TIDMGEMD
RNS Number : 8503K
Gem Diamonds Limited
31 August 2023
Thursday, 31 August 2023
Gem Diamonds Limited
Half Year 2023 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company"
or the "Group") announces its Half Year Results for the six months
ended 30 June 2023 (the "Period").
FINANCIAL RESULTS:
-- Revenue of US$71.8 million (H1 2022: US$100.0 million)
-- Underlying EBITDA of US$8.4 million (H1 2022: US$20.9
million)
-- Cash on hand of US$7.3 million as at 30 June 2023 (US$6.2
million attributable to Gem Diamonds)
-- The Group has unutilised facilities of US$72.9 million
-- Loss per share of 0.7 US cents (H1 2022: earnings per share
of 2.7 US cents)
OPERATIONAL RESULTS:
Letšeng
-- Zero fatalities and one lost time injury
-- Recovered 50 601 carats (H1 2022: 55 157 carats)
-- Waste tonnes mined of 4.8 million tonnes (H1 2022: 6.3
million tonnes)
-- Ore treated of 2.5 million tonnes (H1 2022: 3.0 million
tonnes)
-- Average value of US$1 373 per carat achieved (H1 2022: US$1
745 per carat)
Safety performance
The organisational safety culture maturity strategy, that
commenced in 2021 to improve safety performance at Letšeng, has
been fully executed and led to an improved safety performance
during the Period. Letšeng recorded zero fatalities and one LTI
during the Period (2022: three), resulting in an improved LTIFR and
AIFR of 0.09 (2022: 0.13) and 0.57 (2022: 0.7), respectively.
Diamond market
The global rough diamond market has experienced a downturn in
2023. A decrease in the number of large, high-value diamonds
recovered, combined with market pressure has negatively impacted
the average dollar per carat and revenue achieved during the
Period.
Operational performance
Increasing grid electricity interruptions caused a reduction in
volumes of ore processed. In addition, higher than expected
internal basalt dilution in certain domains of ore that was treated
impacted throughput. To mitigate the impact of internal basalt
dilution, improve plant stability and large diamond recoveries, in
the latter part of Q2 2023, an operational decision to open crusher
gaps and to slow throughput in the processing plant was
implemented.
TCFD and Climate
Following the adoption of the TCFD recommendations, the Group
committed to a carbon emissions (Scope 1 and 2) reduction target of
30% by 2030. Improving energy-use efficiency and reducing the
consumption of diesel and electricity remain top priorities, while
appropriate alternative low-carbon and renewable energy sources are
being considered.
Commenting on the results today, Clifford Elphick, Chief
Executive Officer of Gem Diamonds, said:
"The downturn in the rough diamond market together with
increased grid electricity interruptions which increased operating
costs, negatively impacted our financial results for the
Period.
Our focus remains on stabilising our plants to improve large
diamond recoveries and to critically review all operational and
capital expenditure."
The Company will host a live audio webcast presentation of the
half year results today, 31 August 2023, at 9:30 GMT. This can be
viewed on the Company's website: www.gemdiamonds.com .
The page references in this announcement refer to the Half Year
Report 2023, which can be found on the Company's website:
www.gemdiamonds.com .
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67
FOR FURTHER INFORMATION:
Gem Diamonds Limited
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Felicity Winkles
Tel: +44 (0) 208 434 2643
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value
diamonds. The Company owns 70% of the Letšeng mine in Lesotho and
is currently in the process of selling its 100% share of the
Ghaghoo mine in Botswana. The Letšeng mine is famous for the
production of large, top colour, exceptional white diamonds, making
it the highest dollar per carat kimberlite diamond mine in the
world.
INTERIM BUSINESS REVIEW
OVERVIEW
The Group presents its results for the six months ended 30 June
2023 (the Period), achieving an underlying EBITDA from continuing
operations of US$8.4 million (H1 2022 : US$20.9 million ) and an
attributable loss of US$1.0 million (H1 2022 : profit of US$3.8
million ).
The global economic backdrop for the Period remained challenging
despite easing inflationary pressures in major economies at the
start of 2023. Ongoing geopolitical tensions and domestic
challenges in key markets are slowing the return to sustained
growth. The World Bank downgraded its global real GDP forecast for
2023 to 2.1%1 from 3.1% in 2022, and has warned that global growth
is projected to slow significantly amid high inflation, tight
monetary policy and more restrictive credit conditions.
The global rough diamond market has experienced a downturn in
2023. A decrease in the number of large, high-value diamonds
recovered, combined with market pressure has negatively impacted
the average dollar per carat and revenue achieved during the
Period. Revenue decreased by 28% to US$71.8 million compared to
US$100.0 million in H1 2022 , achieving an average price of US$1
373 per carat (H1 2022 : US$1 745 per carat) from the sale of 52
163 carats (H1 2022 : 57 075 carats).
The Group ended the Period with a cash balance of US$7.3 million
(31 December 2022 : US$8.7 million) and drawn down facilities of
US$9.3 million (31 December 2022 : US$5.4 million), resulting in a
net debt position of US$2.0 million (31 December 2022 : net cash of
US$3.3 million) and unutilised available facilities of US$72.9
million (31 December 2022 : US$82.6 million).
Increasing grid electricity interruptions caused a reduction in
volumes of ore processed. In the first six months of the year there
was only one day without load shedding by Eskom, the South African
grid electricity provider, from which the mine sources its power.
Letšeng experienced 180 days of load shedding in the Period
compared to a total of 205 days of load shedding for the full year
2022.
Waste tonnes mined during the Period were 4.8 million tonnes (H1
2022 : 6.3 million ), in accordance with the mine plan. Ore tonnes
treated were 2.5 million tonnes (H1 2022 : 3.0 million ), and 50
601 carats were recovered (H1 2022 : 55 157 ). The decrease in ore
tonnes treated and carats recovered is mainly due to the expiry of
the Alluvial Ventures (AV) contract on 30 June 2022, which
contributed 0.4 million tonnes and 4 409 carats in H1 2022 . Two
greater than 100 carat diamonds were recovered during the Period;
one of these was sold in the Period and the second will be sold in
September.
In March, Letšeng embarked on a programme to critically review
its operational structures and requirements, primarily to optimise
its operations and drive its objective to reduce operating costs.
The workforce element of this right-sizing programme was completed
in June, and the focus will now be on further optimisation of the
current operations by implementing efficiencies and identifying
opportunities to further reduce costs.
As part of this process, a number of changes were made in the
senior leadership structure at Letšeng. Kelebone Leisanyane retired
from his position as CEO of Letšeng at the expiration of his
contract at the end of June 2023. He was succeeded by Motooane
Thinyane, previously the Head of Operations. Thinyane has been a
senior manager and executive of Letšeng for the past eight years.
He has a deep understanding and appreciation of Letšeng's business
and its challenges, employees, stakeholders and communities, and
also possesses the necessary technical skills and experience of
diamond mining in Lesotho. An important part of his role will be
spearheading the identification and implementation of appropriate
alternative energy solutions. Gideon Scheepers has been appointed
to the position of Operations Director. Gideon was most recently
the general manager and executive director at the Mothae diamond
mine in Lesotho. He has 32 years of extensive experience in diamond
mining and related processes, many of these in the Lesotho diamond
mining industry. The leadership and management at Letšeng is
well-equipped to ensure that the mine continues to conduct its
operations safely, efficiently and effectively in the best interest
of all stakeholders.
The safety of our workforce remains a top priority. The critical
control management strategy that commenced in 2021 to mature the
organisational safety culture at Letšeng has been fully executed.
This concerted effort has led to an improved safety performance,
with an all injury frequency rate (AIFR) of 0.57 recorded during
the Period - the lowest number recorded in the past 10 years.
In support of our continued focus on sustainability and
maintaining our social licence to operate, we are proud that Gem
Diamonds won the Junior ESG Award 2023 for "Water" at the Investing
in African Mining Indaba in February. The award was given in
recognition of the Group's commitment to improving access to clean
water for local communities and its innovative and effective
systems for preventing and mitigating water pollution.
We continue to work towards our 2023 objectives of improving
operational energy efficiencies and reducing carbon emissions as
set out in our decarbonisation strategy and the three-year Task
Force on Climate-related Financial Disclosures (TCFD) adoption
roadmap. For more details, refer to Our Approach to Climate Change
Half-Year Report available on our website at www.gemdiamonds.com
.
LOOKING AHEAD
We continue to identify and implement initiatives to improve
operational efficiency and reduce our energy consumption - while
investigating alternative energy sources - with the aim of
mitigating the impact of the significant increase in operating
costs experienced over the past 18 months and reducing our carbon
footprint.
1
https://www.worldbank.org/en/publication/global-economic-prospects
OPERATIONS REVIEW: LET ENG
H1 2023 IN REVIEW
-- Zero fatalities and one lost time injury (LTI)
-- Zero significant or major environmental or social
incidents
-- Recovered two diamonds greater than 100 carats (H1 2022 :
three )
-- Achieved an average price of US$1 373 per carat (H1 2022 :
US$1 745 per carat)
-- The highest price achieved was US$282 889 per carat for a
6.63 carat pink diamon d
SUSTAINABILITY
The organisational safety culture maturity strategy that
commenced in 2021 to improve safety performance at Letšeng, has
been fully executed and led to an improved safety performance
during the Period, as tabled below. Group and operational
leadership remain commit ted to proactively leading safety-focused
improvement through regular engagements with the workforce.
Safety performance Unit H1 2023 2022 2021 2020 2019
=================== ================== ==== ==== ==== ====
Fatalities Number 0 0 0 0 1
LTIs Number 1 3 6 1 7
LTIFR 200 000 man hours 0.09 0.13 0.24 0.04 0.28
AIFR 200 000 man hours 0.57 0.70 0.93 0.76 0.93
=======
Our focused Corporate Social Responsibility Investment (CSRI)
strategy and initiatives support our social licence to operate and
our commitment to the UN Sustainable Development Goals. The Group
has continued its tertiary education scholarships to enhance skills
related to geology, metallurgy, engineering and emergency medical
care in Lesotho. There are currently seven active scholarships.
Letšeng's community dairy project and sponsored egg circles are
proving successful and we continue to work towards ensuring the
sustainability of both these projects. The construction of
additional classrooms at two primary schools in the surrounding
area were also completed during the Period.
Following the adoption of the TCFD recommendations, the Group
committed to a carbon emissions (Scope 1 and 2) reduction target of
30% by 2030. Improving energy-use efficiency and reducing the
consumption of diesel and electricity remain top priorities, while
appropriate alternative low-carbon and renewable energy sources are
being considered. Operational initiatives implemented during the
Period, such as shorter hauling distances, steeper slopes and the
replacement of existing lighting infrastructure with
energy-efficient equipment, have resulted in a reduction in energy
consumption of 29% compared to H1 2022 . For more details, refer to
Our Approach to Climate Change Half-Year Report available on our
website at www.gemdiamonds.com .
Gem Diamonds has implemented its Group residue storage facility
(RSF) management policy and has aligned its RSF standard with the
ICMM Global Industry Standard on Tailings Management (GISTM). The
Group has established appropriate governance structures at both
operational and Group levels to provide oversight and assurance of
continued safe and responsible management of our RSFs.
PRODUCTION OVERVIEW
Unit H1 2023 H1 2022 % change
================= ======= ========= ========
Waste mined tonnes 4 846 680 6 289 380 (23)
Ore mined tonnes 2 787 124 3 219 615 (13)
Ore treated tonnes 2 467 250 3 017 664 (18)
Carats recovered carats 50 601 55 157 (8)
Recovered grade cpht 1 2.05 1.83 12
=========
1 Carats per hundred tonnes.
Waste mining decreased by 23% to 4.8 million tonnes from 6.3
million tonnes in H1 2022 , in accordance with the 2023 mine plan.
The lower waste tonnes were mainly due to lower ore treatment
targets. 2.5 million ore tonnes were treated (H1 2022: 3.0 million
tonnes ), a decrease of 0.5 million tonnes. The decrease is mainly
due to the 0.4 million tonnes that were treated by third-party
processing contractor Alluvial Ventures ( AV ) in H1 2022 prior to
the expiry of their contract on 30 June 2022. The remaining 0.1
million tonnes were due to increasing grid electricity
interruptions which reduced the volumes of ore processed. In
addition, higher than expected internal basalt dilution in certain
domains of ore that was treated impacted throughput. An operational
decision to open crusher gaps and to slow throughput in the
processing plant was implemented in H2 2023 to enhance plant
stability, improve large diamond recoveries and more effectively
treat ore blocks with higher levels of internal basalt
dilution.
Letšeng recovered 50 601 carats (H1 2022: 55 157 carats). The
decrease in volume of recoveries during the Period is mainly due to
the absence of the AV contribution to carats recovered, which was 4
409 carats in H1 2022 .
T he overall grade for H1 2023 was 2.05 cpht (H1 2022: 1.83
cpht), representing an increase of 12% . This was driven by the
expiry of the AV contract, whose older technology pan-plant
recovered at a lower grade, and a higher contribution of
higher-grade Satellite P ipe material , which accounted for 51% of
material treated during the Period (H1 2022: 46%). The grade for
the material treated during the Period is in line with the expected
reserve grade.
Frequency of large diamond recoveries
FY average
Number of diamonds H1 2023 H1 2022 2008 - 2022
=========================== ======= ============
>100 carats 2 3 8
60 - 100 carats 4 8 18
30 - 60 carats 28 42 76
20 - 30 carats 58 63 114
10 - 20 carats 226 258 447
=========================== ======= ======= ============
Total diamonds > 10 carats 318 374 663
=======
DIAMOND SALES
The average price achieved during the Period was US$1 373 per
carat (H1 2022: US$1 745 per carat) . 52 163 carats were sold,
generating rough diamond revenue of US$71.7 million (H1 2022: 57
075 carats at a value of US$99.6 million). The lower revenue is
mainly attributed to the lower number of diamonds greater than 10.8
carats recovered during the Period, as well as a downturn in the
rough diamond market negatively impacting rough diamond prices.
The highest price achieved was US$ 282 889 per carat for a 6.63
carat pink diamond , this being the third-highest price achieved to
date for a Letšeng diamond. 12 diamonds sold for more than US$1.0
million each, generating revenue of US$21.0 million (H1 2022: 15
diamonds sold for more than US$1.0 million each, generating revenue
of US$25.8 million ).
RIGHT-SIZING OF LET ENG
A change in the operational requirements, as well as pressure on
operating expenses and rough diamond prices, required the operation
to critically review all aspects of its business to ensure it
operates optimally and with effective cost management to secure its
sustainability.
A right-sizing programme commenced at Letšeng in March 2023 and
the workforce element of the programme was completed in June. A
total of 327 positions were affected at Letšeng and its contractors
during this phase of the programme, which aimed at more effectively
and efficiently aligning the workforce to operational
requirements.
The further optimisation of operations to ensure efficiency and
effective cost control management is a top priority and will
include a review of all operational contracts.
CAPITAL PROJECTS
The newly constructed modules for the replacement primary
crushing area (PCA) at Letšeng have been completed. Commissioning
of the modules commenced mid-July 2023.
The underground feasibility s tudy to assess the viability of an
earlier shift to underground mining of the Satellite Pipe has
progressed as planned and will inform the trade-off decision
between further open-pit cut-backs and underground mining .
The construction of a 300 kilolitre bioremediation plant for
run-off water treatment has commenced and is expected to be
completed in Q4 2023 .
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and
maintenance and Gem Diamonds is discussing various alternatives
with affected stakeholders, including the potential closure of the
mine.
GROUP FINANCIAL PERFORMANCE
H1 2023 IN REVIEW
-- Revenue achieved of US$71.8 million (H1 2022: US$100.0
million)
-- Underlying EBITDA 1 of US$8.4 million (H1 2022: US$20.9
million)
-- Attributable loss of US$1.0 million (H1 2022: profit of
US$3.8 million)
PROFITABILITY AND LIQUIDITY
US$ million H1 2023 H1 2022 *
=========================================== =========
Revenue from contracts with customers 71.8 100.0
Royalties and selling costs (7.5) (10.8)
Cost of sales 1 (50.7) (63.3)
Corporate expenses (5.2) (5.0)
=========================================== ======= =========
Underlying EBITDA 2 8.4 20.9
=========================================== ======= =========
Depreciation and mining asset amortisation (3.3) (4.3)
Share-based payments (0.2) (0.1)
Other operating expenses (0.8) (1.0)
Foreign exchange gain 2.1 -
Net finance costs (2.2) (2.2)
=========================================== ======= =========
Profit before tax for the Period 4.0 13.3
=========================================== ======= =========
Income tax expense (2.5) (5.0)
=========================================== ======= =========
Profit after tax for the Period 1.5 8.3
=========================================== ======= =========
Non-controlling interests (2.5) (4.5)
=========================================== ======= =========
Attributable (loss)/profit for the Period (1.0) 3.8
=========================================== ======= =========
(Loss)/earnings per share (US cents) (0.7) 2.7
=======
* The prior year figures have been re-presented, as Gem Diamonds
Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be
classified as a discontinued operation at 31 December 2022. Refer
Note 15, Assets held for sale.
1 Including waste stripping amortisation costs but excluding
depreciation and mining asset amortisation.
2 Underlying earnings before interest, tax, depreciation and
mining asset amortisation (EBITDA) as defined in Note 6, Underlying
earnings before interest, tax, depreciation and mining asset
amortisation (underlying EBITDA) of the condensed notes to the
consolidated interim financial statements.
The Group generated an underlying EBITDA 2 of US$8.4 million (H1
2022: US$20.9 million ). The loss attributable to shareholders was
US$1.0 million (H1 2022: profit of US$3.8 million ), equating to a
loss per share of 0.7 US cents (H1 2022: profit per share of 2.7 US
cents) on a weighted average number of shares in issue of 141.6
million (H1 2022: 142.1 million shares).
Revenue
US$ million H1 2023 H1 2022
======================================= =======
Sales - rough 71.7 99.6
Sales - polished margin 0.1 0.3
Impact of carrying over rough diamonds - 0.1
======================================= ======= =======
Group revenue 71.8 100.0
=======
The Group's revenue of US$71.8 million was mainly generated by
the sale of 52 163 carats at an average price of US$1 373 per
carat. The additional US$0.1 million revenue was generated from a
premium on the sale of polished diamonds in accordance with the
agreement with two diamond manufacturers who supply polished
diamonds to some of the world's premium luxury brands.
Costs
The Group closely manage s its costs and preserves cash
resources to maintain appropriate liquidity. Operating expenses
continue to be negatively impacted by the volatile global economic
environment and the ever-increasing frequency of grid electricity
interruptions in South Africa, which increases the reliance on
diesel-powered generators and, as a consequence, diesel
consumption.
OPERATING EXPENSES
F uel prices remain a significant expense, with increased
consumption for the use of diesel-powered generators during load
shedding, although prices stabilised at around LSL18.50 per litre
in the Period from a high in excess of LSL20.00 per litre in
mid-2022.
The right-sizing of Letšeng that was completed in June 2023
affected 327 positions at Letšeng and its contractors . Total
severance payments amounted to LSL23.2 million, of which LSL15.1
million was already provided for at December 2022 in terms of
normal leave and severance pay provisions.
Total direct cash costs at Letšeng, including waste, decreased
marginally to LSL1 040.8 million from LSL1 076.0 million in H1 2022
. Additional once-off expenses relating to the right-sizing, such
as the severance payments discussed above and related consulting
fees, together with higher levels of inflation and increased diesel
consumption due to load shedding, negated the expected decrease in
costs from lower waste mining volumes.
Non-cash accounting charges comprise waste capitalisation and
inventory and stockpile movement. The net charge was similar to H1
2022 , with a decrease in the waste cost capitalised due to lower
waste tonnes mined offset by an increase in the volume of tonnes
added to the stockpile. The additional tonnes added to the
stockpile were mainly due to the plants not treating the planned
ore tonnes mined as a result of load shedding and internal basalt
dilution as discussed in the Operations Review above.
Letšeng unit cost analysis
============
Waste cash
Total direct Total costs per
Unit cost per tonne Direct cash Third plant cash Non-cash accounting operating waste tonne
treated costs 1 operator costs operating costs charges 2 costs mined
===================== =========== =============== =================== ============
H1 (LSL) 296.54 0.00 296.54 78.24 374.78 63.80
H1 (LSL) 223.76 14.28 238.04 85.67 323.71 56.88
% change 25 16 12
===================== =========== =============== ================ =================== ========== ============
H1 (LSL) 16.28 0.00 16.28 4.29 20.57 3.50
H1 (LSL) 14.52 0.93 15.45 5.55 21.00 3.69
% change 5 (2) (5)
================ ========== ============
1 Direct mine cash costs represent all operating costs,
excluding royalty and selling costs.
2 Non-cash accounting charges include waste stripping cost
amortised, inventory and ore stockpile adjustments, and the impact
of adopting IFRS 16 Leases, and exclude depreciation and mining
asset amortisation.
Direct cash costs in H1 2023 were LSL 296.54 per tonne treated
compared to LSL 238.04 in H1 2022, which included the impact of AV
tonnes and costs. The AV contract expired on 30 June 2022,
resulting in a reduction of 0.4 million ore tonnes being treated in
H1 2023 when compared to H1 2022 . On a like-for-like basis
(excluding the impact of AV), the H1 2022 costs increase to LSL
262.06 per tonne treated, resulting in a year-on-year increase of
13% . The 13% increase in unit costs is driven by the additional
costs mentioned above and a 4% reduction in tonnes processed
through the Letšeng plants.
CORPORATE EXPENSES
Corporate office costs are incurred to provide expertise in all
areas of the business to realise maximum value from the Group's
assets. These costs are incurred by the Group through its technical
and administrative offices in South Africa (in South African rand)
and head office in the UK (in British pounds).
General corporate costs were US$5.2 million (H1 2022 : US$5.0
million). The increase was mainly due to structural changes in the
senior leadership and consulting fees related to reviewing new
business opportunities, set off by the weaker South African rand
and British pound against the US dollar.
GHAGHOO
The Ghaghoo Diamond Mine in Botswana remains on care and
maintenance and Gem Diamonds is discussing various alternatives
with affected stakeholders, including the potential closure of the
mine. The care and maintenance costs of US$0.8 million ( H1 2022 :
US$1.0 million) are included in other operating expenses. The
decrease in cash costs is mainly due to the favourable exchange
rate.
EXCHANGE RATE IMPACTS
While revenue is generated in US dollars, the majority of
operational expenses are incurred in the relevant local currency of
the operational jurisdictions. Local currency rates for the Lesotho
loti (LSL) (pegged to the South African rand) and Botswana pula
(BWP) weakened significantly against the US dollar compared to H1
2022 , which decreased the Group's US dollar reported costs and
increased local currency cash flow generation .
Exchange rates H1 2023 H1 2022 % change
========================= ======= ========
LSL per US$1.00
Average exchange rate 18.21 15.41 18
Period end exchange rate 18.89 16.38 15
========================= ======= ======= ========
BWP per US$1.00
Average exchange rate 13.20 11.79 12
Period end exchange rate 13.52 12.40 9
========================= ======= ======= ========
GBP per US$1.00
Average exchange rate 0.81 0.77 5
Period end exchange rate 0.79 0.82 (4)
=======
FINANCIAL POSITION
The LSL closed 11% weaker against the US dollar at the end of
the Period compared to 31 December 2022. This resulted in a
decrease in the US dollar reported values in the Interim
Consolidated Statement of Financial Position. S elected totals of
the Interim Consolidated Statement of Financial Position and key
asset drivers are tabled below.
US$ million H1 2023 FY 2022 % Variance
====================================== ======= ==========
Non-current assets 293.7 320.0
Current assets 44.4 46.3
====================================== ======= ======= ==========
Total assets 338.1 366.3 (8)
====================================== ======= ======= ==========
Equity attributable to parent company 135.3 152.7
Non-controlling interest 76.0 80.4
====================================== ======= ======= ==========
Total equity 211.3 233.1 (9)
====================================== ======= ======= ==========
Non-current liabilities 105.4 110.0
Current liabilities 21.4 23.2
====================================== ======= ======= ==========
Total liabilities 126.8 133.2 (5)
====================================== ======= ======= ==========
Key asset drivers
US$ million H1 2023 H1 2022 % change
=========================================== ======= ========
Waste cost capitalised 19.8 26.6 (25)
Waste stripping cost amortised 17.8 21.9 (19)
Depreciation and mining asset amortisation 3.3 4.3 (23)
Capital expenditure 4.6 2.4 92
=======
Waste cost capitalised decreased due to the lower volumes of
waste tonnes mined. The waste stripping cost amortised decreased to
US$17.8 million ( H1 2022: US$21.9 million) . Depreciation and
mining asset amortisation decreased to US$3.3 million (H1 2022:
US$4.3 million).
During the Period, the majority of capital spent related to the
completion of the replacement PCA for US$ 2.1 million and the
underground feasibility study for US$ 0.9 million. Other capital
projects include the resource core drilling programme required to
inform Letšeng's Resource and Reserve S tatement and the expansion
of the Patiseng coarse residue storage facility.
Liquidity and solvency
The Group ended the Period with cash on hand of US$7.3 million (
31 December 2022 : US$8.7 million), of which US$6.2 million is
attributable to Gem Diamonds. The Group generated cash from
operating activities of US$20.1 million (H1 2022 : US$30.1 million
).
At Period end, the Group had utilised facilities of US$9.3
million, resulting in a net debt position of US$2.0 million ( 31
December 2022 : net cash of US$3.3 million) and available
facilities of US$72.9 million, comprising US$27.0 million at Gem
Diamonds and US$45.9 million at Letšeng.
The decrease in net cash was mainly due to the lower revenue
generated from rough diamond sales, coupled with high levels of
inflation which negatively impacted operating expenses. The
severance packages and consulting fees paid at Letšeng as part of
the right-sizing of the operation also decreased cash
generation.
The Group has a LSL750.0 million and a US$30.0 million revolving
credit facility expiring in December 2024. Letšeng also has a
LSL100.0 million general banking facility that is reviewed annually
and a ZAR136.4 million project term loan facility for the
construction of the replacement PCA. The Group engages regularly
with lenders and credit providers to ensure continued access to
funding and to manage the Group's cash flow requirements.
Summary of loan facilities as at 30 June 2023:
Drawn
down/
Balance
Amount due Available
Company Term/description/expiry Lender Interest rate US$ million US$ million US$ million
============= ======================== ============= =================== ============ ============
Nedbank
Three-year revolving Standard Facility A
credit facility Bank (US$30 million):
Gem Diamonds Expires Firstrand Term SOFR + 5.26%
Limited 22 December 2024 Bank 1 30.0 3.0 27.0
============= ======================== ============= =================== ============ ============ ============
Standard
Lesotho
Bank
Nedbank
Lesotho
First
National
Three-year revolving Bank of Facility B (LSL450
credit facility Lesotho million): Central
Letšeng Expires Firstrand Bank of Lesotho
Diamonds 22 December 2024 Bank rate + 3.25% 23.8 - 23.8
------------------------ ============= =================== ============ ============ ============
Facility C (ZAR300
million):South
African JIBAR
Nedbank + 3.05% 15.9 - 15.9
============= ========================================================== ============ ============ ============
Nedbank
Four-and-a-half-year Export
project facility Credit ZAR136 million
Letšeng Expires Insurance South African
Diamonds 31 May 2027 Corporation JIBAR + 2.50% 7.2 6.3 0.9
============= ======================== ============= =================== ============ ============ ============
General banking ZAR100 million
facility South African
Letšeng Annual review Prime Lending
Diamonds in March Nedbank Rate minus 0.70% 5.3 - 5.3
============= ======================== ============= =================== ============ ============ ============
Total 82.2 9.3 72.9
============ ============ ============
(1) GDL RCF transitioned from LIBOR to term SOFR effective from
1 January 2023. The margin of 5.26% includes a credit adjustment
spread of 0.26% to bring term SOFR in line with LIBOR.
Taxation
The forecast effective tax rate for the full year is 62.3% (31
December 2022: 33.8%) and has been applied to the actual results.
This rate is the result of profits generated by Letšeng being taxed
at 25%, deferred tax assets not being recognised on losses incurred
in non-trading operations, and the effect of the overseas foreign
tax rate differential. The increase in the tax rate compared to
2022 is due to the lower profits generated by Letšeng.
There has been no change to the amended tax assessment that was
issued to Letšeng by the Revenue Services Lesotho (RSL) in December
2019, contradicting the application of certain tax treatments in
the current Lesotho Income Tax Act, 1993. There has therefore been
no change in judgement applied and the accounting treatment
compared to that disclosed in the 2022 Annual Report and
Accounts.
Going concern
The projections of the Group's current and expected
profitability, considering reasonable possible changes in
operations, key assumptions and inputs, indicate that the Group
will be able to operate as a going concern for the foreseeable
future. Refer to the financial statements on page 9.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's principal risks and uncertainties, both current and
emerging, that could have a material financial, operational and
compliance impact on its performance and long-term growth, are
presented in the Annual Report and Accounts for 2022 (pages 36 to
42). The Group's principal risks as presented in the Annual Report
and Accounts for 2022 remain unchanged in the medium to long term
and take into consideration current market and operational
conditions of the Group's operations and global markets. The
Group's risk management strategy aims to manage Group risk in such
a way as to minimise threats and maximise opportunities.
The assessment of emerging risks is embedded within the risk
framework of the Group. Any emerging risks identified are reported
to and considered by the Board. The potential for future carbon tax
liabilities, including the Carbon Border Adjustment Mechanism in
the European Union, is being monitored through the Group's climate
change-related governance and risk management structures.
The Group continues to monitor and manage areas of
unpredictability, in particular the immediate and evolving impact
of excessive and increased power outages and diesel consumption and
the current downturn in prices being experienced in the rough
diamond market.
Clifford Elphick
Chief Executive Officer
30 August 2023
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
HALF-YEAR REPORT AND FINANCIAL STATEMENTS
PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES (DTR) 4.2.10
The Directors confirm that, to the best of their knowledge, this
condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting and that the
Half-Year Report includes a fair review of the information required
by DTR 4.2.7R and DTR 4.2.8R, namely:
(a) an indication of important events that have occurred during
the first six months of the financial year and their impact on this
condensed set of financial statements; and
(b) material related-party transactions in the first six months
of the year and any material changes in the related-party
transactions described in the Gem Diamonds Limited Annual Report
2022.
The names and functions of the Directors of Gem Diamonds Limited
are listed in the Annual Report for the year ended 31 December
2022.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
30 August 2023
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE SIX MONTHSED 30 JUNE 2023
30 June 2023 1 30 June 2022* 1
Notes US$'000 US$'000
========================================================================== ===== ============== ===============
Revenue from contracts with customers 4 71 763 99 951
Cost of sales (53 997) (67 430)
========================================================================== ===== ============== ===============
Gross profit 17 766 32 521
Other operating expense 5 (766) (1 059)
Royalties and selling costs (7 476) (10 781)
Corporate expenses (5 239) (5 004)
Share-based payments 17 (241) (125)
Foreign exchange gain 2 148 20
========================================================================== ===== ============== ===============
Operating profit 6 192 15 572
Net finance costs (2 246) (2 207)
============== ===============
- Finance income 187 73
- Finance costs (2 433) (2 280)
============== ===============
Profit before tax for the Period 3 946 13 365
Income tax expense 8 (2 458) (5 075)
========================================================================== ===== ============== ===============
Profit for the Period 1 488 8 290
========================================================================== ===== ============== ===============
Attributable to:
Equity holders of parent (991) 3 755
Non-controlling interests 2 479 4 535
-------------------------------------------------------------------------- ----- -------------- ---------------
Earnings per share (cents)
- Basic (loss)/earnings for the year attributable to ordinary equity
holders of the parent (0.71) 2.68
- Diluted (loss)/earnings for the year attributable to ordinary equity
holders of the parent (0.70) 2.64
==============
* The prior year figures have been re-presented, as Gem Diamonds
Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be
classified as a discontinued operation at 31 December 2022. Refer
Note 15, Assets held for sale.
1 Unaudited.
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR TH E SIX MONTHSED 30 JUNE 2023
30 June 2023 1 30 June 2022 1
US$'000 US$'000
=================================================================================== ============== ==============
Profit for the Period 1 488 8 290
Other comprehensive income that will be reclassified to the interim Consolidated
Statement
of Profit or Loss in subsequent periods:
Exchange differences on translation of foreign operations, net of tax (23 525) (6 916)
==================================================================================== ============== ==============
Other comprehensive loss for the Period, net of tax (23 525) (6 916)
==================================================================================== ============== ==============
Total comprehensive (loss)/income for the Period (22 037) 1 374
==================================================================================== ============== ==============
Attributable to:
Equity holders of parent (17 611) (938)
Non-controlling interests (4 426) 2 312
==============
1 Unaudited.
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
30 June 2023 1 31 December 2022 2
Notes US$'000 US$'000
==================================================== ===== ============== ==================
ASSETS
Non-current assets
Property, plant and equipment 10 269 798 293 499
Right-of-use assets 11 5 633 6 340
Intangible assets 12 10 107 11 221
Receivables and other assets 13 2 687 2 916
Deferred tax assets 5 492 5 994
==================================================== ===== ============== ==================
293 717 319 970
==================================================== ===== ============== ==================
Current assets
Inventories 31 425 30 370
Receivables and other assets 13 4 462 4 855
Income tax receivable 1 155 2 323
Cash and short-term deposits 14 7 322 8 721
==================================================== ===== ============== ==================
44 364 46 269
==================================================== ===== ============== ==================
Total assets 338 081 366 239
==================================================== ===== ============== ==================
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 16 1 411 1 410
Treasury shares 16 (1 157) (1 157)
Share premium 885 648 885 648
Other reserves (255 549) (239 169)
Accumulated losses (495 104) (494 113)
==================================================== ===== ============== ==================
135 249 152 619
==================================================== ===== ============== ==================
Non-controlling interests 76 002 80 428
==================================================== ===== ============== ==================
Total equity 211 251 233 047
==================================================== ===== ============== ==================
Non-current liabilities
Interest-bearing loans and borrowings 18 7 466 4 370
Lease liabilities 19 4 695 6 021
Trade and other payables 1 422 2 169
Provisions 14 711 15 387
Deferred tax liabilities 77 126 82 030
==================================================== ===== ============== ==================
105 420 109 977
==================================================== ===== ============== ==================
Current liabilities
Interest-bearing loans and borrowings 18 1 444 1 575
Lease liabilities 19 2 224 1 877
Trade and other payables 17 705 19 708
Income tax payable 37 55
==================================================== ===== ============== ==================
21 410 23 215
==================================================== ===== ============== ==================
Total liabilities 126 830 133 192
==================================================== ===== ============== ==================
Total equity and liabilities 338 081 366 239
==============
1 Unaudited.
2 Audited.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2023
Attributable to the equity holders of the
parent
=============================================================
Issued Share Treasury Other Accumu- Total Non-controlling Total
capital premium shares reserves lated interests equity
1 (losses)/
retained
earnings
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
==================== ======== ======== ======== ========= ========== ======== =============== ========
As at 1
January
2023 1 410 885 648 (1 157) (239 169) (494 113) 152 619 80 428 233 047
===================== ======== ======== ======== ========= ========== ======== =============== ========
Total comprehensive
loss - - - (16 620) (991) (17 611) (4 426) (22 037)
======== ======== ======== ========= ========== ======== =============== ========
Profit for
the year - - - - (991) (991) 2 479 1 488
Other comprehensive
loss - - - (16 620) - (16 620) (6 905) (23 525)
======== ======== ======== ========= ========== ======== =============== ========
Share capital
issued (Note16) 1 - - (1) - - - -
Share-based
payments
(Note 17) - - - 241 - 241 - 241
===================== ======== ======== ======== ========= ========== ======== =============== ========
As at 30
June 2023 1 411 885 648 (1 157) (255 549) (495 104) 135 249 76 002 211 251
===================== ======== ======== ======== ========= ========== ======== =============== ========
As at 1
January (226
2022 1 406 885 648 - 697) (500 550) 159 807 86 843 246 650
Total comprehensive
(loss)/income - - - (4 693) 3 755 (938) 2 312 1 374
======== ======== ======== ========= ========== ======== =============== ========
Profit for
the year - - - - 3 755 3 755 4 535 8 290
Other comprehensive
loss - - - (4 693) - (4 693) (2 223) (6 916)
======== ======== ======== ========= ========== ======== =============== ========
Share capital
issued (Note
16) 4 - - (4) - - - -
Share buyback
(Note 16) - - (1 157) - - (1 157) - (1 157)
Share-based
payments
(Note 17) - - - 125 - 125 - 125
Dividends
paid (Note
9, Note
22) - - - - (3 771) (3 771) (3 908) (7 679)
===================== ======== ======== ======== ========= ========== ======== =============== ========
As at 30 (231
June 2022 1 410 885 648 (1 157) 269) (500 566) 154 066 85 247 239 313
===================== ======== ======== ======== ========= ========== ======== =============== ========
1 Other reserves relate to Foreign currency translation reserves
and Share-based equity reserves. Refer Note 16, Issued share
capital and reserves for further detail.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2023
30 June 2023 1 30 June 2022* 1
-----
Notes US$'000 US$'000
==================================================================== ===== ============== ===============
Cash flows from operating activities 20 076 30 095
----- ============== ===============
Cash generated by operations 20.1 28 867 42 995
----- ---------------
Working capital adjustments 20.2 (7 346) (9 841)
----- ---------------
Interest received 125 73
----- ---------------
Interest paid (1 547) (1 453)
----- ---------------
Income tax paid (23) (2 940)
Income tax received - 1 261
============== ===============
Cash flows used in investing activities (24 309) (28 983)
----- ============== ===============
Purchase of property, plant and equipment 10 (4 555) (2 376)
----- ---------------
Waste stripping costs capitalised 10 (19 835) (26 607)
Proceeds from sale of property, plant and equipment 81 -
============== ===============
Cash flows used in financing activities 2 514 (8 617)
----- ============== ===============
Lease liabilities repaid (950) (850)
----- ---------------
Net financial liabilities raised 20.3 3 464 600
----- ============== ===============
- Financial liabilities raised 23 600 4 298
----- ---------------
- Financial liabilities repaid (20 136) (3 698)
----- ============== ===============
Share buyback 16 - (1 157)
----- ---------------
Dividends paid to holders of the parent - (3 302)
Dividends paid to non-controlling interests - (3 908)
============== ===============
Net decrease in cash and cash equivalents (1 719) (7 505)
----- ---------------
Cash and cash equivalents at beginning of Period 8 721 31 057
----- ---------------
Foreign exchange differences 321 639
==================================================================== ===== ============== ===============
Cash and cash equivalents at end of Period 0 7 323 24 191
----- ============== ===============
Cash and cash equivalents at end of Period 14 7 322 24 145
----- ---------------
Cash and cash equivalents at end of Period - discontinued operation - 46
----- ============== ===============
* The prior year figures have been re-presented, as Gem Diamonds
Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be
classified as a discontinued operation at 31 December 2022. Refer
Note 15, Assets held for sale.
1 Unaudited.
CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2023
1. CORPORATE INFORMATION
1.1 Incorporation and authorisation
The holding company, Gem Diamonds Limited (the Company), was
incorporated on 29 July 2005 in the British Virgin Islands (BVI)
and is domiciled in the United Kingdom (UK). The Company's
registration number is 669758.
The financial information shown in this report relating to Gem
Diamonds Limited and its subsidiaries (the Group) was approved by
the Board of Directors on 30 August 2023, is not audited or
reviewed by the auditor and does not constitute statutory financial
statements. The report of the auditor on the Group's 2022 Annual
Report and Accounts was unqualified.
The Group is principally engaged in operating diamond mines.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of preparation
The condensed consolidated interim financial statements for the
six months ended 30 June 2023 (the Period) have been prepared in
accordance with IAS 34 Interim Financial Reporting. The condensed
consolidated interim financial statements do not include all the
information and disclosures required in the annual financial
statements and should be read in conjunction with the Group's
Annual Financial Statements for the year ended 31 December 2022.
The Condensed financial statements are unaudited and do not
constitute statutory accounts as defined in section 434 of the
Companies Act, 2006. The financial information for the year to 31
December 2022 included in this report was derived from the
statutory accounts for the year ended 31 December 2022, a copy of
which has been delivered to the Registrar of Companies. The
auditor's report on these accounts was unqualified, did not include
a reference to any matters to which the auditor drew attention by
way of an emphasis of matter and did not contain a statement under
sections 498(2) or (3) of the Companies Act, 2006.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out on pages 1 to 3 . The financial position of the Group,
its cash flows and liquidity position are described in the Group
Financial Performance on pages 4 to 7. The Group's net debt at 30
June 2023 was US$2.0 million (31 December 2022: net cash of US$3.3
million) and with its undrawn facilities of US$72.9 million (31
December 2022: US$82.6 million), its liquidity (defined as net cash
and undrawn facilities) of US$70.9 million (31 December 2022:
US$85.9 million) remains strong. The Group's Revolving Credit
facilities, which total US$69.7 million when fully unutilised,
mature on 22 December 2024. In addition, there is a US$5.3 million
general banking facility with no set expiry date, but is reviewed
annually. For further information on these facilities, r efer Note
18, Interest-bearing loans and borrowings.
After making enquiries which include reviews of forecasts and
budgets, timing of cash flows and sensitivity analyses, and
considering the continued impact of the Russian invasion of Ukraine
on consumable and commodity prices on both the wider macro-economic
environment (including demand for the Group's products and realised
prices) and the Group's operations and production levels, the
Directors have a reasonable expectation that the Group and the
Company have adequate financial resources without the use of
mitigating actions to continue in operational existence for the
foreseeable future. For this reason, the Directors continue to
adopt the going concern basis in preparing this half-year report
and accounts of the Group.
2.2 Significant accounting policies
The accounting policies adopted in the preparation of the
condensed consolidated interim financial statements are consistent
with those followed in the preparation of the Group's Annual
Financial Statements for the year ended 31 December 2022.
New accounting pronouncements, principally minor amendments to
existing standards, also became effective on 1 January 2023 and
have been adopted by the Group. The adoption of these new
accounting pronouncements has not had a significant impact on the
accounting policies, methods of computation or presentation applied
by the Group.
Amendments to standards
Standards, amendments, and improvements Description
-------------------------------------------------------------------
IFRS 17 Insurance contracts
-------------------------------------------------------------------
Amendments to IAS 8 Definition of Accounting Estimates
-------------------------------------------------------------------
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies
-------------------------------------------------------------------
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a
Single Transaction
* Annual periods beginning on or after.
Standards issued but not yet effective
The standards, amendments and improvements that are issued, but
not yet effective, up to the date of issuance of the Group's
consolidated interim financial statements are listed in the table
below. The standards, amendments and improvements have not been
early adopted and it is expected that, where applicable, these
standards and amendments will be adopted on each respective
effective date. The impact of the adoption of these standards
cannot be reasonably assessed at this stage.
Standards, amendments, and improvements Description Effective date*
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback 1 January 2024
------------------------------------------------------------ ---------------
Amendments to IAS 1 Classification of Liabilities as Current or Non-current and 1 January 2024
Non-current Liabilities with Covenants
* Annual periods beginning on or after.
3. SEGMENT INFORMATION
For management purposes, the Group is organised into
geographical units as its risks and required rates of return are
affected predominantly by differences in the geographical regions
of the mines and areas in which the Group operates or areas in
which operations are managed. The below measures of profit or loss,
assets and liabilities are reviewed by the
Board of Directors. The main geographical regions and the type
of products and services from which each reporting segment derives
its revenue from are:
-- Lesotho (diamond mining activities);
-- Belgium (sales, marketing and manufacturing of diamonds);
-- BVI, RSA, UK and Cyprus (technical and administrative
services); and
-- Botswana (diamond mining activities), ceased to be classified
as a discontinued operation held for sale at 31 December 2022.
Refer Note 15 , Assets held for sale .
Management monitors the operating results of the geographical
units separately for the purpose of making decisions about resource
allocation and performance assessment.
Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond
Mine), which was classified as a discontinued operation held for
sale and disclosed separately as the discontinued operation segment
in prior years, has ceased to be classified as a discontinued
operation held for sale on 31 December 2022. Refer Note 15 , Assets
held for sale . The 30 June 2022 comparative segment information
has been restated to re-present the previous discontinued operation
segment as the Botswana segment as part of the Group's continuing
operations.
Segment performance is evaluated based on operating profit or
loss. Intersegment transactions are entered into under normal arm's
length terms in a manner similar to transactions with third
parties. Segment revenue, segment expenses and segment results
include transactions between segments. Those transactions are
eliminated on consolidation.
Segment revenue is derived from mining activities, polished
diamond manufacturing margins and diamond analysis and
manufacturing services.
The following tables present revenue from contracts with
customers, profit/(loss) for the Period, EBITDA and asset and
liability information from operations regarding the Group's
geographical segments:
Lesotho Belgium BVI, RSA, UK and Cyprus 3 Botswana Total
Six months ended 30 June 2023 1 US$'000 US$'000 US$'000 US$'000 US$'000
====================================== ======== ======= ========================= ======== ========
Revenue from contracts with customers
Total revenue 70 688 72 045 3 478 - 146 211
Intersegment (70 564) (406) (3 478) - (74 448)
====================================== ======== ======= ========================= ======== ========
External customers 124 71 639 - - 71 763
Segment operating profit/(loss) 12 360 330 (5 672) (826) 6 192
Net finance costs (1 734) (12) (412) (88) (2 246)
====================================== ======== ======= ========================= ======== ========
Profit/(loss) before tax 10 626 318 (6 084) (914) 3 946
Income tax (expense)/income (2 361) 4 (101) 4 - (2 458)
====================================== ======== ======= ========================= ======== ========
Profit/(loss) for the Period 8 265 322 (6 185) (914) 1 488
====================================== ======== ======= ========================= ======== ========
EBITDA 13 099 413 (5 156) - 8 356
======== ======= ========================= ======== ========
Lesotho Belgium BVI, RSA, UK and Cyprus 3 Botswana Total
US$'000 US$'000 US$'000 US$'000 US$'000
========================================== ======= ======= ========================= ======== =======
Segment assets
30 June 2023 1 324 773 3 090 4 061 665 332 589
31 December 2022 2 350 640 2 411 6 676 518 360 245
========================================== ======= ======= ========================= ======== =======
Net cash/(debt) and short-term deposits 5
30 June 2023 1 (3 150) 1 424 (312) 60 (1 978)
31 December 2022 2 (2 627) 660 5 231 1 3 265
========================================== ======= ======= ========================= ======== =======
Segment liabilities
30 June 2023 1 40 198 1 716 4 449 3 341 49 704
31 December 2022 2 43 987 1 677 2 097 3 401 51 162
======= ======= ========================= ======== =======
1 Unaudited.
2 Audited.
3 No revenue was generated in BVI and Cyprus.
4 This includes the adjustment to align the forecast effective
tax rate for the full year, to the actual results for the Period.
Refer Note 8 , Income tax expense .
5 Calculated as cash and short-term deposits less drawn down
bank facilities (excluding insurance premium financing and credit
underwriting fees). Refer Note 18, Interest-bearing loans and
borrowings .
Included in revenue for the Period is revenue from one customer
who individually contributed 10% or more to total revenue. This
revenue in total amounted to US$10.3 million ( 30 June 2022 :
US$12.5 million from one customer) arising from the sales reported
in the Belgium segment.
Segment assets and liabilities do not include deferred tax
assets and liabilities of US$5.5 million and US$77.1 million
respectively ( 31 December 2022 : deferred tax asset US$6.0 million
, deferred tax liabilities US$82.0 million ).
Total revenue for the Period is lower than that of the prior
period. Although the volume of carats sold of 52 163 carats was
only 9% lower than the prior period ( 57 075 carats), the $ per
carat achieved of US$1 373 was 21% lower than the prior period (
US$1 745 per carat). The lower revenue is mainly attributed to the
lower number of diamonds greater than 10.8 carats recovered during
the Period, as well as a downturn in the rough diamond market
negatively impacting rough diamond prices.
Lesotho Belgium BVI, RSA, UK and Cyprus 2 Botswana* Total
Six months ended 30 June 2022 1 US$'000 US$'000 US$'000 US$'000 US$'000
====================================== ======== ======= ========================= ========= =========
Revenue from contracts with customers
Total revenue 98 435 100 037 3 660 - 202 132
Intersegment (98 128) (393) (3 660) - (102 181)
====================================== ======== ======= ========================= ========= =========
External customers 307 99 644 - - 99 951
Segment operating profit/(loss) 21 383 635 (5 480) (966) 15 572
Net finance costs (1 506) (4) (588) (109) (2 207)
====================================== ======== ======= ========================= ========= =========
Profit/(loss) before tax 19 877 631 (6 068) (1 075) 13 365
Income tax expense (4 760) (89) (226) 3 - (5 075)
====================================== ======== ======= ========================= ========= =========
Profit/(loss) for the Period 15 117 542 (6 294) (1 075) 8 290
====================================== ======== ======= ========================= ========= =========
EBITDA 24 937 830 (4 860) - 20 907
======== ======= ========================= ========= =========
* Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond
Mine), previously reported as the discontinued operation segment in
prior periods, ceased to be classified as a
discontinued operation held for sale at 31 December 2022 and the
comparative segment information has been restated to re-present the
previous discontinued operation segment as the Botswana segment.
Refer Note 15, Assets held for sale.
1 Unaudited.
2 No revenue was generated in BVI and Cyprus.
3 This includes the adjustment to align the forecast effective
tax rate for the full year, to the actual results for the Period.
Refer Note 8, Income tax expense .
30 June 2023 1 30 June 2022 1
US$'000 US$'000
====================================== ============== ==============
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
Sale of goods 71 638 99 627
Partnership arrangements 125 306
Rendering of services - 18
========================================== ============== ==============
71 763 99 951
==============
1 Unaudited.
The revenue from the sale of goods mainly represents the sale of
rough diamonds, for which revenue is recognised at the point in
time at which control transfers.
The revenue from partnership arrangements of US$0.1 million
(2022: US$0.3 million) represents the additional uplift from
partnership arrangements for which revenue is recognised when the
significant constraints are lifted or resolved and the amount of
revenue is guaranteed. At Period end 2 082 carats ( 2022 : 527
carats) have significant constraints in recognising revenue
relating to the additional uplift.
No revenue was generated from joint operation arrangements
during the current or prior period.
30 June 2023 1 30 June 2022* 1
US$'000 US$'000
================================================================== ============== ===============
5. OTHER OPERATING EXPENSES
Sundry income/(expense) 61 (93)
Ghaghoo care and maintenance costs (906) (966)
Profit on disposal and scrapping of property, plant and equipment 79 -
====================================================================== ============== ===============
(766) (1 059)
==============
* The prior year figures have been re-presented, as Gem Diamonds
Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be
classified as a discontinued operation at 31 December 2022. Refer
Note 15, Assets held for sale.
1 Unaudited.
6. UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND
MINING ASSET AMORTISATION (UNDERLYING EBITDA)
Underlying EBITDA is shown, as the Directors consider this
measure to be a relevant guide to the operational performance of
the Group and excludes such non-operating costs and income as
listed below. The reconciliation from operating profit to
underlying EBITDA is as follows:
30 June 2023 1 30 June 2022* 1
US$'000 US$'000
========================================================================= ============== ===============
Operating profit 6 192 15 572
Other operating expenses 764 966
Foreign exchange gain (2 148) (20)
Share-based payments 241 125
Depreciation and amortisation (excluding waste stripping cost amortised) 3 307 4 264
========================================================================= ============== ===============
Underlying EBITDA 8 356 20 907
==============
* The prior year figures have been re-presented, as Gem Diamonds
Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be
classified as a discontinued operation at 31 December 2022. Refer
Note 15, Assets held for sale.
1 Unaudited.
7. SEASONALITY OF OPERATIONS
The Group's sales environment with regard to its diamond sales
is not materially impacted by seasonal and cyclical fluctuations.
The mining operations may be impacted by seasonal weather
conditions. Appropriate mine planning and ore stockpile build-up
ensures that operations can continue during adverse weather
conditions.
30 June 2023 1 30 June 2022 1
US$'000 US$'000
=================== ============== ==============
8. INCOME TAX EXPENSE
Current
- Foreign (978) (3 940)
Withholding tax
- Foreign 596 2 (550)
Deferred
- Foreign (2 076) (585)
======================= ============== ==============
Income tax expense (2 458) (5 075)
==============
1 Unaudited.
2 This relates to a refund due to Gem Diamonds Limited from
Revenue Services Lesotho for withholding tax overpaid on dividends
in prior periods, following an amendment to the Double Tax
Agreement between the United Kingdom and the Kingdom of Lesotho.
The receivable has been recognised as part of Other Receivables.
Refer Note 13, Receivables and other assets.
The forecast effective tax rate for the full year is 62.3% (31
December 2022: 33.8%) and has been applied to the actual
results.
The effective tax rate is above the Lesotho statutory tax rate
of 25% primarily as a result of deferred tax assets not recognised
on losses incurred in non-trading operations and the effect of the
overseas foreign tax rate differential. The increase in the tax
rate compared to 2022 is due to the lower profits generated by
Letšeng.
30 June 2023 1 30 June 2022 1
US$'000 US$'000
========================================================================== ============== ==============
9. DIVIDS PAID
Dividends on ordinary shares declared and paid
Final ordinary cash dividend for 2022: nil (2021: 2.7 US cents per share) - 3 771
==============
There was no dividend proposed on the 2022 full-year results or
paid during the current Period.
The Directors intend on applying a similar dividend policy in
the current year on the 2023 full year results as has been adopted
previously. The dividend policy is dependent on the results of the
Group's operations, its financial position, cash requirements,
future prospects, profits available for distribution and other
factors deemed to be relevant at that time.
10. PROPERTY, PLANT AND EQUIPMENT
During the Period, the Group invested US$4.6 million (30 June
2022: US$2.4 million) into property, plant and equipment, of which
US$4.5 million (30 June 2022: US$2.3 million) related to
Letšeng.
Letšeng's capital spend was incurred mainly on the completion of
the construction of the PCA of US$2.1 million (30 June 2022: US$1.9
million) and the Underground Feasibility Study of US$0.9
million.
Letšeng further invested US$19.8 million (30 June 2022: US$26.6
million) in deferred stripping costs which were capitalised.
Amortisation of the deferred stripping asset (waste stripping cost
amortisation) of US$17.8 million (30 June 2022: US$21.9 million)
was charged to the Interim Consolidated Statement of Profit or Loss
during the Period. The amortisation is directly related to the
areas that were mined during the Period and their associated waste
to ore strip ratios.
Depreciation and amortisation of US$2.4 million (30 June 2022:
US$3.4 million) was charged to the Interim Consolidated Statement
of Profit or Loss during the Period.
In addition to the above, foreign exchange movements on
translation affecting property, plant and equipment decreased the
asset balances by US$27.9 million (30 June 2022: US$7.5 million
decrease).
Right-of-use assets
Plant and equipment Motor vehicles Buildings Total
US$'000 US$'000 US$'000 US$'000
===================================== =================== ============== ========= =======
11. RIGHT-OF-USE ASSETS
As at 30 June 2023 1
Cost
As at 1 January 2023 3 190 421 6 430 10 041
Additions 420 515 122 1 057
Derecognition of lease - (526) (225) (751)
Foreign exchange differences (332) (41) (455) (828)
========================================== =================== ============== ========= =======
As at 30 June 2023 1 3 278 369 5 872 9 519
========================================== =================== ============== ========= =======
Accumulated depreciation
===================================== =================== ============== ========= =======
As at 1 January 2023 688 115 2 898 3 701
Charge for the year 346 40 480 866
Derecognition of lease - (98) (225) (323)
Foreign exchange differences (81) (10) (267) (358)
========================================== =================== ============== ========= =======
As at 30 June 2023 1 953 47 2 886 3 886
========================================== =================== ============== ========= =======
Net book value at 30 June 2023 1 2 325 322 2 986 5 633
========================================== =================== ============== ========= =======
As at 31 December 2022 2
Cost
As at 1 January 2022 56 94 5 761 5 911
Additions 3 259 384 1 644 5 287
Derecognition of lease (27) (38) (672) (737)
Foreign exchange differences (98) (19) (303) (420)
========================================== =================== ============== ========= =======
As at 31 December 2022 2 3 190 421 6 430 10 041
========================================== =================== ============== ========= =======
Accumulated depreciation
As at 1 January 2022 20 63 2 691 2 774
Charge for the year 695 96 1 027 1 818
Derecognition of lease (24) (38) (672) (734)
Foreign exchange differences (3) (6) (148) (157)
========================================== =================== ============== ========= =======
As at 31 December 2022 2 688 115 2 898 3 701
========================================== =================== ============== ========= =======
Net book value at 31 December 2022 2 2 502 306 3 532 6 340
1 Unaudited.
2 Audited.
Plant and equipment mainly comprise back-up power generating
equipment utilised at Letšeng. Motor vehicles mainly comprise
vehicles utilised by contractors at Letšeng. Buildings comprise
office buildings in Maseru, Antwerp, London, Gaborone and
Johannesburg.
Right-of-use assets are depreciated on a straight-line basis
over the shorter of the estimated useful life and the lease
term.
During the Period, Gem Diamonds Limited entered into a new
contract for the rental of its London office space as the original
lease came to an end. At Letšeng, the lease contract for blasting
services was renegotiated resulting in the recognition of new
associated right-of-use assets and lease liabilities. The original
contract was cancelled and all associated assets and liabilities
were derecognised. Furthermore, a new contract for the rental of
earth-moving
equipment was entered into. The contract was assessed as
containing a lease resulting in the recognition of the new
associated right-of-use assets and lease liabilities. Refer Note
19, Lease liabilities.
Total gains of US$22.9 thousand (30 June 2022: nil) relating to
the derecognition of leases in the Group have been recognised in
the Interim Consolidated Statement of Profit or Loss. Refer Note 19
, Lease liabilities and Note 20.1 , Cash generated by operations .
During the Period the Group recognised income of US$0.2 million (30
June 2022: US$0.2 million) from the sub-leasing of office buildings
in Maseru. The Group expects to receive the following lease
payments from the operating sub-leasing in the following years:
US$ '000
========
1 July 2023 - 30 June 2024 343
---------------------------
1 July 2024 - 30 June 2025 206
========
Goodwill 1
US$'000
======================================== ==========
12. INTANGIBLE ASSETS
As at 30 June 2023 2
Cost
Balance at 1 January 2023 11 221
Foreign exchange translation difference (1 114)
============================================= ==========
Balance at 30 June 2023 2 10 107
Accumulated amortisation
Balance at 1 January 2023 -
Amortisation -
======================================== ==========
Balance at 30 June 2023 2 -
======================================== ==========
Net book value at 30 June 2023 2 10 107
============================================= ==========
As at 31 December 2022 3
Cost
Balance at 1 January 2022 11 962
Foreign exchange translation difference (741)
============================================= ==========
Balance at 31 December 2022 3 11 221
Accumulated amortisation
Balance at 1 January 2022 -
Amortisation -
======================================== ==========
Balance at 31 December 2022 3 -
======================================== ==========
Net book value at 31 December 2022 3 11 221
============================================= ==========
1 Goodwill allocated to Letšeng Diamonds.
2 Unaudited.
3 Audited.
30 June 2023 1 31 December 2022 2
US$'000 US$'000
============================================================================ ============== ==================
13. RECEIVABLES AND OTHER ASSETS
Non-current
Deposits 87 96
Insurance asset 2 600 2 820
================================================================================= ============== ==================
2 687 2 916
Current
Trade receivables 27 23
Prepayments 314 1 350
Deposits 24 21
Other receivables 3 1 826 249
Vat receivable 2 271 3 212
================================================================================= ============== ==================
4 462 4 855
================================================================================= ============== ==================
The carrying amounts above approximate their fair value due to the nature of
the instruments.
Analysis of trade receivables based on their terms and conditions
Neither past due nor impaired 4 -
Past due but not impaired:
Less than 30 days - -
30 to 60 days - -
60 to 90 days - -
90 to 120 days - -
> 120 days 23 23
================================================================================= ============== ==================
27 23
==============
1 Unaudited.
2 Audited.
3 Other receivables includes US$1.0 million relating to
insurance proceeds receivable from the settlement of the previously
identified diesel theft at Letšeng. These proceeds were received in
August 2023.
Based on the nature of the Group's client base and the
negligible exposure to credit risk through its client base,
insurance asset and other financial assets, the expected credit
loss is insignificant and has no impact on the Group.
30 June 2023 1 31 December 2022 2
US$'000 US$'000
============================= ============== ==================
14. CASH AND SHORT-TERM DEPOSITS
Cash on hand 5 4
Bank balances 4 132 6 006
Short term bank deposits 3 185 2 711
================================== ============== ==================
7 322 8 721
==============
1 Unaudited.
2 Audited.
The amounts reflected in the financial statements approximate
fair value due to the short-term maturity and nature of cash and
short-term deposits.
Cash at banks earn interest at floating rates based on daily
bank deposit rates. Short-term deposits are generally call deposit
accounts and earn interest at the respective short-term deposit
rates.
The Group's cash surpluses are deposited with major financial
institutions of high-quality credit standing predominantly within
Lesotho and the United Kingdom.
At 30 June 2023, the Group had US$72.9 million (31 December
2022: US$82.6 million) of undrawn facilities, representing the
LSL750.0 million (US$39.7 million) three-year secured revolving
working capital facility at Letšeng, the Letšeng ZAR100.0 million
(US$5.3 million) general banking facility, the available portion of
the PCA project debt facility of ZAR17.4 million (US$0.9 million)
and US$27.0 million from the Company's secured revolving credit
facility. For further details on these facilities, refer Note 18 ,
Interest-bearing loans and borrowings .
15. ASSETS HELD FOR SALE
Since 2019, in line with the strategic objective to dispose of
non-core assets, the Board of Directors and Management have
remained committed to the sale of Gem Diamonds Botswana (Pty) Ltd
(GDB), which owns the Ghaghoo Diamond Mine. During the previous
period, GDB continued to be disclosed as a discontinued operation
held for sale. At the end of the previous year, 31 December 2022,
GDB ceased to be classified as a discontinued operation held for
sale based on there not being a sales agreement in place and
therefore the prospects of a sale not being highly probable. GDB
was therefore re-presented to be reflected as part of continuing
operations, and continued to be disclosed as such during the
Period. All impacted prior year figures in the interim consolidated
statement of profit or loss and relevant notes have been
re-presented to reflect GDB as part of continuing operations.
The table below represents the prior year re-presentation for
all amounts in the Interim consolidated statement of profit or loss
and notes thereto which were re-presented.
As previously reported Re-presentation adjustment Re-presented figures
30 June 2022 30 June 2022 30 June 2022
US$'000 US$'000 US$'000
---------------------------------------- ---------------------- -------------------------- --------------------
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
CONTINUING OPERATIONS
Other operating expense (93) (966) (1 059)
Operating profit 16 538 (966) 15 572
Net finance costs (2 098) (109) (2 207)
- Finance costs (2 171) (109) (2 280)
Profit before tax for the Period 14 440 (1 075) 13 365
Profit after tax for the Period 9 365 (1 075) 8 290
DISCONTINUED OPERATION
Loss after tax for the Period from
discontinued operation (1 075) 1 075 -
Earnings per share (cents) for
continuing operations
- Basic earnings for the year attributable
to ordinary equity holders of the parent 3.44 (0.76) 2.68
- Diluted earnings for the year
attributable to ordinary equity holders of
the parent 3.40 (0.76) 2.64
------------------------------------------- ---------------------- -------------------------- --------------------
0 OTHER OPERATING EXPENSES
Ghaghoo care and maintenance costs - (966) (966)
------------------------------------------- ---------------------- -------------------------- --------------------
UNDERLYING EARNINGS BEFORE INTEREST,
TAX, DEPRECIATION AND MINING ASSET
AMORTISATION (UNDERLYING
0 EBITDA) BEFORE DISCONTINUED OPERATION
Operating profit 16 538 (966) 15 572
Other operating expenses - 966 966
------------------------------------------- ---------------------- -------------------------- --------------------
16. ISSUED SHARE CAPITAL AND RESERVES
30 June 2023 1 31 December 2022 2
====================
Number Number
of shares 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 139 403 1 410 140 515 1 406
Allotments during the Period/Year 149 1 408 4
============================================================ ========== ======= =========== =======
Number of ordinary shares outstanding at end of Period/Year 139 552 1 411 140 923 1 410
Treasury shares 3 (1 520) (1 157) (1 520) (1 157)
============================================================ ========== ======= =========== =======
Balance at end of Period/Year 138 032 254 139 403 253
========== =======
1 Unaudited.
2 Audited.
3 Shares repurchased by Gem Diamonds in the prior period.
Treasury shares
During the previous period, the Board of Directors approved a
share buyback programme to purchase up to US$2.0 million of the
Company's ordinary shares. The sole purpose of the programme was to
reduce the capital of the Company and the Company intends to hold
those ordinary shares purchased under the programme in treasury.
Such treasury shares are not entitled to dividends and have no
voting rights. The share buyback programme was initiated on 12
April 2022 and at 30 June 2022, 1 520 170 shares were bought back
at a weighted average price of 60.05 GB pence, totalling US$1.2
million (including transaction costs). This reduction in shares
issued is taken into account in calculating the earnings per share.
No further share buyback has taken place during the Period.
17. SHARE-BASED PAYMENTS
Employee Share Option Plan 2017 Award (ESOP) - 21 April 2023
award
On 21 April 2023, 250 860 nil-cost options were granted to
certain key employees under the ESOP of the Company. The value of
the award was determined based on the Group performance for the
prior 2022 financial year. The vesting of the options will be
subject to the satisfaction of certain service conditions which are
classified as non-market conditions. The award is subject to malus
and clawback conditions in line with the Group's ESOP.
In addition, 809 195 nil-cost options were granted to certain
Executive employees and the Executive Directors on the same terms
as detailed above. These options were granted in line with the
introduction of the Gem Diamonds Incentive Plan (GDIP) in 2021,
which integrates annual bonus awards with awards under the ESOP.
These options are also subject to a two-year holding period after
the vesting date.
All the options vest over a three-year period in tranches of 1/3
commencing on 21 April 2024 and ending on 21 April 2026. The
options are exercisable between the respective vesting dates and 20
April 2033. If the service conditions are not met, unvested options
lapse. The fair value of the award is based on the observable Gem
Diamonds Limited share price on the date of the award with no
adjustments made to the price. The Company's share price on the
date of the award was GBP0.27 (US$0.34). The option grants are
settled by issuing shares. The expense disclosed in the Interim
Consolidated Statement of Profit or Loss is made up as follows:
30 June 2023 1 30 June 2022 1
US$'000 US$'000
=================================================================================== ============== ==============
The expense recognised for employee services received during the Period is shown in
the following
table:
Equity-settled share-based payment transactions charged to the statement of profit
or loss 241 125
==============
1 Unaudited.
18. INTEREST-BEARING LOANS AND BORROWINGS
The interest-bearing loans and borrowings subject to the US$
three-month LIBOR rate transitioned to a Secured Overnight
Financing Rate (SOFR) effective from 1 January 2023, in line with
the IBOR phase 2 Amendments which became effective in 2021. The
South African JIBAR rates are yet to transition to alternative
benchmark rates at the reporting period end. The Group will
continue to assess the impact of the interest rate benchmark reform
on the Group's JIBAR interest-bearing loans and borrowings as the
revised benchmark rates are published or negotiated with the
funders. The developments on these facilities from 1 January 2023
and their carrying amounts and maturities as at 30 June 2023 are
disclosed in the note below.
Effective interest rate Maturity 30 June 2023 1 31 December 2022 2
============================== ============================= ================ ==================
US$'000 US$'000
Non-current
Central Bank of Lesotho rate
LSL450.0 million and ZAR300.0 + 3.25% and South African
million bank loan facility JIBAR + 3.05% - -
Credit underwriting fees 22 December 2024 (220) (327)
============================== ============================= ================ ============== ==================
US$30.0 million bank loan
facility Term SOFR + 5.26% 3 3 000 -
Credit underwriting fees 22 December 2024 (169) (225)
============================== ============================= ================ ============== ==================
LSL136.4 million project debt
facility South African JIBAR + 2.50% 31 May 2027 4 855 4 922
============================== ============================= ================ ============== ==================
7 466 4 370
Current
ZAR2.5 million insurance
premium finance 3.55% 1 April 2023 - 60
============================== ============================= ================ ============== ==================
LSL30.0 million insurance
premium finance 3.55% 1 April 2023 - 719
============================== ============================= ================ ============== ==================
LSL10.9 million insurance
premium finance 3.55% 1 May 2023 - 262
============================== ============================= ================ ============== ==================
LSL136.4 million project debt
facility South African JIBAR + 2.50% 31 May 2027 1 444 534
============================== ============================= ================ ============== ==================
1 444 1 575
==============
1 Unaudited.
2 Audited.
3 GDL RCF transitioned from LIBOR to term SOFR effective from 1
January 2023. The margin of 5.26% includes a credit adjustment
spread of 0.26% to bring term SOFR in line with LIBOR.
LSL450.0 million and ZAR300.0 million (US$39.7 million) bank
loan facility at Letšeng Diamonds
The Group, through its subsidiary Letšeng Diamonds, has a
LSL450.0 million and ZAR300.0 million (US$39.7 million) three-year
revolving credit facility jointly with Nedbank Lesotho Limited,
Standard Lesotho Bank Limited, First National Bank of Lesotho
Limited, Firstrand Bank Limited (acting through its Rand Merchant
Bank division) and Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division).
The facility is secured and expires on 22 December 2024 and has
a 24-month renewal option. The LSL450.0 million facility is subject
to interest at the Central Bank of Lesotho rate plus 3.25% and the
ZAR300.0 million facility is subject to South African JIBAR plus
3.05%. There was no draw down on this facility at Period end.
The remaining balance of the credit underwriting fees, which
were incurred and capitalised to the Group's consolidated
interest-bearing loans and borrowings as part of the 2021
refinancing facility, is US$0.2 million (31 December 2022: US$0.3
million). The capitalised fees are amortised and accounted for as
finance costs within profit or loss over the period of the
facility.
US$30.0 million bank loan facility at Gem Diamonds Limited
This facility is a secured three-year RCF with Nedbank Limited
(acting through its London branch), Standard Bank of South Africa
Limited (acting through its Isle of Man branch) and Firstrand Bank
Limited (acting through its Rand Merchant Bank division) for
US$13.5 million, US$9.0 million and US$7.5 million, respectively.
All draw downs will be made in these ratios.
The facility expires on 22 December 2024 and has a 24-month
renewal option.
At Period end, US$3.0 million (31 December 2022: nil) had been
drawn down resulting in US$27.0 million (31 December 2022: US$30.0
million) being available for draw down. The remaining balance of
the previously capitalised credit underwriting fees is US$0.2
million (31 December 2022: US$0.2 million) at Period end. The
capitalised fees are amortised and accounted for as finance costs
within profit or loss over the period of the facility.
The US$-based interest rate for this facility at 30 June 2023
was 10.25% (31 December 2022: 8.7%) which comprises term SOFR plus
a 0.26% credit adjustment spread and 5.00% margin (31 December
2022: US$ three-month LIBOR plus 5.00% margin).
Total interest for the period on this interest-bearing RCF was
US$0.4 million (31 December 2022: US$1.1 million).
LSL136.4 million (US$7.2 million) project debt facility at
Letšeng Diamonds
The loan is an unsecured project debt facility which was signed
jointly with Nedbank and the ECIC on 29 November 2022 to fund the
replacement of the PCA at Letšeng. The loan is repayable in equal
quarterly payments commencing in November 2023. The outstanding
balance at period end was ZAR119.0 million (US$6.3 million) (31
December 2022: ZAR92.8 million (US$5.4 million)). This loan expires
on 27 May 2027.
The South African rand-based interest rate for the facility at
30 June 2023 was 11.00% which comprises South Africa JIBAR plus
2.50%.
Total interest for the Period on this interest-bearing loan was
US$0.3 million (31 December 2022: US$15.6 thousand). This interest
is being capitalised as part of the PCA asset.
Insurance premium finance
During the Period, all outstanding insurance premium finance
balances were fully repaid. The total interest paid during the
Period relating to these liabilities was US$15.8 thousand (31
December 2022: US$80.5 thousand).
Other facilities
Letšeng Diamonds has a ZAR100.0 million (US$5.3 million) general
banking facility with Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division) renewable annually.
There was no draw down on this facility at Period end.
The bank loan facilities include an additional US$20.0 million
accordion option for Gem Diamonds, the utilisation of which is
subject to all necessary internal credit and other approvals from
all funders. There was no utilisation of this facility at Period
end.
30 June 2023 1 31 December 2022 2
US$'000 US$'000
================================================ ============== ==================
19. LEASE LIABILITIES
Non-current 4 695 6 021
Current 2 224 1 877
===================================================== ============== ==================
Total lease liabilities 6 919 7 898
===================================================== ============== ==================
Reconciliation of movement in lease liabilities
As at 1 January 7 898 4 824
Additions 1 057 5 287
Interest expense 262 666
Lease payments (1 212) (2 512)
Derecognition of lease (451) -
Foreign exchange differences (635) (367)
===================================================== ============== ==================
As at 30 June/31 December 6 919 7 898
==============
1 Unaudited.
2 Audited.
Lease payments comprise payments in principle of US$1.0 million
(31 December 2022: US$1.8 million) and repayments of interest of
US$0.2 million (31 December 2022: US$0.7 million).
During the Period, the Group recognised variable lease payments
in the Interim Consolidated Statement of Profit or Loss, for which
no lease liability can be recognised, of US$16.5 million (30 June
2022: US$21.3 million). These payments consist of mining activities
outsourced to a mining contractor, of which US$11.9 million (30
June 2022: US$15.5 million) has been capitalised to the Stripping
Asset within Property, Plant and equipment.
30 June 2023 1 30 June 2022 1
Notes US$'000 US$'000
================================================================== ====== ============== ==============
20. CASH FLOW NOTES
20.1 Cash generated by operations
Profit before tax for the Period 3 946 13 365
Adjustments for:
Depreciation and amortisation excluding waste stripping 2 447 3 409
Depreciation on right-of-use assets 866 905
Waste stripping cost amortised 17 787 21 880
Finance income (187) (73)
Finance costs 2 433 2 280
Unrealised foreign exchange differences (620) 431
Profit on disposal and scrapping of property, plant and equipment (79) -
Gain on derecognition of leases (23) -
Bonus, leave and severance provisions raised 2 056 673
Share-based payments 241 125
=========================================================================== === ============== ==============
28 867 42 995
=============================================================================== ============== ==============
20.2 Working capital adjustment
Increase in inventory (5 086) (2 766)
Decrease/(increase) in receivables 509 (2 357)
Decrease in payables (2 769) (4 718)
=========================================================================== === ============== ==============
(7 346) (9 841)
=============================================================================== ============== ==============
20.3 Cash flows from financing activities (excluding lease liabilities)
Balance at beginning of Period 5 944 11 043
Net cash used in financing activities 3 464 600
=== ============== ==============
- Financial liabilities raised 23 600 4 298
- Financial liabilities repaid (20 136) (3 698)
=== ============== ==============
Interest paid (1 285) (1 084)
Non-cash movements 786 1 306
=== ============== ==============
- Interest accrued 1 285 1 084
- Amortisation of credit underwriting fees 133 147
- Foreign exchange differences (632) 75
=== ============== ==============
Balance at Period end 8 909 11 865
==============
1 Unaudited.
21. COMMITMENTS AND CONTINGENCIES
The Board has approved capital projects of US$5.5 million (31
December 2022: US$14.7 million), mainly relating to some plant
upgrades of US$1.6 million, the continued residue storage facility
extension and studies of US$0.9 million, and the construction of a
bioremediation plant of US$0.9 million.
The Group has conducted its operations in the ordinary course of
business in accordance with its understanding and interpretation of
commercial arrangements and applicable legislation in the countries
where the Group has operations. In certain specific transactions,
however, the relevant third party or authorities could have a
different interpretation of those laws and regulations that could
lead to contingencies or additional liabilities for the Group.
Having consulted professional advisers, the Group has identified
possible disputes approximating US$0.5 million (31 December 2022:
US$0.3 million).
The Group monitors possible tax claims within the various
jurisdictions in which the Group operates. Management applies
judgement in identifying uncertainties over tax treatments and
concluded that there were no uncertain tax treatments during the
Period. There remains a risk that further tax liabilities may
potentially arise. While it is difficult to predict the ultimate
outcome in some cases, the Group does not anticipate that there
will be any material impact on the Group's results, financial
position or liquidity.
There has been no change to the amended tax assessment that was
issued to Letšeng by the Revenue Services Lesotho (RSL) in December
2019, contradicting the application of certain tax treatments in
the current Lesotho Income Tax Act 1993. There has therefore been
no change in judgement applied and the accounting treatment
compared to that disclosed in the 2022 Annual Report and
Accounts.
22. RELATED PARTIES
Related party Relationship
Jemax Management (Proprietary) Limited Common director
Government of the Kingdom of Lesotho Non-controlling interest
====================================== ==========================
30 June 2023 1 30 June 2022 1
US$'000 US$'000
=============================================================== ============== ==============
Compensation to key management personnel (including Directors)
Share-based equity transactions 110 92
Short-term employee benefits 2 126 2 808
Post-employment benefits (including severance pay and pension) 160 155
=============================================================== ============== ==============
2 396 3 055
=============================================================== ============== ==============
Fees paid to related parties
Jemax Management (Proprietary) Limited (38) (44)
=============================================================== ============== ==============
Royalties paid to related parties
Government of the Kingdom of Lesotho (6 737) (9 947)
=============================================================== ============== ==============
Lease and licence payments to related parties
Government of the Kingdom of Lesotho (47) (96)
=============================================================== ============== ==============
Purchases from related parties
Jemax Management (Proprietary) Limited (2) (2)
=============================================================== ============== ==============
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited (6) (7)
=============================================================== ============== ==============
Amounts owing to related party
Government of the Kingdom of Lesotho (1 244) (2 365)
=============================================================== ============== ==============
Dividends declared
Government of the Kingdom of Lesotho - (3 908)
==============
1 Unaudited.
Jemax Management (Proprietary) Limited provided administrative
services with regards to the mining activities undertaken by the
Group. A controlling interest is held by an Executive Director of
the Company.
The above transactions were made on terms agreed between the
parties and were made on terms that prevail in arm's length
transactions.
23. EVENTS AFTER THE REPORTING PERIOD
No other fact or circumstance has taken place between the end of
the reporting period and the approval of the financial statements
which, in our opinion, is of significance in assessing the state of
the Group's affairs or requires adjustments or disclosures.
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