Half Year 2023 Results
Thursday, 31 August 2023
Gem Diamonds Limited
Half Year 2023 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Half Year Results for the six months ended 30 June 2023 (the "Period").
FINANCIAL RESULTS:
· Revenue of US$71.8 million (H1 2022: US$100.0 million)
· Underlying EBITDA of US$8.4 million (H1 2022: US$20.9 million)
· Cash on hand of US$7.3 million as at 30 June 2023 (US$6.2 million attributable to Gem Diamonds)
· The Group has unutilised facilities of US$72.9 million
· Loss per share of 0.7 US cents (H1 2022: earnings per share of 2.7 US cents)
OPERATIONAL RESULTS:
Letšeng
· Zero fatalities and one lost time injury
· Recovered 50 601 carats (H1 2022: 55 157 carats)
· Waste tonnes mined of 4.8 million tonnes (H1 2022: 6.3 million tonnes)
· Ore treated of 2.5 million tonnes (H1 2022: 3.0 million tonnes)
· Average value of US$1 373 per carat achieved (H1 2022: US$1 745 per carat)
Safety performance
The organisational safety culture maturity strategy, that commenced in 2021 to improve safety performance at Letšeng, has been fully executed and led to an improved safety performance during the Period. Letšeng recorded zero fatalities and one LTI during the Period (2022: three), resulting in an improved LTIFR and AIFR of 0.09 (2022: 0.13) and 0.57 (2022: 0.7), respectively.
Diamond market
The global rough diamond market has experienced a downturn in 2023. A decrease in the number of large, high-value diamonds recovered, combined with market pressure has negatively impacted the average dollar per carat and revenue achieved during the Period.
Operational performance
Increasing grid electricity interruptions caused a reduction in volumes of ore processed. In addition, higher than expected internal basalt dilution in certain domains of ore that was treated impacted throughput. To mitigate the impact of internal basalt dilution, improve plant stability and large diamond recoveries, in the latter part of Q2 2023, an operational decision to open crusher gaps and to slow throughput in the processing plant was implemented.
TCFD and Climate
Following the adoption of the TCFD recommendations, the Group committed to a carbon emissions (Scope 1 and 2) reduction target of 30% by 2030. Improving energy-use efficiency and reducing the consumption of diesel and electricity remain top priorities, while appropriate alternative low-carbon and renewable energy sources are being considered.
Commenting on the results today, Clifford Elphick, Chief Executive Officer of Gem Diamonds, said:
"The downturn in the rough diamond market together with increased grid electricity interruptions which increased operating costs, negatively impacted our financial results for the Period.
Our focus remains on stabilising our plants to improve large diamond recoveries and to critically review all operational and capital expenditure."
The Company will host a live audio webcast presentation of the half year results today, 31 August 2023, at 9:30 GMT. This can be viewed on the Company's website: www.gemdiamonds.com.
The page references in this announcement refer to the Half Year Report 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
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Felicity Winkles
Tel: +44 (0) 208 434 2643
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho and is currently in the process of selling its 100% share of the Ghaghoo mine in Botswana. The Letšeng mine is famous for the production of large, top colour, exceptional white diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.
INTERIM BUSINESS REVIEW
OVERVIEW
The Group presents its results for the six months ended 30 June 2023 (the Period), achieving an underlying EBITDA from continuing operations of US$8.4 million (H1 2022: US$20.9 million) and an attributable loss of US$1.0 million (H1 2022: profit of US$3.8 million).
The global economic backdrop for the Period remained challenging despite easing inflationary pressures in major economies at the start of 2023. Ongoing geopolitical tensions and domestic challenges in key markets are slowing the return to sustained growth. The World Bank downgraded its global real GDP forecast for 2023 to 2.1%1 from 3.1% in 2022, and has warned that global growth is projected to slow significantly amid high inflation, tight monetary policy and more restrictive credit conditions.
The global rough diamond market has experienced a downturn in 2023. A decrease in the number of large, high-value diamonds recovered, combined with market pressure has negatively impacted the average dollar per carat and revenue achieved during the Period. Revenue decreased by 28% to US$71.8 million compared to US$100.0 million in H1 2022, achieving an average price of US$1 373 per carat (H1 2022: US$1 745 per carat) from the sale of 52 163 carats (H1 2022: 57 075 carats).
The Group ended the Period with a cash balance of US$7.3 million (31 December 2022: US$8.7 million) and drawn down facilities of US$9.3 million (31 December 2022: US$5.4 million), resulting in a net debt position of US$2.0 million (31 December 2022: net cash of US$3.3 million) and unutilised available facilities of US$72.9 million (31 December 2022: US$82.6 million).
Increasing grid electricity interruptions caused a reduction in volumes of ore processed. In the first six months of the year there was only one day without load shedding by Eskom, the South African grid electricity provider, from which the mine sources its power. Letšeng experienced 180 days of load shedding in the Period compared to a total of 205 days of load shedding for the full year 2022.
Waste tonnes mined during the Period were 4.8 million tonnes (H1 2022: 6.3 million), in accordance with the mine plan. Ore tonnes treated were 2.5 million tonnes (H1 2022: 3.0 million), and 50 601 carats were recovered (H1 2022: 55 157). The decrease in ore tonnes treated and carats recovered is mainly due to the expiry of the Alluvial Ventures (AV) contract on 30 June 2022, which contributed 0.4 million tonnes and 4 409 carats in H1 2022. Two greater than 100 carat diamonds were recovered during the Period; one of these was sold in the Period and the second will be sold in September.
In March, Letšeng embarked on a programme to critically review its operational structures and requirements, primarily to optimise its operations and drive its objective to reduce operating costs. The workforce element of this right-sizing programme was completed in June, and the focus will now be on further optimisation of the current operations by implementing efficiencies and identifying opportunities to further reduce costs.
As part of this process, a number of changes were made in 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 2023. He was succeeded by Motooane Thinyane, previously the Head of Operations. Thinyane has been a senior manager and executive of Letšeng for the past eight years. He has a deep understanding and appreciation of Letšeng's business and its challenges, employees, stakeholders and communities, and also possesses the necessary technical skills and experience of diamond mining in Lesotho. An important part of his role will be spearheading the identification and implementation of appropriate alternative energy solutions. Gideon Scheepers has been appointed to the position of Operations Director. Gideon was most recently the general manager and executive director at the Mothae diamond mine in Lesotho. He has 32 years of extensive experience in diamond mining and related processes, many of these in the Lesotho diamond mining industry. The leadership and management at Letšeng is well-equipped to ensure that the mine continues to conduct its operations safely, efficiently and effectively in the best interest of all stakeholders.
The safety of our workforce remains a top priority. The critical control management strategy that commenced in 2021 to mature the organisational safety culture at Letšeng has been fully executed. This concerted effort has led to an improved safety performance, with an all injury frequency rate (AIFR) of 0.57 recorded during the Period - the lowest number recorded in the past 10 years.
In support of our continued focus on sustainability and maintaining our social licence to operate, we are proud that Gem Diamonds won the Junior ESG Award 2023 for "Water" at the Investing in African Mining Indaba in February. The award was given in recognition of the Group's commitment to improving access to clean water for local communities and its innovative and effective systems for preventing and mitigating water pollution.
We continue to work towards our 2023 objectives of improving operational energy efficiencies and reducing carbon emissions as set out in our decarbonisation strategy and the three-year Task Force on Climate-related Financial Disclosures (TCFD) adoption roadmap. For more details, refer to Our Approach to Climate Change Half-Year Report available on our website at www.gemdiamonds.com.
LOOKING AHEAD
We continue to identify and implement initiatives to improve operational efficiency and reduce our energy consumption - while investigating alternative energy sources - with the aim of mitigating the impact of the significant increase in operating costs experienced over the past 18 months and reducing our carbon footprint.
1 https://www.worldbank.org/en/publication/global-economic-prospects
OPERATIONS REVIEW: LETŠENG
H1 2023 IN REVIEW
• Zero fatalities and one lost time injury (LTI)
• Zero significant or major environmental or social incidents
• Recovered two diamonds greater than 100 carats (H1 2022: three)
• Achieved an average price of US$1 373 per carat (H1 2022: US$1 745 per carat)
• The highest price achieved was US$282 889 per carat for a 6.63 carat pink diamond
SUSTAINABILITY
The organisational safety culture maturity strategy that commenced in 2021 to improve safety performance at Letšeng, has been fully executed and led to an improved safety performance during the Period, as tabled below. Group and operational leadership remain committed to proactively leading safety-focused improvement through regular engagements with the workforce.
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|
Safety performance |
Unit |
H1 2023 |
2022 |
2021 |
2020 |
2019 |
|
Fatalities |
Number |
0 |
0 |
0 |
0 |
1 |
|
LTIs |
Number |
1 |
3 |
6 |
1 |
7 |
|
LTIFR |
200 000 man hours |
0.09 |
0.13 |
0.24 |
0.04 |
0.28 |
|
AIFR |
200 000 man hours |
0.57 |
0.70 |
0.93 |
0.76 |
0.93 |
|
|
|
|
|
|
|
|
Our focused Corporate Social Responsibility Investment (CSRI) strategy and initiatives support our social licence to operate and our commitment to the UN Sustainable Development Goals. The Group has continued its tertiary education scholarships to enhance skills related to geology, metallurgy, engineering and emergency medical care in Lesotho. There are currently seven active scholarships. Letšeng's community dairy project and sponsored egg circles are proving successful and we continue to work towards ensuring the sustainability of both these projects. The construction of additional classrooms at two primary schools in the surrounding area were also completed during the Period.
Following the adoption of the TCFD recommendations, the Group committed to a carbon emissions (Scope 1 and 2) reduction target of 30% by 2030. Improving energy-use efficiency and reducing the consumption of diesel and electricity remain top priorities, while appropriate alternative low-carbon and renewable energy sources are being considered. Operational initiatives implemented during the Period, such as shorter hauling distances, steeper slopes and the replacement of existing lighting infrastructure with energy-efficient equipment, have resulted in a reduction in energy consumption of 29% compared to H1 2022. For more details, refer to Our Approach to Climate Change Half-Year Report available on our website at www.gemdiamonds.com.
Gem Diamonds has implemented its Group residue storage facility (RSF) management policy and has aligned its RSF standard with the ICMM Global Industry Standard on Tailings Management (GISTM). The Group has established appropriate governance structures at both operational and Group levels to provide oversight and assurance of continued safe and responsible management of our RSFs.
PRODUCTION OVERVIEW
|
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|
Unit |
H1 2023 |
H1 2022 |
% change |
|
Waste mined |
tonnes |
4 846 680 |
6 289 380 |
(23) |
|
Ore mined |
tonnes |
2 787 124 |
3 219 615 |
(13) |
|
Ore treated |
tonnes |
2 467 250 |
3 017 664 |
(18) |
|
Carats recovered |
carats |
50 601 |
55 157 |
(8) |
|
Recovered grade |
cpht1 |
2.05 |
1.83 |
12 |
|
|
|
|
|
|
1 Carats per hundred tonnes.
Waste mining decreased by 23% to 4.8 million tonnes from 6.3 million tonnes in H1 2022, in accordance with the 2023 mine plan. The lower waste tonnes were mainly due to lower ore treatment targets. 2.5 million ore tonnes were treated (H1 2022: 3.0 million tonnes), a decrease of 0.5 million tonnes. The decrease is mainly due to the 0.4 million tonnes that were treated by third-party processing contractor Alluvial Ventures (AV) in H1 2022 prior to the expiry of their contract on 30 June 2022. The remaining 0.1 million tonnes were due to increasing grid electricity interruptions which reduced the volumes of ore processed. In addition, higher than expected internal basalt dilution in certain domains of ore that was treated impacted throughput. An operational decision to open crusher gaps and to slow throughput in the processing plant was implemented in H2 2023 to enhance plant stability, improve large diamond recoveries and more effectively treat ore blocks with higher levels of internal basalt dilution.
Letšeng recovered 50 601 carats (H1 2022: 55 157 carats). The decrease in volume of recoveries during the Period is mainly due to the absence of the AV contribution to carats recovered, which was 4 409 carats in H1 2022.
The overall grade for H1 2023 was 2.05 cpht (H1 2022: 1.83 cpht), representing an increase of 12%. This was driven by the expiry of the AV contract, whose older technology pan-plant recovered at a lower grade, and a higher contribution of higher-grade Satellite Pipe material, which accounted for 51% of material treated during the Period (H1 2022: 46%). The grade for the material treated during the Period is in line with the expected reserve grade.
Frequency of large diamond recoveries
|
Number of diamonds |
H1 2023 |
H1 2022 |
FY average 2008 - 2022 |
|
>100 carats |
2 |
3 |
8 |
|
60 - 100 carats |
4 |
8 |
18 |
|
30 - 60 carats |
28 |
42 |
76 |
|
20 - 30 carats |
58 |
63 |
114 |
|
10 - 20 carats |
226 |
258 |
447 |
|
Total diamonds > 10 carats |
318 |
374 |
663 |
|
|
|
|
|
DIAMOND SALES
The average price achieved during the Period was US$1 373 per carat (H1 2022: US$1 745 per carat). 52 163 carats were sold, generating rough diamond revenue of US$71.7 million (H1 2022: 57 075 carats at a value of US$99.6 million). The lower revenue is mainly attributed to the lower number of diamonds greater than 10.8 carats recovered during the Period, as well as a downturn in the rough diamond market negatively impacting rough diamond prices.
The highest price achieved was US$282 889 per carat for a 6.63 carat pink diamond, this being the third-highest price achieved to date for a Letšeng diamond. 12 diamonds sold for more than US$1.0 million each, generating revenue of US$21.0 million (H1 2022: 15 diamonds sold for more than US$1.0 million each, generating revenue of US$25.8 million).
RIGHT-SIZING OF LETŠENG
A change in the operational requirements, as well as pressure on operating expenses and rough diamond prices, required the operation to critically review all aspects of its business to ensure it operates optimally and with effective cost management to secure its sustainability.
A right-sizing programme commenced at Letšeng in March 2023 and the workforce element of the programme was completed in June. A total of 327 positions were affected at Letšeng and its contractors during this phase of the programme, which aimed at more effectively and efficiently aligning the workforce to operational requirements.
The further optimisation of operations to ensure efficiency and effective cost control management is a top priority and will include a review of all operational contracts.
CAPITAL PROJECTS
The newly constructed modules for the replacement primary crushing area (PCA) at Letšeng have been completed. Commissioning of the modules commenced mid-July 2023.
The underground feasibility study to assess the viability of an earlier shift to underground mining of the Satellite Pipe has progressed as planned and will inform the trade-off decision between further open-pit cut-backs and underground mining.
The construction of a 300 kilolitre bioremediation plant for run-off water treatment has commenced and is expected to be completed in Q4 2023.
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem Diamonds is discussing various alternatives with affected stakeholders, including the potential closure of the mine.
GROUP FINANCIAL PERFORMANCE
H1 2023 IN REVIEW
• Revenue achieved of US$71.8 million (H1 2022: US$100.0 million)
• Underlying EBITDA1 of US$8.4 million (H1 2022: US$20.9 million)
• Attributable loss of US$1.0 million (H1 2022: profit of US$3.8 million)
PROFITABILITY AND LIQUIDITY
|
|
|
|
|
US$ million |
H1 2023 |
H1 2022* |
|
Revenue from contracts with customers |
71.8 |
100.0 |
|
Royalties and selling costs |
(7.5) |
(10.8) |
|
Cost of sales 1 |
(50.7) |
(63.3) |
|
Corporate expenses |
(5.2) |
(5.0) |
|
Underlying EBITDA 2 |
8.4 |
20.9 |
|
Depreciation and mining asset amortisation |
(3.3) |
(4.3) |
|
Share-based payments |
(0.2) |
(0.1) |
|
Other operating expenses |
(0.8) |
(1.0) |
|
Foreign exchange gain |
2.1 |
- |
|
Net finance costs |
(2.2) |
(2.2) |
|
Profit before tax for the Period |
4.0 |
13.3 |
|
Income tax expense |
(2.5) |
(5.0) |
|
Profit after tax for the Period |
1.5 |
8.3 |
|
Non-controlling interests |
(2.5) |
(4.5) |
|
Attributable (loss)/profit for the Period |
(1.0) |
3.8 |
|
(Loss)/earnings per share (US cents) |
(0.7) |
2.7 |
|
|
|
|
* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.
1 Including waste stripping amortisation costs but excluding depreciation and mining asset amortisation.
2 Underlying earnings before interest, tax, depreciation and mining asset amortisation (EBITDA) as defined in Note 6, Underlying earnings before interest, tax, depreciation and mining asset amortisation (underlying EBITDA) of the condensed notes to the consolidated interim financial statements.
The Group generated an underlying EBITDA2 of US$8.4 million (H1 2022: US$20.9 million). The loss attributable to shareholders was US$1.0 million (H1 2022: profit of US$3.8 million), equating to a loss per share of 0.7 US cents (H1 2022: profit per share of 2.7 US cents) on a weighted average number of shares in issue of 141.6 million (H1 2022: 142.1 million shares).
Revenue
|
|
|
|
|
US$ million |
H1 2023 |
H1 2022 |
|
|
|
|
|
Sales - rough |
71.7 |
99.6 |
|
Sales - polished margin |
0.1 |
0.3 |
|
Impact of carrying over rough diamonds |
- |
0.1 |
|
Group revenue |
71.8 |
100.0 |
|
|
|
|
The Group's revenue of US$71.8 million was mainly generated by the sale of 52 163 carats at an average price of US$1 373 per carat. The additional US$0.1 million revenue was generated from a premium on the sale of polished diamonds in accordance with the agreement with two diamond manufacturers who supply polished diamonds to some of the world's premium luxury brands.
Costs
The Group closely manages its costs and preserves cash resources to maintain appropriate liquidity. Operating expenses continue to be negatively impacted by the volatile global economic environment and the ever-increasing frequency of grid electricity interruptions in South Africa, which increases the reliance on diesel-powered generators and, as a consequence, diesel consumption.
OPERATING EXPENSES
Fuel prices remain a significant expense, with increased consumption for the use of diesel-powered generators during load shedding, although prices stabilised at around LSL18.50 per litre in the Period from a high in excess of LSL20.00 per litre in mid-2022.
The right-sizing of Letšeng that was completed in June 2023 affected 327 positions at Letšeng and its contractors. Total severance payments amounted to LSL23.2 million, of which LSL15.1 million was already provided for at December 2022 in terms of normal leave and severance pay provisions.
Total direct cash costs at Letšeng, including waste, decreased marginally to LSL1 040.8 million from LSL1 076.0 million in H1 2022. Additional once-off expenses relating to the right-sizing, such as the severance payments discussed above and related consulting fees, together with higher levels of inflation and increased diesel consumption due to load shedding, negated the expected decrease in costs from lower waste mining volumes.
Non-cash accounting charges comprise waste capitalisation and inventory and stockpile movement. The net charge was similar to H1 2022, with a decrease in the waste cost capitalised due to lower waste tonnes mined offset by an increase in the volume of tonnes added to the stockpile. The additional tonnes added to the stockpile were mainly due to the plants not treating the planned ore tonnes mined as a result of load shedding and internal basalt dilution as discussed in the Operations Review above.
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Letšeng unit cost analysis |
|
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||||
|
Unit cost per tonne treated |
Direct cash costs1 |
Third plant operator costs |
Total direct cash operating costs |
Non-cash accounting charges2 |
Total operating costs |
|
Waste cash costs per waste tonne mined |
|
|
|
|
|
|
|
|
|
|
H1 (LSL) |
296.54 |
0.00 |
296.54 |
78.24 |
374.78 |
|
63.80 |
|
H1 (LSL) |
223.76 |
14.28 |
238.04 |
85.67 |
323.71 |
|
56.88 |
|
% change |
|
|
25 |
|
16 |
|
12 |
|
H1 (LSL) |
16.28 |
0.00 |
16.28 |
4.29 |
20.57 |
|
3.50 |
|
H1 (LSL) |
14.52 |
0.93 |
15.45 |
5.55 |
21.00 |
|
3.69 |
|
% change |
|
|
5 |
|
(2) |
|
(5) |
|
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|
1 Direct mine cash costs represent all operating costs, excluding royalty and selling costs.
2 Non-cash accounting charges include waste stripping cost amortised, inventory and ore stockpile adjustments, and the impact of adopting IFRS 16 Leases, and exclude depreciation and mining asset amortisation.
Direct cash costs in H1 2023 were LSL296.54 per tonne treated compared to LSL238.04 in H1 2022, which included the impact of AV tonnes and costs. The AV contract expired on 30 June 2022, resulting in a reduction of 0.4 million ore tonnes being treated in H1 2023 when compared to H1 2022. On a like-for-like basis (excluding the impact of AV), the H1 2022 costs increase to LSL262.06 per tonne treated, resulting in a year-on-year increase of 13%. The 13% increase in unit costs is driven by the additional costs mentioned above and a 4% reduction in tonnes processed through the Letšeng plants.
CORPORATE EXPENSES
Corporate office costs are incurred to provide expertise in all areas of the business to realise maximum value from the Group's assets. These costs are incurred by the Group through its technical and administrative offices in South Africa (in South African rand) and head office in the UK (in British pounds).
General corporate costs were US$5.2 million (H1 2022: US$5.0 million). The increase was mainly due to structural changes in the senior leadership and consulting fees related to reviewing new business opportunities, set off by the weaker South African rand and British pound against the US dollar.
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem Diamonds is discussing various alternatives with affected stakeholders, including the potential closure of the mine. The care and maintenance costs of US$0.8 million (H1 2022: US$1.0 million) are included in other operating expenses. The decrease in cash costs is mainly due to the favourable exchange rate.
EXCHANGE RATE IMPACTS
While revenue is generated in US dollars, the majority of operational expenses are incurred in the relevant local currency of the operational jurisdictions. Local currency rates for the Lesotho loti (LSL) (pegged to the South African rand) and Botswana pula (BWP) weakened significantly against the US dollar compared to H1 2022, which decreased the Group's US dollar reported costs and increased local currency cash flow generation.
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|
|
|
|
Exchange rates |
H1 2023 |
H1 2022 |
% change |
|
LSL per US$1.00 |
|
|
|
|
Average exchange rate |
18.21 |
15.41 |
18 |
|
Period end exchange rate |
18.89 |
16.38 |
15 |
|
BWP per US$1.00 |
|
|
|
|
Average exchange rate |
13.20 |
11.79 |
12 |
|
Period end exchange rate |
13.52 |
12.40 |
9 |
|
GBP per US$1.00 |
|
|
|
|
Average exchange rate |
0.81 |
0.77 |
5 |
|
Period end exchange rate |
0.79 |
0.82 |
(4) |
|
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|
|
|
FINANCIAL POSITION
The LSL closed 11% weaker against the US dollar at the end of the Period compared to 31 December 2022. This resulted in a decrease in the US dollar reported values in the Interim Consolidated Statement of Financial Position. Selected totals of the Interim Consolidated Statement of Financial Position and key asset drivers are tabled below.
|
|
|
|
|
|
US$ million |
H1 2023 |
FY 2022 |
% Variance |
|
Non-current assets |
293.7 |
320.0 |
|
|
Current assets |
44.4 |
46.3 |
|
|
Total assets |
338.1 |
366.3 |
(8) |
|
Equity attributable to parent company |
135.3 |
152.7 |
|
|
Non-controlling interest |
76.0 |
80.4 |
|
|
Total equity |
211.3 |
233.1 |
(9) |
|
Non-current liabilities |
105.4 |
110.0 |
|
|
Current liabilities |
21.4 |
23.2 |
|
|
Total liabilities |
126.8 |
133.2 |
(5) |
|
|
|
|
|
Key asset drivers
|
|
|
|
|
|
US$ million |
H1 2023 |
H1 2022 |
% change |
|
Waste cost capitalised |
19.8 |
26.6 |
(25) |
|
Waste stripping cost amortised |
17.8 |
21.9 |
(19) |
|
Depreciation and mining asset amortisation |
3.3 |
4.3 |
(23) |
|
Capital expenditure |
4.6 |
2.4 |
92 |
|
|
|
|
|
Waste cost capitalised decreased due to the lower volumes of waste tonnes mined. The waste stripping cost amortised decreased to US$17.8 million (H1 2022: US$21.9 million). Depreciation and mining asset amortisation decreased to US$3.3 million (H1 2022: US$4.3 million).
During the Period, the majority of capital spent related to the completion of the replacement PCA for US$2.1 million and the underground feasibility study for US$0.9 million. Other capital projects include the resource core drilling programme required to inform Letšeng's Resource and Reserve Statement and the expansion of the Patiseng coarse residue storage facility.
Liquidity and solvency
The Group ended the Period with cash on hand of US$7.3 million (31 December 2022: US$8.7 million), of which US$6.2 million is attributable to Gem Diamonds. The Group generated cash from operating activities of US$20.1 million (H1 2022: US$30.1 million).
At Period end, the Group had utilised facilities of US$9.3 million, resulting in a net debt position of US$2.0 million (31 December 2022: net cash of US$3.3 million) and available facilities of US$72.9 million, comprising US$27.0 million at Gem Diamonds and US$45.9 million at Letšeng.
The decrease in net cash was mainly due to the lower revenue generated from rough diamond sales, coupled with high levels of inflation which negatively impacted operating expenses. The severance packages and consulting fees paid at Letšeng as part of the right-sizing of the operation also decreased cash generation.
The Group has a LSL750.0 million and a US$30.0 million revolving credit facility expiring in December 2024. Letšeng also has a LSL100.0 million general banking facility that is reviewed annually and a ZAR136.4 million project term loan facility for the construction of the replacement PCA. The Group engages regularly with lenders and credit providers to ensure continued access to funding and to manage the Group's cash flow requirements.
Summary of loan facilities as at 30 June 2023:
|
|
|
|
|
|
|
|
|
Company |
Term/description/expiry |
Lender |
Interest rate |
Amount US$ million |
Drawn down/ Balance due US$ million |
Available US$ million |
|
|
|
|
|
|
|
|
|
Gem Diamonds Limited |
Three-year revolving credit facility Expires |
Nedbank Standard Bank Firstrand Bank |
Facility A Term SOFR + 5.26% 1 |
30.0 |
3.0 |
27.0 |
|
Letšeng Diamonds |
Three-year revolving credit facility Expires |
Standard Lesotho Bank Nedbank Lesotho First National Bank of Lesotho Firstrand Bank |
Facility B (LSL450 million): Central Bank of Lesotho rate + 3.25% |
23.8 |
- |
23.8 |
|
|
|
Nedbank |
Facility C (ZAR300 million):South African JIBAR + 3.05% |
15.9 |
- |
15.9 |
|
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 |
6.3 |
0.9 |
|
Letšeng Diamonds |
General banking facility Annual review in March |
Nedbank |
ZAR100 million South African Prime Lending Rate minus 0.70% |
5.3 |
- |
5.3 |
|
Total |
|
|
|
82.2 |
9.3 |
72.9 |
|
|
|
|
|
|
|
|
1GDL RCF transitioned from LIBOR to term SOFR effective from 1 January 2023. The margin of 5.26% includes a credit adjustment spread of 0.26% to bring term SOFR in line with LIBOR.
Taxation
The forecast effective tax rate for the full year is 62.3% (31 December 2022: 33.8%) and has been applied to the actual results. This rate is the result of profits generated by Letšeng being taxed at 25%, deferred tax assets not being recognised on losses incurred in non-trading operations, and the effect of the overseas foreign tax rate differential. The increase in the tax rate compared to 2022 is due to the lower profits generated by Letšeng.
There has been no change to the amended tax assessment that 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. There has therefore been no change in judgement applied and the accounting treatment compared to that disclosed in the 2022 Annual Report and Accounts.
Going concern
The projections of the Group's current and expected profitability, considering reasonable possible changes in operations, key assumptions and inputs, indicate that the Group will be able to operate as a going concern for the foreseeable future. Refer to the financial statements on page 9.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's principal risks and uncertainties, both current and emerging, that could have a material financial, operational and compliance impact on its performance and long-term growth, are presented in the Annual Report and Accounts for 2022 (pages 36 to 42). The Group's principal risks as presented in the Annual Report and Accounts for 2022 remain unchanged in the medium to long term and take into consideration current market and operational conditions of the Group's operations and global markets. The Group's risk management strategy aims to manage Group risk in such a way as to minimise threats and maximise opportunities.
The assessment of emerging risks is embedded within the risk framework of the Group. Any emerging risks identified are reported to and considered by the Board. The potential for future carbon tax liabilities, including the Carbon Border Adjustment Mechanism in the European Union, is being monitored through the Group's climate change-related governance and risk management structures.
The Group continues to monitor and manage areas of unpredictability, in particular the immediate and evolving impact of excessive and increased power outages and diesel consumption and the current downturn in prices being experienced in the rough diamond market.
Clifford Elphick
Chief Executive Officer
30 August 2023
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT AND FINANCIAL STATEMENTS
PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES (DTR) 4.2.10
The Directors confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting and that the Half-Year Report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
(a) an indication of important events that have occurred during the first six months of the financial year and their impact on this condensed set of financial statements; and
(b) material related-party transactions in the first six months of the year and any material changes in the related-party transactions described in the Gem Diamonds Limited Annual Report 2022.
The names and functions of the Directors of Gem Diamonds Limited are listed in the Annual Report for the year ended 31 December 2022.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
30 August 2023
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
|
|
|
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 2022*1 |
|
|
|
Notes |
|
US$'000 |
US$'000 |
|
|
Revenue from contracts with customers |
4 |
|
71 763 |
99 951 |
|
|
Cost of sales |
|
|
(53 997) |
(67 430) |
|
|
Gross profit |
|
|
17 766 |
32 521 |
|
|
Other operating expense |
5 |
|
(766) |
(1 059) |
|
|
Royalties and selling costs |
|
|
(7 476) |
(10 781) |
|
|
Corporate expenses |
|
|
(5 239) |
(5 004) |
|
|
Share-based payments |
17 |
|
(241) |
(125) |
|
|
Foreign exchange gain |
|
|
2 148 |
20 |
|
|
Operating profit |
|
|
6 192 |
15 572 |
|
|
Net finance costs |
|
|
(2 246) |
(2 207) |
|
|
- Finance income |
|
|
187 |
73 |
|
|
- Finance costs |
|
|
(2 433) |
(2 280) |
|
|
|
|
|
|
|
|
|
Profit before tax for the Period |
|
|
3 946 |
13 365 |
|
|
Income tax expense |
8 |
|
(2 458) |
(5 075) |
|
|
Profit for the Period |
|
|
1 488 |
8 290 |
|
|
Attributable to: |
|
|
|
|
|
|
Equity holders of parent |
|
|
(991) |
3 755 |
|
|
Non-controlling interests |
|
|
2 479 |
4 535 |
|
|
Earnings per share (cents) |
|
|
|
|
|
|
- Basic (loss)/earnings for the year attributable to ordinary equity holders of the parent |
|
|
(0.71) |
2.68 |
|
|
- Diluted (loss)/earnings for the year attributable to ordinary equity holders of the parent |
|
|
(0.70) |
2.64 |
|
|
|
|
|
|
|
|
* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.
1 Unaudited.
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2023
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
US$'000 |
US$'000 |
|
Profit for the Period |
|
1 488 |
8 290 |
|
Other comprehensive income that will be reclassified to the interim Consolidated Statement of Profit or Loss in subsequent periods: |
|
|
|
|
Exchange differences on translation of foreign operations, net of tax |
|
(23 525) |
(6 916) |
|
Other comprehensive loss for the Period, net of tax |
|
(23 525) |
(6 916) |
|
Total comprehensive (loss)/income for the Period |
|
(22 037) |
1 374 |
|
Attributable to: |
|
|
|
|
Equity holders of parent |
|
(17 611) |
(938) |
|
Non-controlling interests |
|
(4 426) |
2 312 |
|
|
|
|
|
1 Unaudited.
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
|
|
|
|
|
|
|
|
30 June 20231 |
31 December 20222 |
|
|
Notes |
US$'000 |
US$'000 |
|
ASSETS |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
10 |
269 798 |
293 499 |
|
Right-of-use assets |
11 |
5 633 |
6 340 |
|
Intangible assets |
12 |
10 107 |
11 221 |
|
Receivables and other assets |
13 |
2 687 |
2 916 |
|
Deferred tax assets |
|
5 492 |
5 994 |
|
|
|
293 717 |
319 970 |
|
Current assets |
|
|
|
|
Inventories |
|
31 425 |
30 370 |
|
Receivables and other assets |
13 |
4 462 |
4 855 |
|
Income tax receivable |
|
1 155 |
2 323 |
|
Cash and short-term deposits |
14 |
7 322 |
8 721 |
|
|
|
44 364 |
46 269 |
|
Total assets |
|
338 081 |
366 239 |
|
EQUITY AND LIABILITIES |
|
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
|
Issued capital |
16 |
1 411 |
1 410 |
|
Treasury shares |
16 |
(1 157) |
(1 157) |
|
Share premium |
|
885 648 |
885 648 |
|
Other reserves |
|
(255 549) |
(239 169) |
|
Accumulated losses |
|
(495 104) |
(494 113) |
|
|
|
135 249 |
152 619 |
|
Non-controlling interests |
|
76 002 |
80 428 |
|
Total equity |
|
211 251 |
233 047 |
|
Non-current liabilities |
|
|
|
|
Interest-bearing loans and borrowings |
18 |
7 466 |
4 370 |
|
Lease liabilities |
19 |
4 695 |
6 021 |
|
Trade and other payables |
|
1 422 |
2 169 |
|
Provisions |
|
14 711 |
15 387 |
|
Deferred tax liabilities |
|
77 126 |
82 030 |
|
|
|
105 420 |
109 977 |
|
Current liabilities |
|
|
|
|
Interest-bearing loans and borrowings |
18 |
1 444 |
1 575 |
|
Lease liabilities |
19 |
2 224 |
1 877 |
|
Trade and other payables |
|
17 705 |
19 708 |
|
Income tax payable |
|
37 |
55 |
|
|
|
21 410 |
23 215 |
|
Total liabilities |
|
126 830 |
133 192 |
|
Total equity and liabilities |
|
338 081 |
366 239 |
|
|
|
|
|
1 Unaudited.
2 Audited.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the equity holders of the parent |
|
|
||||||
|
|
|
Issued capital |
Share premium |
Treasury shares |
Other reserves1
|
Accumu- lated (losses)/ retained earnings |
Total |
Non-controlling interests |
Total equity |
|
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
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 |
|
- |
- |
- |
(16 620) |
(991) |
(17 611) |
(4 426) |
(22 037) |
|
|
Profit for the year |
|
- |
- |
- |
- |
(991) |
(991) |
2 479 |
1 488 |
|
|
Other comprehensive loss |
|
- |
- |
- |
(16 620) |
- |
(16 620) |
(6 905) |
(23 525) |
|
|
Share capital issued (Note16) |
|
1 |
- |
- |
(1) |
- |
- |
- |
- |
|
|
Share-based payments (Note 17) |
|
- |
- |
- |
241 |
- |
241 |
- |
241 |
|
|
As at 30 June 2023 |
|
1 411 |
885 648 |
(1 157) |
(255 549) |
(495 104) |
135 249 |
76 002 |
211 251 |
|
|
As at 1 January 2022 |
|
1 406 |
885 648 |
- |
(226 697) |
(500 550) |
159 807 |
86 843 |
246 650 |
|
|
Total comprehensive (loss)/income |
|
- |
- |
- |
(4 693) |
3 755 |
(938) |
2 312 |
1 374 |
|
|
Profit for the year |
|
- |
- |
- |
- |
3 755 |
3 755 |
4 535 |
8 290 |
|
|
Other comprehensive loss |
|
- |
- |
- |
(4 693) |
- |
(4 693) |
(2 223) |
(6 916) |
|
|
Share capital issued (Note 16) |
|
4 |
- |
- |
(4) |
- |
- |
- |
- |
|
|
Share buyback (Note 16) |
|
- |
- |
(1 157) |
- |
- |
(1 157) |
- |
(1 157) |
|
|
Share-based payments (Note 17) |
|
- |
- |
- |
125 |
- |
125 |
- |
125 |
|
|
Dividends paid (Note 9, Note 22) |
|
- |
- |
- |
- |
(3 771) |
(3 771) |
(3 908) |
(7 679) |
|
|
As at 30 June 2022 |
|
1 410 |
885 648 |
(1 157) |
(231 269) |
(500 566) |
154 066 |
85 247 |
239 313 |
|
1 Other reserves relate to Foreign currency translation reserves and Share-based equity reserves. Refer Note 16, Issued share capital and reserves for further detail.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 2022*1 |
|
|
|
|
Notes |
|
|
US$'000 |
US$'000 |
|
|
|
Cash flows from operating activities |
|
|
|
20 076 |
30 095 |
|
|
|
Cash generated by operations |
20.1 |
|
|
28 867 |
42 995 |
|
|
|
Working capital adjustments |
20.2 |
|
|
(7 346) |
(9 841) |
|
|
|
Interest received |
|
|
|
125 |
73 |
|
|
|
Interest paid |
|
|
|
(1 547) |
(1 453) |
|
|
|
Income tax paid |
|
|
|
(23) |
(2 940) |
|
|
|
Income tax received |
|
|
|
- |
1 261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
(24 309) |
(28 983) |
|
|
|
Purchase of property, plant and equipment |
10 |
|
|
(4 555) |
(2 376) |
|
|
|
Waste stripping costs capitalised |
10 |
|
|
(19 835) |
(26 607) |
|
|
|
Proceeds from sale of property, plant and equipment |
|
|
|
81 |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities |
|
|
|
2 514 |
(8 617) |
|
|
|
Lease liabilities repaid |
|
|
|
(950) |
(850) |
|
|
|
Net financial liabilities raised |
20.3 |
|
|
3 464 |
600 |
|
|
|
- Financial liabilities raised |
|
|
|
23 600 |
4 298 |
|
|
|
- Financial liabilities repaid |
|
|
|
(20 136) |
(3 698) |
|
|
|
Share buyback |
16 |
|
|
- |
(1 157) |
|
|
|
Dividends paid to holders of the parent |
|
|
|
- |
(3 302) |
|
|
|
Dividends paid to non-controlling interests |
|
|
|
- |
(3 908) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
|
(1 719) |
(7 505) |
|
|
|
Cash and cash equivalents at beginning of Period |
|
|
|
8 721 |
31 057 |
|
|
|
Foreign exchange differences |
|
|
|
321 |
639 |
|
|
|
Cash and cash equivalents at end of Period |
0 |
|
|
7 323 |
24 191 |
|
|
|
Cash and cash equivalents at end of Period |
14 |
|
|
7 322 |
24 145 |
|
|
|
Cash and cash equivalents at end of Period - discontinued operation |
|
|
|
- |
46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.
1 Unaudited.
CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2023
1. CORPORATE INFORMATION
1.1 Incorporation and authorisation
The holding company, Gem Diamonds Limited (the Company), was incorporated on 29 July 2005 in the British Virgin Islands (BVI) and is domiciled in the United Kingdom (UK). The Company's registration number is 669758.
The financial information shown in this report relating to Gem Diamonds Limited and its subsidiaries (the Group) was approved by the Board of Directors on 30 August 2023, is not audited or reviewed by the auditor and does not constitute statutory financial statements. The report of the auditor on the Group's 2022 Annual Report and Accounts was unqualified.
The Group is principally engaged in operating diamond mines.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of preparation
The condensed consolidated interim financial statements for the six months ended 30 June 2023 (the Period) have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2022. The Condensed financial statements are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act, 2006. The financial information for the year to 31 December 2022 included in this report was derived from the statutory accounts for the year ended 31 December 2022, a copy of which has been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of an emphasis of matter and did not contain a statement under sections 498(2) or (3) of the Companies Act, 2006.
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 1 to 3. The financial position of the Group, its cash flows and liquidity position are described in the Group Financial Performance on pages 4 to 7. The Group's net debt at 30 June 2023 was US$2.0 million (31 December 2022: net cash of US$3.3 million) and with its undrawn facilities of US$72.9 million (31 December 2022: US$82.6 million), its liquidity (defined as net cash and undrawn facilities) of US$70.9 million (31 December 2022: US$85.9 million) remains strong. The Group's Revolving Credit facilities, which total US$69.7 million when fully unutilised, mature on 22 December 2024. In addition, there is a US$5.3 million general banking facility with no set expiry date, but is reviewed annually. For further information on these facilities, refer Note 18, Interest-bearing loans and borrowings.
After making enquiries which include reviews of forecasts and budgets, timing of cash flows and sensitivity analyses, and considering the continued impact of the Russian invasion of Ukraine on consumable and commodity prices on both the wider macro-economic environment (including demand for the Group's products and realised prices) and the Group's operations and production levels, the Directors have a reasonable expectation that the Group and the Company have 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 this half-year report and accounts of the Group.
2.2 Significant accounting policies
The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's Annual Financial Statements for the year ended 31 December 2022.
New accounting pronouncements, principally minor amendments to existing standards, also became effective on 1 January 2023 and have been adopted by the Group. The adoption of these new accounting pronouncements has not had a significant impact on the accounting policies, methods of computation or presentation applied by the Group.
Amendments to standards
|
|
|
|
Standards, amendments, and improvements |
Description |
|
IFRS 17 |
Insurance contracts |
|
Amendments to IAS 8 |
Definition of Accounting Estimates |
|
Amendments to IAS 1 and IFRS Practice Statement 2 |
Disclosure of Accounting Policies |
|
Amendments to IAS 12 |
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
|
|
|
|
* Annual periods beginning on or after. |
|
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 interim financial statements are listed in the table below. The standards, amendments and improvements have not been early adopted and it is expected that, where applicable, these standards and amendments will be adopted on each respective effective date. The impact of the adoption of these standards cannot be reasonably assessed at this stage.
|
|
|
|
|
Standards, amendments, and improvements |
Description |
Effective date* |
|
Amendments to IFRS 16 |
Lease Liability in a Sale and Leaseback |
1 January 2024 |
|
Amendments to IAS 1 |
Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants |
1 January 2024 |
|
|
|
|
|
* Annual periods beginning on or after. |
|
|
3. SEGMENT INFORMATION
For management purposes, the Group is organised into geographical units as its risks and required rates of return are affected predominantly by differences in the geographical regions of the mines and areas in which the Group operates or areas in which operations are managed. The below measures of profit or loss, assets and liabilities are reviewed by the
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), ceased to be classified as a discontinued operation held for sale at 31 December 2022. Refer Note 15, Assets held for sale.
Management monitors the operating results of the geographical units separately for the purpose of making decisions about resource allocation and performance assessment.
Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), which was classified as a discontinued operation held for sale and disclosed separately as the discontinued operation segment in prior years, has ceased to be classified as a discontinued operation held for sale on 31 December 2022. Refer Note 15, Assets held for sale. The 30 June 2022 comparative segment information has been restated to re-present the previous discontinued operation segment as the Botswana segment as part of the Group's continuing operations.
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 diamond manufacturing margins and diamond analysis and manufacturing services.
The following tables present revenue from contracts with customers, profit/(loss) for the Period, EBITDA and asset and liability information from operations regarding the Group's geographical segments:
|
|
|
|
|
|
|
|
|
Lesotho |
Belgium |
BVI, RSA, UK and Cyprus3 |
Botswana |
Total |
|
Six months ended 30 June 20231 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue from contracts with customers |
|
|
|
|
|
|
Total revenue |
70 688 |
72 045 |
3 478 |
- |
146 211 |
|
Intersegment |
(70 564) |
(406) |
(3 478) |
- |
(74 448) |
|
External customers |
124 |
71 639 |
- |
- |
71 763 |
|
Segment operating profit/(loss) |
12 360 |
330 |
(5 672) |
(826) |
6 192 |
|
Net finance costs |
(1 734) |
(12) |
(412) |
(88) |
(2 246) |
|
Profit/(loss) before tax |
10 626 |
318 |
(6 084) |
(914) |
3 946 |
|
Income tax (expense)/income |
(2 361) |
4 |
(101)4 |
- |
(2 458) |
|
Profit/(loss) for the Period |
8 265 |
322 |
(6 185) |
(914) |
1 488 |
|
EBITDA |
13 099 |
413 |
(5 156) |
- |
8 356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lesotho |
Belgium |
BVI, RSA, UK and Cyprus3 |
Botswana |
Total |
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Segment assets |
|
|
|
|
|
|
30 June 20231 |
324 773 |
3 090 |
4 061 |
665 |
332 589 |
|
31 December 20222 |
350 640 |
2 411 |
6 676 |
518 |
360 245 |
|
Net cash/(debt) and short-term deposits5 |
|
|
|
|
|
|
30 June 20231 |
(3 150) |
1 424 |
(312) |
60 |
(1 978) |
|
31 December 20222 |
(2 627) |
660 |
5 231 |
1 |
3 265 |
|
Segment liabilities |
|
|
|
|
|
|
30 June 20231 |
40 198 |
1 716 |
4 449 |
3 341 |
49 704 |
|
31 December 20222 |
43 987 |
1 677 |
2 097 |
3 401 |
51 162 |
|
|
|
|
|
|
|
1 Unaudited.
2 Audited.
3 No revenue was generated in BVI and Cyprus.
4 This includes the adjustment to align the forecast effective tax rate for the full year, to the actual results for the Period. Refer Note 8, Income tax expense.
5 Calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing and credit underwriting fees). Refer Note 18, Interest-bearing loans and borrowings.
Included in revenue for the Period is revenue from one customer who individually contributed 10% or more to total revenue. This revenue in total amounted to US$10.3 million (30 June 2022: US$12.5 million from one customer) arising from the sales reported in the Belgium segment.
Segment assets and liabilities do not include deferred tax assets and liabilities of US$5.5 million and US$77.1 million respectively (31 December 2022: deferred tax asset US$6.0 million, deferred tax liabilities US$82.0 million).
Total revenue for the Period is lower than that of the prior period. Although the volume of carats sold of 52 163 carats was only 9% lower than the prior period (57 075 carats), the $ per carat achieved of US$1 373 was 21% lower than the prior period (US$1 745 per carat). The lower revenue is mainly attributed to the lower number of diamonds greater than 10.8 carats recovered during the Period, as well as a downturn in the rough diamond market negatively impacting rough diamond prices.
|
|
|
|
|
|
|
|
|
Lesotho |
Belgium |
BVI, RSA, UK and Cyprus2 |
Botswana* |
Total |
|
Six months ended 30 June 20221 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
Revenue from contracts with customers |
|
|
|
|
|
|
Total revenue |
98 435 |
100 037 |
3 660 |
- |
202 132 |
|
Intersegment |
(98 128) |
(393) |
(3 660) |
- |
(102 181) |
|
External customers |
307 |
99 644 |
- |
- |
99 951 |
|
Segment operating profit/(loss) |
21 383 |
635 |
(5 480) |
(966) |
15 572 |
|
Net finance costs |
(1 506) |
(4) |
(588) |
(109) |
(2 207) |
|
Profit/(loss) before tax |
19 877 |
631 |
(6 068) |
(1 075) |
13 365 |
|
Income tax expense |
(4 760) |
(89) |
(226)3 |
- |
(5 075) |
|
Profit/(loss) for the Period |
15 117 |
542 |
(6 294) |
(1 075) |
8 290 |
|
EBITDA |
24 937 |
830 |
(4 860) |
- |
20 907 |
|
|
|
|
|
|
|
* Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), previously reported as the discontinued operation segment in prior periods, ceased to be classified as a
discontinued operation held for sale at 31 December 2022 and the comparative segment information has been restated to re-present the previous discontinued operation segment as the Botswana segment. Refer Note 15, Assets held for sale.
1 Unaudited.
2 No revenue was generated in BVI and Cyprus.
3 This includes the adjustment to align the forecast effective tax rate for the full year, to the actual results for the Period. Refer Note 8, Income tax expense.
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
US$'000 |
US$'000 |
|
4. |
REVENUE FROM CONTRACTS WITH CUSTOMERS |
|
|
|
|
Sale of goods |
71 638 |
99 627 |
|
|
Partnership arrangements |
125 |
306 |
|
|
Rendering of services |
- |
18 |
|
|
|
71 763 |
99 951 |
|
|
|
|
|
1 Unaudited.
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$0.1 million (2022: US$0.3 million) represents the additional uplift from partnership arrangements for which revenue is recognised when the significant constraints are lifted or resolved and the amount of revenue is guaranteed. At Period end 2 082 carats (2022: 527 carats) have significant constraints in recognising revenue relating to the additional uplift.
No revenue was generated from joint operation arrangements during the current or prior period.
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 2022*1 |
|
|
|
US$'000 |
US$'000 |
|
5. |
OTHER OPERATING EXPENSES |
|
|
|
|
Sundry income/(expense) |
61 |
(93) |
|
|
Ghaghoo care and maintenance costs |
(906) |
(966) |
|
|
Profit on disposal and scrapping of property, plant and equipment |
79 |
- |
|
|
|
(766) |
(1 059) |
|
|
|
|
|
* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.
1 Unaudited.
6. UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET AMORTISATION (UNDERLYING EBITDA)
Underlying EBITDA is shown, as the Directors consider this measure to be a relevant guide to the operational performance of the Group and excludes such non-operating costs and income as listed below. The reconciliation from operating profit to underlying EBITDA is as follows:
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 2022*1 |
|
|
|
US$'000 |
US$'000 |
|
|
Operating profit |
6 192 |
15 572 |
|
|
Other operating expenses |
764 |
966 |
|
|
Foreign exchange gain |
(2 148) |
(20) |
|
|
Share-based payments |
241 |
125 |
|
|
Depreciation and amortisation (excluding waste stripping cost amortised) |
3 307 |
4 264 |
|
|
Underlying EBITDA |
8 356 |
20 907 |
|
|
|
|
|
* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.
1 Unaudited.
7. SEASONALITY OF OPERATIONS
The Group's sales environment with regard to its diamond sales is not materially impacted by seasonal and cyclical fluctuations. The mining operations may be impacted by seasonal weather conditions. Appropriate mine planning and ore stockpile build-up ensures that operations can continue during adverse weather conditions.
|
|
|
|
|
|
|
|
|
30 June 20231 |
|
30 June 20221 |
|
|
|
US$'000 |
|
US$'000 |
|
8. |
INCOME TAX EXPENSE |
|
|
|
|
|
Current |
|
|
|
|
|
- Foreign |
(978) |
|
(3 940) |
|
|
Withholding tax |
|
|
|
|
|
- Foreign |
596 |
2 |
(550) |
|
|
Deferred |
|
|
|
|
|
- Foreign |
(2 076) |
|
(585) |
|
|
Income tax expense |
(2 458) |
|
(5 075) |
|
|
|
|
|
|
1 Unaudited.
2 This relates to a refund due to Gem Diamonds Limited from Revenue Services Lesotho for withholding tax overpaid on dividends in prior periods, following an amendment to the Double Tax Agreement between the United Kingdom and the Kingdom of Lesotho. The receivable has been recognised as part of Other Receivables. Refer Note 13, Receivables and other assets.
The forecast effective tax rate for the full year is 62.3% (31 December 2022: 33.8%) and has been applied to the actual results.
The effective tax rate is above the Lesotho statutory tax rate of 25% primarily as a result of deferred tax assets not recognised on losses incurred in non-trading operations and the effect of the overseas foreign tax rate differential. The increase in the tax rate compared to 2022 is due to the lower profits generated by Letšeng.
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
US$'000 |
US$'000 |
|
9. |
DIVIDENDS PAID |
|
|
|
|
Dividends on ordinary shares declared and paid |
|
|
|
|
Final ordinary cash dividend for 2022: nil (2021: 2.7 US cents per share) |
- |
3 771 |
|
|
|
|
|
There was no dividend proposed on the 2022 full-year results or paid during the current Period.
The Directors intend on applying a similar dividend policy in the current year on the 2023 full year results as has been adopted previously. The dividend policy is dependent on the results of the Group's operations, its financial position, cash requirements, future prospects, profits available for distribution and other factors deemed to be relevant at that time.
10. PROPERTY, PLANT AND EQUIPMENT
During the Period, the Group invested US$4.6 million (30 June 2022: US$2.4 million) into property, plant and equipment, of which US$4.5 million (30 June 2022: US$2.3 million) related to Letšeng.
Letšeng's capital spend was incurred mainly on the completion of the construction of the PCA of US$2.1 million (30 June 2022: US$1.9 million) and the Underground Feasibility Study of US$0.9 million.
Letšeng further invested US$19.8 million (30 June 2022: US$26.6 million) in deferred stripping costs which were capitalised. Amortisation of the deferred stripping asset (waste stripping cost amortisation) of US$17.8 million (30 June 2022: US$21.9 million) was charged to the Interim Consolidated Statement of Profit or Loss during the Period. The amortisation is directly related to the areas that were mined during the Period and their associated waste to ore strip ratios.
Depreciation and amortisation of US$2.4 million (30 June 2022: US$3.4 million) was charged to the Interim Consolidated Statement of Profit or Loss during the Period.
In addition to the above, foreign exchange movements on translation affecting property, plant and equipment decreased the asset balances by US$27.9 million (30 June 2022: US$7.5 million decrease).
|
|
|
|
|
|
|
|
|
|
Right-of-use assets |
|||
|
|
|
Plant and equipment |
Motor vehicles |
Buildings |
Total |
|
|
|
US$'000 |
US$'000 |
US$'000 |
US$'000 |
|
11. |
RIGHT-OF-USE ASSETS |
|
|
|
|
|
|
As at 30 June 20231 |
|
|
|
|
|
|
Cost |
|
|
|
|
|
|
As at 1 January 2023 |
3 190 |
421 |
6 430 |
10 041 |
|
|
Additions |
420 |
515 |
122 |
1 057 |
|
|
Derecognition of lease |
- |
(526) |
(225) |
(751) |
|
|
Foreign exchange differences |
(332) |
(41) |
(455) |
(828) |
|
|
As at 30 June 20231 |
3 278 |
369 |
5 872 |
9 519 |
|
|
Accumulated depreciation |
|
|
|
|
|
|
As at 1 January 2023 |
688 |
115 |
2 898 |
3 701 |
|
|
Charge for the year |
346 |
40 |
480 |
866 |
|
|
Derecognition of lease |
- |
(98) |
(225) |
(323) |
|
|
Foreign exchange differences |
(81) |
(10) |
(267) |
(358) |
|
|
As at 30 June 20231 |
953 |
47 |
2 886 |
3 886 |
|
|
Net book value at 30 June 20231 |
2 325 |
322 |
2 986 |
5 633 |
|
|
|
|
|
|
|
|
|
As at 31 December 20222 |
|
|
|
|
|
|
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 20222 |
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 20222 |
688 |
115 |
2 898 |
3 701 |
|
|
Net book value at 31 December 20222 |
2 502 |
306 |
3 532 |
6 340 |
|
|
|
|
|
|
|
1 Unaudited.
2 Audited.
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 the estimated useful life and the lease term.
During the Period, 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 blasting services 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. Furthermore, a new contract for the rental of earth-moving
equipment was entered into. The contract was assessed as containing a lease resulting in the recognition of the new associated right-of-use assets and lease liabilities. Refer Note 19, Lease liabilities.
Total gains of US$22.9 thousand (30 June 2022: nil) relating to the derecognition of leases in the Group have been recognised in the Interim Consolidated Statement of Profit or Loss. Refer Note 19, Lease liabilities and Note 20.1, Cash generated by operations. During the Period the Group recognised income of US$0.2 million (30 June 2022: US$0.2 million) from the sub-leasing of office buildings in Maseru. The Group expects to receive the following lease payments from the operating sub-leasing in the following years:
|
|
|
|
|
US$ '000 |
|
1 July 2023 - 30 June 2024 |
343 |
|
1 July 2024 - 30 June 2025 |
206 |
|
|
|
|
|
|
|
|
|
|
Goodwill1 |
|
|
|
US$'000 |
|
12. |
INTANGIBLE ASSETS |
|
|
|
As at 30 June 20232 |
|
|
|
Cost |
|
|
|
Balance at 1 January 2023 |
11 221 |
|
|
Foreign exchange translation difference |
(1 114) |
|
|
Balance at 30 June 20232 |
10 107 |
|
|
Accumulated amortisation |
|
|
|
Balance at 1 January 2023 |
- |
|
|
Amortisation |
- |
|
|
Balance at 30 June 20232 |
- |
|
|
Net book value at 30 June 20232 |
10 107 |
|
|
|
|
|
|
As at 31 December 20223 |
|
|
|
Cost |
|
|
|
Balance at 1 January 2022 |
11 962 |
|
|
Foreign exchange translation difference |
(741) |
|
|
Balance at 31 December 20223 |
11 221 |
|
|
Accumulated amortisation |
|
|
|
Balance at 1 January 2022 |
- |
|
|
Amortisation |
- |
|
|
Balance at 31 December 20223 |
- |
|
|
Net book value at 31 December 20223 |
11 221 |
|
|
|
|
1 Goodwill allocated to Letšeng Diamonds.
2 Unaudited.
3 Audited.
|
|
|
|
|
|
|
|
30 June 20231 |
31 December 20222 |
|
|
|
US$'000 |
US$'000 |
|
13. |
RECEIVABLES AND OTHER ASSETS |
|
|
|
|
Non-current |
|
|
|
|
Deposits |
87 |
96 |
|
|
Insurance asset |
2 600 |
2 820 |
|
|
|
2 687 |
2 916 |
|
|
Current |
|
|
|
|
Trade receivables |
27 |
23 |
|
|
Prepayments |
314 |
1 350 |
|
|
Deposits |
24 |
21 |
|
|
Other receivables3 |
1 826 |
249 |
|
|
Vat receivable |
2 271 |
3 212 |
|
|
|
4 462 |
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 |
4 |
- |
|
|
Past due but not impaired: |
|
|
|
|
Less than 30 days |
- |
- |
|
|
30 to 60 days |
- |
- |
|
|
60 to 90 days |
- |
- |
|
|
90 to 120 days |
- |
- |
|
|
> 120 days |
23 |
23 |
|
|
|
27 |
23 |
|
|
|
|
|
1 Unaudited.
2 Audited.
3 Other receivables includes US$1.0 million relating to insurance proceeds receivable from the settlement of the previously identified diesel theft at Letšeng. These proceeds were received in August 2023.
Based on the nature of the Group's client base and the negligible exposure to credit risk through its client base, insurance asset and other financial assets, the expected credit loss is insignificant and has no impact on the Group.
|
|
|
|
|
|
|
|
30 June 20231 |
31 December 20222 |
|
|
|
US$'000 |
US$'000 |
|
14. |
CASH AND SHORT-TERM DEPOSITS |
|
|
|
|
Cash on hand |
5 |
4 |
|
|
Bank balances |
4 132 |
6 006 |
|
|
Short term bank deposits |
3 185 |
2 711 |
|
|
|
7 322 |
8 721 |
|
|
|
|
|
1 Unaudited.
2 Audited.
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 30 June 2023, the Group had US$72.9 million (31 December 2022: US$82.6 million) of undrawn facilities, representing the LSL750.0 million (US$39.7 million) three-year secured revolving working capital facility at Letšeng, the Letšeng ZAR100.0 million (US$5.3 million) general banking facility, the available portion of the PCA project debt facility of ZAR17.4 million (US$0.9 million) and US$27.0 million from the Company's secured revolving credit facility. For further details on these facilities, refer Note 18, Interest-bearing loans and borrowings.
15. ASSETS HELD FOR SALE
Since 2019, in line with the strategic objective to dispose of non-core assets, the Board of Directors and Management have remained committed to the sale of Gem Diamonds Botswana (Pty) Ltd (GDB), which owns the Ghaghoo Diamond Mine. During the previous period, GDB continued to be disclosed as a discontinued operation held for sale. At the end of the previous year, 31 December 2022, GDB ceased to be classified as a discontinued operation held for sale based on there not being a sales agreement in place and therefore the prospects of a sale not being highly probable. GDB was therefore re-presented to be reflected as part of continuing operations, and continued to be disclosed as such during the Period. All impacted prior year figures in the interim consolidated statement of profit or loss and relevant notes have been re-presented to reflect GDB as part of continuing operations.
The table below represents the prior year re-presentation for all amounts in the Interim consolidated statement of profit or loss and notes thereto which were re-presented.
|
|
|
|
|
|
|
|
|
As previously reported |
Re-presentation adjustment |
Re-presented figures |
|
|
|
30 June 2022 |
30 June 2022 |
30 June 2022 |
|
|
|
US$'000 |
US$'000 |
US$'000 |
|
|
CONSOLIDATED STATEMENT OF PROFIT OR LOSS |
|
|
|
|
|
CONTINUING OPERATIONS |
|
|
|
|
|
Other operating expense |
(93) |
(966) |
(1 059) |
|
|
Operating profit |
16 538 |
(966) |
15 572 |
|
|
Net finance costs |
(2 098) |
(109) |
(2 207) |
|
|
- Finance costs |
(2 171) |
(109) |
(2 280) |
|
|
Profit before tax for the Period |
14 440 |
(1 075) |
13 365 |
|
|
Profit after tax for the Period |
9 365 |
(1 075) |
8 290 |
|
|
DISCONTINUED OPERATION |
|
|
|
|
|
Loss after tax for the Period from discontinued operation |
(1 075) |
1 075 |
- |
|
|
Earnings per share (cents) for continuing operations |
|
|
|
|
|
- Basic earnings for the year attributable to ordinary equity holders of the parent |
3.44 |
(0.76) |
2.68 |
|
|
- Diluted earnings for the year attributable to ordinary equity holders of the parent |
3.40 |
(0.76) |
2.64 |
|
|
|
|
|
|
|
0 |
OTHER OPERATING EXPENSES |
|
|
|
|
|
Ghaghoo care and maintenance costs |
- |
(966) |
(966) |
|
|
|
|
|
|
|
0 |
UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET AMORTISATION (UNDERLYING EBITDA) BEFORE DISCONTINUED OPERATION |
|
|
|
|
|
Operating profit |
16 538 |
(966) |
15 572 |
|
|
Other operating expenses |
- |
966 |
966 |
16. ISSUED SHARE CAPITAL AND RESERVES
|
|
|
|
|
|
|
|
|
|
30 June 20231 |
31 December 20222 |
||
|
|
|
Number of shares '000 |
US$'000 |
Number of shares '000 |
US$'000 |
|
|
Authorised - ordinary shares of US$0.01 each |
|
|
|
|
|
|
As at Period/Year end |
200 000 |
2 000 |
200 000 |
2 000 |
|
|
Issued and fully paid balance at beginning of Period/Year |
139 403 |
1 410 |
140 515 |
1 406 |
|
|
Allotments during the Period/Year |
149 |
1 |
408 |
4 |
|
|
Number of ordinary shares outstanding at end of Period/Year |
139 552 |
1 411 |
140 923 |
1 410 |
|
|
Treasury shares3 |
(1 520) |
(1 157) |
(1 520) |
(1 157) |
|
|
Balance at end of Period/Year |
138 032 |
254 |
139 403 |
253 |
|
|
|
|
|
|
|
1 Unaudited.
2 Audited.
3 Shares repurchased by Gem Diamonds in the prior period.
Treasury shares
During the previous period, 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 and at 30 June 2022, 1 520 170 shares were bought back at a weighted average price of 60.05 GB pence, totalling US$1.2 million (including transaction costs). This reduction in shares issued is taken into account in calculating the earnings per share. No further share buyback has taken place during the Period.
17. SHARE-BASED PAYMENTS
Employee Share Option Plan 2017 Award (ESOP) - 21 April 2023 award
On 21 April 2023, 250 860 nil-cost options were granted to certain key employees under the ESOP of the Company. The value of the award was determined based on the Group performance for the prior 2022 financial year. The vesting of the options will be subject to the satisfaction of certain service conditions which are classified as non-market conditions. The award is subject to malus and clawback conditions in line with the Group's ESOP.
In addition, 809 195 nil-cost options were granted to certain Executive employees and the Executive Directors on the same terms as detailed above. 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 ESOP. These options are also subject to a two-year holding period after the vesting date.
All the options vest over a three-year period in tranches of 1/3 commencing on 21 April 2024 and ending on 21 April 2026. The options are exercisable between the respective vesting dates and 20 April 2033. If the service conditions are not met, unvested options lapse. 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 made to the price. The Company's share price on the date of the award was £0.27 (US$0.34). The option grants are settled by issuing shares. The expense disclosed in the Interim Consolidated Statement of Profit or Loss is made up as follows:
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
US$'000 |
US$'000 |
|
|
|
|
|
|
|
The expense recognised for employee services received during the Period is shown in the following table: |
|
|
|
|
Equity-settled share-based payment transactions charged to the statement of profit or loss |
241 |
125 |
|
|
|
|
|
1 Unaudited.
18. INTEREST-BEARING LOANS AND BORROWINGS
The interest-bearing loans and borrowings subject to the US$ 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 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 30 June 2023 are disclosed in the note below.
|
|
|
|
|
|
|
|
|
|
Effective interest rate |
Maturity |
30 June 20231 |
31 December 20222 |
|
|
|
|
|
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 |
(220) |
(327) |
|
|
US$30.0 million bank loan facility |
Term SOFR + 5.26%3 |
|
3 000 |
- |
|
|
Credit underwriting fees |
|
22 December 2024 |
(169) |
(225) |
|
|
LSL136.4 million project debt facility |
South African JIBAR + 2.50% |
31 May 2027 |
4 855 |
4 922 |
|
|
|
|
|
7 466 |
4 370 |
|
|
Current |
|
|
|
|
|
|
ZAR2.5 million insurance premium finance |
3.55% |
1 April 2023 |
- |
60 |
|
|
LSL30.0 million insurance premium finance |
3.55% |
1 April 2023 |
- |
719 |
|
|
LSL10.9 million insurance premium finance |
3.55% |
1 May 2023 |
- |
262 |
|
|
LSL136.4 million project debt facility |
South African JIBAR + 2.50% |
31 May 2027 |
1 444 |
534 |
|
|
|
|
|
1 444 |
1 575 |
|
|
|
|
|
|
|
1 Unaudited.
2 Audited.
3 GDL RCF transitioned from LIBOR to term SOFR effective from 1 January 2023. The margin of 5.26% includes a credit adjustment spread of 0.26% to bring term SOFR in line with LIBOR.
LSL450.0 million and ZAR300.0 million (US$39.7 million) bank loan facility at Letšeng Diamonds
The Group, through its subsidiary Letšeng Diamonds, has a LSL450.0 million and ZAR300.0 million (US$39.7 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 a 24-month renewal option. 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%. There was no draw down on this facility at Period end.
The remaining balance of the credit underwriting fees, which were incurred and capitalised to the Group's consolidated interest-bearing loans and borrowings as part of the 2021 refinancing facility, 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 RCF 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 will be made in these ratios.
The facility expires on 22 December 2024 and has a 24-month renewal option.
At Period end, US$3.0 million (31 December 2022: nil) had been drawn down resulting in US$27.0 million (31 December 2022: US$30.0 million) being available for draw down. The remaining balance of the previously capitalised credit underwriting fees is US$0.2 million (31 December 2022: US$0.2 million) at Period end. The capitalised fees are amortised and accounted for as finance costs within profit or loss over the period of the facility.
The US$-based interest rate for this facility at 30 June 2023 was 10.25% (31 December 2022: 8.7%) 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 period on this interest-bearing RCF was US$0.4 million (31 December 2022: US$1.1 million).
LSL136.4 million (US$7.2 million) project debt facility at Letšeng Diamonds
The loan is an unsecured project debt facility which was signed jointly with Nedbank and the ECIC on 29 November 2022 to fund the replacement of the PCA at Letšeng. The loan is repayable in equal quarterly payments commencing in November 2023. The outstanding balance at period end was ZAR119.0 million (US$6.3 million) (31 December 2022: ZAR92.8 million (US$5.4 million)). This loan expires on 27 May 2027.
The South African rand-based interest rate for the facility at 30 June 2023 was 11.00% which comprises South Africa JIBAR plus 2.50%.
Total interest for the Period on this interest-bearing loan was US$0.3 million (31 December 2022: US$15.6 thousand). This interest is being capitalised as part of the PCA asset.
Insurance premium finance
During the Period, all outstanding insurance premium finance balances were fully repaid. The total interest paid during the Period relating to these liabilities was US$15.8 thousand (31 December 2022: US$80.5 thousand).
Other facilities
Letšeng Diamonds has a ZAR100.0 million (US$5.3 million) general banking facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division) renewable annually. There was no draw down on this facility at Period end.
The bank loan facilities include an additional US$20.0 million accordion option for Gem Diamonds, the utilisation of which is subject to all necessary internal credit and other approvals from all funders. There was no utilisation of this facility at Period end.
|
|
|
|
|
|
|
|
30 June 20231 |
31 December 20222 |
|
|
|
US$'000 |
US$'000 |
|
19. |
LEASE LIABILITIES |
|
|
|
|
Non-current |
4 695 |
6 021 |
|
|
Current |
2 224 |
1 877 |
|
|
Total lease liabilities |
6 919 |
7 898 |
|
|
|
|
|
|
|
Reconciliation of movement in lease liabilities |
|
|
|
|
As at 1 January |
7 898 |
4 824 |
|
|
Additions |
1 057 |
5 287 |
|
|
Interest expense |
262 |
666 |
|
|
Lease payments |
(1 212) |
(2 512) |
|
|
Derecognition of lease |
(451) |
- |
|
|
Foreign exchange differences |
(635) |
(367) |
|
|
As at 30 June/31 December |
6 919 |
7 898 |
|
|
|
|
|
1 Unaudited.
2 Audited.
Lease payments comprise payments in principle of US$1.0 million (31 December 2022: US$1.8 million) and repayments of interest of US$0.2 million (31 December 2022: US$0.7 million).
During the Period, the Group recognised variable lease payments in the Interim Consolidated Statement of Profit or Loss, for which no lease liability can be recognised, of US$16.5 million (30 June 2022: US$21.3 million). These payments consist of mining activities outsourced to a mining contractor, of which US$11.9 million (30 June 2022: US$15.5 million) has been capitalised to the Stripping Asset within Property, Plant and equipment.
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
|
Notes |
|
US$'000 |
US$'000 |
|
|
20. |
CASH FLOW NOTES |
|
|
|
|
|
|
20.1 |
Cash generated by operations |
|
|
|
|
|
|
|
Profit before tax for the Period |
|
|
3 946 |
13 365 |
|
|
|
Adjustments for: |
|
|
|
|
|
|
|
Depreciation and amortisation excluding waste stripping |
|
|
2 447 |
3 409 |
|
|
|
Depreciation on right-of-use assets |
|
|
866 |
905 |
|
|
|
Waste stripping cost amortised |
|
|
17 787 |
21 880 |
|
|
|
Finance income |
|
|
(187) |
(73) |
|
|
|
Finance costs |
|
|
2 433 |
2 280 |
|
|
|
Unrealised foreign exchange differences |
|
|
(620) |
431 |
|
|
|
Profit on disposal and scrapping of property, plant and equipment |
|
|
(79) |
- |
|
|
|
Gain on derecognition of leases |
|
|
(23) |
- |
|
|
|
Bonus, leave and severance provisions raised |
|
|
2 056 |
673 |
|
|
|
Share-based payments |
|
|
241 |
125 |
|
|
|
|
|
|
28 867 |
42 995 |
|
|
20.2 |
Working capital adjustment |
|
|
|
|
|
|
|
Increase in inventory |
|
|
(5 086) |
(2 766) |
|
|
|
Decrease/(increase) in receivables |
|
|
509 |
(2 357) |
|
|
|
Decrease in payables |
|
|
(2 769) |
(4 718) |
|
|
|
|
|
|
(7 346) |
(9 841) |
|
|
20.3 |
Cash flows from financing activities (excluding lease liabilities) |
|
|
|
|
|
|
|
Balance at beginning of Period |
|
|
5 944 |
11 043 |
|
|
|
Net cash used in financing activities |
|
|
3 464 |
600 |
|
|
|
- Financial liabilities raised |
|
|
23 600 |
4 298 |
|
|
|
- Financial liabilities repaid |
|
|
(20 136) |
(3 698) |
|
|
|
Interest paid |
|
|
(1 285) |
(1 084) |
|
|
|
Non-cash movements |
|
|
786 |
1 306 |
|
|
|
- Interest accrued |
|
|
1 285 |
1 084 |
|
|
|
- Amortisation of credit underwriting fees |
|
|
133 |
147 |
|
|
|
- Foreign exchange differences |
|
|
(632) |
75 |
|
|
|
Balance at Period end |
|
|
8 909 |
11 865 |
|
|
|
|
|
|
|
|
|
1 Unaudited.
21. COMMITMENTS AND CONTINGENCIES
The Board has approved capital projects of US$5.5 million (31 December 2022: US$14.7 million), mainly relating to some plant upgrades of US$1.6 million, the continued residue storage facility extension and studies of US$0.9 million, and the construction of a bioremediation plant of US$0.9 million.
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 (31 December 2022: US$0.3 million).
The Group monitors possible tax claims within the various jurisdictions in which the Group operates. Management applies judgement in identifying uncertainties over tax treatments and concluded that there were no uncertain tax treatments during the Period. There remains a risk that further tax liabilities may potentially arise. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate that there will be any material impact on the Group's results, financial position or liquidity.
There has been no change to the amended tax assessment that was issued to Letšeng by the Revenue Services Lesotho (RSL) in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. There has therefore been no change in judgement applied and the accounting treatment compared to that disclosed in the 2022 Annual Report and Accounts.
|
22. |
RELATED PARTIES |
|
|
|
|
Related party |
Relationship |
|
|
|
Jemax Management (Proprietary) Limited |
Common director |
|
|
|
Government of the Kingdom of Lesotho |
Non-controlling interest |
|
|
|
|
|
|
|
|
|
30 June 20231 |
30 June 20221 |
|
|
|
US$'000 |
US$'000 |
|
|
Compensation to key management personnel (including Directors) |
|
|
|
|
Share-based equity transactions |
110 |
92 |
|
|
Short-term employee benefits |
2 126 |
2 808 |
|
|
Post-employment benefits (including severance pay and pension) |
160 |
155 |
|
|
|
2 396 |
3 055 |
|
|
Fees paid to related parties |
|
|
|
|
Jemax Management (Proprietary) Limited |
(38) |
(44) |
|
|
Royalties paid to related parties |
|
|
|
|
Government of the Kingdom of Lesotho |
(6 737) |
(9 947) |
|
|
Lease and licence payments to related parties |
|
|
|
|
Government of the Kingdom of Lesotho |
(47) |
(96) |
|
|
Purchases from related parties |
|
|
|
|
Jemax Management (Proprietary) Limited |
(2) |
(2) |
|
|
Amount included in trade payables owing to related parties |
|
|
|
|
Jemax Management (Proprietary) Limited |
(6) |
(7) |
|
|
Amounts owing to related party |
|
|
|
|
Government of the Kingdom of Lesotho |
(1 244) |
(2 365) |
|
|
Dividends declared |
|
|
|
|
Government of the Kingdom of Lesotho |
- |
(3 908) |
|
|
|
|
|
1 Unaudited.
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 and were made on terms that prevail in arm's length transactions.
23. EVENTS AFTER THE REPORTING PERIOD
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.
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