TIDMGEMD
RNS Number : 8260X
Gem Diamonds Limited
01 September 2022
Thursday, 1 September 2022
Gem Diamonds Limited
Half Year 2022 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company"
or the "Group") announces its Half Year Results for the six months
ending 30 June 2022 (the "Period").
FINANCIAL
-- Revenue of US$100.0 million (H1 2020: US$104.5 million)
-- Cash on hand of US$24.2 million at 30 June 2022 (US$19.3
million attributable to Gem Diamonds)
-- The Group has unutilised facilities of US$69.9 million
-- Underlying EBITDA of US$20.9 million (H1 2021: US$34.7 million)
-- Earnings per share from continuing operations of 3.4 US cents
per share (H1 2021: 7.6 US cents)
OPERATIONAL AND HEALTH AND SAFETY
-- Zero fatalities and two lost time injuries
-- Average price of US$1 745 per carat achieved (H1 2021: US$1 886 per carat)
-- Three diamonds larger than 100 carats recovered (H1 2021: Three)
-- Recovered 55 157 carats (H1 2021: 58 831 carats)
-- Waste tonnes mined of 6.3 million tonnes in accordance with
mine plan (H1 2021: 10.2 million tonnes)
-- Ore treated of 3.0 million tonnes (H1 2021: 3.1 million tonnes)
Diamond market
Strong demand and robust prices achieved for Letšeng's diamonds
reflected the continued positive sentiment in the diamond market.
The Group hosted another Dubai tender viewing in March 2022 which
was well-attended and contributed positively to the firm prices
achieved during the Period.
Operations
The Letšeng operation has operated in line with expectations
during the Period despite challenges presented by severe weather
conditions such as a high rainfall season and snow, which impacted
both mining and treatment activities; increased frequency of
electricity disruptions and increased operating costs, most notably
diesel and explosive consumables.
Commenting on the results today, Clifford Elphick, Chief
Executive Officer of Gem Diamonds, said:
"The financial results during the Period reflect continued
strong demand for Letšeng's high-quality rough diamonds.
A solid operational performance has been achieved despite
exceptionally high rainfall over the period to April and grid
electricity interruptions which have necessitated increased
reliance on diesel power generation resulting in cost increases as
well as supply chain disruptions from adverse global events. "
The Company will host a live audio webcast presentation of the
half year results today, 1 September 2022, 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, 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
Susan Wallace, Company Secretarial Department
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. 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 is pleased to report its results for the six months
ended 30 June 2022 (the Period) which saw continued positive demand
for Letseng's high quality diamonds with global events impacting
operational costs.
The global economic backdrop for the Period has been challenging
with unprecedented high levels of inflation and interest rates
experienced in major economies. The World Bank downgraded its
global real GDP forecast for 2022 to 2.9% compared to a high-water
mark of 5.7% in 2021(1) . The Russian invasion of Ukraine has
contributed significantly to slowing down global economic growth by
disrupting supply chains worldwide and impacting energy and
commodity prices. The global diamond market, however, has continued
to recover into 2022. The sanctions imposed on Alrosa in Russia, a
major diamond producer, has caused a shortage of rough diamonds in
the market which has supported strong demand and robust prices
being achieved for Letšeng's high-quality white diamonds. During
the Period, a record number of average bids per lot was received
and an average price of US$1 745 per carat was achieved. These
results do not include the sale of three greater than 100 carat
diamonds that were recovered in June and sold subsequent to Period
end, in July.
Our sustainability strategy and maintaining our social licence
to operate are of the utmost importance to the Group and we are
proud that Gem Diamonds won three awards at the Investing in
African Mining Indaba Junior ESG Awards in May, in the following
categories; Health and Safety, Responsible Water and Protection of
Biodiversity. These awards recognise the work to deliver our
commitment to the environment, workforce and project-affected
communities.
The safety of our workforce remains a top priority and numerous
initiatives that commenced in 2021 to mature the organisational
safety culture at Letšeng, have been fully implemented during the
Period. The identification and implementation of further
initiatives continue.
Our Letšeng operation has operated in line with expectations
during the Period, despite numerous challenges presented by severe
weather conditions such as a high rainfall season and snow which
impacted both mining and treatment activities; increased frequency
of electricity supply disruptions and increased operating costs.
Waste tonnes mined during the Period were 6.3 million tonnes (H1
2021: 10.2 million) in accordance with the mine plan, ore tonnes
treated were 3.0 million tonnes (H1 2021: 3.1 million), 55 157
carats were recovered (H1 2021: 58 831) and the mine's 2022
production metrics remain on track. The decrease in volume of
recoveries during the Period is due to lower tonnes treated and the
reduced contribution for the higher-grade Satellite pit compared to
H1 2021. Three greater than 100 carat diamonds were recovered
during the Period which were sold in July, compared to three that
were recovered and sold in H1 2021.
(1)
https://www.worldbank.org/en/publication/global-economic-prospects
Revenue decreased by 4% to US$100.0 million, compared to H1
2021, achieving an average of US$1 745 per carat (H1 2021: US$1 886
per carat). This, together with the extraordinary increases in
operating costs, most notably diesel prices and explosive
consumables, resulted in a decrease in underlying EBITDA from
continuing operations to US$20.9 million (H1 2021: US$34.7
million), with attributable profit decreasing to US$3.8 million (H1
2021: US$9.3 million).
The Group ended the Period with a cash balance of US$24.2
million (31 December 2021: US$31.1 million) and drawn down
facilities of US$12.1 million (31 December 2021: US$10.2 million),
resulting in a net cash position of US$12.1 million (31 December
2021: US$20.9 million) and unutilised available facilities of
US$69.9 million (31 December 2021: US$74.3 million).
In line with our commitment to deliver sustainable shareholder
returns, the Board proposed a dividend of 2.7 US cents per share
(US$3.8 million) in March which was approved at the Annual General
Meeting on 8 June. In addition, a share buyback programme was
launched on 12 April, and during the Period, 1 520 170 shares were
purchased for US$1.2 million and held as treasury shares. The
weighted average purchase price was 60.05 GB pence (78.07 US cents)
per share.
We continue to work towards our 2022 objectives as set out in
the three-year Task Force on Climate-related Financial Disclosures
(TCFD) adoption roadmap that commenced in 2021. The members of the
TCFD Adoption Steering Committee are participating in the UN Global
Compact Climate Ambition Accelerator programme. The Climate
Ambition Accelerator is a six-month programme designed to equip
companies with the knowledge and understanding needed to set
science-based emissions reduction targets aligned with the 1.50C
pathway. For more details, refer to the Our Approach to Climate
Change Half-Year Report available on our website at
www.gemdiamonds.com.
LOOKING AHEAD
We are driving initiatives to reduce the impact of the
significant uncontrollable cost increases experienced during the
Period, to drive efficiencies and effectively manage operating
costs in the current volatile environment.
The Group is advancing the implementation of its critical
control management strategy, a safety risk mitigation initiative
that is on track to be completed by the end of the year.
OPERATIONS REVIEW: LET ENG
H1 2022 IN REVIEW
-- Zero fatalities and two LTIs
-- Zero significant environmental or social incidents
-- Recovered three diamonds greater than 100 carats (H1 2021: Three)
-- Achieved an average price of US$1 745 per carat (H1 2021: US$1 886 per carat)
-- The highest price achieved was US$66 059 per carat for an 8.41 carat pink diamond
SUSTAINABILITY
The Group's safety approach is founded on our commitment to zero
harm and belief that all injuries are preventable. The
organisational safety maturity campaign continues to be implemented
at Letšeng to address specific actions identified during the 2021
'Stop for Safety' campaign. Group and operational leadership have
reaffirmed their commitment to proactively leading safety-focused
improvement through regular engagements with the workforce and have
established a 'leading indicator safety committee'. In addition to
the initiatives that form part of the organisational safety
maturity campaign, best practice engagements are planned to focus
on further safety performance improvement.
The LTIFR and AIFR are tabled below:
2018 2019 2020 2021 H1 2022
------------------- ---- ---- ---- ---- -------
LTI frequency rate 0.15 0.28 0.04 0.24 0.16
AIFR 1.45 0.93 0.76 0.93 0.82
------------------- ---- ---- ---- ---- -------
The Group has spent approximately US$0.3 million on corporate
social responsibility projects during the Period. Three tertiary
scholarships were awarded in 2022 to enhance skills in Lesotho in
mining, engineering and emergency medical care. In support of our
dairy project, an additional 15 cows have been purchased and in
support of our communities we have provided additional access to
water and sanitation infrastructure which includes the construction
of 50 ablution facilities, construction of a water storage tank for
supply of clean water from a natural spring catchment and the
installation of standpipe taps in a local village. Our focused CSRI
strategy and initiatives support our social licence to operate and
our commitment to the UN Sustainable Development Goals.
The measures implemented during 2021, as part of the TCFD
adoption strategy and carbon emissions reduction objectives, have
resulted in a reduction of our H1 2022 carbon emissions footprint
by approximately 10% compared to H1 2021. The carbon emissions
reduction was primarily driven by mining initiatives aimed at
optimising waste mining and reducing hauling and travel distances
of mining equipment.
PRODUCTION OVERVIEW
Unit H1 2022 H1 2021 % variance
----------------- -------- --------- ---------- ----------
Waste mined tonnes 6 289 380 10 167 526 (38)
Ore mined tonnes 3 219 615 3 175 880 1
Ore treated tonnes 3 017 664 3 139 719 (4)
Carats recovered carats 55 157 58 831 (6)
Recovered grade cpht(1) 1.83 1.87 (2)
----------------- -------- --------- ---------- ----------
(1) Carats per hundred tonnes.
Waste mining decreased by 38% to 6.3 million tonnes (H1 2021:
10.2 million) in accordance with the mine plan. 3.0 million ore
tonnes were treated, of which the two Letšeng plants treated 2.6
million tonnes (H1 2021: 2.6 million tonnes), with the remaining
0.4 million tonnes (H1 2021: 0.5 million tonnes) treated by
Alluvial Ventures (AV), the third-party processing contractor. The
contract with AV ended on 30 June and with the start of the next
cut-back in the Main Pipe, the contractor has commenced
decommissioning of its plant. The opportunity to replace the 1.0 to
1.2 million tonnes per annum previously treated by AV, through the
construction of a third plant, is being considered.
The Group recovered 55 157 carats (H1 2021: 58 831 carats). The
decrease in volume of recoveries during the Period is due to the
reduced contribution from the higher-grade Satellite pit compared
to H1 2021, and lower tonnes treated in May and June due to
operational challenges, primarily severe weather conditions and
more frequent disruptions in grid electricity supply.
The mobile coarse X-ray sorting machine recovered 367 carats (H1
2021: 592) and an additional 472 carats were recovered by the
mobile fines X-ray sorting machine that was commissioned in
2021.
The overall grade for H1 2022 was 1.83 cpht (H1 2021: 1.87
cpht), representing a decrease of 2% from H1 2021, mainly driven by
a lower contribution from Satellite pipe material which accounted
for 46% of all material treated during the Period (H1 2021: 53%).
The grade recovered is in line with the expected reserve grade.
The plant stabilisation initiatives that were implemented for
Plant 1 in 2021 were rolled out to Plant 2 during the Period. The
benefits were evidenced in the improved production performance from
January to April which was offset by lower tonnes treated in May
and June as mentioned above.
Due to the significant increase in operating costs during the
Period, specifically diesel prices and explosive consumables, a
number of cost-reduction initiatives have been implemented in an
effort to manage these costs. These initiatives mainly focus on
reducing hauling and travel distances of mining equipment and the
introduction of saver plugs in ore blasting practices.
Frequency of large diamond recoveries
FY average
Number of diamonds H1 2022 H1 2021 2008 - 2021
-------------------------- ------- ------- ------------
>100 carats 3 3 8
60 - 100 carats 8 9 19
30 - 60 carats 42 43 77
20 - 30 carats 63 59 114
10 - 20 carats 258 317 442
-------------------------- ------- ------- ------------
Total diamonds >10 carats 374 431 660
-------------------------- ------- ------- ------------
DIAMOND SALES
The average price achieved during the Period was US$1 745 per
carat (H1 2021: US$1 886 per carat) for 57 075 carats generating
rough diamond revenue of US$99.6 million (H1 2021: 55 123 carats at
a value of US$104.0 million).
The highest price achieved was for an 8.41 carat pink diamond
that sold for US$66 059 per carat.
15 diamonds sold for more than US$1.0 million each, generating
revenue of US$25.8 million (H1 2021: 10 diamonds sold for more than
US$1.0 million each, generating revenue of US$36.1 million).
The Group hosted another Dubai tender viewing in March 2022
which was well-attended and contributed positively to the firm
prices achieved during the Period. The next Dubai viewing will be
held in September.
GHAGHOO
Following the lapse of the sales agreement with Botswana
Diamonds in May 2022 we continue to pursue potential sales
opportunities while closure and other disposal alternatives are
being investigated.
CAPITAL PROJECTS
The replacement of the primary crushing area (PCA) has commenced
and is progressing well with commissioning expected in Q2 2023. The
resource core drilling programme to inform Letšeng's Resource and
Reserve Statement, was completed in June. The Resource statement is
expected in Q4 2022 and the Reserve Statement by Q1 2023.
The first phase of the underground feasibility study has
commenced to review the financial viability of the Blast Hole Open
Stope and Sub-Level Cave Mining methods.
The design of a bioremediation plant has advanced, and
construction is planned to commence in Q3 with implementation of
the first phase expected in Q4.
GROUP FINANCIAL PERFORMANCE
H1 2022 IN REVIEW
-- Revenue achieved of US$100.0 million (H1 2021: US$104.5 million)
-- Underlying EBITDA(1) decreased to US$20.9 million (H1 2021: US$34.7 million)
-- Attributable profit from continuing operations decreased to
US$4.9 million (H1 2021: US$10.6 million)
-- Dividend paid of 2.7 US cents per share (H1 2021: 2.5 US cents)
-- Loss from discontinued operations relating to Ghaghoo reduced
to US$1.1 million (H1 2021: US$1.3 million)
PROFITABILITY AND LIQUIDITY
US$ million H1 2022 H1 2021
--------------------------------------------------------- ------- -------
Revenue 100.0 104.5
Royalty and selling costs (10.8) (11.0)
Cost of sales(2) (63.2) (53.6)
COVID-19 costs/standing costs (0.1) (0.4)
Corporate expenses (5.0) (4.8)
--------------------------------------------------------- ------- -------
Underlying EBITDA(1) from continuing operations 20.9 34.7
--------------------------------------------------------- ------- -------
Depreciation and mining asset amortisation (4.3) (4.2)
Share-based payments (0.1) (0.3)
Foreign exchange loss - (0.1)
Net finance costs (2.1) (1.8)
--------------------------------------------------------- ------- -------
Profit before tax from continuing operations 14.4 28.3
--------------------------------------------------------- ------- -------
Income tax expense (5.0) (10.0)
--------------------------------------------------------- ------- -------
Profit for the Period from continuing operations 9.4 18.3
--------------------------------------------------------- ------- -------
Non-controlling interests (4.5) (7.7)
--------------------------------------------------------- ------- -------
Attributable profit from continuing operations 4.9 10.6
--------------------------------------------------------- ------- -------
Loss from discontinued operations (1.1) (1.3)
--------------------------------------------------------- ------- -------
Attributable net profit 3.8 9.3
--------------------------------------------------------- ------- -------
Earnings per share from continuing operations (US cents) 3.4 7.6
Loss per share from discontinued operations (US cents) (0.8) (1.0)
--------------------------------------------------------- ------- -------
(1) Underlying earnings before interest, tax, depreciation and
mining asset amortisation (EBITDA) as defined in Note 6 of the
condensed notes to the consolidated interim financial
statements.
(2) Including waste stripping amortisation costs but excluding
depreciation and mining asset amortisation.
The Group generated an underlying EBITDA(1) of US$20.9 million
(H1 2021: US$34.7 million). The profit attributable to shareholders
from continuing operations was US$4.9 million (H1 2021: US$10.6
million), equating to earnings per share from continuing operations
of 3.4 US cents (H1 2021: 7.6 US cents) on a weighted average
number of shares in issue of 142.1 million (H1 2021: 139.8 million
shares). After including the loss of US$1.1 million from Ghaghoo,
which remains classified as a discontinued operation, the Group's
attributable profit was US$3.8 million, resulting in earnings per
share after discontinued operations of 2.6 US cents (H1 2021: 6.6
US cents).
Revenue
US$ million H1 2022 H1 2021
------------------------------------ ------- -------
Sales - rough 99.6 104.0
Sales - polished margin 0.3 0.2
Impact of carry over rough diamonds 0.1 0.3
------------------------------------ ------- -------
Group revenue 100.0 104.5
------------------------------------ ------- -------
The Group's revenue of US$100.0 million was mainly generated by
the sale of 55 075 carats at an average price of US$1 745 per
carat.
These results do not include the sale of three greater than 100
carat diamonds that were recovered in June and sold subsequent to
Period end, in July.
Costs
The Group continues to closely manage its costs and preserve
cash resources to maintain strong margins and appropriate
liquidity. The Russian invasion of Ukraine has contributed
significantly to increasing energy and commodity prices and
disrupting supply chains worldwide, which has had an impact on the
Group's short term operating expenses.
OPERATING EXPENSES
The biggest impact on the Letšeng's operating expenses has been
an increase in fuel prices and explosive consumables. Diesel prices
have increased 87% from LSL10.87 per litre in June 2021 to LSL20.32
per litre in June 2022. Letšeng consumed an estimated 8 million
litres of diesel during the Period. Electricity supply disruptions
which necessitate an increase in the use of diesel-powered
generators also significantly increased diesel consumption on the
mine site. In addition, the price of explosives has also increased
by an estimated 83% compared to H1 2021.
Total direct cash costs, including waste, increased by 4% to
LSL1 076.0 million from LSL1 033.3 million in H1 2021,
notwithstanding the decrease in waste tonnes mined in accordance
with the mine plan. The anticipated decrease in costs due to the
lower waste volumes was negated by the increase in commodity prices
and inflation experienced during the Period. The impact on unit
costs is tabled below:
Letšeng Unit Cost Analysis
Unit cost per Direct cash Third plant Total direct Non-cash Total operating Waste cash costs
tonne treated costs(1) operator costs cash operating accounting cost per waste tonne
costs(1) charges(2) mined
-------------- ----------------
H1 2022 (LSL) 223.76 14.28 238.04 85.67 323.71 56.88
H1 2021 (LSL) 172.43 12.52 184.95 64.34 249.29 44.52
% change 29 30 28
--------------- --------------- -------------- -------------- -------------- --------------- ----------------
H1 2022 (US$) 14.52 0.93 15.45 5.55 21.00 3.69
H1 2021 (US$) 11.86 0.86 12.72 4.43 17.15 3.06
% change 21 22 21
--------------- --------------- -------------- -------------- -------------- --------------- ----------------
(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.
Third plant operator costs increased by 10% in local currency
compared to H1 2021. The cost is a function of the revenue
generated by the sales of diamonds recovered through the contractor
plant. The increase is driven by a number of higher-value diamonds
that were recovered during the Period.
Non-cash accounting charges comprise waste amortisation which
was similar to H1 2021. The increase was mainly due to inventory
movement during the Period and an increase in the volume of tonnes
added to the stockpile.
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$5.0 million (H1 2021: US$4.8
million). The increase was mainly due to an increase in travel
costs after the suspension of travel restrictions and an increase
in insurance premiums due to the tightening of the insurance
market, set off by the weaker South African Rand and British Pound
against the US Dollar.
DISCONTINUED OPERATION - GHAGHOO
The operation, currently on care and maintenance, continues to
be classified as a discontinued operation per IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations. Care and
maintenance costs reduced to US$1.1 million (H1 2021: US$1.3
million) and have been recognised and disclosed separately in the
Interim Consolidated Statement of Profit or Loss.
Following the lapse of the sales agreement with Botswana
Diamonds in May 2022 we continue to pursue potential sales
opportunities while closure and other disposal alternatives are
being investigated.
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
2021) which decreased the Group's US dollar reported costs and
increased local currency cash flow generation.
Exchange rates H1 2022 H1 2021 % change
------------------------------------- ------- ------- --------
LSL per US$1.00
Average exchange rate for the Period 15.41 14.54 6
Period end exchange rate 16.38 14.28 15
------------------------------------- ------- ------- --------
BWP per US$1.00
Average exchange rate for the Period 11.79 10.87 8
Period end exchange rate 12.40 10.92 14
------------------------------------- ------- ------- --------
US$ per GBP1.00
Average exchange rate for the Period 1.30 1.39 (6)
Period end exchange rate 1.21 1.38 (12)
------------------------------------- ------- ------- --------
FINANCIAL POSITION
The LSL closed 3% weaker against the US dollar at the end of the
Period compared to 31 December 2021. This resulted in a decrease in
the US dollar reported values in the Interim Consolidated Statement
of Financial Position. The changes to and key drivers of selected
totals of the Interim Consolidated Statement of Financial Position
are detailed below.
US$ million H1 2022 FY 2021 % variance
--------------------------------------------------- ------- ------- ----------
Non-current assets 316.0 315.1
Current assets 61.4 67.4
Assets associated with discontinued operation 1.9 2.1
--------------------------------------------------- ------- ------- ----------
Total assets 379.3 384.6 (1)
--------------------------------------------------- ------- ------- ----------
Equity attributable to parent company 154.1 159.8
Non-controlling interest 85.2 86.8
--------------------------------------------------- ------- ------- ----------
Total equity 239.3 246.6 (3)
--------------------------------------------------- ------- ------- ----------
Non-current liabilities 114.4 108.0
Current liabilities 21.7 25.9
Liabilities associated with discontinued operation 3.9 4.1
--------------------------------------------------- ------- ------- ----------
Total liabilities 140.0 138.0 (1)
--------------------------------------------------- ------- ------- ----------
Key asset drivers
US$ million H1 2022 H1 2021 % variance
------------------------------------------- ------------- ------------- -------------
Waste cost capitalised 26.6 35.7 (25)
Waste stripping cost amortised 21.9 23.0 (4)
Depreciation and mining asset amortisation 4.3 4.2 2
Capital expenditure 2.3 1.9 21
------------------------------------------- ------------- ------------- -------------
Waste cost capitalised decreased due to the lower volumes of
waste tonnes mined. This decrease was set off by an increase in
operating expenses, specifically diesel prices and explosive
consumables. The waste stripping cost amortised decreased to
US$17.5 million. Depreciation and mining asset amortisation
increased to US$4.3 million (H1 2021: US$4.2 million).
During the Period, the majority of capital spent related to the
replacement of the PCA to the amount of US$1.9 million. Other
capital projects include the resource core drilling programme
required to inform Letšeng's Resource and Reserve statement and the
design work for the expansion of the Patiseng coarse tailings
storage facility.
Liquidity and solvency
The Group ended the Period with cash on hand of US$24.2 million
(31 December 2021: US$33.9 million) of which US$19.3 million is
attributable to Gem Diamonds. The Group generated cash from
operating activities of US$30.1 million (30 June 2021: US$29.9
million).
At Period end, the Group had utilised facilities of US$12.1
million, resulting in a net cash position of US$12.1 million (31
December 2021: US$20.9 million) and available facilities of US$69.9
million, comprising US$18.0 million at Gem Diamonds and US$51.9
million at Letšeng.
The decrease in net cash was mainly due to the share buyback
programme and the payment of dividends to Gem Diamonds'
shareholders of US$5.0 million and the Lesotho Government's portion
of dividends and withholding taxes extracted from Letšeng of US$4.3
million.
The Group has a LSL750.0 million and a US$30.0 million revolving
credit facility expiring in December 2024. Letšeng also has a
LSL100.0 million general banking facility that is reviewed
annually. The Group engages regularly with lenders and credit
providers to ensure continued access to funding and to manage the
Group's cash flow requirements.
Summary of loan facilities as at 30 June 2022:
Amount Drawn down Available
Company Term/description/expiry Lender Interest rate US$ million US$ million US$ million
-------------- ------------------------ ------------- ------------------ ------------ ------------- ------------
Nedbank
Three-year revolving Standard
credit facility (RCF) Bank Facility A:
Gem Diamonds Expires FirstRand (US$30 million)
Limited 22 December 2024 Bank LIBOR + 5.00% 30.0 12.0 18.0
-------------- ------------------------ ------------- ------------------ ------------ ------------- ------------
Standard
Lesotho Bank
Nedbank
Lesotho Facility B
Three-year revolving First (LSL450 million):
credit facility National Central Bank of
Letšeng Expires Bank Lesotho rate
Diamonds 22 December 2024 of Lesotho + 3.25% 27.5 - 27.5
------------- ------------------ ------------ ------------- ------------
Facility C
Nedbank (ZAR300 million): JIBAR + 3.05% 18.3 - 18.3
------------- ---------------------------------------------------------- ------------ ------------- ------------
Nedbank/
5.5-year project Export
facility Credit Tranche A
Letšeng Tranche A: expires Insurance (LSL35 million)
Diamonds September 2022 Corporation JIBAR + 6.75% 2.1 0.1 -
------------------ ------------ ------------- ------------
Tranche B: expired March Tranche B (R180 - - -
2022 million)
JIBAR + 3.15%
-------------- ------------------------ ------------- ------------------ ------------ ------------- ------------
South African
Letšeng Overdraft facility prime rate minus
Diamonds Annual review in March Nedbank 0.7% 6.1 - 6.1
-------------- ------------------------ ------------- ------------------ ------------ ------------- ------------
Total 84.0 12.1 69.9
--------------------------------------------------------------------------- ------------ ------------- ------------
Dividends and share buyback programme
In line with the Group's commitment to deliver sustainable
shareholder returns, the Board proposed a dividend of 2.7 US cents
per share (US$3.8 million) which was approved at the Annual General
Meeting on 8 June.
In addition, the Board launched a share buyback programme on 12
April and purchased 1 520 170 shares that are held as treasury
shares. The weighted average purchase price was 60.05 GB pence
(78.07 US cents) per share. An amount of US$1.2 million was spent
up to 7 June, which is the date that the Board authority lapsed. At
the AGM on 8 June shareholders again authorised Gem Diamonds to
purchase its own shares within the permitted parameters. No further
share buyback programme has commenced due to the current volatility
in the current economic situation and the potential impact on the
Group's cash flow.
Tax matters
The forecast effective tax rate for the full year is 35.2% and
has been applied to the actual results for the Period. This rate is
the result of profits generated by Letšeng being taxed at 25% and
deferred tax assets not recognised on losses incurred in
non-trading operations.
As disclosed in the 2021 Annual Report and Accounts, an amended
tax assessment was issued to Letšeng by the Lesotho Revenue
Authority (LRA), contradicting the application of certain tax
treatments in the current Lesotho Income Tax Act, 1993. An
objection to the amended tax assessment was lodged with the LRA in
March 2020, which was supported by the opinion of senior
counsel.
On 7 February 2022, Letšeng received an application from the LRA
to amend its original grounds for the court application. Letšeng's
counsel continues to review the LRA's proposed amendment and has
opposed the new application by the LRA.
Going concern
The projections of the Group's current and expected
profitability, considering reasonable possible changes in
operations, key assumptions and inputs, such as the renewed
facilities, indicate that the Group will be able to operate as a
going concern for the foreseeable future. See the financial
statements on page 10.
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 2021 (pages 37 to
44). The Group's principal risks as presented in the Annual Report
and Accounts for 2021 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 Group continues to monitor areas of unpredictability, in
particular the immediate and evolving impact on all Group risks
resulting from increased commodity prices, disruption of global
supply chains and excessive inflation caused by the Russian
invasion of Ukraine and related sanctions. Lesotho elections are
scheduled for 7 October 2022 and the Group continues to monitor the
political environment in the build-up to the elections.
All appropriate controls implemented in response to the COVID-19
pandemic, remain effective in mitigating the COVID-19 risk ensuring
the safety of our workforce and the achievement of the Group's
objectives. As in previous years, insurers have continued to
decrease their exposure to the mining industry due to the current
risk perception within the industry. The Group has adopted a risk
transfer strategy to address the substantial changes in the
insurance market by implementing a sustainable insurance solution
for the Group in the medium to long term.
Climate change is one of the most significant risks facing
organisations. The Financial Conduct Authority (FCA) has published
new proposals on climate-related disclosure rules for premium
listed companies to promote climate and sustainability-related
financial disclosures. The aim is to provide investors and
consumers with a better understanding of the impact of climate
change on our operations and to ensure potential climate
change-related impacts are considered in all decision making. The
Group is integrating the recommendations of the TCFD into its
governance and risk management structures, strategy and reporting
platforms to adequately report on the financial and strategic
considerations related to climate change.
The Group's strong operational and safety results demonstrate
its resilience and the maturity of the risk management process to
enable rapid response and flexibility in a fast-evolving and
challenging operating environment.
Clifford Elphick
Chief Executive Officer
31 August 2022
HALF-YEAR FINANCIAL STATEMENTS
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
(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
2021.
The names and functions of the Directors of Gem Diamonds Limited
are listed in the Annual Report for the year ended 31 December
2021.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
31 August 2022
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE SIX MONTHSED 30 JUNE 2022
30 June 2022(1) 30 June 2021(1)
Notes US$'000 US$'000
---------------------------------------------------------------------------- ----- ---------------- ---------------
CONTINUING OPERATIONS
Revenue from contracts with customers 4 99 951 104 525
Cost of sales (67 430) (57 757)
---------------------------------------------------------------------------- ----- ---------------- ---------------
Gross profit 32 521 46 768
Other operating expense 5 (93) (340)
Royalties and selling costs (10 781) (11 038)
Corporate expenses (5 004) (4 813)
Share-based payments 17 (125) (295)
Foreign exchange gain/(loss) 20 (122)
---------------------------------------------------------------------------- ----- ---------------- ---------------
Operating profit 16 538 30 160
Net finance costs (2 098) (1 848)
---------------- ---------------
- Finance income 73 88
- Finance costs (2 171) (1 936)
---------------- ---------------
Profit before tax for the Period from continuing operations 14 440 28 312
---------------------------------------------------------------------------- ----- ---------------- ---------------
Income tax expense 8 (5 075) (9 953)
---------------------------------------------------------------------------- ----- ---------------- ---------------
Profit after tax for the Period from continuing operations 9 365 18 359
---------------------------------------------------------------------------- ----- ---------------- ---------------
DISCONTINUED OPERATION
Loss after tax for the Period from discontinued operation 15 (1 075) (1 329)
---------------------------------------------------------------------------- ----- ---------------- ---------------
Profit for the Period 8 290 17 030
---------------------------------------------------------------------------- ----- ---------------- ---------------
Attributable to:
Equity holders of parent 3 755 9 288
Non-controlling interests 4 535 7 742
---------------------------------------------------------------------------- ----- ---------------- ---------------
Earnings per share (cents)
- Basic earnings for the Period attributable to ordinary equity holders of
the parent 2.68 6.64
- Diluted earnings for the Period attributable to ordinary equity holders of
the parent 2.64 6.53
Earnings per share (cents) for continuing operations
- Basic earnings for the Period attributable to ordinary equity holders of
the parent 3.44 7.59
- Diluted earnings for the Period attributable to ordinary equity holders of
the parent 3.40 7.47
---------------------------------------------------------------------------- ----- ---------------- ---------------
(1) Unaudited
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2022
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
----------------------------------------------------------------------------------- ---------------- ---------------
Profit for the Period 8 290 17 030
Other comprehensive income that will be reclassified to the Interim Consolidated
Statement
of Profit or Loss in subsequent periods
Exchange differences on translation of foreign operations, net of tax (6 916) 6 142
----------------------------------------------------------------------------------- ---------------- ---------------
Other comprehensive (loss)/income for the Period, net of tax (6 916) 6 142
----------------------------------------------------------------------------------- ---------------- ---------------
Total comprehensive income for the Period, net of tax 1 374 23 172
Attributable to:
Equity holders of parent (938) 13 686
Non-controlling interests 2 312 9 486
----------------------------------------------------------------------------------- ---------------- ---------------
(1) Unaudited
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
30 June 2022(1) 31 December 2021(2)
Notes US$'000 US$'000
------------------------------------------------------------- ----- ---------------- -------------------
ASSETS
Non-current assets
Property, plant and equipment 10 289 798 293 627
Right-of-use assets 11 7 363 3 137
Intangible assets 12 11 653 11 962
Receivables and other assets 13 1 260 1 278
Deferred tax assets 5 985 5 117
------------------------------------------------------------- ----- ---------------- -------------------
316 059 315 121
------------------------------------------------------------- ----- ---------------- -------------------
Current assets
Inventories 31 508 31 158
Receivables and other assets 13 5 711 4 095
Income tax receivable 17 1 232
Cash and short-term deposits 14 24 145 30 913
------------------------------------------------------------- ----- ---------------- -------------------
61 381 67 398
------------------------------------------------------------- ----- ---------------- -------------------
Asset held for sale 15 1 864 2 097
------------------------------------------------------------- ----- ---------------- -------------------
Total assets 379 304 384 616
------------------------------------------------------------- ----- ---------------- -------------------
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 16 1 410 1 406
Treasury shares(3) 16 (1 157) -
Share premium 885 648 885 648
Other reserves (231 269) (226 697)
Accumulated losses (500 566) (500 550)
------------------------------------------------------------- ----- ---------------- -------------------
154 066 159 807
------------------------------------------------------------- ----- ---------------- -------------------
Non-controlling interests 85 247 86 843
------------------------------------------------------------- ----- ---------------- -------------------
Total equity 239 313 246 650
------------------------------------------------------------- ----- ---------------- -------------------
Non-current liabilities
Interest-bearing loans and borrowings 18 11 402 8 340
Lease liabilities 19 7 122 3 851
Trade and other payables 2 189 2 095
Provisions 11 450 11 202
Deferred tax liabilities 82 205 82 472
------------------------------------------------------------- ----- ---------------- -------------------
114 368 107 960
------------------------------------------------------------- ----- ---------------- -------------------
Current liabilities
Interest-bearing loans and borrowings 18 464 2 704
Lease liabilities 19 1 939 973
Trade and other payables 18 337 22 188
Income tax payable 988 41
------------------------------------------------------------- ----- ---------------- -------------------
21 728 25 906
------------------------------------------------------------- ----- ---------------- -------------------
Liabilities directly associated with the asset held for sale 15 3 895 4 100
------------------------------------------------------------- ----- ---------------- -------------------
Total liabilities 139 991 137 966
------------------------------------------------------------- ----- ---------------- -------------------
Total equity and liabilities 379 304 384 616
------------------------------------------------------------- ----- ---------------- -------------------
(1) Unaudited
(2) Audited
(3) Shares repurchased by Gem Diamonds Limited. Refer Note 16,
Issued capital.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2022
Attributable to the equity holders of the parent
-----------------------------------------------------------------------
Accumulated
Issued Share Treasury Other (losses)/retained Non-controlling Total
capital premium shares(1) Reserves(2) earnings Total interests equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Balance at 1
January 2022 1 406 885 648 - (226 697) (500 550) 159 807 86 843 246 650
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Profit for the
Period - - - - 3 755 3 755 4 535 8 290
Other
comprehensive
loss - - - (4 693) - (4 693) (2 223) (6 916)
------- -------- --------- ----------- ----------------- --------- --------------- ---------
Total
comprehensive
(loss)/income - - - (4 693) 3 755 (938) 2 312 1 374
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
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)
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Balance at 30
June 2022(3) 1 410 885 648 (1 157) (231 269) (500 566) 154 066 85 247 239 313
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Attributable to
discontinued
operation - - - (53 792) (198 409) (252 201) - (252 201)
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Balance at 1
January 2021 1 397 885 648 - (212 164) (511 808) 163 073 84 422 247 495
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Profit for the
Period - - - - 9 288 9 288 7 742 17 030
Other
comprehensive
income - - - 4 398 - 4 398 1 744 6 142
------- -------- --------- ----------- ----------------- --------- --------------- ---------
Total
comprehensive
income - - - 4 398 9 288 13 686 9 486 23 172
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Share capital
issued (Note
16) 8 - - (8) - - - -
Share-based
payments (Note
17) - - - 296 - 296 - 296
Dividends paid
(Note 9) - - - - (3 509) (3 509) - (3 509)
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Balance at 30
June 2021(3) 1 405 885 648 - (207 478) (506 029) 173 546 93 908 267 454
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
Attributable to
discontinued
operation
(Note 15) - - - (53 027) (193 581) (246 608) - (246 608)
--------------- ------- -------- --------- ----------- ----------------- --------- --------------- ---------
(1) Being shares repurchased from the owners of Gem Diamonds
Limited. Refer Note 16, Issued capital.
(2) Other reserves relate to Foreign currency translation
reserves and Share based equity reserves.
(3) Unaudited
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2022
30 June 2022(1) 30 June 2021(1)
Notes US$'000 US$'000
-------------------------------------------------------------------- ----- ---------------- ---------------
Cash flows from operating activities 30 095 29 905
---------------- ---------------
Cash generated by operations 20.1 42 995 57 438
Working capital adjustments 20.2 (9 841) (10 501)
Interest received 73 88
Interest paid (1 453) (1 182)
Income tax paid (2 940) (15 937)
Income tax received 1 261 -
---------------- ---------------
Cash flows used in investing activities (28 983) (37 576)
---------------- ---------------
Purchase of property, plant and equipment 10 (2 376) (1 898)
Waste stripping costs capitalised 10 (26 607) (35 683)
Proceeds from sale of property, plant and equipment - 5
---------------- ---------------
Cash flows from financing activities (8 617) (9 038)
---------------- ---------------
Lease liabilities repaid (850) (1 067)
Net financial liabilities raised/(repaid) 20.3 600 (1 667)
---------------- ---------------
- Financial liabilities raised 4 298 1 000
- Financial liabilities repaid (3 698) (2 667)
---------------- ---------------
Share buyback 16 (1 157) -
Dividends paid to holders of the parent (3 302) (3 509)
Dividends paid to non-controlling interests (3 908) (2 795)
---------------- ---------------
Net decrease in cash and cash equivalents (7 505) (16 709)
---------------- ---------------
Cash and cash equivalents at beginning of Period 31 057 49 827
Foreign exchange differences 639 868
---------------- ---------------
Cash and cash equivalents 24 191 33 987
---------------- ---------------
Cash and cash equivalents at end of Period - continuing operations 14 24 145 33 929
---------------- ---------------
Cash and cash equivalents held at banks 24 145 33 929
---------------- ---------------
Cash and cash equivalents at end of Period - discontinued operation 15 46 58
---------------- ---------------
Cash and cash equivalents held at banks 46 58
---------------- ---------------
(1) Unaudited
CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2022
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). 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 31 August 2022, is unaudited and does
not constitute statutory financial statements. The report of the auditor on the Group's 2021
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 presentation
The condensed consolidated interim financial statements for the six months ended 30 June 2022
(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 2021. 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 2021 included in this report was derived
from the statutory accounts for the year ended 31 December 2021, 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 8. The Group's net cash at 30 June 2022 was US$12.1 million (31 December 2021:
net cash of US$20.9 million) and with its undrawn facilities of US$69.9 million (31 December
2021: US$74.3 million), its liquidity (defined as net cash and undrawn facilities) of US$82.0
million (31 December 2021: US$95.2 million) remains strong. The Group's Revolving Credit facilities,
which total US$75.8 million when fully unutilised, mature on 22 December 2024.
After making enquiries which include reviews of forecasts and budgets, timing of cash flows
and sensitivity analyses, and considering the continued impact of the COVID-19 pandemic and
the 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 2021. A new policy on Treasury shares has been adopted,
following a share buyback programme introduced during the Period.
Treasury shares
Own equity instruments that are reacquired are recognised at cost, including transaction costs,
and deducted from equity. No gain or loss is recognised in profit or loss in the purchase,
sale, issue or cancellation of the Group's own equity instruments. Any difference between
the carrying amount and the consideration, if reissued, is recognised in equity.
Minor amendments to existing standards, also became effective on 1 January 2022 and have been
adopted by the Group. The adoption of these amendments has not had a significant impact on
the accounting policies, methods of computation or presentation applied by the Group.
Amendments to standards
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest rate benchmark reform
The amendment addresses issues that might affect financial reporting when an existing interest
rate benchmark is replaced with an alternative benchmark interest rate. The Group and its
funders commenced a comprehensive debt refinancing programme of the Group's facilities. The
refinancing programme incorporates the consideration of any risk posed to the Group by phase
two of the IBOR reform, which was effective from 1 January 2021. The IBOR reform may potentially
have an impact on the JIBAR and LIBOR linked interest-bearing loans and borrowings within
the Group, Refer Note 18, Interest-bearing loans and borrowings for more information regarding
the maturities and the related benchmark rates subject to the IBOR reform on these loans.
At Period end, it is not possible to estimate the potential impact of the amendment as no
alternative rates have been published by the regulatory bodies or negotiated with the funders.
The Group will continue to assess the impact of the interest rate benchmark reform as the
revised benchmark rates are published.
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*
------------------------- ------------------------------------------------------------------ -----------------
IFRS 17 Insurance contracts 1 January 2023
Amendments to IAS 37 Onerous contracts - cost of fulfilling a contract 1 January 2022
Amendments to IFRS 3 Reference to the Conceptual Framework 1 January 2022
Amendments to IAS 16 Property, plant and equipment proceeds before intended use 1 January 2022
Amendments to IAS 1 Classification of liabilities as current or non-current 1 January 2023
Amendments to IFRS 10 and Sale or Contribution of Assets between an Investor and its
IAS 28 Associate or Joint Venture Pending
Amendments to IAS 8 Definition of Accounting Estimates 1 January 2023
Amendments to IAS 1 and Disclosure of Accounting Policies
IFRS Practice Statement 2 1 January 2023
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a
Single Transaction 1 January 2023
Improvement IFRS 1 Subsidiary as a first-time adopter 1 January 2022
Improvement IFRS 9 Fees in the '10 per cent' test for derecognition of financial
liabilities 1 January 2022
Improvement IAS 41 Agriculture - Taxation in fair value measurements 1 January 2022
(*) Annual periods beginning on or after.
2.3 Significant accounting matters
During the six months ended 30 June 2022, the significant accounting matters addressed by
management focused on the assessment of any continued COVID-19 impacts, climate-related disclosures
and the impact of the Russian invasion of Ukraine.
COVID-19 continued impact
The Group has considered the impact of COVID-19 on its significant accounting judgements and
estimates. The Group's main source of estimation uncertainty is in relation to assumptions
used for the assessment of impairment and impairment reversal of assets. No further significant
estimates have been identified as a result of COVID-19. Although the pandemic has increased
the level of uncertainty inherent in all future cash flow forecasts, the pandemic has had
a reduced impact compared to previous periods.
Task Force on Climate-related Financial Disclosures (TCFD)
Management has considered the impact of climate change, particularly in the context of the
phased approach strategy which the Group has adopted in implementing the TCFD requirements
and the high level overview of some climate-related risks and opportunities. These considerations
did not have a material impact on the financial reporting estimates and judgements, consistent
with the assessment that climate change is not expected to have a significant impact on the
Group's going concern assessment to August 2023. These considerations also had no material
impact on any Property, Plant and Equipment or Commitments. For Letšeng, the physical
risks identified of severe weather conditions, are similar to its current operating conditions
of drought, high wind, snow and rainfall. The operation is therefore well set up to manage
these conditions within its current reporting and accounting framework. As users of grid-supplied
and fossil fuel energy, our short-term focus is on improving energy efficiencies in our operational
processes and to reducing combustion related fossil fuel use. Due to the uncertainty of the
cost and timing of implementation of carbon-related taxes, the impact of such taxes on the
Group's operations and cash flows has been excluded from the going concern and impairment
review.
The Russian invasion of Ukraine
The Russian invasion of Ukraine has significantly increased the price of consumables, especially
diesel and explosive costs used in the mining activities, and inflation rates across the jurisdictions
where the Group operates. Management has considered the impact of increased costs on future
cashflows, and whether these costs and inflation rates are short or long term in nature. Management
has used current pricing and inflation estimates for shorter term forecasts, and normalised
these to levels of the previous year for the medium to long term.
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), classified as a discontinued operation since 30 June
2019.
Management monitors the operating results of the geographical units separately for the purpose
of making decisions about resource allocation and performance assessment.
Gem Diamonds Botswana (Ghaghoo Diamond Mine), which was classified as a discontinued operation
held for sale and disclosed separately in 2019, continues to be classified as such at Period
end as management remain committed to the sales process. Refer Note 15, Asset held for sale.
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 Group 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:
Total
BVI, RSA, UK continuing
Six months ended Lesotho Belgium and Cyprus(2) operations Discontinued operations Total
30 June 2022(1) US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ----------- ----------- --------------- --------------- ----------------------- ---------
Revenue from
contracts
with customers
Total revenue 98 435 100 037 3 660 202 132 - 202 132
Intersegment (98 128) (393) (3 660) (102 181) - (102 181)
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
External customers 307 99 644 - 99 951 - 99 951
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
Segment operating
profit/(loss) 21 383 635 (5 480) 16 538 (966) 15 572
Net finance costs (1 506) (4) (588) (2 098) (109) (2 207)
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
Profit/(loss) before
tax 19 877 631 (6 068) 14 440 (1 075) 13 365
Income tax expense (4 760) (89) (226)(3) (5 075) - (5 075)
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
Profit/(loss) for the
Period 15 117 542 (6 294) 9 365 (1 075) 8 290
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
EBITDA 24 937 830 (4 860) 20 907 (960) 19 947
--------------------- ----------- ----------- --------------- --------------- ----------------------- ---------
(1) Unaudited.
(2) No revenue was generated in BVI and Cyprus.
(3) This includes the adjustment to align the forecast effective tax rate for the full year,
to the actual results for the Period. Refer Note 8, Income tax expense.
BVI, RSA, UK and Total continuing Discontinued
Lesotho Belgium Cyprus operations operations Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Segment assets
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
30 June 2022(1) 360 305 3 463 7 688 371 456 1 864 373 320
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
31 December 2021(2) 369 105 1 985 6 312 377 402 2 097 379 499
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Net cash/(debt) and short-term
deposits(3)
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
30 June 2022(1) 16 153 1 615 (5 764) 12 004 46 12 050
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
31 December 2021(2) 24 175 1 561 (5 014) 20 722 144 20 866
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Segment liabilities
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
30 June 2022(1) 37 586 1 975 14 328 53 889 3 895 57 784
------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
31 December 2021(2) 39 440 351 11 603 51 394 4 100 55 494
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
(1) Unaudited
(2) Audited
(3) Calculated as cash and short-term deposits less drawn down bank facilities (excluding
the asset-based finance facility). 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$12.5 million (30 June 2021:
US$38.0 million from two customers) arising from the sales reported in the Belgium segment.
Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.0
million and US$82.2 million respectively (31 December 2021: deferred tax asset US$5.1 million,
deferred tax liabilities US$82.5 million).
Total revenue for the Period is slightly lower than that of the prior period. Although the
volume of carats sold of 57 075 carats was 4% higher than the prior period (55 123 carats),
the $ per carat achieved of $1 745 was 7% lower than the prior period ($1 886 per carat) based
on the reduced contribution from the higher grade Satellite pit.
BVI, RSA, UK and Total continuing Discontinued
Six months ended Lesotho Belgium Cyprus(2) operations operations Total
30 June 2021(1) US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Revenue from contracts with
customers
Total revenue 102 949 104 659 3 388 210 996 - 210 996
Intersegment (102 714) (369) (3 388) (106 471) - (106 471)
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
External customers 235 104 290 - 104 525 - 104 525
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Segment operating profit/(loss) 35 235 720 (5 795) 30 160 (1 216) 28 944
Net finance costs (1 190) (2) (656) (1 848) (113) (1 961)
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Profit/(loss) before tax 34 045 718 (6 451) 28 312 (1 329) 26 983
Income tax expense (8 237) (94) (1 622)(3) (9 953) - (9 953)
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
Profit/(loss) for the Period 25 808 624 (8 073) 18 359 (1 329) 17 030
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
EBITDA 38 379 915 (4 616) 34 678 (1 184) 33 494
--------------------------------------- ------------------------------- ----------------------------- ----------------- --------------------- ---------------------- ---------
(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.
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Sale of goods 99 627 104 277
Partnership arrangements 306 235
Rendering of services 18 13
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
99 951 104 525
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
The revenue from the sale of goods represents the sale of rough diamonds, for which revenue
is recognised at the point in time at which control transfers.
The revenue from partnership arrangements of US$0.3 million (30 June 2021: US$0.2 million)
represents the additional uplift from partnership arrangements for which revenue is recognised
when the significant constraints are lifted or resolved and the amount of revenue is guaranteed.
At Period end 527 carats (30 June 2021: 852 carats) have significant constraints in recognising
revenue relating to the additional uplift.
The revenue from the rendering of services mainly represents the sales of rough diamonds on
behalf of third parties, for which revenue is recognised at the time when performance obligations
are met, and services rendered on third-party diamond analysis and manufacturing, for which
the revenue is recognised over time as the services are rendered.
No revenue was generated from joint operation arrangements during the current or prior periods.
5. OTHER OPERATING EXPENSES
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Sundry income - 85
Sundry expenses - (12)
Loss on disposal and scrapping of property, plant and equipment - (4)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Other operating income - 69
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
COVID-19 related costs (93) (409)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Other operating expenses (93) (340)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
6. UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET AMORTISATION (UNDERLYING
EBITDA) BEFORE DISCONTINUED OPERATION
Underlying EBITDA is shown, as the Directors consider this measure to be a relevant guide
to the operational performance of the Group and excludes such non-operating costs and income
as listed below. The reconciliation from operating profit to underlying EBITDA is as follows:
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Operating profit 16 538 30 160
Other operating expense(2) - (69)
Foreign exchange (gain)/loss (20) 122
Share-based payments 125 295
Depreciation and amortisation (excluding waste stripping cost amortised) 4 264 4 170
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Underlying EBITDA before discontinued operation 20 907 34 678
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Excludes COVID-19 related costs which are considered operating costs.
7. SEASONALITY OF OPERATIONS
The Group's sales environment with regard to its diamond sales is not materially impacted
by seasonal and cyclical fluctuations. The mining operations may be impacted by seasonal weather
conditions. Appropriate mine planning and ore stockpile build-up ensures that operations can
continue during adverse weather conditions.
8. INCOME TAX EXPENSE
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Current
- Foreign (3 940) (4 958)
Withholding tax
- Foreign (550) (90)
Deferred
- Foreign (585) (4 905)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Income tax expense (5 075) (9 953)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
The forecast effective tax rate for the full year from continuing operations is 35.2% (31
December 2021: 33.4%) and has been applied to the actual results from continuing operations
for the Period. The asset held for sale (refer to Note 15, Asset held for sale), has been
excluded from the forecast effective tax rate for the full year and taxed separately. There
is no tax effect on the loss from the asset held for sale.
The effective tax rate is above the Lesotho statutory tax rate of 25% primarily as a result
of deferred tax assets not recognised on losses incurred in non-trading operations.
9. DIVIDS PAID
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Dividends on ordinary shares declared and paid
Final ordinary dividend for 2021: 2.7 US cents per share (2020: 2.5 US cents) (3 771) (3 509)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
The 2022 proposed dividend based on the 2021 full-year results was approved at the Annual
General Meeting on 8 June 2022 and a final cash dividend of US$3.8 million was paid on 21
June 2022.
The Directors intend on applying a similar dividend policy in the current year on the 2022
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$2.4 million (30 June 2021: US$1.9 million) into property,
plant and equipment, of which US$2.3 million (30 June 2021: US$1.8 million) related to Letšeng.
Letšeng's capital spend was incurred mainly on the design, planning work and commencement
of construction of the primary crushing area of US$1.9 million (30 June 2021: US$0.2 million).
Letšeng further invested US$26.6 million (30 June 2021: US$35.7 million) in deferred
stripping costs which were capitalised. Amortisation of the deferred stripping asset (waste
stripping cost amortisation) of US$21.9 million (30 June 2021: US$23.0 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$3.4 million (30 June 2021: US$3.1 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$7.5 million (30 June 2021: US$8.4 million
increase).
11. RIGHT-OF-USE ASSETS
Right-of-use assets
Plant and equipment Motor vehicles Buildings Total
----------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
As at 30 June 2022(1)
Cost
Balance at 1 January 2022 56 94 5 761 5 911
Additions 3 461 316 1 611 5 388
Derecognition of lease - - (672) (672)
Foreign exchange differences (207) (23) (125) (355)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 30 June 2022(1) 3 310 387 6 575 10 272
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Accumulated depreciation
Balance at 1 January 2022 20 63 2 691 2 774
Charge for the year 325 42 538 905
Derecognition of lease - - (672) (672)
Foreign exchange differences (20) (4) (74) (98)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 30 June 2022(1) 325 101 2 483 2 909
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Net book value at 30 June 2022(1) 2 985 286 4 092 7 363
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
As at 31 December 2021(2)
Cost
Balance at 1 January 2021 2 217 364 6 444 9 025
Additions - - 507 507
Derecognition of lease (2 141) (260) (768) (3 169)
Foreign exchange differences (20) (10) (422) (452)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 31 December 2021(2) 56 94 5 761 5 911
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Accumulated depreciation
Balance at 1 January 2021 1 737 255 2 210 4 202
Charge for the year 437 75 1 173 1 685
Derecognition of lease (2 141) (260) (523) (2 924)
Foreign exchange differences (13) (7) (169) (189)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 31 December 2021(2) 20 63 2 691 2 774
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Net book value at 31 December 2021(2) 36 31 3 070 3 137
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
Plant and equipment mainly comprise printing equipment utilised at Gem Diamond Technical Services.
Motor vehicles mainly comprise vehicles utilised by contractors at Letšeng. Buildings
comprise office buildings in Maseru, Antwerp, London and Johannesburg.
Right-of-use assets are depreciated on a straight-line basis over the shorter of their estimated
useful life and the lease term.
During the Period, the lease for back-up power generating equipment at Letšeng (which
expired in 2021) was renewed resulting in the recognition of assets and liabilities associated
with the new lease. Furthermore, Gem Diamonds Marketing Services and Baobab Technologies entered
into new contracts for the rental of office space in Antwerp. The new contracts were assessed
as containing leases, which resulted in the recognition of the new associated right-of-use
assets and lease liabilities. The original contracts were both cancelled and all associated
assets and liabilities were derecognised. 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 2021: US$0.2 million)
from the sub-leasing of office buildings in Maseru.
The Group expects to receive the following income from its sub-leasing activities:
US$'000
------------------------------------------------------------------------------------------------------------------------------------------------------ ----------------------
1 July 2022 - 30 June 2023 360
1 July 2023 - 30 June 2024 384
1 July 2024 - 30 June 2025 317
1 July 2025 - 30 June 2026 119
12. INTANGIBLE ASSETS
Intangibles Goodwill(1) Total
US$'000 US$'000 US$'000
----------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
As at 30 June 2022(2)
Cost
Balance at 1 January 2022 - 11 962 11 962
Foreign exchange differences - (309) (309)
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Balance as at 30 June 2022(2) - 11 653 11 653
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Accumulated amortisation
Balance at 1 January 2022 - - -
Amortisation for the Period - - -
----------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Balance as at 30 June 2022(2) - - -
----------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Net book value as at 30 June 2022(2) - 11 653 11 653
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
As at 31 December 2021(3)
Cost
Balance at 1 January 2021 791 12 997 13 788
Foreign exchange difference - (1 035) (1 035)
Scrapping (791) - (791)
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 31 December 2021(3) - 11 962 11 962
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Accumulated amortisation
Balance at 1 January 2021 791 - 791
Amortisation - - -
Scrapping (791) - (791)
----------------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at 31 December 2021(3) - - -
----------------------------------------------------------------------------------- ------------------------------- -------------------------------- ----------------------
Net book value at 31 December 2021(3) - 11 962 11 962
(1) Goodwill is allocated to Letšeng Diamonds.
(2) Unaudited
(3) Audited
13. RECEIVABLES AND OTHER ASSETS
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Non-current
Deposits 96 109
Insurance Asset 1 164 1 169
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
1 260 1 278
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Current
Trade receivables 23 25
Prepayments(3) 1 918 975
Deposits 17 19
Other receivables 198 122
VAT receivable 3 555 2 954
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Total current 5 711 4 095
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited.
(2) Audited.
(3) Prepayments mainly comprise advance payments made by Letšeng Diamonds to suppliers
for long lead items relating to the primary crushing area capital project.
Based on the nature of the Group's client base and the negligible exposure to credit risk
through its client base, its insurance asset and other financial assets, the expected credit
loss is insignificant and has no impact on the Group.
14. CASH AND SHORT-TERM DEPOSITS
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Cash on hand 2 3
Bank balances 20 950 27 673
Short-term bank deposits 3 193 3 237
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
24 145 30 913
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(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 called 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.
Finance income relates to interest earned on cash and short-term deposits.
Finance costs include interest incurred on bank overdraft and borrowings and associated unwinding
of facility credit underwriting fees, finance lease liabilities and the unwinding of rehabilitation
provisions.
At 30 June 2022, the Group had US$69.9 million (31 December 2021: US$74.3 million) of undrawn
facilities, representing the LSL750.0 million (US$45.8 million) three-year secured revolving
working capital facility and the ZAR100.0 million (US$6.1 million) general banking facility,
both at Letšeng, and US$18.0 million from the Company's secured revolving credit facility.
For further details on these facilities refer Note 18, Interest-bearing loans and borrowings.
15. ASSET 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. In May 2022, the sales agreement which Gem
Diamonds Limited had entered into with Okwa Diamonds (Pty) Ltd (Okwa Diamonds) lapsed, following
the inability of Okwa Diamonds' owners to secure a funding partner for the transaction. There
has been no new agreement entered into for the sale of the asset by Period end, although a
number of interested parties are performing due diligence procedures. GDB continued to be
disclosed as a discontinued operation held for sale at Period end.
The asset held for sale is carried at a net liability value of US$2.0 million, which is lower
than fair value less costs to sell. The fair value is based on prior unobservable market offers
from potential buyers, accordingly the non-recurring fair value measurement is included in
level 3 of the fair value hierarchy.
The trading results of the operation continue to be classified as a discontinued operation
held for sale and are presented as follows:
30 June 2022(1) 30 June 2021(2)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Gross profit - -
Other costs (966) (1 198)
Inventory write-down - (16)
Share-based payments - (1)
Foreign exchange loss - (1)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Operating loss (966) (1 216)
Net finance costs (109) (113)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Loss for the Period before tax from discontinued operation (1 075) (1 329)
Income tax expense - -
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Loss for the Period after tax from discontinued operation attributable to Equity holders of
the parent (1 075) (1 329)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Loss per share from discontinued operation (cents)
Basic (0.8) (1.0)
Diluted (0.8) (0.9)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
Gem Diamonds Botswana incurred rental expenses from short-term leases of US$0.3 million (30
June 2021: US$0.3 million) during the Period.
Gem Diamonds Botswana has estimated tax losses of US$173.2 million (30 June 2021: US$184.3
million), which carry no expiry date, for which no deferred tax asset has been recognised.
Deferred tax assets of US$0.3 million (31 December 2021: US$0.3 million) were recognised to
the extent of the deferred tax liabilities. These have been offset in the table below.
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
ASSETS
Non-current assets
Property, plant and equipment 1 350 1 413
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Current assets
Inventories 444 477
Receivables and other assets 24 63
Cash and cash short-term deposits 46 144
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
514 684
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Total assets 1 864 2 097
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
LIABILITIES
Non-current liabilities
Provisions 3 570 3 654
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Current liabilities
Trade and other payables 325 446
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Total liabilities 3 895 4 100
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
The net cash flows attributable to the discontinued operation held for sale are as follows:
Operating cash outflows (1 086) (2 186)
Investing - -
Financing cash inflows(3) 990 2 332
Foreign exchange loss on translation of cash balance (3) (9)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Net cash (outflow)/inflow (99) 137
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
(3) Financing provided by Gem Diamonds Limited, being Gem Diamonds Botswana's holding company,
to fund care and maintenance costs.
16. ISSUED CAPITAL
30 June 2022(1) 31 December 2021(2)
Number of shares Number of shares
'000 US$'000 '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 140 515 1 406 139 612 1 397
Allotments during the Period/Year 408 4 903 9
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Subtotal 140 923 1 410 140 515 1 406
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Share buyback during the Period/Year (1 520) (1 157) - -
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Balance at end of Period/Year 139 403 253 140 515 1 406
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
Share buyback
During the 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 is to
reduce the capital of the Company and the Company intends to hold those ordinary shares purchased
under the programme in treasury. Such treasury shares are not entitled to dividends and have
no voting rights. The share buyback programme was initiated on 12 April 2022. At 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 will be taken
into account in calculating the earnings per share.
17. SHARE-BASED PAYMENTS
Long-term Incentive Plan 2017 Award (LTIP) - 4 April 2022 award
On 4 April, 165 930 nil-cost options were granted to certain key employees under the Long-term
Incentive Plan 2017 of the Company. The value of the award was determined based on the Group
performance for the prior 2021 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 LTIP.
In addition, 841 168 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 the prior year, which integrates
annual bonus awards with awards under the LTIP. 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 4 April 2023
and ending on 4 April 2025. The options are exercisable between the respective vesting dates
and 3 April 2032. If the service conditions are not met, the options lapse. The performance
conditions are not reflected in the fair value of the award at grant date, and therefore the
Company will assess the likelihood of these conditions being met with a relevant adjustment
to the cumulative charge as required at each financial year end. The option grants are settled
by issuing shares. The fair value of the nil-cost options is GBP0.58 (US$0.74), representing
the Company's share price on the date of the award. The expense disclosed in the Interim Consolidated
Statement of Profit or Loss is made up as follows:
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Equity-settled share-based payment transactions - charged to the Statement of Profit or Loss
- continuing operations 125 295
Equity-settled share-based payment transactions - charged to the Statement of Profit or Loss
- discontinued operation - 1
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
125 296
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
18. INTEREST-BEARING LOANS AND BORROWINGS
On 28 February 2022, Gem Diamonds Limited provided security for both the Letšeng Diamonds
and Gem Diamonds Limited RCF facilities over its bank accounts domiciled in the United Kingdom
and on 15 March 2022 the security over its 70% shareholding in Letšeng Diamonds was implemented.
This security had the impact of decreasing the interest rate margin on all facilities by 1.5%
from 15 March 2022 and converting the facilities into secured facilities.
30 June 2022(1) 31 December 2021(2)
Effective interest rate Maturity US$'000 US$'000
----------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Non-current
----------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
ZAR12.8 million asset-based finance facility South African Prime Lending Rate 1 January 2024 108 202
(repaid on 15 July 2022)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
LSL450.0 million and
ZAR300.0 million bank loan
facility Credit underwriting fees - 22 December 2024 (425) (525)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
London US$ three-month
US$30.0 million bank loan facility LIBOR + 5% 22 December 2024 11 719 8 663
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
11 402 8 340
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
Current
----------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
LSL7.3 million insurance
premium finance 2.35% 1 June 2022 - 305
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
ZAR3.5 million insurance premium finance 2.5% 1 July 2022 22 155
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
LSL20.0 million insurance premium finance 3.2% 1 July 2022 125 880
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
LSL215.0 million bank loan facility
Tranche A South African JIBAR + 6.75% 30 September 2022 142 439
Tranche B South African JIBAR + 3.15% 31 March 2022 - 752
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
ZAR12.8 million asset-based finance facility South African Prime Lending Rate 1 January 2024 175 173
(repaid on 15 July 2022)
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
464 2 704
----------------------------------------------------- ---------------------------------- ------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
LSL450.0 million and ZAR300.0 million (US$45.8 million) bank loan facility at Letšeng
Diamonds
Following the consolidated refinancing on 23 December 2021, the Group, through its subsidiary
Letšeng Diamonds, has a secured LSL450.0 million and ZAR300.0 million (US$45.8 million
in total) 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 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 were no draw downs on
these facilities at Period end.
Credit underwriting fees of US$0.4 million (31 December 2021: US$0.5 million) relate to the
balance of the amortised fees which were capitalised to the Group's consolidated interest-bearing
loans and borrowings at the end of the previous year.
US$30.0 million bank loan facility at Gem Diamonds Limited
This secured facility is a 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 drawdowns are made in these ratios.
The facility expires on 22 December 2024 and has a 24-month renewal option.
An additional US$3.0 million had been drawn down during the Period, resulting in a total outstanding
balance of US$12.0 million (31 December 2021: US$9.0 million) at Period end and a remaining
undrawn balance of US$18.0 million (31 December 2021: US$21.0 million). The disclosure of
a net US$11.7 million (31 December 2021: US$8.7 million) loan balance, is net of the capitalised
credit underwriting fees which are amortised and accounted for as finance costs within profit
or loss over the period of the facility. The balance of the credit underwriting fees at Period
end was US$0.3 million (31 December 2021: US$0.3 million).
The US$-based interest rate for this facility at 30 June 2022 was 7.25% (31 December 2021:
6.72%) which comprises London US$ three-month LIBOR plus 5.0% (31 December 2021: London US$
three-month LIBOR plus 6.5%).
Total interest for the Period on this interest-bearing RCF was US$0.5 million (31 December
2021: US$1.0 million).
ZAR12.8 million (US$0.8 million) Asset-Based Finance facility
In January 2019, the Group, through its subsidiary, Gem Diamond Technical Services, entered
into a ZAR12.8 million (US$0.8 million) Asset Based Finance (ABF) facility with Nedbank Limited
for the purchase of a coarse mobile X-Ray transmission machine (the asset). The asset serves
as security for the facility and has a carrying value of ZAR1.4 million (US$85 thousand) (31
December 2021: ZAR2.5 million (US$0.2 million)). At Period end ZAR4.6 million (US$0.4 million)
remains outstanding (31 December 2021: ZAR6.0 million (US$0.4 million). Post Period end, the
facility was fully repaid before maturity on 15 July 2022.
Total interest for the Period on this interest-bearing ABF was US$13 thousand (31 December
2021: US$34 thousand).
Insurance premium finance
At Period end, the following insurance premium finance balances were outstanding and were
fully repaid post Period end on 1 July 2022:
-- LSL20.0 million (US$1.2 million) at Letšeng Diamonds for the Multi-aggregate Insurance
Policy of which total interest paid for the Period on this interest-bearing loan was LSL0.4
million (US$25 thousand).
-- ZAR3.5 million (US$0.2 million) at Gem Diamond Technical Service for the Group Umbrella
liability insurance premium of which total interest paid for the Period on this interest-bearing
loan was ZAR55 thousand (US$4 thousand).
Furthermore, the LSL7.3 million (US$0.4 million) funding agreement at Letšeng Diamonds
for its Asset All Risk insurance premium was fully repaid on 1 June 2022. Total interest charge
for the Period was LSL0.1 million (US$7 thousand).
Other facilities
In addition, Letšeng Diamonds has a ZAR100.0 million (US$6.1 million) general banking
facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking
division), which is renewable annually. There was no draw down on this facility at Period
end.
19. LEASE LIABILITIES
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Non-current 7 122 3 851
Current 1 939 973
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Total lease liabilities 9 061 4 824
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Reconciliation of movement in lease liabilities
As at 1 January 4 824 6 738
Additions 5 388 507
Interest expense 365 525
Lease payments (1 215) (2 185)
Derecognition of lease - (352)
Foreign exchange differences (301) (409)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
As at 30 June/31 December 9 061 4 824
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
(2) Audited
Lease payments comprise payments in principle of US$0.8 million (31 December 2021: US$1.7
million) and repayments of interest of US$0.4 million (31 December 2021: US$0.5 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$21.3 million
(30 June 2021: US$25.9 million). These payments consist of mining activities outsourced to
a mining contractor of which US$15.5 million (30 June 2021: US$22.0 million) has been capitalised
to the Stripping Asset within Property, Plant and Equipment.
During the Period, the lease for back-up power generating equipment at Letšeng Diamonds
was renewed. This lease contains residual value guarantees of US$45 thousand (31 December
2021: Nil) which represents the cost to decommission and return the power generating equipment
to the supplier at the end of the lease term. Refer Note 11, Right-of-use assets for details
on new leases entered into during the Period.
20. CASH FLOW NOTES
30 June 2022(1) 30 June 2021(1)
Notes US$'000 US$'000
------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
20.1 Cash generated by operations
Profit before tax for the Period - continuing operations 14 440 28 312
Loss for the Period - discontinued operation (1 075) (1 329)
Adjustments for:
Depreciation and amortisation excluding waste stripping 3 409 3 060
Depreciation on right-of-use assets 905 1 110
Waste stripping cost amortised 21 880 22 988
Finance income (73) (88)
Finance costs 2 280 2 049
Unrealised foreign exchange differences 431 (1 766)
Loss on disposal of property, plant and equipment - 4
Gain on derecognition of leases - (92)
Inventory write down - 16
Bonus, leave and severance provisions raised 673 2 878
Share-based payments 125 296
------------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
42 995 57 438
------------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
20.2 Working capital adjustment
Increase in inventories (2 766) (2 892)
Increase in receivables (2 357) (652)
Decrease in trade and other payables (4 718) (6 957)
------------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
(9 841) (10 501)
------------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
20.3 Cash flows from financing activities (excluding lease liabilities)
Balance at beginning of Period 11 043 16 086
Net cash raised/(used) in financing activities 600 (1 667)
-------------------------------- ----------------------
- Financial liabilities raised 4 298 1 000
- Financial liabilities repaid (3 698) (2 667)
-------------------------------- ----------------------
Interest paid (1 084) (896)
Non-cash movements 1 306 1 181
-------------------------------- ----------------------
- Interest accrued 1 084 896
- Amortisation of capitalised facility fees 147 150
- Foreign exchange differences 75 135
-------------------------------- ----------------------
Balance at Period end 11 865 14 704
------------------------------------------------------------------------------------------------- ----------------------- -------------------------------- ----------------------
(1) Unaudited
21. COMMITMENTS AND CONTINGENCIES
The Board has approved capital projects of US$19.0 million (31 December 2021: US$20.2 million),
mainly relating to the new primary crushing area at Letšeng of US$7.1 million and underground
studies for pit development of US$5.1 million (US$4.9 million of which will only be committed
if a Phase 1 analysis costing US$0.2 million informs the continuation of further underground
studies) at Letšeng. Other smaller capital expenditure, all at Letšeng, relates
to the construction of a bioremediation plant of US$1.8 million, investment in continued tailings
storage extension and studies of US$1.1 million, the construction of an employee recreation
centre of US$0.8 million linked to the successful completion of the Business Transformation
target and further mineral resource and reserve studies of US$0.8 million. This expenditure
is expected to be incurred over the next 12 - 18 months.
Of the total approved capital projects, US$10.0 million (31 December 2021: US$0.9 million)
has been contracted at 30 June 2022, the majority of which relates to the new primary crushing
area at Letšeng.
The Group has conducted its operations in the ordinary course of business in accordance with
its understanding and interpretation of commercial arrangements and applicable legislation
in the countries where the Group has operations. In certain specific transactions, however,
the relevant third party or authorities could have a different interpretation of those laws
and regulations that could lead to contingencies or additional liabilities for the Group.
Having consulted professional advisers, the Group has identified possible disputes approximating
US$0.2 million (31 December 2021: US$0.2 million) mainly relating to ongoing employee-related
legal costs.
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.
As disclosed in the 2021 Annual Report and Accounts, an amended tax assessment was issued
to Letšeng by the Lesotho Revenue Authority (LRA) in December 2019, contradicting the
application of certain tax treatments in the current Lesotho Income Tax Act 1993. There has
been no significant change in this matter during the Period and therefore there has been no
change in the judgement applied and the accounting treatment compared to prior year. An objection
to the amended tax assessment was lodged with the LRA in March 2020, which was supported by
the opinion of senior counsel.
On 7 February 2022, Letšeng received an application from the LRA to amend its original
grounds for the court application. Letšeng's counsel continues to review the LRA's proposed
amendment and has opposed the new application by the LRA. There has been no change in the
judgement applied and the accounting treatment for this matter.
22. RELATED PARTIES
Relationship
------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------
Jemax Management (Proprietary) Limited Common director
Government of the Kingdom of Lesotho Non-controlling interest
------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
-------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Compensation to key management personnel (including Directors)
Share-based equity transactions 92 126
Short-term employee benefits 2 808 2 795
Post-employment benefits (including severance pay and pension) 155 162
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Fees paid to related parties
Jemax Management (Proprietary) Limited (44) (47)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Royalties paid to related parties
Government of the Kingdom of Lesotho (9 947) (10 226)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Lease and licence payments to related parties
Government of the Kingdom of Lesotho (96) (54)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Purchases from related parties
Jemax Management (Proprietary) Limited (2) (2)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited (7) (8)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Amounts owing to related party
Government of the Kingdom of Lesotho (2 365) (4 476)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
Dividends paid
Government of the Kingdom of Lesotho (3 908) (2 795)
-------------------------------------------------------------------------------------------------------------------------- -------------------------------- ----------------------
(1) Unaudited
Jemax Management (Proprietary) Limited provided administrative services with regard to the
mining activities undertaken by the Group. A controlling interest is held by an Executive
Director of the Company.
The above transactions were made on terms agreed between the parties and were made on terms
that prevail in arm's length transactions.
23. EVENTS AFTER THE REPORTING PERIOD
No other fact or circumstance has taken place between the Period end and the approval of the
financial statements which, in our opinion, is of significance in assessing the state of the
Group's affairs.
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END
IR BKDBKABKDBFN
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