TIDMGEMD
RNS Number : 3072P
Gem Diamonds Limited
07 February 2019
7 February 2019
GEM DIAMONDS LIMITED
Q4 2018 Trading Update
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds" or the
"Company" or the "Group") provides the following Trading Update
detailing the Group's operational and sales performance for the
Period from 1 October 2018 to 31 December 2018 ("Q4 2018" or the
"Period").
Letšeng:
-- Recovered three greater than 100 carat diamonds during the
Period, bringing the number of diamonds greater than 100 carats
recovered during 2018 to fifteen, a record for the Company.
-- Carats recovered during 2018 increased by 13% to 126 875 carats (2017: 111 811 carats).
-- Sold 33 140 carats during the Period, up 9% from Q3 2018.
-- Sold nine diamonds for more than US$ 1.0 million each,
generating revenue of US$ 14.6 million during the Period. This
resulted in 44 diamonds being sold for more than
US$ 1.0 million each during 2018, generating revenue of US$
137.2 million.
-- Achieved an average price of US$ 2 131 per carat for 2018, up
10% from US$ 1 930 per carat in 2017.
-- Subsequent to Period end, strong pricing was achieved at the
first tender of 2019, with an average price of US$2 004 per
carat(*) .
-- No Lost Time Injuries (LTI's) occurred during Q4 2018.
Innovation:
-- The manufacturing of the pilot plant has commenced, and the
project remains on target to be commissioned at the end of Q2 2019.
This project employs innovative technology to identify diamonds
within kimberlite, in line with the continuing strategy of early
detection of large diamonds and diamond damage reduction.
Business Transformation:
-- The Company remains on track to achieve its cumulative target
of US$ 100 million in incremental revenue, productivity
improvements and cost savings for the 4-year period to end 2021.
Initiatives that have been implemented to date, are expected to
deliver
US$ 60 million of the targeted US$ 100 million. Further details
will be released at the Full Year Results, on 13 March 2019.
Financial:
-- At the end of the Period, the Group had US$ 50.8 million of
cash on hand of which US$ 43.3 million is attributable to Gem
Diamonds. The Group's net cash position was US$ 17.5 million (of
which US$ 14.0 million was attributable to Gem Diamonds). At Period
end, US$ 33.3 million of available facilities had been drawn down,
with undrawn and available facilities of US$ 57.8 million.
-- During the Period, Letšeng paid dividends of US$ 17.4
million, resulting in a net cash flow of US$ 11.0 million to Gem
Diamonds and a cash outflow from the Group for withholding taxes of
US$ 1.2 million and payment of the Government of Lesotho's share of
dividend of
US$ 5.2 million.
Gem Diamonds' CEO, Clifford Elphick, commented:
"The large diamond recoveries continued during the Period with
three diamonds greater than 100 carats being recovered, resulting
in the highest number of these recoveries in a single calendar
year. Production in 2018 also included a record number of diamonds
greater than 20 carats being recovered in a single year.
The revised mine plan results in a significant reduction in
Letšeng's overall stripping ratio due to steeper slope angles,
which is expected to result in a significantly improved NPV of the
mine.
Good progress has been made on the business transformation
process which remains on track to achieve its cumulative 4-year
target of US$ 100 million, with already implemented initiatives
expected to deliver US$ 60 million over the 4-year target
period."
1. Diamond Market
The demand and prices for Letšeng's large high-quality white
rough diamonds have remained firm.
2. Letšeng
2.1. Production
Q4 2018 Q3 2018 % Change FY 2018 FY 2017 % Change
Waste tonnes stripped 5 622 965 6 693 245 -16% 25 809 076 29 718 985 -13%
---------- ---------- --------- ----------- ----------- ---------
Ore tonnes treated 1 734 156 1 806 638 -4% 6 532 596 6 439 299 1%
---------- ---------- --------- ----------- ----------- ---------
Carats recovered* 29 523 35 755 -17% 126 875 111 811 13%
---------- ---------- --------- ----------- ----------- ---------
Grade recovered (cpht)* 1.70 1.98 -14% 1.94 1.74 11%
---------- ---------- --------- ----------- ----------- ---------
* Includes carats recovered through the mobile XRT sorting
machine.
Waste stripping continued in line with the requirements of the
long-term mine plan. Letšeng treated a total of 1.4 million tonnes
of ore during the Period, 71% of which was sourced from the Main
pipe and 29% from the Satellite pipe. The remaining balance of the
ore was treated through the Alluvial Ventures contractor plant.
Although tonnes treated for the Period was slightly lower than the
previous period due to planned maintenance and repairs undertaken
in the Plants, tonnes treated for H2 2018 was 3.5 million tonnes,
significantly up from H1 2018 of 3.0 million tonnes.
Grade recovered for the Period decreased to 1.70cpht compared to
the previous Period mainly driven by the lower contribution of
Satellite pipe tonnes treated. Overall grade for 2018 was 1.94cpht,
due in part to the Business Transformation initiative to re-treat
tailings material through a mobile XRT sorting machine. This
machine recovered 11 905 carats in 2018 of which 6 233 related to
historical (pre-2018) tailings material.
The statutory negotiation process relating to the renewal of the
Letseng Mining Lease is progressing well and updates will be
provided in due course.
Frequency of recovery of large diamonds
The recovery of large diamonds improved markedly during 2018.
The table below shows the frequency of large diamonds recovered
during 2018 when compared to prior years.
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Number of diamonds
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
>100 carats 7 6 7 6 3 6 9 11 5 7 15
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
60-100 carats 18 11 11 22 17 17 21 15 21 19 22
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
30-60 carats 96 79 66 66 77 60 74 65 70 74 83
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
20-30 carats 108 111 101 121 121 82 123 126 83 113 137
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total diamonds
> 20 carats 229 207 185 215 218 165 227 217 179 213 257
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
2.2. Rough diamond sales
Q4 2018 Q3 2018 % Change FY 2018 FY 2017 % Change
Carats sold 33 140 30 275 9% 125 111 107 152 17%
-------- -------- --------- -------- -------- ---------
Total value (US$ millions) 41.7 55.7 -25% 266.6 206.8 29%
-------- -------- --------- -------- -------- ---------
Achieved US$/ct 1 259 1 841 -32% 2 131 1 930 10%
-------- -------- --------- -------- -------- ---------
During the Period, the highest diamond price achieved was US$ 64
067 per carat for a 4.06 carat, pink diamond, which is also the
highest price per carat achieved during 2018. The reduction in
average US$ per carat compared to Q3 2018 is a result of lower
quality recoveries during the Period.
With improved quality in production, strong pricing was achieved
at the first tender of 2019, with an average price of US$2 004 per
carat(*) .
2.3. Costs
Letšeng has managed to maintain its costs within the expected
targets, with the approximate figures below:
Costs Maloti Guidance
Direct cash costs (before waste)
per tonne treated (1,3) 169 165 - 170
------- ----------
Operating costs per tonne treated(2,3) 282 280 - 290
------- ----------
Mining waste cash costs per tonne
of waste mined 36 34 - 36
------- ----------
(1) Direct cash costs represent all operating costs, excluding
royalty and selling costs
(2) Operating costs include waste stripping costs amortised,
inventory and ore stockpile adjustments, and excludes
depreciation
(3) Costs excludes costs associated with the implementation of
Business Transformation initiatives, consultancy fees and employee
recognition and reward scheme related thereto and approximates
LSL14 per tonne treated.
(*) It should be noted that included in these sales figures are
the carry-over diamonds from Export 1 that have been included at
valuation and will be sold with the sale to be held in March
2019.
2.4. 2019 Mine Plan and Guidance
2019 Mine Plan
The improvement in drilling and blasting practises resulted in
the revised mine plan incorporating various Business Transformation
initiatives, most notably the steeper inter-ramp slope angles,
resulting in significantly lower stripping ratios while increasing
the overall contribution from the higher-grade higher-value
Satellite pipe. Mining in line with this plan has commenced and is
expected to significantly increase the mine's Life-of-Mine NPV.
Further details will be released with the Full Year Results
presentation on 13 March 2019.
2019 Guidance
FY 2019
Waste tonnes mined (Mt) 25 - 27
---------
Ore treated (Mt) 6.5 - 6.7
---------
Satellite pipe ore contribution
(Mt) 1.8
---------
Carats recovered (Kct) 114 - 118
---------
Carats sold (Kct) 115 - 119
---------
Direct cash costs (before waste)
per tonne treated (Maloti)(2) 175 - 185
---------
Operating costs per tonne treated(1,2)
(Maloti) 250 - 260
---------
Mining waste cash costs per tonne
of waste mined (Maloti) 36 - 38
---------
Total capital (US$ million) 18 - 20
---------
1. Operating costs per tonne excludes royalty, selling costs,
depreciation and mine amortisation, but includes inventory, waste
and ore stockpile adjustments.
2. Guidance excludes costs associated with the implementation of
Business Transformation initiatives, consultancy fees and employee
recognition and reward scheme related thereto. These costs are
expected to range between LSL7 - LSL8 per tonne treated.
3. Health, Safety, Social and Environment (HSSE)
The Group-wide Lost Time Injury Frequency Rate stands at 0.15
for 2018. The Group-wide All Injury Frequency Rate is 1.45, an
improvement over the 2017 rate of 2.02.
No major or significant community or environmental incidents
occurred across the Group during the Period.
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Susan Wallace, Company Secretarial department
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Joanna Parker
Tel: +44 (0) 207 520 9261
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67.
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value
diamonds. The Company owns 70% of the Letšeng mine in Lesotho and
100% of the Ghaghoo mine in Botswana. The Letšeng mine is famous
for the production of large, top colour, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond
mine in the world. www.gemdiamonds.com
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Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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