2023 was US$21.3 million (31 December 2022: net cash US$3.3 million). The Group's available undrawn facilities at 31 December 2023 amounted to US$45.9 million (31 December 2022: US$82.6 million), resulting in liquidity (defined as net debt/cash and available undrawn facilities) of US$24.6 million (31 December 2022: US$85.9 million). The gross liquidity position of the Group (defined as gross cash and available undrawn facilities) as at 31 December 2023 is US$62.4 million (31 December 2022: US$91.3 million). The Group's Revolving Credit Facilities (RCF), which total US$71.0 million when fully unutilised, mature on 22 December 2024. In addition, there is a US$5.5 million general banking facility with no set expiry date, but is reviewed annually (Refer Note 16, Interest-bearing loans and borrowings).The impacts on future cash flows of Eskom's continued electricity outages, the current diamond market conditions, the ongoing Russian invasion on Ukraine and the conflict in Gaza, were considered by performing sensitivities on costs, diamond pricing and the unlikely weakening of the US dollar against the Lesotho loti.

The Group's RCFs mature on 22 December 2024. The existing facility agreement includes an option to extend the facilities for a period of 24 months (subject to lender approval). The Group may also decide to renew these facilities for a potentially longer period of 36 months. These facilities have been in place since 2011 and have been renewed on three previous occasions through expanding the lender group and increasing the overall facility amount. The Directors believe that in considering the future cash flows, the long-standing relationships with the wider lender group and the history of the successful renewals of the facilities, it is more than likely that the facilities be extended or renewed during 2024. In the unlikely event that the RCFs are not renewed, the Directors believe that various mitigation actions such as the deferment or further optimisation of waste stripping activities could be implemented in the short term.

After making enquiries which include reviews of forecasts and budgets, timing of cash flows and sensitivity analyses, the Group's operations and production levels, the various cost reduction initiatives and considering the likely successful renewal of the Group's RCFs, the Directors have a reasonable expectation that the Group has adequate financial resources without the use of mitigating actions to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the Group Financial Statements.

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 2023.

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 intra-group 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 mining assets within 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.

1.2.5 Development expenditure

When proven and probable 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 1.2.6, 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.

1.2.6 Property, plant and equipment

Property, plant and equipment is 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 life
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; units of production	Three to 15 years; machine hours
Other assets	Straight line	Two to eight years

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (ie, 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

The non-current asset recognised is referred to as a "stripping activity asset" and is separately disclosed in Note 8, 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. Given the deep vertical nature of the pit, all stripping costs are capitalised on a cut/component basis for each cut in the mine planning process.

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. The net book value of the stripping asset and future expected stripping costs to be incurred for that component is depreciated using the units of production over the proven and probable reserves, in order to match the total stripping costs of the cut to the economic benefits created by the cut. As a result, the stripping activity asset is carried at cost less amortisation and any impairment losses. The future stripping costs of the cut/component and the expected ore to be mined of that cut/component 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 1.2.26, 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 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.

1.2.9 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 and 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 timeframe established by regulation or convention in the marketplace (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 initially measured at fair value net of (in the case of financial liabilities not at fair value through profit or loss) directly attributable transaction costs. The Group's Interest-bearing loans and borrowings and trade and other payables 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 1.2.6, Property, plant and equipment, 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.

1.2.10 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.

1.2.11 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.

The Group maintains strategic stockpiles in line with operational and insurance requirements. In normal mining activities, lower grade (highly diluted) ore is consequentially mined and maintained in a separate stockpile. Although this lower grade (highly diluted) stockpile could be processed as emergency plant feed, it is likely that it will be processed at the end of life of mine. As a result, the associated mining costs for this stockpile are allocated at the net realisable value and the balance of the costs are allocated to the Main pipe strategic stockpiles.

1.2.12 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 that are held to meet the Group's short-term cash commitments.

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 which are repayable on demand and form an integral part of the Group's cash management.

1.2.13 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.

Treasury shares

Own equity instruments that are reacquired are recognised at cost, including transaction costs, and deducted from equity. These are disclosed as treasury shares. No gain or loss is recognised in profit or loss in the purchase, sale, issue or cancellation of the Group's own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in equity.

1.2.14 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 15, Issued share 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.

1.2.15 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).

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).

On a cumulative basis, over the vesting period of an award, 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.

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 Note1.2.26, Critical accounting estimates and judgements.

The Group periodically releases the share-based equity reserve to retained earnings in relation to lapsed and forfeited options subsequent to vesting dates.

1.2.16 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.

1.2.17 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 programme 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 1.2.26, Critical accounting estimates and judgements.

1.2.18 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.

1.2.19 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.

1.2.20 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 and non-lease component on the basis of the individual relative stand-alone price of all lease and non-lease components and the aggregate stand-alone price of all lease and 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 IFRS 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 1.2.10, 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 is 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.

1.2.21 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 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, as this is the point in time at which the significant constraints are lifted or resolved from the Polished Margin revenue.

Rendering of services

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.

1.2.22 Interest income

Interest income is recognised on a time proportion basis using the effective interest rate method.

1.2.23 Dividend income

Dividend income is recognised when the amount of the dividend can be reliably measured and the Group's right to receive payment is established.

1.2.24 Finance costs

Finance costs are recognised on a time proportion basis using the effective interest rate method.

1.2.25 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.

1.2.26 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.

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, Europe and the United Kingdom. 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.

Task Force on Climate-related Financial Disclosures (TCFD)

In preparing the Consolidated Financial Statements management continues to consider the impact of climate change, particularly in the context of the disclosures included in the Strategic Report detailing the now implemented TCFD requirements and the high level overview of some climate-related risks and opportunities. These considerations did not have a material impact on the financial reporting estimates and judgements, consistent with the assessment that climate change is not expected to have a significant impact on the Group's going concern assessment to March 2025, after which management will assess the impact on the Group's going concern. These considerations also had no material impact on any Property, Plant and Equipment or Commitments. For Letšeng, the physical risks identified of severe weather conditions, are similar to its current operating conditions of drought, high wind, snow and rainfall. The operation is therefore well set up to manage these conditions within its current reporting and accounting framework. As users of grid-supplied and fossil fuel energy, our short-term focus is on improving energy efficiencies in our operational processes and on reducing fossil fuel use. Due to the uncertainty of the cost and timing of implementation of carbon-related taxes, the impact of such taxes on the Group's operations and cash flows has been excluded from the going concern, viability assessment and impairment review.

The ongoing Russian invasion of Ukraine and the conflict in Gaza

The supply chain challenges caused by the ongoing Russian invasion of Ukraine has significantly increased the price of consumables, especially diesel and explosive costs used in the mining activities, and inflation rates across the jurisdictions where the Group operates. The slowdown of global economic growth in 2023 was further impacted by the conflict in Gaza that began in October 2023 and the subsequent attacks launched by Yemen's Houthi rebels on cargo vessels in the Red Sea at the start of 2024. The diamond industry has suffered in the face of these challenges. Management has incorporated the impact of the current and historical diamond prices, increased costs and current inflation when assessing its future cash flows.

Insourcing of the mining activities

Matekane Mining Investment Company (Proprietary) Limited (MMIC) has been the provider of mining services to Letšeng since 2005. Following the election of Mr Sam Matekane (the ultimate owner of MMIC) as Prime Minister of Lesotho in October 2022, Letšeng carefully considered its options to resolve the potential conflict of interest created by being in a business relationship with a politically exposed person. This transition to owner mining further creates an opportunity for Letšeng to maximise mining efficiencies, reduce costs through eliminating contractor margins, manage mining procurement directly and enables further flexibility in the planning and execution of its mining activities. All these factors will contribute to a more efficient and cost effective operation. Effective 1 December 2023, Letšeng reached agreement with MMIC to early terminate the mining equipment and service lease contract, eleven months ahead of its scheduled contractual end date (31 October 2024) without any termination penalties and insourced these activities. Letšeng acquired the mining fleet and support equipment that was used exclusively for Letšeng, and offered employment to those MMIC employees working exclusively for Letšeng, in line with operational requirements, effective 1 February 2024. The MMIC employees remained as contract workers from 1 December 2023.

The total purchase price, which was determined with the assistance of external third-party valuators,was US$22.7 million. A payment mechanism was agreed whereby US$13.0 million was paid on 1 December 2023, the effective date, US$9.3 million was paid in January 2024, and a retainer of US$0.4 million, withheld for equipment under repair was paid in early March 2024. The US$9.7 million portion of the purchase price not settled in cash on the effective date of the acquisition has been presented as part of current trade and other payables in the consolidated statement of financial position.

In assessing whether this transaction met the criteria of an asset acquisition or a business combination, the criteria set out in IFRS 3 Business Combinations was considered. Management opted to apply the optional test, being a concentration test, which permits a simplified quantitative assessment of whether an acquired set of activities and assets is not a business. Based on the results from the concentration test, the Group concluded that the acquisition is not a business combination but rather an asset acquisition due to substantially all the fair value of the gross assets acquired being concentrated into a group of similar identifiable assets which are the same in nature and exposed to the same risk in terms of managing and creating outputs from the mining activities at Letšeng. The total purchase price was allocated to all the identifiable IAS 16 Property, plant and equipment assets acquired on the basis of their relative fair values at the effective date of the acquisition. The capitalised total purchase price has been disclosed as additions within Note 8, Property, plant and equipment mainly within the plant and equipment category amounting to US$22.7 million. Directly attributable transaction costs of US$0.1 million were allocated to all of the individual identifiable IAS 16 Property, plant and equipment assets acquired on the basis of their relative fair values at the effective date of the acquisition. These assets will be depreciated over the useful life of each asset based on the available production hours. The financial results for 31 December 2023 includes one month of depreciation. The US$13.0 million portion of the purchase price and the directly attributable transaction costs of US$0.1 million that were settled in cash during the current financial reporting period have been presented in the purchase of property, plant and equipment line item within cash flows used in investing activities.

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 8, Property, plant and equipment, Note 10, Intangible assets and Note 20, Provisions.

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 20, 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, 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. Refer Note 11, 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. The LoM of Letšeng is to 2038 (2022: 2040). The earlier life was mainly as a result of a redesign of the Main pit.

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 costs have been based on owner-mining assumptions and estimates, following the insourcing of the mining activities, and are lower than in the past due to an immediate saving of contractor margin costs. Processing costs in the short term have been based on historical trends and agreements with relevant contractors. More recently there has been a significant focus on cost efficiencies in the processing plants, which have yielded positive results consistently for two months. These costs have been reduced to recently achieved levels from 2025. In the longer term, management has applied local inflation rates of 5.0% (2022: 5.0%) for operating costs beyond 2026. Up to 2026, inflation rates applied ranged between 5.4% - 8.9% (2022: 5.5% - 8.9%).

Capital costs for the first five years have been based on management's capital programme after which a fixed percentage of operating costs has been applied to determine the capital costs necessary to maintain current levels of operations.

Exchange rates

Exchange rates are applied in line with IAS 36, Impairment of Assets. The US dollar/Lesotho loti (LSL) exchange rate used was determined with reference to the closing rate at 31 December 2023 of LSL18.29 (31 December 2022: LSL17.02).

Diamond prices

Discount rate

The discount rate of 10.4% for revenue (2022: 12.5%) and 12.4% for costs (2022: 15.4%) 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 11, Impairment testing.

Provision for restoration and rehabilitation and deferred tax thereon

Judgement is applied when calculating the closure costs associated with the restoration of the Letšeng mine site. These include the following:

· there are no costs associated with the backfill of the open pits due to no in-country legislation requirements;

· concurrent rehabilitation of the waste rock dump and residue storage facilities will take place during the operational phase; and

· there are no costs associated with dismantling permanent buildings as these will be handed over to various parties in consultation with the Lesotho Government when the end of life is reached.

At the Ghaghoo mine site, the following judgements were applied:

· the mine site will be left in a state which could enable a future operator to operate on the site, and therefore certain infrastructure, such as access roads to the mine, paving and walkways, a new solar solution installation, borehole pump and water treatment plant, will remain intact and, after obtaining the necessary approvals, it will be handed over to the Government of Botswana through the Ministry of Minerals and Energy. Therefore, no costs associated with the rehabilitation of certain roads or rehabilitation and dismantling of certain infrastructures; and

· the timing of the rehabilitation cost cash flows has been estimated to be five years.

At Letšeng, deferred tax assets are recognised on provisions for rehabilitation as management will ensure appropriate tax planning to ensure sufficient taxable income is available to utilise all deductions in the future. At Ghaghoo, no deferred tax assets have been recognised on the provision for rehabilitation as management does not foresee any taxable profits or taxable temporary differences against which the deferred tax asset can be utilised due to the operation being under care and maintenance.

Capitalised stripping costs (deferred waste)

Waste removal costs (stripping costs) are incurred during the development and production phases at surface mining operations. 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.

Judgements and estimates are also used to apply the amortisation rate, future stripping costs of the cut/component and the expected ore to be mined of that cut/component. Refer Note 8, Property, plant and equipment.8, Property, plant and equipment.

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 26, Share-based payments, for further detail.

Identifying uncertainties over tax treatments

As previously disclosed, an amended tax assessment was issued to Letšeng by the Revenue Services Lesotho (RSL), in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. An objection to the amended tax assessment was lodged with the RSL in March 2020, which was supported by the opinion of senior counsel. The RSL subsequently lodged a court application for the review and setting aside of the applicable regulations to the Lesotho High Court pertaining to this matter, which Letšeng is opposing. The amended court application process will continue during 2024, with support from senior legal counsel.

Management do not believe an uncertain tax position exists as:

· there is no ambiguity in the application of the published 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 for the new circumstances. This advice still reflects good prospects of success.

No provision or contingent liability, relating to

· the amended tax assessment in question; or,

· any potential legal costs that could be incurred should the matter be found in favour of the RSL has been raised in the 2023 Annual Financial Statements.

Offsetting of deferred tax assets and deferred tax liabilities of the Group's subsidiary, Letšeng Diamonds

The Group's subsidiary, Letšeng Diamonds, is subject to the tax laws and regulations enacted within Lesotho. The corporate tax laws and regulations currently enacted by the RSL requires a taxpayer to file a claim for offsetting current tax asset and current tax liabilities, and offsetting deferred tax assets and deferred tax liabilities with the Commissioner within four years after service of the notice of assessment for the year of assessment to which the claim relates.

The Group, after applying significant judgement, is of the view that Letšeng Diamonds does not have a legal enforceable right to offset current tax assets against current tax liabilities, and deferred tax assets against deferred tax liabilities within the Lesotho corporate tax jurisdiction as it is subject to the Commissioner's approval of the claim submitted for which the outcome is highly uncertain as the approval is purely subject to the discretion of the Commissioner. On this basis, the Group does not offset Letšeng Diamonds deferred tax assets and deferred tax liabilities, but rather presents them on a gross basis in the consolidated statement of financial position. Refer Note 1.2.18, Taxation.

Equipment and service lease

Prior to the insourcing of Letšeng's mining activities on 1 December 2023, these activities were outsourced to a mining contractor, MMIC, that performed these functions using their own equipment. Management applied judgement when evaluating whether the contract between Letšeng and MMIC contained a lease. While it was concluded there was a lease, lease payments were variable in nature as the lease payments varied based on the tonnes of ore and waste mined and hence no right of use asset or liability could be measured. From the beginning of the current year until 1 December 2023, a portion of the lease payment was expensed in the consolidated statement of profit or loss, and the portion relating to waste removal/stripping costs was 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 1.2.26, Critical accounting estimates and judgements, Capitalised stripping costs (deferred waste) and Note 23, Commitments and contingencies.


		2023	2022
		US$'000	US$'000
2.	REVENUE FROM CONTRACTS WITH CUSTOMERS
	Sale of goods	139 433	188 615
	Partnership arrangements	854	306
	Rendering of services	-	16
		140 287	188 937

The revenue from the sale of goods mainly 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$0.9 million represents the additional uplift from partnership arrangements for which revenue is recognised when the significant constraints are lifted or resolved and the amount of revenue is guaranteed (2022: US$0.3 million). At year end 1 728 carats (2022: 1 457 carats) have significant constraints in recognising revenue relating to the additional uplift.


		2023	2022
		US$'000	US$'000
3.	OTHER OPERATING INCOME/(EXPENSES)
	Sundry income	206	61
	Ghaghoo reduction in rehabilitation provision	354	-
	Proceeds from insurance claim1	1 030	-
	Proceeds from VAT refund2	251	-
	Ghaghoo care and maintenance costs3	(1 809)	(2 053)
	(Loss)/profit on disposal and scrapping of property, plant and equipment	(22)	195
	COVID-19 related costs	(3)	(140)
		7	(1 937)

1 Proceeds from insurance claim includes a payout of US$1.0 million for a claim on diesel theft at Letšeng which occurred between June 2020 and June 2021.

2 Proceeds from VAT refund relates to long-outstanding VAT refunds received from the Revenue Service of Lesotho which had been previously written off at Letšeng.

3 Includes depreciation recognised in the current year of US$10.0 thousand (31 December 2022: US$80.0 thousand) relating to right of use assets.


		2023	2022
		US$'000	US$'000
4.	OPERATING PROFIT
	Operating profit includes operating costs and income as listed below:
	Depreciation and amortisation
	Depreciation and mining asset amortisation excluding waste stripping cost1	(5 423)	(6 588)
	Depreciation of right-of-use assets	(1 892)	(1 818)
	Waste stripping costs amortised	(39 194)	(36 285)
		(46 509)	(44 691)
	Inventories
	Cost of inventories recognised as an expense (including the relevant portion of waste stripping costs amortised)	(102 204)	(116 382)
	Foreign exchange
	Foreign exchange gain	2 775	1 914
	Lease expenses not included in lease liability
	Mine site property	(152)	(142)
	Equipment and service lease	(9 728)	(11 154)
	Contingent rental - Alluvial Ventures	-	(3 556)
		(9 880)	(14 852)
	Impairment of non-current assets	-	(702)

	Auditor's remuneration - EY
	Group financial statements	(328)	(411)
	Statutory	(161)	(242)
		(489)	(653)
	Auditor's remuneration - other audit firms
	Statutory	(92)	(26)
	Other non-audit fees - EY
	Other services	(7)	(56)
	Other non-audit fees - other audit firms
	Tax services advisory and consultancy	(31)	(74)
	Employee benefits expense
	Salaries and wages2	(14 386)	(17 239)
	Underlying earnings before interest, tax, depreciation and mining asset amortisation (underlying EBITDA)
	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	10 380	34 521
	Other operating (income)/expenses3	(20)	1 718
	Impairment of non-current assets	-	702
	Foreign exchange gain	(2 775)	(1 914)
	Share-based payments	332	253
	Depreciation and amortisation (excluding waste stripping cost amortised)	7 315	8 406
	Underlying EBITDA	15 232	43 686

1 Includes depreciation for the month of December, of US$0.2 million, relating to the mining fleet and support equipment, acquired as part of the insourcing of the mining activities. Refer Note 1.2.26, Critical accounting estimates and judgements.

2 Includes contributions to defined contribution plan of US$0.4 million (31 December 2022: US$0.5 million). An average of 313 employees excluding contractors were employed during the period (2022: 370).

3 Excludes COVID-19-related costs of US$3.3 thousand (31 December 2022: US$0.1 million) which are considered as operating costs. Includes Ghaghoo-related care and maintenance costs of US$1.8 million (31 December 2022: US$2.1 million), and an insurance payout of US$1.0 million for a claim on diesel theft at Letšeng, which are considered non-operating.


		2023	2022
		US$'000	US$'000
5.	NET FINANCE COSTS
	Finance income
	Bank deposits	292	303
	Insurance asset	325	110
	Total finance income	617	413
	Finance costs
	Finance costs on borrowings	(3 332)	(2 552)
	Finance costs on lease liabilities	(497)	(666)
	Finance costs on unwinding of rehabilitation and decommissioning provision	(1 484)	(1 284)
	Total finance costs	(5 313)	(4 502)
		(4 696)	(4 089)

Finance income relates to interest earned on cash, short-term deposits and insurance assets.

Finance costs include interest incurred on borrowings and associated unwinding of facility credit underwriting fees, finance lease liabilities and the unwinding of rehabilitation provisions.


		2023	2022
		US$'000	US$'000
6.	INCOME TAX EXPENSE
	Current
	- Foreign	(909)	(6 054)
	Withholding tax
	- Foreign	-	(1 356)
	- Foreign: prior year over payment2	596	-
	Deferred
	- Foreign	(3 777)	(2 867)
	Income tax expense	(4 090)	(10 277)
	Profit before taxation	5 684	30 432


	%	%
Reconciliation of tax rate
Applicable income tax rate	25.0%	25.0%
Permanent differences1	5.4%	0.4%
Unrecognised deferred tax assets	32.9%	6.4%
Effect of foreign tax at different rates3	19.2%	2.8%
Unremitted earnings4	-%	(5.3)%
Withholding tax4	-%	4.5%
Withholding tax: prior year over payment2	(10.5)%	-%
Effective income tax rate	72.0%	33.8%

The tax rate reconciles to the statutory Lesotho corporation tax rate of 25% as this is the jurisdiction in which the majority of the Group's taxes are incurred.

1 This item relates to withholding tax previously overpaid and refunded in full in the current year by the Revenue Services Lesotho after acknowledgment thereof.

2 Permanent differences comprise non-deductible expenses for tax purposes, namely corporate social investment, legal fees of a capital nature and share-based payments in both the current and prior year.

3 Includes provision for uncertain tax positions. Refer Note 23 Commitments and contingencies.

4 These amounts were disclosed on a net basis in the prior year and have been disaggregated and disclosed separately in the current year and had no impact in the consolidated financial statements of the Group.

The corporate income tax rate in the United Kingdom was increased from 19% to 25% for companies effective from 1 April 2023. This is applicable to Gem Diamonds Limited, the Groups' parent company. This increase did not have a material impact on the Group.


		2023	2022
		US$'000	US$'000
7.	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	1 594	20 155
	Less: Non-controlling interests	(3 719)	(9 977)
	Net (loss)/ profit attributable to ordinary equity holders of the parent for basic and diluted earnings	(2 125)	10 178
	Number of ordinary shares outstanding at end of year ('000)	141 210	140 923
	Weighted number of share options exercised during the year ('000)	(161)	(145)
	Effect of share buyback - Treasury shares ('000)	(1 520)	(977)
	Weighted average number of ordinary shares outstanding during the year ('000)	139 529	139 801
	Basic (loss)/earnings per share attributable to ordinary equity holders of the parent (cents)	(1.5)	7.3

(Loss)/earnings per share is calculated by dividing the net (loss)/profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted (loss)/earnings per share is calculated by dividing the net (loss)/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.


	2023	2022
	Number of shares 000's	Number of shares 000's
Weighted average number of ordinary shares outstanding during the year	139 529	139 801
Effect of dilution:
- Future share awards under the Employee Share Option Plan	2 509	1 857
Weighted average number of ordinary shares outstanding during the year adjusted for the effect of dilution	142 038	141 658
Diluted (loss)/earnings per share attributable to ordinary equity holders of the parent (cents)	(1.5)	7.2

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.

8. PROPERTY, PLANT AND EQUIPMENT


	Stripping activity asset	Mining asset	De- commis- sioning assets	Lease- hold improve- ment	Plant and equip- ment3	Other assets1	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
As at 31 December 2023
Cost
As at 1 January 2023	609 336	103 972	3 519	53 740	89 292	8 521	868 380
Additions2	37 102	2 056	-	17	27 056	1 255	67 486
Net movement in rehabilitation provision	-	-	-	-	(1 342)	-	(1 342)
Disposals	-	-	-	-	(588)	(238)	(826)
Reclassifications	-	156	-	710	(1 153)	287	-
Foreign exchange differences	(42 066)	(5 357)	(264)	(3 575)	(5 948)	(489)	(57 699)
As at 31 December 2023	604 372	100 827	3 255	50 892	107 317	9 336	875 999
Accumulated depreciation/amortisation/impairment
As at 1 January 2023	425 316	42 564	3 519	33 140	63 727	6 615	574 881
Charge for the year	39 194	559	-	1 536	2 895	433	44 617
Disposals	-	-	-	-	(571)	(229)	(800)
Foreign exchange differences	(27 356)	(4 097)	(264)	(2 132)	(4 279)	(401)	(38 529)
As at 31 December 2023	437 154	39 026	3 255	32 544	61 772	6 418	580 169
Net book value at 31 December 2023	167 218	61 801	-	18 348	45 545	2 918	295 830

1 Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment.

2 Includes purchase of mining fleet and support equipment (including transaction costs capitalised) of US$22.8 million in terms of the insourcing of the mining activities which is disclosed in the plant and equipment category. Refer Note 1.2.26 Critical accounting estimates and judgements.

3 Included in plant and equipment are capital projects in progress of US$4.1 million (31 December 2022: US$14.4 million).


	Stripping activity asset	Mining asset	De- commis- sioning assets	Lease- hold improve- ment	Plant and equip- ment	Other assets1	Total
As at 31 December 2022
Cost
Balance at 1 January 2022	599 558	107 999	3 769	51 418	74 504	7 304	844 552
Additions - Ghaghoo (Note 15)	-	585	-	6 135	10 594	1 240	18 554
Additions	47 948	242	-	-	11 391	287	59 868
Net movement in rehabilitation provision	858	-	-	(307)	(266)	-	285
Disposals	-	-	-	-	(23)	(116)	(139)
Reclassifications	-	262	-	113	(685)	310	-
Foreign exchange differences	(39 028)	(5 116)	(250)	(3 619)	(6 223)	(504)	(54 740)
As at 31 December 2022	609 336	103 972	3 519	53 740	89 292	8 521	868 380
Accumulated depreciation/ amortisation/impairment
As at 1 January 2022	414 706	44 874	3 769	26 648	55 544	5 384	550 925
Additions - Ghaghoo (Note 15)	-	585	-	5 567	9 746	1 243	17 141
Charge for the year	36 080	958	-	2 925	2 388	522	42 873
Impairment2	-	-	-	161	541	-	702
Disposals	-	-	-	-	(21)	(116)	(137)
Foreign exchange differences	(25 470)	(3 853)	(250)	(2 161)	(4 471)	(418)	(36 623)
As at 31 December 2022	425 316	42 564	3 519	33 140	63 727	6 615	574 881
Net book value at 31 December 2022	184 020	61 408	-	20 600	25 565	1 906	293 499

1 Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment.

2 The impairment relates to the assets impaired at Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) following it ceasing to be classified as a discontinued operation held for sale during the prior year. The recoverable amount of all items of property, plant and equipment at Ghaghoo was assessed and an impairment charge of US$0.7

million was recognised, reducing the carrying value of the leasehold improvements and plant and equipment categories to zero. This impairment has been included in the Botswana segment in Note 1.1.3, Segment information.



		Plant and equipment	Motor vehicles	Buildings	Total
		US$'000	US$'000	US$'000	US$'000
9.	RIGHT-OF-USE ASSETS
	As at 31 December 2023
	Cost
	As at 1 January 2023	3 190	421	6 430	10 041
	Additions	502	508	122	1 132
	Derecognition of lease	(94)	(536)	(225)	(855)
	Foreign exchange differences	(219)	(30)	(319)	(568)
	As at 31 December 2023	3 379	363	6 008	9 750
	Accumulated depreciation
	As at 1 January 2023	688	115	2 898	3 701
	Charge for the year	845	96	951	1 892
	Derecognition of lease	(42)	(100)	(225)	(367)
	Foreign exchange differences	(41)	(8)	(173)	(222)
	As at 31 December 2023	1 450	103	3 451	5 004
	Net book value at 31 December 2023	1 929	260	2 557	4 746
	As at 31 December 2022
	Cost
	As at 1 January 2022	56	94	5 761	5 911
	Additions	3 259	384	1 644	5 287
	Derecognition of lease	(27)	(38)	(672)	(737)
	Foreign exchange differences	(98)	(19)	(303)	(420)
	As at 31 December 2022	3 190	421	6 430	10 041
	Accumulated depreciation
	As at 1 January 2022	20	63	2 691	2 774
	Charge for the year	695	96	1 027	1 818
	Derecognition of lease	(24)	(38)	(672)	(734)
	Foreign exchange differences	(3)	(6)	(148)	(157)
	As at 31 December 2022	688	115	2 898	3 701
	Net book value at 31 December 2022	2 502	306	3 532	6 340

Plant and equipment mainly comprise back-up power generating equipment utilised at Letšeng. Motor vehicles mainly comprise vehicles utilised by contractors at Letšeng. Buildings comprise office buildings in Maseru, Antwerp, London, Gaborone and Johannesburg.

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, Gem Diamonds Limited entered into a new contract for the rental of its London office space as the original lease came to an end. At Letšeng, the lease contract for certain assets relating to blasting services was renegotiated resulting in the recognition of associated right-of-use assets and lease liabilities. The original contract was cancelled and all associated assets and liabilities were derecognised. Furthermore, two new contracts were entered into for the rental of earth-moving equipment and certain assets relating to catering, housekeeping and laundry services. Both contracts were assessed as containing a lease resulting in the recognition of the new associated right-of-use assets and lease liabilities. Refer Note 17, Lease liabilities.

During the prior year, a new lease contract for back-up power generating equipment at Letšeng was entered into resulting in the recognition of right-of-use assets and lease liabilities associated with the new lease. Furthermore, Gem Diamonds Marketing Services and Baobab Technologies entered into new contracts for the rental of office space in Antwerp as the original contracts both came to an end. The new contracts were assessed as containing leases, which resulted in the recognition of the new associated right-of-use assets and lease liabilities. Refer Note 17, Lease liabilities and Note 22.1, Cash generated by operations.

Total gains of US$30 thousand (2022: nil) have been recognised in the consolidated statement of profit or loss relating to the derecognition of leases in the Group during the year. Refer Note 17, Lease liabilities and Note 22.1, Cash generated by operations. During the year the Group recognised income of US$0.3 million (2022: US$0.3 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 future

years in line with current lease terms:


	US$ '000
1 January 2024 - 31 December 2024	340
1 January 2025 - 31 December 2025	205


		Goodwill1
		US$'000
10.	INTANGIBLE ASSETS
	As at 31 December 2023
	Cost
	Balance at 1 January 2023	11 221
	Foreign exchange translation difference	(781)
	Balance at 31 December 2023	10 440
	Accumulated amortisation
	Balance at 1 January 2023	-
	Amortisation	-
	Balance at 31 December 2023	-
	Net book value at 31 December 2023	10 440
	As at 31 December 2022
	Cost
	Balance at 1 January 2022	11 962
	Foreign exchange translation difference	(741)
	Balance at 31 December 2022	11 221
	Accumulated amortisation
	Balance at 1 January 2022	-
	Amortisation	-
	Balance at 31 December 2022	-
	Net book value at 31 December 2022	11 221

1 Goodwill allocated to Letšeng Diamonds. Refer Note 11, Impairment testing.


		2023	2022
		US$'000	US$'000
11.	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 2023. 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 2023, 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	10 440	11 221
	As at 31 December 2023	10 440	11 221

Movement in goodwill relates to foreign exchange translation from functional to presentation currency, as disclosed within Note 10, Intangible assets.

The discount rates are outlined below and represents the nominal pre-tax rate. These rates are 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.


	2023	2022
	%	%
Discount rate - Letšeng Diamonds
Applied to revenue	10.4	12.5
Applied to costs	12.4	15.4

Value in use

The mining lease period at Letšeng extends to 2029 with an exclusive option to renew for a further 10 years to 2039. The latest open pit mine plan which has been used to project the cash flows, reflects that the open pit mining (including inferred resources) is expected to cease in 2038 (31 December 2022: 2040). In terms of IAS 36, cash flows are projected for a period up to the date of the life of mine plan period, ie 2038, as it is earlier than the ceasing of the current mining lease period of 2039. During the prior period the IAS 36 cash flows were projected for a period up to the end of the mining lease period of 2039 as it was earlier than the life of mine plan period which was up to 2040. The mine plan takes into account the available reserves and other relevant inputs such as diamond pricing, costs and geotechnical parameters. It includes the next open pit cutback in the Satellite pipe (C6W) and steeper slope angles implemented in the Main pit Cut 4 East and Cut 4 West cutbacks. The cost savings associated with the recently concluded owner-mining initiative have been included in the value-in-use model. Refer Note1.2.26, Critical accounting estimates and judgements.

Sensitivity to changes in assumptions

The Group will continue to test its assets for impairment where indications are identified.

Refer Note 1.2.26, Critical accounting estimates and judgements, for further details on impairment testing policies.

The short and medium-term diamond prices used in the impairment test have been set with reference to historical and 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 2023 exceeded the carrying value by US$63.3 million (31 December 2022: US$92.2 million). The valuation is sensitive to input assumptions particularly in relation to the foreign exchange assumption of the US dollar (US$) to the Lesotho loti (LSL) at year end, future price growth for diamonds and increase in operating costs. The Group has assumed an appropriate price increase for its diamonds following the significant pressure experienced in the diamond market during the year.

A range of alternative scenarios have been considered in determining whether there is a reasonable possible change in the foreign exchange rates, operating costs and diamond prices, which would result in the recoverable amount equating to the carrying amount. A 7% strengthening of the LSL to the US$ to US$1:LSL17.00 (31 December 2022: 8% to US$1:LSL15.60) or a reduction of 5.0% (31 December 2022: 6.5%) to the starting diamond prices (at year end exchange rate) would result in the recoverable amount equating to the current carrying value, with other valuation assumptions remaining the same. As a result of the variability in consumable prices such as diesel and explosive costs, a third sensitivity on changes in costs was performed. An 8% (31 December 2022: 8%) increase in current estimated operating costs of US$1.7 billion (31 December 2022: US$2.5 billion) over the life of mine would result in the recoverable amount equating to the current carrying amount, with other valuation assumptions remaining the same.

As a result, no impairment charge was recognised for the Letšeng Diamonds CGU during the year.


		2023	2022
		US$'000	US$'000
12.	RECEIVABLES AND OTHER ASSETS
	Non-current
	Deposits	90	96
	Insurance asset1	4 397	2 820
		4 487	2 916
	Current
	Trade receivables	23	23
	Prepayments2	1 249	1 350
	Deposits	24	21
	Other receivables	374	249
	Vat receivable	1 961	3 212
		3 631	4 855
	The carrying amounts above approximate their fair value due to the nature of the instruments.
	Analysis of trade receivables based on their terms and conditions
	Neither past due nor impaired	2	-
	Past due but not impaired:
	> 120 days	21	23
		23	23

1 This non-current asset relates to Letšeng's Multi-aggregate Protection Insurance Policy with The Lesotho National Insurance Group (LNIGC) of M140.0 million (US$7.7 million) (31 December 2022: LSL140.0 million) entered into in October 2021. This policy has a remaining tenure of two-and-a-half years at year end (31 December 2022: three-and-a-half-years). Premium payments of LSL30.0 million (US$1.6 million) (31 December 2022: LSL30.0 million (US$1.8 million)) for the policy are payable annually in advance. Refer Note 23, Commitments and contingencies. The policy gives Letšeng the right to claim up to LSL75.0 million (31 December 2022: LSL75.0 million) for each-and-every-loss and LSL150.0 million (31 December 2022: LSL150.0 million) in the aggregate (subject to terms and conditions contained in the policy). On expiry of the policy in June 2026, all unutilised funds within the policy are due and payable to Letšeng. A non-current financial asset has been recognised for the unutilised premium paid to date, net of underwriting service fee of LSL 2.1 million (US$0.1 million) (31 December 2022: LSL2.1 million (U$0.1 million)) as expensed as part of operating expenses within the Statement of Profit or Loss. The non-current financial asset is measured at amortised cost in line with IFRS 9 Financial Instruments. Interest is earned on the unrealised premium and recognised as finance income. The third premium payment of LSL 30.0 million (US$1.6 million) (31 December 2022: LSL30.0 million (US$1.8 million) was financed through a 10-month loan through Premium Finance Partners (Proprietary) Limited. This non-current financial asset is ceded in favour of Premium Finance Partners (Proprietary) Limited. Refer Note 16, Interest-bearing loans and borrowings.

2 Prepayments include insurance premiums prepaid at Letšeng of US$0.4 million (31 December 2022: US$0.4 million) which were also funded through Premium Finance Partners (Proprietary) Limited. This prepayment is ceded in favour of Premium Finance Partners (Proprietary) Limited. Refer Note 16, Interest-bearing loans and borrowings.

Based on the nature of the Group's customer base and the negligible exposure to credit risk through its customer base, insurance asset and other financial assets, the expected credit loss is insignificant and has no impact on the Group.


		2023	2022
		US$'000	US$'000
13.	INVENTORIES
	Diamonds on hand	17 128	16 745
	Ore stockpile	11 553	5 053
	Consumable stores	8 952	8 572
		37 633	30 370

Inventory is carried at the lower of cost or net realisable value.

There were no write-downs to net realisable value recorded in the current year. In the prior year, lower grade (highly diluted) ore stockpile inventory at Letšeng was written down by US$1.5 million to net realisable value.

Part of the ore stockpile was historically treated by Alluvial Ventures, the third-party plant contractor. This contract expired during the previous year and the plant was dismantled, resulting in the stockpiles being treated at a slower rate, causing the overall increase in the balance. Refer Note 1.2.11, Inventories.


		2023	2022
		US$'000	US$'000
14.	CASH AND SHORT-TERM DEPOSITS
	Cash on hand	3	4
	Bank balances	5 101	6 006
	Short term bank deposits	11 399	2 711
		16 503	8 721

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 2023, the Group had US$45.9 million (31 December 2022: US$82.6 million) of undrawn facilities, representing LSL180.0 million (US$9.8 million) (31 December 2022: LSL450.0 million (US$26.5 million)) and ZAR120.0 million (US$6.6 million) (31 December 2022: ZAR300.0 million (US$17.6 million)) of the three-year secured revolving working capital facility at Letšeng, ZAR100.0 million (US$5.5 million) (31 December 2022: ZAR100.0 million (US$5.9 million) of the Letšeng general banking facility, and US$24.0 million (31 December 2022: US$30.0 million) of the Company's three-year secured revolving credit facility. In the prior year there was also an amount of ZAR43.5 million (US$2.6 million) undrawn facility relating to the PCA project facility which had been fully drawn down in the current year. For further details on these facilities, refer Note 16, Interest-bearing loans and borrowings.

15. ISSUED SHARE CAPITAL AND RESERVES

Share capital


	31 December 2023		31 December 2022
	Number of shares '000	US$'000	Number of shares '000	US$'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	140 923	1 410	140 515	1 406
Allotments during the year	287	3	408	4
Number of ordinary shares outstanding at end of year	141 210	1 413	140 923	1 410
Treasury shares	(1 520)	(1 157)	(1 520)	(1 157)
Balance at end of year	139 690	256	139 403	253

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	Share- based equity reserve	Total
	US$'000	US$'000	US$'000
As at 1 January 2023	(245 967)	6 798	(239 169)
Other comprehensive loss	(11 957)	-	(11 957)
Total comprehensive loss	(11 957)	-	(11 957)
Share capital issue	-	(3)	(3)
Share-based payment expense	-	332	332
As at 31 December 2023	(257 924)	7 127	(250 797)
As at 1 January 2022	(233 276)	6 579	(226 697)
Other comprehensive loss	(12 691)	-	(12 691)
Total comprehensive loss	(12 691)	-	(12 691)
Share capital issue	-	(4)	(4)
Share-based payment expense	-	253	253
Transfer to (accumulated losses)/retained earnings	-	(30)	(30)
As at 31 December 2022	(245 967)	6 798	(239 169)

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 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:


		2023	2022
	Currency	US$'000	US$'000
Average rate	ZAR/LSL to US$1	18.45	16.37
Year end	ZAR/LSL to US$1	18.29	17.02
Average rate	Pula to US$1	13.36	12.37
Year end	Pula to US$1	13.39	12.75

Share-based equity reserves

For details on the share-based equity reserve, refer Note 26, Share-based payments.

Capital management

For details on capital management, refer Note 25, Financial risk management.

Treasury shares

During the previous year, the Board of Directors approved a share buyback programme to purchase up to US$2.0 million of the Company's ordinary shares. The sole purpose of the programme was to reduce the capital of the Company and the Company intends to hold those ordinary shares purchased under the programme in treasury. Such treasury shares are not entitled to dividends and have no voting rights. The share buyback programme was initiated on 12 April 2022. At 31 December 2022, 1 520 170 shares had been bought back at the market value on the date of each buyback, equating to a weighted average price of 60.05 GB pence (78.07 US cents) per share, totalling US$1.2 million (including transaction costs). This reduction in shares issued has been taken into account in calculating the earnings per share. No further share buybacks have taken place since the prior year.

16. INTEREST-BEARING LOANS AND BORROWINGS

Gem Diamonds Limited provides security for both the Letšeng Diamonds and Gem Diamonds Limited RCF facilities over its bank accounts domiciled in the United Kingdom (US$1.4 million) (31 December 2022: US$4.6 million) and over its 70% shareholding in Letšeng Diamonds, refer Note 30. Material partly owned subsidiary.

The interest-bearing loans and borrowings subject to the US$ three-month LIBOR rate transitioned to a Secured Overnight Financing Rate (SOFR) effective from 1 January 2023, in line with the IBOR phase 2 Amendments which became effective in

2021. The South African JIBAR rates are yet to transition to alternative benchmark rates at the reporting period end. The interest-bearing loans and borrowings that remain subject to the South African JIBAR rate include the LSL132.0 million unsecured project debt facility and the ZAR300.0 million revolving credit facility.

The Group will continue to assess the impact of the interest rate benchmark reform on the Group's JIBAR interest-bearing loans and borrowings as the revised benchmark rates are published or negotiated with the funders. The developments on these facilities from 1 January 2023 and their carrying amounts and maturities as at 31 December 2023 are disclosed in the note below.


	Effective interest rate	Maturity	2023	2022
	Effective interest rate	Maturity	US$'000	US$'000
Non-current
LSL450.0 million and ZAR300.0 million bank loan facility	Central Bank of Lesotho rate + 3.25% and South African JIBAR + 3.05%		-	-
Credit underwriting fees		22 December 2024	-	(327)
US$30.0 million bank loan facility	Term SOFR + 5.26% (2022: London US$ three-month LIBOR + 5.00%)	22 December 2024	-	-
Credit underwriting fees			-	(225)
ZAR132.0 million project debt facility	South African JIBAR + 2.50%	31 May 2027	5 156	4 922
			5 156	4 370
Current
LSL30.0 million insurance premium finance	3.55%	Repaid 1 April 2023	-	719
ZAR2.5 million insurance premium finance	3.55%	Repaid 1 April 2023	-	60
LSL10.9 million insurance premium finance	3.55%	Repaid 1 May 2023	-	262
LSL30.0 million insurance premium finance	4.20%	1 April 2024	671	-
ZAR2.5 million insurance premium finance	4.30%	1 April 2024	55	-
LSL12.4 million insurance premium finance	4.20%	1 April 2024	278	-
ZAR132.0 million project debt facility	South African JIBAR + 2.50%	31 May 2027	2 062	534
LSL450.0 million and ZAR300.0 million bank loan facility	Central Bank of Lesotho rate + 3.25% and South African JIBAR + 3.05%		24 632	-
Credit underwriting fees		22 December 2024	(175)	-
US$30.0 million bank loan facility	Term SOFR + 5.26% (2022: London US$ three-month LIBOR + 5.00%)	22 December 2024	6 000	-
Credit underwriting fees			(112)	-
			33 411	1 575

LSL450.0 million and ZAR300.0 million (US$41.0 million) bank loan facility at Letšeng Diamonds

The Group, through its subsidiary Letšeng Diamonds, has a LSL450.0 million and ZAR300.0 million (US$41.0 million) three-year revolving credit facility jointly with Nedbank Lesotho Limited, Standard Lesotho Bank Limited, First National Bank of Lesotho Limited, Firstrand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division).

The facility is secured and expires on 22 December 2024, and has therefore been recorded as a current liability. The facility has a 24-month extension option which can be exercised at any time up to 21 September 2024, being three months before expiry, and is subject to credit approval by the lenders at the extension date. The LSL450.0 million facility is subject to interest at the Central Bank of Lesotho rate plus 3.25% and the ZAR300.0 million facility is subject to South African JIBAR plus 3.05%. At year end LSL270.0 million (US$14.8 million) and ZAR180.0 million (US$9.8 million) had been drawn down resulting in LSL180.0 million (US$9.8 million) and ZAR120.0 million (US$6.6 million) remaining available. At 31 December 2022, there were no drawdowns on these facilities.

The remaining balance of the credit underwriting fees capitalised is US$0.2 million (31 December 2022: US$0.3 million). The capitalised fees are amortised and accounted for as finance costs within profit or loss over the period of the facility.

US$30.0 million bank loan facility at Gem Diamonds Limited

This facility is a secured three-year revolving credit facility with Nedbank Limited (acting through its London branch), Standard Bank of South Africa Limited (acting through its Isle of Man branch) and Firstrand Bank Limited (acting through its Rand Merchant Bank division) for US$13.5 million, US$9.0 million and US$7.5 million, respectively. All draw downs are made in these ratios.

At year end US$6.0 million (31 December 2022: nil) had been drawn down resulting in US$24.0 million (31 December 2022: US$30.0 million) remaining available. The remaining balance of the credit underwriting fees capitalised is US$0.1 million (31 December 2022: US$0.2 million) at year end. The capitalised fees are amortised and accounted for as finance costs within profit or loss over the period of the facility.

The US$-based interest rate for this facility at 31 December 2023 was 10.65% (31 December 2022: 8.67%) which comprises term SOFR plus a 0.26% credit adjustment spread and 5.00% margin (31 December 2022: US$ three-month LIBOR plus 5.00% margin).

Total interest for the year on this interest-bearing RCF was US$0.9 million (31 December 2022: US$1.1 million).

The facility includes an additional US$20.0 million accordion option for Gem Diamonds, the utilisation of which is subject to all necessary credit and other approvals from the lenders. There was no utilisation of this facility in the current or prior years.

ZAR132.0 million (US$7.2 million) project debt facility at Letšeng Diamonds

This loan is an unsecured project debt facility which was signed jointly with Nedbank Limited and the ECIC on 29 November 2022 to fund the replacement of the primary crushing area (PCA) at Letšeng. The loan is repayable in equal quarterly payments commencing in March 2024. The total project debt facility initially available on the effective date (29 November 2022) was ZAR136.4 million (US$7.5 million), which is the amount that was previously disclosed at 31 December 2022. Utilisation of the project debt facility amounted to ZAR132.0 million (US$7.2 million) at the end of the availability period on 29 November 2023 and the remaining available balance expired on the same date. This loan expires on 27 May 2027.

The South African rand-based interest rates for the facility at 31 December 2023 was 10.90% which comprises JIBAR plus 2.50%.

Total interest for the year on this interest-bearing loan was US$0.7 million (31 December 2022: US$15.6 thousand). The interest has been capitalised as part of the qualifying PCA asset included within the plant and equipment asset class within Note 8, Property, plant and equipment. The PCA asset was successfully commissioned in November 2023.

Insurance premium finance for Multi-aggregate and Asset All Risk Insurance policies

The Group, through its subsidiary Letšeng Diamonds, enters into financing agreements for insurance premiums for the Multi-aggregate Insurance Policy and its Asset All Risk Policy. All respective insurance premiums prepaid are ceded in favour of Premium Finance Partners (Proprietary) Limited. The funding is payable monthly in advance. Refer Note 12, Receivables and other assets.

During the year, all prior year outstanding insurance premium finance balances for the Multi-aggregate Insurance Policy and its Asset All Risk Policy were fully repaid by 1 May 2023. The total interest paid during the current year relating to these liabilities was LSL0.3 million (US$16.2 thousand).

In June, the Group through its subsidiary Letšeng Diamonds, entered into a LSL30.0 million (US$1.6 million) 10-month funding agreement with Premium Finance Partners (Proprietary) Limited to finance the third premium of LSL30.0 million on the Multi-aggregate Insurance Policy. At year end, LSL12.3 million (US$0.7 million) remains outstanding. The funding is repayable in 10 monthly instalments, payable in advance. Total interest on this funding is LSL1.3 million (US$70.5 thousand) of which LSL1.0 million (US$54.2 thousand) was paid during the year.

In July, the Group through its subsidiary Letšeng Diamonds, entered into a LSL12.4 million (US$0.7 million) 10-month funding agreement with Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All Risk insurance premium. At year end LSL5.2 million (US$0.3 million) remains outstanding. The funding is repayable in 10 monthly instalments, payable in advance. Total interest on this funding is LSL0.5 million (US$27.1 thousand) of which LSL0.4 million (US$21.6 thousand) was paid during the year.

Other facilities

Letšeng Diamonds has a ZAR100.0 million (US$5.5 million) general banking facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division) which is reviewed annually. During the year the facility was utilised from time to time based on cash flow requirements, but repaid in full at year end.


		2023	2022
		US$'000	US$'000
17.	LEASE LIABILITIES
	Non-current	3 786	6 021
	Current	2 164	1 877
	Total lease liabilities	5 950	7 898

	Reconciliation of movement in lease liabilities
	As at 1 January	7 898	4 824
	Additions	1 132	5 287
	Interest expense	497	666
	Lease payments	(2 589)	(2 512)
	Derecognition of lease	(519)	-
	Foreign exchange differences	(469)	(367)
	As at 31 December	5 950	7 898

Lease payments comprise payments in principle of US$2.1 million (31 December 2022: US$1.8 million) and repayments of interest of US$0.5 million (31 December 2022: US$0.7 million).

During the year, the Group recognised variable lease payments of US$31.6 million (31 December 2022: US$39.5 million), which consist of mining activities outsourced to a mining contractor, prior to the transition to insourcing of mining activities effective 1 December 2023. Total costs incurred for the year amounted to US$31.6 million (31 December 2022: US$39.5 million) of which US$21.9 million (31 December 2022: US$28.4 million) were capitalised to the Stripping Asset. Refer Note 1.2.6, Property plant and equipment, Note 1.2.26, Critical accounting estimates and judgements, Equipment and service lease, Note 4, Operating profit and Note 8, Property, plant and equipment.

During the year, the lease contract for blasting services at Letšeng was renegotiated resulting in the recognition of new associated right-of-use assets and lease liabilities. The original contract was cancelled and all associated assets and liabilities were derecognised.

During the prior year, a new lease contract for backup power generating equipment at Letšeng was entered into. This lease contains residual value guarantees of US$37.7 thousand (31 December 2022: US$42.5 thousand) which represents the cost to decommission and return the power generating equipment to the supplier at the end of the lease term. Refer Note 9, Right-of-use assets for details on new leases entered into and leases derecognised during the year.

No rental expenses from short-term leases were incurred by the Group during the year (31 December 2022: US$61.8 thousand).


		2023	2022
		US$'000	US$'000
18.	TRADE AND OTHER PAYABLES
	Non-current
	Severance pay benefits1	1 494	2 169

	Current
	Trade payables2,3	15 761	10 888
	Accrued expenses2	4 066	5 884
	Leave benefits	498	625
	Royalties2	2 679	1 936
	Withholding taxes2	224	230
	Other	128	145
		23 356	19 708

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 both interest and non-interest bearing and are settled in accordance with terms agreed between the parties.

3 Included in the current year amount is US$9.7 million relating to the remaining portion of the purchase price for the mining fleet and support equipment purchased in terms of the insourcing of the mining activities. Post period end, this amount was settled. Refer Note 1.2.26, Critical accounting estimates and judgements.

Royalties consist of a levy payable to the Government of the Kingdom of Lesotho on the value of diamonds sold by Letšeng. Withholding taxes mainly consist of taxes payable on dividends and other services to the Revenue Services Lesotho.

The carrying amounts above approximate fair value.


		2023	2022
		US$'000	US$'000
19.	INCOME TAX (RECEIVABLE)/PAYABLE
	Reconciliation of movement in income tax (receivable)/payable
	As at 1 January	(2 268)	(1 191)
	Payments made during the year	(1 596)	(8 435)
	Refunds received during the year	-	1 187
	Current income tax charge	909	6 054
	Authorised offset - VAT receivable¹	(897)	-
	Foreign exchange differences	139	117
	As at 31 December	(3 713)	(2 268)
	Split as follows
	Income tax receivable	(4 631)	(2 323)
	Income tax payable	918	55
	¹ VAT receivable from Revenue Services Lesotho (RSL) of US$0.9 million (LSL16.6 million) was offset against provisional tax payments due to RSL during the year. This offset has been authorised by RSL. No offset took place in the prior year.
		2023	2022
		US$'000	US$'000
20.	PROVISIONS
	Rehabilitation provisions	14 170	15 387

	Reconciliation of movement in rehabilitation provisions
	As at 1 January	15 387	11 202
	Additions - Ghaghoo	-	3 654
	Decrease in provision - Ghaghoo	(354)	(573)
	Other movements - Letšeng	(1 342)	858
	Unwinding of discount rate	1 484	1 284
	Foreign exchange differences	(1 005)	(1 038)
	As at 31 December	14 170	15 387

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 estimated rehabilitation period 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 Letšeng, management used a discount rate of 11.4% (31 December 2022: 11.5%), estimated rehabilitation timing of 16 years (31 December 2022: 13 years) and an inflation rate of 7.2% (31 December 2022: 7.0%). Although the Letšeng rehabilitation quantum increased from the prior year mainly driven by the completion of the PCA and annual reassessment of the estimated closure costs performed at the operation, the effect of the revised timing of the rehabilitation, discount rate and interest rate used to present value the provision, together with a weakening exchange rate, had an overall impact of reducing the provision.

At Ghaghoo, which continued its care and maintenance state, an independent rehabilitation assessment was performed during the year based on the rehabilitation costs of certain areas of the mine which are expected to be rehabilitated. Following discussions with the Ministry of Minerals and Energy and the Department of Mines of Botswana, it is anticipated that the mine site will be left in a state which could enable a future operator to operate on the site, and therefore certain infrastructure, such as access roads to the mine, paving and walkways, a new solar solution installation, borehole pump and water treatment plant, will remain intact and handed over to the Government of Botswana through the Ministry of Minerals and Energy.

In determining the amounts attributable to the rehabilitation provision at Ghaghoo, management used a discount rate of 6.0% (31 December 2022: 6.0%), estimated rehabilitation timing of 5 years (31 December 2022: 5 years) and an inflation rate of 4.8% (31 December 2022: 4.8%). The decrease in the provision at Ghaghoo is mainly attributable to cost saving measures implemented by management since the previous reporting date and the removal of certain camp site costs from the prior year cost estimate following discussions with the Ministry of Minerals and Energy and the Department of Mines of Botswana as mentioned above.


		2023	2022
		US$'000	US$'000
21.	DEFERRED TAXATION
	Deferred tax assets
	Lease liabilities	1 122	1 590
	Accrued leave	111	141
	Provisions	3 759	4 263
	Other	-	-
	Tax losses1	1 822	-
		6 814	5 994
	Deferred tax liabilities
	Property plant and equipment	(79 537)	(79 021)
	Right of use assets	(966)	(1 347)
	Prepayments	(55)	(84)
	Unremitted earnings	(1 578)	(1 578)
		(82 136)	(82 030)

	Net deferred tax liability	(75 322)	(76 036)

	Reconciliation of net deferred tax liability
	As at 1 January	(76 036)	(77 355)
	Movement in current period:
	- Accelerated depreciation for tax purposes	(5 326)	(5 321)
	- Accrued leave	(21)	4
	- Unremitted earnings	-	1 604
	- Prepayments	29	102
	- Provisions	(205)	779
	- Deferred tax asset raised on tax losses1	1 822	-
	- Lease liabilities	(354)	459
	- Right-of-use assets	294	(494)
	- Foreign exchange differences	4 475	4 186
	As at 31 December	(75 322)	(76 036)

1 Deferred tax assets were recognised on tax losses incurred by Letšeng during the current year as management believe Letšeng will generate future taxable income against which the losses can be utilised.

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$110.5 million (31 December 2022: US$134.3 million).

The deferred tax liability on unremitted earnings is based on the timing of expected dividends from the Group's subsidiaries over the next three years. There are no income tax consequences attached to the payment of dividends by Gem Diamonds Limited to its shareholders.

The Group has estimated tax losses of US$208.5 million (of which US$155.7 million relates to Gem Diamonds Botswana) (31 December 2022: US$223.4 million, of which US$175.8 million related to Gem Diamonds Botswana) for which no deferred tax assets have been recognised as management does not foresee any taxable profits or taxable temporary differences against which to utilise these. Letšeng has no unrecognised deferred tax losses (31 December 2022: nil). The net decrease from the prior period is as a result of a total estimated tax loss for which no deferred tax assets have been recognised of US$8.2 million, offset by tax assessment updates and forex movements.

The majority of tax losses are generated in jurisdictions where tax losses do not expire, except for tax losses incurred by Gem Diamonds Innovation Solutions CY Limited, within the Cyprus jurisdiction, which has unrecognised tax losses of US$2.0 million ((31 December 2022: US$1.8 million) and if not utilised, will expire as indicated in the table below:


	2023	2022
	US$ '000	US$ '000
Utilisation required within one year	350	82
Utilisation required between one and two years	415	338
Utilisation required between two and five years	1 217	1 404


			2023	2022
		Notes	US$'000	US$'000
22.	CASH FLOW NOTES
22.1	Cash generated by operations
	Profit before tax for the year		5 684	30 432
	Adjustments for:
	Depreciation and amortisation excluding waste stripping		5 423	6 588
	Depreciation on right-of-use assets	4, 9	1 892	1 818
	Waste stripping cost amortised	4	39 194	36 285
	Finance income	5	(617)	(413)
	Finance costs	5	5 313	4 502
	Unrealised foreign exchange differences		(2 001)	(1 911)
	Loss/(profit) on disposal and scrapping of property, plant and equipment	3	22	(195)
	Gain on derecognition of leases	9	(30)	-
	Environmental rehabilitation adjustment	3	(354)	-
	Write-down of inventories to net realisable value		-	1 556
	Bonus, leave and severance provisions raised		1 292	3 182
	Share-based payments		332	253
	Impairment of assets	4	-	702
			56 150	82 799
22.2	Working capital adjustment
	Increase in inventory		(10 157)	(3 747)
	Decrease/(increase) in receivables		1 444	(1 465)
	Decrease in payables		(6 897)	(4 677)
			(15 610)	(9 889)
22.3	Cash flows from financing activities (excluding lease liabilities)
	As at 1 January		5 945	11 044
	Net cash generated/(used) in financing activities		30 113	(7 734)
	- Financial liabilities repaid		(45 103)	(17 627)
	- Financial liabilities raised		75 216	9 893
	Interest paid		(3 719)	(2 263)
	Non-cash movements		6 228	4 898
	- Interest accrued		3 065	2 263
	- Interest capitalised to property, plant and equipment		654	-
	- Amortisation of credit underwriting fees		265	284
	- Financial liabilities raised 1		2 434	2 654
	- Foreign exchange differences		(190)	(303)

	As at 31 December	16	38 567	5 945

1 This amount mainly 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 instalments to the lender. Refer Note 16, Interest-bearing loans and borrowings.


		2023	2022
		US$'000	US$'000
23.	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	218	187
	- After one year but not more than five years	1 000	847
	- More than five years	628	809
		1 846	1 843
	Equipment and service lease
	Until 1 December 2023, the Group had 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 were variable in nature. A portion of the lease payment was expensed in the Consolidated statement of profit or loss and the portion relating to waste removal/stripping costs was 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 1.2.26, Critical accounting estimates and judgements. This lease was early terminated, effective 1 December 2023 in terms of the transition to insourced mining and therefore there are no commitments associated with this lease as at 31 December 2023. During the year, variable lease payments of US$31.6 million (31 December 2022: US$39.5 million) relating to this lease, were paid. Refer Note 1.2.26, Critical accounting estimates and judgements, and Note 17., Lease liabilities.
	- Within one year	-	32 645
	- After one year but not more than five years	-	32 514
		-	65 159
	Multi-aggregate protection policy
	The Group, through its subsidiary Letšeng entered into a LSL140.0 million (US$7.7 million) Multi-aggregate Protection Insurance Policy with the Lesotho National Insurance Group (LNIGC) in October 2021. The policy has a tenure of 4 years and 9 months and consists of five premium payments each payable annually in advance. As at 31 December 2023 the Group has committed to settle the two remaining premium payments, as well as the annual insurance risk finance service fee of 7% of the annual premium and the surplus reserve finance cost fee of 1.5% on the cumulative net premiums surplus balance carried over each year. These fees are either deductible from premium or payable upfront at the option of Letšeng. The Group has elected to deduct the fees from the annual premiums, therefore there is no additional cash commitment relating to these fees and the future cash flow commitments are stated at the future premiums payable over the remaining insurance period. Refer Note 12, Receivables and other assets for further detail on the policy.
	- Within one year	1 640	1 763
	- After one year but not more than five years	1 640	3 526
		3 280	5 289
	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	80	68
- After one year but not more than five years	42	103
	122	171
Capital expenditure
Approved but not contracted for	3 645	8 676
Approved and contracted for	643	5 999
	4 288	14 675

The main capital expenditure approved relates to the replacement of screens in Plant 1 and Plant 2 and the scrubber in Plant 1 at a combined cost of US$1.5 million; and investment in continued residue storage extension of US$0.8 million. Other smaller capital expenditure, all at Letšeng, relates to the continued construction of the bioremediation plant of US$0.3 million, the balance of the investment in the new PCA of US$0.2 million and new investment in energy saving projects of US$0.3 million. The expenditure is expected to be incurred over the next 12 months.

In the prior year, the main capital expenditure approved consisted mainly of the investment in the new PCA at Letšeng of US$2.6 million and the Underground Feasibility Study of US$4.5 million. During the current year, the new PCA was successfully commissioned in November 2023. Part of the Underground Feasibility Study was completed at a total cost of U$1.8 million.

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$0.5 million (December 2022: US$0.3 million) relating mainly to labour matters.

The Group monitors possible tax claims within the various jurisdictions in which the Group operates. It is noted that tax legislation is highly complex and subject to interpretation of the application of the law. It is common for tax authorities to review tax returns, and in some instances, disputes may arise over the interpretation and application of the prevailing tax legislation. Due to the complexity of the legislation, significant judgment is required to determine any effects of uncertainties in accounting for and disclosure of income taxes. Uncertain tax positions that have been determined as being probable within the Group have been provided for and are disclosed to such an extent that such disclosure does not prejudice the Group. Refer Note 1.2.26, Critical accounting estimates and judgements and Note 6., Income tax expense. 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.


24.	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.


	2023	2022
	US$'000	US$'000
Compensation to key management personnel (including Directors)
Share-based equity transactions	252	204
Short-term employee benefits	3 577	3 874
Post-employment benefits (including severance pay and pension)	139	203
	3 968	4 281
Fees paid to related parties
Jemax Management (Proprietary) Limited	(68)	(84)
Royalties paid to related parties
Government of the Kingdom of Lesotho	(14 215)	(18 869)
Lease and licence payments to related parties
Government of the Kingdom of Lesotho	(32)	(38)
Sales to/(purchases from) related parties
Jemax Management (Proprietary) Limited	(12)	(5)
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited	(7)	(7)
Amounts owing to related party
Government of the Kingdom of Lesotho	(3 176)	(2 163)
Dividends declared
Government of the Kingdom of Lesotho	-	(10 549)

Jemax Management (Proprietary) Limited provided administrative services with regards 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. The amounts included in trade payables are non-interest bearing and have no repayment terms.

25. 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, buy back its 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 2023, the Group had US$45.9 million (31 December 2022: US$82.6 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 16, Interest-bearing loans and borrowings for detail on the debt facilities within 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, together with diamond market fundamentals. Diamond prices are marketed in US dollar and long-term US dollar per carat prices are based on external market consensus forecasts. The Group does not have any financial instruments that may fluctuate as a result of commodity price movements.

(ii) Foreign exchange rate 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 all its 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; and

· 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 2023 and 31 December 2022.

There has been no change in the assumptions or method applied from the prior year.

Sensitivity analysis

At year-end, Letšeng had US$2.5 million (2022: US$40.4 thousand) cash on hand held in US$. If the US dollar had appreciated/(depreciated) by 10% against the LSL, the Group's profit before tax and equity at 31 December 2023 would have been US$0.3 million higher/(lower) (31 December 2022: US$3.4 thousand).

(iii) Forward exchange contracts

From time to time, 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 2023, the Group had no forward exchange contracts outstanding (31 December 2022: 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 100 basis points (2022: 100 basis points) during the year, profit before tax and equity would have been US$0.2 million (lower)/higher 31 December 2022: US$0.1 million).

(b) Credit risk

The Group's potential concentration of credit risk consists mainly of cash deposits with banks, trade receivables, insurance asset 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 their carrying values 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.

The Group's insurance premiums are placed with insurers and underwriters that have high-quality credit standings, to minimise the exposure to credit risk to the lowest level possible from the perspective of the Group's insurance asset.

No material other financial assets are impaired or past due and accordingly, no additional ECL or credit risk analysis has been provided.

The Group did not hold any form of collateral or credit enhancements for its credit exposures during the 31 December 2023 and 31 December 2022 financial reporting periods.

Liquidity risk arises from the Group's inability to obtain the funds it requires to comply with its commitments including the inability to realise a financial asset in a short period of time at a price close to its fair value. Management manages the risk by maintaining sufficient cash and 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 undrawn debt facilities of US$45.9 million at year end (2022: US$82.6 million)). The Group's facilities expire in December 2024. The current facility agreements have a two-year renewal option subject to lender approval. Management will commence the process of renewal or extension in the second quarter of 2024.

The table below summarises the maturity profile of the Group's financial liabilities at 31 December based on contractual undiscounted payments.


	2023	2022
	US$'000	US$'000
Floating interest rates
Interest-bearing loans and borrowings
- Within one year	35 037	2 317
- After one year but not more than five years	5 913	8 805
Total	40 950	11 122
Lease liabilities
- Within one year	2 487	2 332
- After one year but not more than five years	3 650	6 161
- After five years	448	448
Total	6 585	8 941
Trade and other payables
- Within one year	23 356	19 708
- After one year but not more than five years	1 494	2 169
Total	24 850	21 877

26. SHARE-BASED PAYMENTS


	2023	2022
	US$'000	US$'000

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	332	253

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. Prior to the April 2022 award, the fair value of share options granted was 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 took into account projected dividends and share price fluctuation co-variances of the Company. Since 2022, the fair value of the share options granted have been based on the observable Gem Diamonds Limited share price on the date of the award with no adjustments made to the price.

There is a nil 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 is one award where options are still outstanding.

This award was awarded on the following basis:

To key employees (excluding Executive Directors):

· the award vests 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). These non-market condition awards are referred to as Nil Value options in the tables below;

· 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 award vests, it is exercisable for seven years (ie contractual term is 10 years); and

· the vested award is equity settled.

To Executive Directors:

· the award vests 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 award granted is subject to non-market conditions (referred to as Nil Value options in tables below) and 25% to market conditions (referred to as Market Value options in tables below) 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 award vests, it is exercisable for seven years (ie contractual term is 10 years); and

· the vested award is equity settled.

The fair value of the Nil value award 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 the award within the 2007 LTIP that remains outstanding:


	LTIP
	March
	2016
Number of options granted - Nil value	1 215 000
Number of options granted - Market value	185 000
Date exercisable	15 March 2019
Options outstanding	24 287
Dividend yield (%)	2.00
Expected volatility (%)1	39.71
Risk-free interest rate (%)2	0.97
Expected life of option (years)	3.00
Exercise price (US$)	nil
Exercise price (GBP)	nil
Weighted average share price (US$)	1.56
Fair value of nil value options (US$)	1.40
Fair value of nil value options (GBP)	0.99
Fair value of market value options (US$)	0.69
Fair value of market value options (GBP)	0.49
Model used	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 six awards where options are still outstanding.

All the awards were issued on the same basis as the 2007 LTIP.

LTIP 2017 Award - April 2023 award

On 21 April 2023, 250 860 nil-cost options were granted to certain key employees of the Company. In addition, 809 195 nil-cost options were granted to certain Executive employees and the Executive Directors on a similar basis as the 2007 LTIP. These options were granted in line with the introduction of the Gem Diamonds Incentive Plan (GDIP) in 2021, which integrates annual bonus awards with awards under the LTIP. The options which vest in tranches of one-third per annum commencing on 21 April 2024, are exercisable between the respective vesting dates and 21 April 2033. The fair value of the award is based on the observable Gem Diamonds Limited share price on the date of the award with no adjustments to the price made.

This new award was made under predominantly the same basis as the 2007 LTIP, with the following differences:

To key employees (excluding Executive Directors):

· the number of awards granted are determined on the Group's performance in the preceding financial year in terms of the Gem Diamonds Incentive Plan (GDIP) introduced in 2021;

· the vesting of the award is dependent only on service conditions. There are no future performance conditions attached to the award;

· if the service conditions are not met, the options lapse;

· the fair value of the awards is based on the observable Gem Diamonds Limited share price on the date of award with no adjustments to the price made; and

· the awards are subject to malus and clawback.

To Executive Directors as a bonus share award:

· the number of awards granted are determined on the Group's performance in the preceding financial year in terms of the Gem Diamonds Incentive Plan (GDIP) introduced in 2021;

· the vesting of the award is dependent only on service conditions. There are no future performance conditions attached to the award;

· if the service conditions are not met, the options lapse;

· the fair value of the awards is based on the observable Gem Diamonds Limited share price on the date of award with no adjustments to the price made;

· the awards have a two-year holding period from the respective vesting dates and are exercisable for 10 years from the award date; and

· the awards are subject to malus and clawback.

The following table reflects details of all the awards within the 2017 LTIP that remain outstanding:


	LTIP	LTIP	LTIP	LTIP	LTIP	LTIP
	April	April	June	March	March	July
	2023	2022	2020	2019	2018	2017
Number of options granted - Nil value	1 060 055	1 007 098	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	21 April 2024	4 April 2023	9 June 2023	20 March 2022	20 March 2021	4 July 2020
Options outstanding	1 060 055	888 221	323 267	244 582	236 154	48 642
Dividend yield (%)	-	-	-	-	-	2.00
Expected volatility (%)1	n/a	n/a	47.00	43.00	40.00	40.21
Risk-free interest rate (%)2	n/a	n/a	0.34	1.20	1.20	0.67
Expected life of option (years)	3.00	3.00	3.00	3.00	3.00	3.00
Exercise price (US$)	nil	nil	nil	nil	nil	nil
Exercise price (GBP)	nil	nil	nil	nil	nil	nil
Weighted average share price (US$)	0.34	0.74	0.39	1.20	1.35	1.24
Fair value of nil value options (US$)	0.34	0.74	0.39	1.20	1.35	1.11
Fair value of nil value options (GBP)	0.27	0.58	0.31	0.90	0.96	0.86
Fair value of market value options (US$)	-	-	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	n/a	n/a	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.

The following table illustrates the number ('000) and movement in the outstanding share options during the year:


	2023	2022
	US$'000	US$'000
Outstanding as at 1 January	2 648	2 453
Granted during the year	1 060	1 007
Exercised during the year1	(253)	(394)
Forfeited	(630)	(418)
Outstanding as at 31 December	2 825	2 648
Exercisable as at 31 December	1 244	635

1 Options were exercised regularly throughout the year. The weighted average share price during the year was £0.21 (US$0.26) (2022: £0.45 (US$0.55)).

The weighted average remaining contractual life for the share options outstanding as at 31 December 2023 was 7.7 years (2022: 7.6 years).

The weighted average fair value of the share options outstanding as at 31 December 2023 was US$0.40 (2022: US$0.48).

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 2023 was £0.13 (US$0.17) (2022: £0.33 (US$0.39)). The shares outstanding at the end of the year are as follows:


	2023	2022
	US$'000	US$'000
Outstanding as at 1 January	10	10
Exercised during the year	-	-
As at 31 December	10	10
Exercisable as at 31 December	10	10

27. FINANCIAL INSTRUMENTS

Set out below is an overview of financial instruments, other than the current portions of the prepayment disclosed in Note 12, Receivables and other assets, which do not meet the criteria of a financial asset.


		2023	2022
	Notes	US$'000	US$'000
Financial assets at amortised cost
Cash	14	16 503	8 721
Receivables and other assets	12	6 869	6 421
Total		23 372	15 142
Total non-current		4 487	2 916
Total current		18 885	12 226
Financial liabilities at amortised cost
Interest-bearing loans and borrowings	16	38 567	5 945
Trade and other payables	18	24 850	21 877
Total		63 417	27 822
Total non-current		6 650	6 539
Total current		56 767	21 283

The carrying amounts of the Group's financial instruments held approximate their fair value.

There were no open hedges at year end (2022: nil).


		2023	2022
		US$'000	US$'000
28.	DIVIDENDS DECLARED AND PROPOSED
	Declared dividends on ordinary shares
	Final ordinary cash dividend for 2022: nil (2021: 2.7 US cents per share)	-	3 771

There were no dividends proposed in 2022.

In the prior year, the 2021 declared dividend was approved on 8 June 2022 and a final cash dividend of 2.7 US cents per share was paid to shareholders on 21 June 2022.

29. EVENTS AFTER THE REPORTING PERIOD

The deferred consideration payable of US$9.7 million relating to the insourcing of the mining activities at Letšeng was settled post period end. US$9.3 million was paid in January 2024, and the retainer of US$0.4 million which was withheld for equipment under repair at the effective date was settled in early March 2024. Refer Note 18 Trade and other payables.

No other 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.

30. 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. This information is based on amounts before intercompany eliminations.


		2023	2022
		US$'000	US$'000
Name	Country of incorporation and operation
Letšeng Diamonds (Proprietary) Limited	Lesotho
Accumulated balances of material non-controlling interest		68 543	69 822
Profit allocated to material non-controlling interest		3 981	9 786
Summarised statement of profit or loss for the year ended 31 December
Revenue		140 905	186 087
Cost of sales		(109 959)	(123 793)
Gross profit		30 946	62 294
Royalties and selling costs		(14 747)	(19 571)
Other operating income		4 162	2 133
Operating profit		20 361	44 856
Net finance costs		(3 500)	(2 590)
Profit before tax		16 861	42 266
Income tax expense		(3 590)	(9 647)
Profit for the year		13 271	32 619
Total comprehensive income		13 271	32 619
Attributable to non-controlling interest		3 981	9 786
Dividends paid to non-controlling interest		-	(10 549)
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		320 186	317 550
Current assets
Inventories, receivables and other assets, and cash and short-term deposits		60 711	39 231
Total assets		380 897	356 781
Non-current liabilities
Interest-bearing loans and borrowings, trade and other payables, provisions, lease liabilities and deferred tax liabilities		101 278	104 118
Current liabilities
Interest-bearing loans and borrowings, trade and other payables and lease liabilities		51 144	19 923
Total liabilities		152 422	124 041
Total equity		228 475	232 740
Attributable to:
Equity holders of parent		159 932	162 918
Non-controlling interest		68 543	69 822
Summarised cash flow information for the year ended 31 December
Operating cash inflows		43 548	74 793
Investing cash outflows		(56 827)	(59 928)
Financing cash inflows/(outflows)		22 543	(36 387)
Foreign exchange differences		1 848	(475)
Net increase/(decrease) in cash and cash equivalents		11 112	(21 997)

REPORT ON PAYMENTS TO GOVERNMENTS

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 2023 financial year, as required under the 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 2023 financial year, 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 2023.

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 2023.

Signature, discovery, and production bonuses

There were no payments of this nature to governments for the year ended 31 December 2023.

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 2023.

Cash flow basis

Payments reported are on a cash flow basis and may differ to amounts reported in the Gem Diamonds Limited 2023 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, which are equal to or exceed US$109 632 (£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 exchange rate for the year ended 31 December 2023.

Summary report


Operation	Country	Taxes US$'000	Royalties US$'000	Licence fee US$'000	Total US$'000
Letšeng Diamonds (Proprietary) Limited	Lesotho	2 418	13 072	180	15 670
Total		2 418	13 072	180	15 670

Lesotho Letšeng Diamonds (Proprietary) Limited		Taxes US$'000	Royalties US$'000	Licence fee US$'000	Total US$'000
Revenue Services Lesotho		2 418	-	-	2 418
Government of the Kingdom of Lesotho		-	13 072	180	13 252

Other

Other than the taxes, royalties and licence fees disclosed above, there were no other payments to governments for the year ended 31 December 2023, but Letšeng Diamonds (Proprietary) Limited (a subsidiary of Gem Diamonds Limited) has a mining contract (which has been in place since 2006), with Matekane Mining Investment Corporation. Letšeng Diamonds (Proprietary) Limited understands that Matekane Mining Investment Corporation is wholly or majority indirectly owned and controlled by Ntsokoane Samuel Matekane, who became Prime Minister of the Kingdom of Lesotho in October 2022. An early termination of the agreement was reached effective 1 December 2023, eleven months ahead of the expiry date of October 2024, which resolved any potential conflicts of interest.

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