REG - Gem Diamonds Limited - Full Year 2024 Results
13/03/2025 07:00
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RNS Number : 4412A Gem Diamonds Limited 13 March 2025
Thursday, 13 March 2025
Gem Diamonds Limited
Full Year 2024 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the
"Group") announces its Full Year Results for the year ending 31 December 2024
(the "Period").
FINANCIAL RESULTS:
· Revenue of US$154.2 million (US$140.3 million in 2023)
· Underlying EBITDA of US$29.7 million (US$15.2 million in 2023)
· Profit for the year of US$8.1 million (US$1.6 million in 2023)
· Attributable profit of US$2.9 million (loss of US$2.1 million
in 2023)
· Earnings per share of 2.1 US cents (loss per share of 1.5 US
cents in 2023)
· Net debt of US$7.3 million as at 31 December 2024 (2023: net debt
of US$21.3 million)
OPERATIONAL RESULTS:
Letšeng
· Carats recovered of 105 012 (109 656 carats in 2023)
· Waste tonnes mined of 5.4 million tonnes (8.8 million tonnes in
2023)
· Ore treated of 5.0 million tonnes (5.0 million tonnes in 2023)
· Average value of US$1 390 per carat achieved (US$1 334 in 2023)
· The highest dollar per carat achieved for a white rough diamond
during the year was US$41 007 per carat
Safety performance
The Group maintained and excellent safety performance in 2024, achieving our
lowest AIFR on record of 0.61 (2023: 0.67). The Group had zero fatalities
(2023: zero), three LTIs (2023: two) and an LTIFR of 0.18 (2023: 0.10).
Financial performance
The global economic landscape in 2024 was marked by uncertainty, with
persistent inflation, higher interest rates for longer periods than expected,
and geopolitical tensions weighing on growth. As a result, the downward
pressure on the diamond market persisted. Despite these challenges, the Group
achieved a 10% increase in revenue, mainly driven by the 13 diamonds greater
than 100 carats that were sold. The increase in revenue, together with the
implementation of numerous cost reduction initiatives resulted in a 95%
increase in underlying EBITDA compared to 2023.
Operational performance
The benefits of the structural changes implemented in 2023 and 2024 is evident
in Letšeng's operational performance during the year. The targeted initiative
to control the ore feed rate into the treatment plants resulted in a
significant improvement in plant stability and an increase in overall plant
utilisation to 80% in 2024 (up from 78% in 2023 and 75% in 2022).
Decarbonisation strategy
The Group achieved a cumulative 27% reduction of its Scope 1 and Scope 2
carbon emissions compared to its decarbonisation target of a 30% reduction by
2030, against a 2021 baseline.
Letšeng's updated long-term mine plan
A key focus for 2024 was optimising Letšeng's long-term life of mine plan. A
steeper open-pit concept was approved for the final cutback of the Satellite
pit that will significantly reduce waste volumes, leading to an updated mine
plan that was communicated to the market in December 2024.
Commenting on the results today, Clifford Elphick, Chief Executive Officer of
Gem Diamonds, said:
"2024 was another challenging year for the diamond market with decreasing
rough and polished diamond prices. Our relentless focus on factors within our
control - cost containment, operational efficiencies and appropriate capital
allocation, has yielded pleasing results.
We are proud of our excellent safety performance in 2024 and commend our
management and workforce for their daily commitment to operate safely and
responsibly.
Our focus now is on the safe implementation of Letšeng's updated mine plan,
which will significantly reduce waste volumes. The next four years will be
challenging with limited access to higher-value Satellite ore. We will
continue to look for opportunities to further optimise our mine plan to ensure
the profitability of our operations.
2025 has begun with modest improvements in prices of both rough and polished
diamonds. We are optimistic that this will continue throughout the year."
The Company will host a live audio webcast of the full year results today,
13 March 2025, at 9:30 GMT. If you would like to attend the webcast please
register using this link: 2024 Full Year results webcast
(https://gemdiamonds.zoom.us/webinar/register/WN_J1bkUHDITSmqwwtnYUw2Xw)
The page references in this announcement refer to the Annual Report and
Accounts 2024 which can be found on the Company's website:
www.gemdiamonds.com.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Kiki Constantopoulos, Company Secretary
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Felicity Winkles
Tel: +44 (0) 207 777 6424
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global producer of high value diamonds. The Company
owns 70% of the Letšeng mine in Lesotho. The Letšeng mine is famous for the
production of large, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond mine in
the world.
CHAIRPERSON'S STATEMENT
In a year marked by significant challenges, our commitment to strong
governance and adaptability enabled us to navigate the pressures of a downturn
in the diamond market while laying a solid foundation for sustainable growth
in the future.
Dear shareholders,
On behalf of the Board of Directors, I am pleased to share with you the Gem
Diamonds Annual Report and Accounts for 2024, which outlines the Group's
performance during another challenging year for the diamond market.
The diamond industry continued to face significant challenges amid global
macro-economic headwinds. Despite efforts by major producers to limit supply,
both diamond demand and prices remained under considerable pressure.
Additional factors, such as the high inventory levels in and the growing
prevalence of lab-grown diamonds, further exacerbated the challenges facing
the industry.
At Letšeng, the positive impact of numerous initiatives implemented over the
past 24 months is evident in the 2024 results. These efforts included
strengthening cost controls, strategic workforce alignment, the insourcing of
key activities - such as mining services and processing - and a strong focus
on enhancing operational efficiencies. The financial results are discussed in
the CFO Review on page 33 and the financial statements are available from page
106. The COO Review on page 40 contains the full details of Letšeng's
operational performance during 2024.
The terms for the relinquishment of the mining licence and handover of the
Ghaghoo mine site to the Botswana Department of Mines have been agreed and,
subject to final approval, the process is expected to be finalised by the end
of March 2025. We would like to express our gratitude to the Government of
Botswana for their cooperation on this matter.
We are pleased to report that no significant environmental or social incidents
were reported at any of our operations during the year.
GOVERNANCE MATTERS IN 2024
The Governance section from page 53 provides full details of all corporate
governance matters relevant to the Group in 2024.
No changes were made to the makeup of the Board of Directors during 2024, and
the governance structure was aligned with the independence requirements of the
UK Corporate Governance Code. The Board was fully representative with respect
to both gender and ethnic minority groups.
Michael Lynch-Bell, the Senior Independent Director (SID) and Chair of the
Audit and Remuneration Committees, is retiring in advance of the 2025 AGM. The
Board will appoint Janet Blas as the new non-Executive Director effective 1
April 2025. Janet will also take up the position of Chair of the Audit
Committee, while Rosalind Kainyah will succeed Michael as SID and Chair of the
Remuneration Committee.
We are aware of the changes included in the UK Corporate Governance Code 2024
and will be implementing these as relevant.
The findings from the internal Board performance review concluded at the end
of 2023 were considered. The review offered only minor improvement
opportunities, which were implemented in 2024. These included a modest
refining of the Committee meeting structure and schedule to improve efficiency
and a review of ongoing training provided to Directors to support them in
their work.
Consistent with past practice, 99% of the workforce at Letšeng is from within
Lesotho. Enhancing female representation in our workforce remains a key
priority, and we have implemented various initiatives in local communities and
schools to raise awareness of the diverse career opportunities available in
the mining sector. Through these efforts, we aim to position Letšeng as an
employer of choice for women.
THE BOARD'S PRIORITIES IN 2024
· Ensuring that the Letšeng mine was operated in a safe and
effective manner and overseeing the development of the updated mine plan and
the associated steeper conventional slope design in the Satellite pit.
· Preparing for the implementation of the recommendations of both
the Taskforce on Nature-related Financial Disclosures (TNFD) and the new S1
and S2 standards issued by the International Sustainability Standards Board
(ISSB).
· Overseeing the effective insourcing of the mining contract, which
was concluded towards the end of 2023, and preparing for a similar transition
in the processing operations, which was concluded in the final quarter of
2024.
· Finalising the conditions under which the Ghaghoo mine in
Botswana is to be transferred back to the ownership of the Government of
Botswana.
· Implementing the various governance recommendations generated by
the Board performance review conducted in late 2023 and preparing for the
retirement of the Senior Independent Director.
· Considering shareholder returns such as dividends or share
buyback programmes in the context of cash availability and the investment
required to deliver the updated mine plan.
SAFETY PERFORMANCE
The safety and health of our workforce remains our highest priority. Letšeng
maintained its exceptional safety performance during 2024, and this
consistency is a testament to the efforts and commitment of the entire
workforce over many years. The Board would like to express its gratitude to
management for their strong leadership in this critical aspect. We do,
however, remain constantly vigilant and alert to both existing and emerging
risks as we strive to extend our strong and collaborative safety culture.
The COO Review on page 40 contains full details of Letšeng's safety
performance during 2024.
LETŠENG'S UPDATED MINE PLAN
Letšeng's NI 43-101 Technical Report and 2024 Resource and Reserve Statement
was published in March 2024 and is available on the Group's website at
www.gemdiamonds.com (https://www.gemdiamonds.com/operations.php#mine2) .
As reported in the Annual Report and Accounts 2023, a number of different
options to extend the life of the Satellite pit had been under consideration
for some time. During 2024, a group of internationally recognised experts were
engaged to determine whether it would be viable to steepen the slope angles in
certain basalt sectors of the Satellite pit, thereby allowing for a
considerable reduction in waste stripping required for an additional Satellite
pit cutback. An intense review process ensued, driven by senior Executive
Management and overseen by the Board, to evaluate the technical, safety,
economic and overall feasibility of the concept, which was completed in the
last quarter of 2024. Following sign-off by the external experts and the
Board, the Letšeng mine plan was updated, resulting in a substantial
reduction in waste volumes in the last open pit cutback of the Satellite pit.
After careful consideration of all key factors, the Board approved the updated
mine plan. An investor presentation was made to the market on 3 December 2024
and is available on the Group's website at www.gemdiamonds.com
(https://www.gemdiamonds.com/downloads/2024/annual-report/mine-plan-presentation-03122024.pdf)
.
It is important to note that while waste for the final cutback of the
Satellite pit is being mined, no Satellite ore will be available from 2026 to
the end of 2029. During this time, the business will be completely dependent
on Main Pipe ore, which typically produces diamonds of a lower value than the
Satellite Pipe, with higher-value ore from the Satellite Pipe returning to the
mix late in 2029. The Board will continue to provide the necessary focus and
oversight to navigate this challenging period. We would like to thank our
banking partners and lenders, who have demonstrated their trust in our ability
to manage through this period by extending our revolving credit facilities,
which expired in December 2024, for a further 24-month period.
Refer to the COO Review for details of the updated mine plan on page 43.
DECARBONISATION STRATEGY
At the beginning of 2023 we announced our decarbonisation strategy, which sets
out our commitment to reduce our Scope 1 and Scope 2 carbon emissions by 30%
(as measured against our 2021 emissions) by 2030. We are pleased to report
that we have already achieved a cumulative 27% reduction against the 2021
baseline by the end of 2024 and that we remain on track to meet our 2030
target.
A wide range of different initiatives have been identified and implemented to
reduce our energy usage, aided by the refinement of the mine plan, which will
lead to a reduction in waste mining and thereby directly reduce our Scope 1
carbon emissions. The carbon and energy footprint of the Group in 2024 is
detailed in the Climate Change Report on page 47.
Our primary focus is to reduce our reliance on high-carbon grid electricity
supplied by Eskom and diesel-generated electricity on site. We are actively
exploring alternative large-scale, long-term renewable energy solutions that
could be effective in the specific high-altitude geography of the Maluti
mountains of Lesotho.
STAKEHOLDER ENGAGEMENT
The Government of the Kingdom of Lesotho is a significant shareholder and our
partner in the Letšeng mine, and we remain committed to maintaining strong
and constructive relationships with officials across all departments. The
Board extends its gratitude to the Lesotho Government for its cooperation and
for its ultimate support of Letšeng's updated mine plan. The new plan secures
Letšeng's long-term sustainability, reinforcing its role as a key employer
and contributor to Lesotho's economy.
We recognise the critical importance of maintaining open and transparent
communication with all stakeholders. Dialogue based on mutual trust and
respect enables us to keep them informed of key developments in our operations
and to address any concerns they may have. Transparency is essential to
maintaining stakeholder trust, and this in turn ensures that wider economic,
social and political headwinds can be navigated smoothly and in the best
interests of all parties. To this end, we have established a range of formal
and informal stakeholder engagement forums that meet regularly, ensuring that
key discussions and concerns are routinely relayed to the Board for its
consideration.
LOOKING TO THE FUTURE
The primary focus of the Board in 2025 will be to support management and
oversee the successful implementation Letšeng's updated mine plan and further
mine plan optimisation efforts.
The Board will consider changes in regulatory guidance that may impact the
Group, such as the UK Corporate Governance Code 2024 and the TNFD
recommendations, and oversee the implementation thereof.
We will stay abreast of developments in the diamond market and respond
appropriately both operationally and by selling Letšeng's rough diamonds
through appropriate channels to achieve the highest obtainable market prices.
As certain members of the Board approach retirement, we are committed to
overseeing a seamless transition by selecting new members who possess the
necessary skills and expertise to navigate the challenges ahead. At the same
time, we remain dedicated to fostering diversity and ensuring a well-rounded
leadership team that can effectively guide the Group into the future.
APPRECIATION
On behalf of the Board, I would like to extend my deepest gratitude, first and
foremost, to our people. Our executive and senior management led the
operations with unwavering focus through yet another challenging year for the
diamond market, and every member of our workforce played a vital role in the
Group's success in 2024. We also sincerely appreciate the ongoing support of
our community partners, the Government of the Kingdom of Lesotho, the
Government of Botswana, and our shareholders. Lastly, I would like to thank my
fellow Directors for their valuable contributions and insights throughout the
year. In particular, I would like to thank Michael Lynch-Bell for his many
years of dedicated service on the Board, acting as SID and Chairperson of the
Audit and Remuneration Committees. We look forward to welcoming Janet Blas to
the Board and to benefiting from the fresh perspectives she will bring.
Harry Kenyon-Slaney
Chairperson
12 March 2025
RISK MANAGEMENT
HOW WE APPROACH RISK
The Group's risk management framework, which is fully integrated with
strategic and operational planning, aims to identify, manage and respond to
the Group's risks and uncertainties. The framework combines top-down and
bottom-up approaches with appropriate governance and oversight.
Risk management framework
Oversight BOARD OF DIRECTORS Top-down approach -
the Board sets the risk appetite and tolerances, strategic objectives and
The Board is responsible for the overall approach to risk management for the accountability for the management of the framework
Group and provides stakeholders with assurance that key risks are properly
identified, assessed, mitigated and monitored. The Board maintains a formal
Group risk management framework, assesses and approves the overall risk
appetite and tolerance, and formally evaluates the effectiveness of the
Group's risk management and internal control processes annually at a minimum.
It confirms that the process is appropriately aligned with the Group's
strategy and performance objectives.
Governance AUDIT COMMITTEE SUSTAINABILITY COMMITTEE
The Audit Committee monitors the Group's risk management processes, reviews The Sustainability Committee provides assurance to the Board that appropriate
the status of risk management, and reports on a biannual basis. It is systems are in place to identify and manage health, safety, social,
responsible for addressing the corporate governance requirements of risk environmental and climate change-related risks. It monitors the Group's
management. performance within these categories and drives proactive risk mitigation
strategies to secure safe and responsible operations and our social licence to
operate in the future.
Governance MANAGEMENT Bottom-up approach -
ensures a sound risk management process and establishes formal reporting
Management develops, implements, communicates and monitors risk management structures
processes and integrates them into the Group's day-to-day activities. It
identifies risks affecting the Group, including internal and external, current
and emerging risks. It implements appropriate risk responses consistent with
the Group's risk appetite and tolerance.
GROUP INTERNAL AUDIT
Group Internal Audit formally reviews the effectiveness of the Group's risk
management processes. The outputs of risk assessments are used to compile the
strategic three-year rolling and annual internal audit coverage plan and
evaluate the effectiveness of controls.
The Board is ultimately responsible and accountable for the Group's risk
management function. It is supported by its subcommittees and senior
management in overseeing the Group's most relevant and significant current and
emerging risks. These risks are actively identified, assessed, prioritised,
managed and mitigated as much as reasonably possible, as they could negatively
impact the Group's ability to execute its strategy.
While the Group's risk management framework focuses on risk identification and
mitigation, many of the factors that give rise to these risks also present
opportunities. Gem Diamonds tracks these opportunities and incorporates them
into the strategy where they appropriately support the Group's purpose.
The Board and its subcommittees have identified the following key strategic,
operational and external risks, which have been set out in no order of
priority.
1.Rough diamond demand and prices Risk: Risk response: Strategic impact:
Numerous factors beyond our control could affect the price and demand for · Monitoring market conditions and trends Extracting maximum value from our operations
diamonds. These factors include geopolitical tension, macro-economic
conditions, global diamond production levels and consumer trends. Medium to · Flexibility in sales processes and utilisation of multiple sales and Preparing for our future
long-term demand is forecast to outpace supply, but short-term uncertainty and marketing channels including additional viewing opportunities
liquidity constraints within the diamond sector may negatively impact rough
diamond pricing. · Ability to enter into partnership agreements to share in the upside of
polished diamonds
· Maintaining the integrity of the tender process
2.Variability in cash generation Risk: Risk response: Strategic impact:
Marginal cash resources and variability of cash flows could negatively affect · Rigorous cost and capital discipline is in place Extracting maximum value from our operations
the Group's ability to effectively operate, repay debt and fund capital
projects, and impact strategic short and long-term decision-making. The risk · Funding facilities are in place to manage variability in the short to Preparing for our future
is directly impacted by other principal risks such as rough diamond demand and medium term
prices, performance of the resource, economic viability of reserves and
volatility of exchange rate. · Focus on cost discipline to achieve greater operational efficiencies
· Ongoing drive for continuous improvement to deliver operational
efficiencies
3.Diamond resource and reserve Risk: Risk response: Strategic impact:
performance Letšeng's low-grade orebodies make the operation sensitive to resource · Gathering geological evidence on variations within the resource Extracting maximum value from our operations
variability. Unexpected variability in key resource/reserve criteria, such as (lithology, density, volume/tonnage, grade, diamond population size and value
volume, tonnage, grade and price, could significantly impact mine planning, distribution), applying industry best practice and engaging independent Preparing for our future
forecasting and financial stability, in both the short and medium term, and experts to audit and provide advice
could influence decisions regarding future growth.
· Continual review of the reserve extraction strategy considering the
prevailing technical and economic environment
· Ongoing pit mapping, petrography, drilling and 3D modelling
· Grade control, bulk sampling, density and moisture content measurements
(on-site and independent lab verification), dilution control, stockpile
management, data management, quality control and internal auditing of
production data (including geological, processing, recovery and sales data)
· Managing the Diamond Accounting System and Mineral Resource Management
(MRM) database, and monitoring recovery data on a daily and monthly basis, as
well as per export period, to follow trends in diamond distributions, large
stone recovery frequencies and average diamond prices per kimberlite domain
4.Availability of sustainable and reliable power supply Risk: Risk response: Strategic impact:
Regular power interruptions (load shedding by the South African power utility, · Exploring solutions with the Lesotho Electricity Company (LEC) for grid Extracting maximum value from our operations
Eskom) compound the need for and cost of self-generated power in the context and/or renewable power
of escalated diesel prices. Unscheduled power interruptions and poor quality
Working responsibly and maintaining our social licence
of power supply reduce the available processing time and negatively influence · Assessing the potential to generate renewable energy for own use
the reliability and stability of plant equipment.
Preparing for our future
· Prioritisation of load and allocation of power
· Identification and implementation of consumption-reduction initiatives
5.Growth and access to capital Risk: Risk response: Strategic impact:
The volatility of the Group's share price and lack of growth opportunities The Group's strategic objectives are to drive share price growth through: Extracting maximum value from our operations
negatively impact the Group's market capitalisation. Constrained cash flows
add pressure on returns to shareholders. The Group currently relies on a · Assessing mergers and acquisitions and diversification opportunities Working responsibly and maintaining our social licence
single mine with a finite life for its revenues, profits and cash flows.
· Focusing on existing operations to unlock further value through Preparing for our future
rationalisation and efficiency improvements
6. Workforce Risk: Risk response: Strategic impact:
Achieving the Group's objectives and sustainable growth depend on our ability · Human resource practices are designed to identify skills shortages and Extracting maximum value from our operations
to attract and retain suitably qualified, experienced and ethical employees. implement development programmes and succession planning for employees
Gem Diamonds operates in an environment and industry where shortages in
Working responsibly and maintaining our social licence
experience and skills are prevalent. · Remuneration practices and incentives are in place to appropriately
remunerate and retain skills Preparing for our future
· Training and coaching plans are in place to address skills and experience
shortages
7.Information technology (IT) and operational technology (OT) systems, and Risk: Risk response: Strategic impact:
cybersecurity
The Group's operations rely on secure OT and IT systems to process financial · Application of technical and process IT controls and policies in line with Extracting maximum value from our operations
and operating data in its information management systems. If these systems are industry-accepted standards
compromised, there could be a material adverse impact on the Group through a
Preparing for our future
lack of production and/or compromised recovery parameters. · Appropriate back-up procedures, firewalls and other appropriate security
applications are in place
Integration of operating systems due to insourcing of the processing
activities increase the risk exposure in the short term. · Vulnerability assessments to identify gaps and devise corrective actions
8.Production interruption Risk: Risk response: Strategic impact:
Material mine and/or plant shutdowns, pit closures or periods of decreased · Robust business continuity plans are in place to ensure limited delays Extracting maximum value from our operations
production could arise due to various events. These events could lead to due to disruptions
personal injury or death, environmental impacts, damage to infrastructure and
Working responsibly and maintaining our social licence
delays in mining and processing activities, and could result in financial · Appropriate levels of critical resources (fuel, ore stockpiles, etc) are
losses and possible legal liability. maintained to mitigate the impact of any production interruptions
· Appropriate insurance is maintained
9.Health, safety and wellness Risk: Risk response: Strategic impact:
The probability of a major health or safety incident occurring is inherent to · Appropriate health and safety policies, practices, training, and Extracting maximum value from our operations
mining operations. Such incidents could impact the well-being of employees, awareness campaigns are in place
PACs, our licence to operate, the Group's reputation, and compliance with our
Preparing for our future
mining lease agreement. The health and safety of our people is critical to the · A dam safety management framework has been implemented in alignment
business. with the ICMM's GISTM
· ISO 45001 (Occupational Health and Safety Management) accreditation is
maintained
· A safety management and leadership programme, visible felt leadership,
and detection and prevention strategies have been developed and implemented
· We continually assess our organisational safety culture maturity to
address current and emerging issues
10. Security of product Risk: Risk response: Strategic impact:
Theft is an inherent risk in the diamond industry. The high-value nature of · Zero tolerance of non-conformance to diamond security policies and Extracting maximum value from our operations
the product at Letšeng makes it susceptible to theft and could result in regulations
significant losses that would negatively affect revenue, cash flows and
Working responsibly and maintaining our social licence
strategic short and long-term mine plan decision-making. · Advanced security access control and surveillance systems are in place
Preparing for our future
· Monitoring of security process effectiveness is performed by the Executive
Committee and the Board
· Appropriate diamond specie insurance cover is in place
· Vulnerability assessments and assurance audits are conducted by internal
and independent third parties
11. Social licence to operate Risk: Risk response: Strategic impact:
The Group's operations are subject to country risk being the economic, · Implementation of an appropriate CSI strategy, based on a community needs Working responsibly and maintaining our social licence
political and social risks inherent in doing business in certain areas of analysis, that provides infrastructure and access to education and healthcare
Africa, Europe and the United Kingdom. These risks include matters arising out and supports local economic development Preparing for our future
of the policies of the government, economic conditions, imposition of or
changes to taxes and regulations, foreign exchange rate fluctuations and the · Adoption of relevant standards, best practices and strategies
enforceability of contract rights.
· Appropriate governance structures across all levels of the Group, including
The Group's social licence to operate is underpinned by the support of its an established Employee Engagement Committee
stakeholders, particularly employees, regulators, PACs and society. This
support is an outcome of the way the Group manages issues such as ethics, · Regular engagement with all stakeholders, including government, regulators,
labour practices and sustainability in our wider environment, as well as our community leadership and PACs
risk management and engagement activities with stakeholders.
12.Climate Risk: Risk response: Strategic impact:
change Climate change-related risks (transitional and physical risks) are recognised · TCFD recommendations adopted and climate change strategy developed Working responsibly and maintaining our social licence
as top global risks, and investors are increasingly focused on the management
of these risks. The uncertainty of potential carbon taxes and the impact of · Adoption of a Group decarbonisation strategy and 2030 target Preparing for our future
climate change present significant current and future risks to the Group
which, if not identified and managed responsibly, could negatively impact the · Governance and management practices implemented to oversee the
Group's long-term operational and financial resilience. implementation of the adopted strategy and 2030 target
· New reporting standards adopted
· Adoption of UN SDG framework
· Energy footprint and carbon emissions monitoring and reporting
13.Environmental Risk: Risk response: Strategic impact:
Failure to manage vital natural resources, environmental regulations, and · Appropriate sustainability and environmental policies are in place and Extracting maximum value from our operations
pressure from neighbouring communities could affect the Group's ability to regularly reviewed
operate sustainably. Furthermore, investors and stakeholders are increasingly
Working responsibly and maintaining our social licence
focused on environmental practices. · The current behaviour-based care programme embeds environmental
stewardship Preparing for our future
· A dam safety management framework has been implemented
· Annual social and environmental management plan audit programme
implemented
· ISO 14001 (environmental management) accreditation maintained
· Adopted the UN SDG framework
· Rehabilitation and closure management strategy adopted and updated
annually
· Implementation of an integrated water management framework
· Water footprint monitoring and reporting
· Concurrent rehabilitation strategy implemented
EMERGING RISKS
The Group risk framework includes an assessment of emerging risks. These are
defined as risks that:
· are likely to materialise or impact over a longer timeframe than
existing risks;
· do not have much reference from prior experience; and
· are likely to be assessed and monitored against vulnerability,
velocity and preparedness when determining likelihood and impact.
The current emerging risks that are being monitored by the Group are:
· generational shifts in consumer preferences; and
· future workforce (automation, skills for the future, etc).
VIABILITY STATEMENT
The Board has assessed the viability of the Group over a period significantly
longer than 12 months from the approval of the financial statements, in
accordance with the UK Corporate Governance Code. The Board considers three
years from the financial year end to be the most relevant period for
consideration for this assessment, given the Group's current position and the
potential impact on the Group's viability of the principal risks documented on
pages 21 to 26.
While the Group maintains a full business model, based predominantly on the
life of mine plan for Letšeng, the Group's annual business and strategic
planning process also uses a three-year time horizon. This process is led by
the CEO and CFO and involves all relevant functions including operations,
sales and marketing, finance, treasury and risk. The Board participates in the
annual review process through structured Board meetings and annual strategy
review sessions. A three-year period provides sufficient and realistic
visibility in the context of the industry, the environment in which the Group
operates, and the current short-term mine plan, even though the life of mine,
the mining lease tenure and available estimated reserves exceed three years.
The business and strategic plan reflects the Board's best estimate of the
Group's prospects. The Board evaluated several additional scenarios and
assessed their potential impact on the Group by quantifying their financial
impact and overlaying this on the detailed financial forecasts in the plan.
The Board's assessment of the Group's viability focused on the critical
principal risks categorised within the strategic, external and operational
risk types, together with the effectiveness of the potential mitigations that
management reasonably believes would be available to the Group over this
period.
GROUP FACILITIES
The Group has access to US$69.7 million in RCFs when fully available. Of
these RCFs, US$6.0 million was utilised at the end of the year. The Group's
RCFs mature on 21 December 2026 following the successful 24-month extension of
the facilities that was finalised during the year. In addition, there is a
general banking facility of US$5.3 million with no set expiry date which is
reviewed annually by the lenders. This facility was fully available at the end
of the year.
ROUGH DIAMOND MARKET
For a review of the diamond market, refer to page 30.
The diamond market remained under significant pressure in 2024 due to a
challenging macro-economic environment and international conflicts that
negatively impacted rough and polished diamond prices. The market is expected
to remain under pressure, with signs of a modest recovery in diamond prices
seen in 2025.
OPERATIONAL UPDATES
For a review of our operations and costs, refer to pages 34 and 41 of the
Performance Review.
At Letšeng, the risk of rising operating costs has been minimised to an
extent by a wide array of implemented right-sizing and insourcing within the
mining, processing and housekeeping activities, together with improved plant
stability and reduced waste mining requirements (the approved redesign of a
steeper SC6W reduces waste stripping by 65.8 million tonnes compared to the
previous conventional design). Cost reduction and mine plan optimisation
remain ongoing priorities within the business.
CLIMATE CHANGE
The Board is cognisant of the risks presented by climate change and conscious
of the need to minimise carbon emissions. A Group-specific climate change
scenario analysis was conducted to assess the short to medium and longer-term
physical risks. The short to medium-term impacts fall within the viability
period. The physical risks identified for Letšeng, such as drought, strong
winds, extreme precipitation and cold, are similar to its current operating
conditions. The operation is therefore well geared to manage these conditions
within its current and medium-term operational activities, cost structure and
business planning. Additional cash investment required in the event of these
short to medium-term physical risks materialising has been assessed as low
with no material impact on the current operations and viability of the Group.
In terms of transitional risks, as users of grid-supplied and fossil fuel
energy, the short-term focus is on improving energy efficiencies in our
operational processes and reducing the use of fossil fuels. Options are being
assessed in light of the size, nature and location of the Group's operations,
the required investment and the expectations of our main stakeholders. Any
material investment during the viability period is considered unlikely. Due to
uncertainty around the cost and timing of implementation of carbon-related
taxes, the impact of such taxes on the Group's operations and cash flows has
been excluded from the viability assessment and scenario stress testing.
Management and the Board will continue to assess these impacts as the
information becomes more certain. The Group has adopted a carbon-pricing model
that will be used to responsibly assess the potential financial impact of
future projects. The Group has also adopted a decarbonisation strategy that is
aimed at reducing potential future carbon tax liabilities.
STRESS TESTS
The scenarios tested considered the Group's revenue, cash flows and other key
financial ratios over the three-year period. The scenarios included the
compounding effect of the factors below and were applied independently of each
other. In addition, the scenarios assumed the successful renewal of the RCFs
following their expiry in December 2026. The stress scenarios reflect the
magnitude of outcomes that would result in a net debt position equivalent to
the total RCFs.
Effect Extent of sensitivity analysis Related principal risks Area of business model affected
A decrease in forecast rough diamond revenue from reduced market prices or 10% · Rough diamond demand and prices · Entire business model, i.e. inputs, activities,
production volumes caused by unforeseen production disruptions.
outputs and outcomes
· Production interruption
· Diamond resource and reserve performance
· Variability in cash generation
A strengthening of local currencies to the US dollar from expected market 9% · Variability in cash generation · Financial capital inputs and outcomes
forecasts.
(R16.70:$1)
CONCLUSION
The Group ended the year in a net debt1 position of US$7.3 million with
undrawn available credit facilities of US$69.0 million. These facilities
expire on 21 December 2026 following the 24-month extension concluded in 2024.
The Group will follow all necessary processes to renew these facilities for an
extended period before the 2026 expiry date, as has been the practice in the
past.
The Board is aware that the implementation of Letšeng's updated mine plan
will present material challenges for the business, with no availability of
Satellite ore until the end of 2029 while the steeper slopes are being
implemented. During this period, our focus will remain on factors within our
control, including cost containment, sound capital allocation, and maintaining
operational efficiencies, all while responsibly managing our cash resources.
The ongoing optimisation of the mine plan (as mentioned in the COO Review on
page 46) will be a major focus.
Based on the robust assessment of the principal risks, prospects and viability
of the Group and the successful renewal of the facilities, the Board confirms
that it has a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the three-year
period ending 31 December 2027.
1 Net debt is calculated as cash and short-term deposits less drawn
down bank facilities (excluding insurance premium financing and credit
underwriting fees).
CHIEF EXECUTIVE OFFICER'S REVIEW
Global economic uncertainty and negative consumer confidence further impacted
the diamond market in 2024.
The global economic landscape in 2024 was marked by uncertainty, with
persistent inflation, higher interest rates for longer periods and
geopolitical tensions weighing on growth. While some economies showed
resilience, challenges such as supply chain disruptions, fluctuating commodity
prices, and slower demand in key markets continued to create volatility, all
of which negatively impacted consumer confidence and luxury spending.
The economic landscape in China, an important consumer of diamonds, was marked
by slow growth in 2024 due to persistent property sector challenges and weak
consumer confidence. Despite government stimulus measures, including monetary
easing and infrastructure spending, economic momentum remained subdued due to
sluggish domestic demand and global trade uncertainties. Geopolitical tensions
and supply chain shifts also impacted export performance.
These macro-economic challenges contributed to the continued downturn of the
diamond market, where demand and prices remained under pressure despite
efforts by major producers to regulate supply. The lower end of the diamond
market was also impacted by the continued rise in sales of lab-grown diamonds,
whose popularity and pricing continue to influence consumer purchasing
decisions.
High inventory levels, and higher interest rates impacting diamond
manufacturers who rely on financing, further negatively influenced pricing. A
similar prolonged downturn of the diamond market has not been seen in more
than four decades.
In this environment, we maintained our strong focus on improving operational
efficiencies and cost containment to ensure the future economic viability of
our operations. This included insourcing mining, processing and certain other
activities, renegotiating selected contracts, and interrogating all capital
expenditure. The initiatives that were implemented over the past 24 months at
the Letšeng operation yielded pleasing results, with a strong operational
performance in 2024. The fact that we are the only fully operational diamond
mine remaining in Lesotho speaks to our resilience and agility to adapt in the
face of these challenges.
Our NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve
Statement was published in March 2024 and is available on the Group's website
at www.gemdiamonds.com (http://www.gemdiamonds.com) . Following from this, a
major focus in 2024 was to evaluate the resource to determine how to maximise
returns and ensure sustainable mining for the remaining economic life of the
mine. The steeper conventional slope design in the Satellite pit, which will
significantly decrease waste volumes, was signed off by world-renowned
experts, approved by the Board, and presented to the market in December 2024.
The details of this important work are set out in the COO Review on page 43.
We are actively working towards our decarbonisation target of a 30% reduction
in Scope 1 and 2 emissions by 2030 (measured against our 2021 footprint). We
are pleased to report that we achieved a cumulative 27% reduction against the
2021 baseline by the end of 2024 and are on track to meet our 2030
decarbonisation target.
EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS
We operated safely, responsibly and efficiently during the year. Production
stabilised following the implementation of targeted initiatives to improve
plant stability and increase diamond recoveries. Overall carats recovered
decreased by 4% compared to 2023, mainly due to a lower contribution from the
higher-grade Satellite Pipe during the year. We reduced our waste investment
by 39% compared to 2023, with a total of 3.4 million tonnes.
13 diamonds greater than 100 carats were recovered during the year, and
exceptional sales included an 11 carat pink diamond that was sold for US$45
537 per carat, a 63 carat Type IIa white diamond that was sold for US$41 007
per carat, and a 113 carat Type IIa white diamond that was sold for US$39 345
per carat.
We have an effective, transparent and competitive tender sales process in
Antwerp. Selected rough diamonds were also sold pursuant to the limited supply
agreement established in 2022 with two key diamond manufacturing clients who
supply polished diamonds to some of the world's most premium luxury brands.
These diamonds are polished to precise specifications required by the brands,
realising additional upside polished value for the Group. This is a further
step in the Group's strategy of focused delivery of top-quality diamonds to
promote Letšeng as an exceptional diamond brand and Lesotho as the place
origin, and to achieve premium prices for our diamonds.
Despite the persistent downward pressure on rough and polished diamond prices
throughout the year, our average price achieved increased to US$1 390 per
carat in 2024 compared to US$1 334 per carat in 2023, mainly due to the
increased number of diamonds greater that 100 carats sold. The higher prices
achieved and increase in carats sold resulted in total revenue of US$154.2
million, a 10% increase compared to 2023.
The Group managed to change its cost base, and as a result achieved an
underlying EBITDA1 of US$29.7 million and ended the year in a net debt2
position of US$7.3 million.
Full details of the Group's financial performance are included in the CFO
Review on page 33.
1 Refer Note 4, Operating profit on page 138 for the definition of
non-GAAP (Generally Accepted Accounting Principles) measures.
2 Net debt is a non-GAAP measure and calculated as cash and short-term
deposits less drawn down bank facilities (excluding insurance premium
financing).
WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE
We maintained our excellent safety performance in 2024. We recorded no
fatalities for the fifth consecutive year, three LTIs (2023: two), and
achieved our lowest overall AIFR on record of 0.61 (2023: 0.67). The drive to
mature the organisational safety culture since June 2021 continues to yield
results of which we are very proud, especially given the harsh operating
environments at Letšeng and Ghaghoo. We will continue to entrench a workplace
safety culture founded on individual responsibility, mutual care and
collaboration.
We adhere to the highest environmental management standards. The
bioremediation plant that was successfully commissioned in February 2024 is
effectively reducing nitrates in the water leaching from our blasted waste
rock dump.
Our residue storage facility management process aligns with the ICMM's GISTM.
Our residue storage and freshwater facilities are subject to regular
inspections by internal as well as independent external experts. These
professional external reviews, together with the internal governance,
monitoring and reporting processes, provide assurance that our freshwater dam
and residue storage facilities are being managed in a safe and responsible
manner.
Our CSI activities are built around our chosen eight UN SDGs and are focused
on supporting infrastructure development, education and health while assisting
and stimulating small businesses. In 2024, we supported small agricultural
operations including those in egg, vegetable and dairy production, maintained
gravel roads in nearby villages, and installed sustainable water supply
infrastructure for five villages. From 2016 to 2024, the Group has invested
US$5.1 million in sustainable CSI initiatives.
In 2024, Letšeng contributed a total of US$20.7 million (LSL379.0 million)
to the Lesotho fiscus in the form of taxes, royalties, dividends and mining
lease payments. We are proud of our contribution to this developing economy
and our position as a significant employer and contributor to the overall
fiscus of Lesotho.
PREPARING FOR THE FUTURE
Our primary focus in 2025 is the safe and timely implementation of Letšeng's
updated mine plan following the approval of the steeper conventional concept
for the Satellite pit. This will significantly reduce the waste mining
investment required for the final open pit cutback of the Satellite pit. The
reliance on lower-value Main Pipe ore until the end of 2029, while the waste
stripping of the final cutback of the Satellite pit is being implemented,
presents financial challenges, as no higher-value Satellite Pipe ore will be
accessible during this period. We are well prepared to navigate this difficult
period, largely assisted by the step change that we have implemented in our
cost base over the past few years and the availability of our revolving credit
facilities following the successful 24-month extension of these at the end of
2024.
We remain focused on the need to identify and implement sustainable
alternative energy solutions for the short, medium and long term. Grid
electricity supply in 2024 was relatively stable due to the suspension of load
shedding by Eskom since March 2024. We do, however, note the challenges ahead
for Lesotho due to the extremely high electricity consumption of the machinery
being used to construct the second phase of the Lesotho Highlands Water
Project. We would like to express our appreciation to the Lesotho Government
and, in particular, His Majesty King Letsie III, for leading efforts across
Europe to get support for alternative energy solutions in Lesotho.
Our capital plans prioritise funding for projects that will sustain growth and
create value. The planned capital projects in 2025, although not financially
significant, include the required extension of the Patiseng coarse residue
storage facility to align its capacity with future mining activities,
replacement of the mining fleet to align with the updated mine plan, and other
opportunities, such as extending the life of Satellite Cut 5 West, to aid with
diamond recoveries.
OUTLOOK
2024 was marked by national elections in a number of major economies, the
outcomes of which have increased uncertainty and may lead to further
volatility, with looming trade wars and a subdued global growth outlook. There
have been reports of a modest recovery in diamond prices in early 2025 and we
are optimistic that this will continue. In this regard, it is pleasing to note
that the global luxury market continued its growth trend in 2024. The luxury
market appears well positioned to cope with economic turbulence, with high-end
luxury brand Richemont reporting single-digit growth in their jewellery sales
year on year and further investment in their jewellery manufacturing capacity.
In the medium to long term, rough diamond prices should be supported by
favourable demand and supply fundamentals, with a projected further decrease
in natural rough diamond supply. Over the longer term, this dynamic of rising
demand and constrained supply is expected to benefit high-quality rough
diamonds in particular. The fundamentals that underpin our business are sound
and strongly position Gem Diamonds for success.
APPRECIATION
I would like to extend my sincere gratitude to the Board for their unwavering
support and commitment in 2024, especially for their valuable input, guidance
and support during the important work that culminated in Letšeng's updated
mine plan being approved. I am grateful to our executive and management teams
and our workforce, and appreciate the dedication required to deliver the
operational and safety performance of 2024. In addition, their commitment to
delivering our strategic goals and upholding our values was commendable. I
would like to thank our lenders, with whom we have a long-standing
relationship, who continue to support our business with the extension of our
facilities. A special word of thanks to our clients for their continued trust
in Letšeng's diamonds, and to our shareholders for their ongoing support.
Finally, I would like to thank the Government of the Kingdom of Lesotho and
the Government of Botswana for their support.
Clifford Elphick
Chief Executive Officer
12 March 2025
CHIEF FINANCIAL OFFICER'S REVIEW
The Group delivered a pleasing financial performance in 2024, driven by
operational excellence in the face of ongoing pressure on the diamond market.
The unstable global economic conditions and resultant pressure on the diamond
market continued into 2024, despite easing inflation and conservative interest
rate cuts in certain major economies.
Letšeng performed well operationally, achieving or exceeding all mining and
processing guidance metrics (refer to the COO Review on page 40). The increase
in carats sold assisted in setting off lower diamond prices, resulting in
revenue from the sale of rough diamonds of US$152.8 million, achieving an
average price of US$1 390 per carat for the year. In addition,
US$1.4 million of margin uplift was generated, bringing total revenue for the
year to US$154.2 million.
Underlying EBITDA increased to US$29.7 million from US$15.2 million in 2024.
The Group reported a profit attributable to shareholders for the year of
US$2.9 million, equating to a basic profit per share of 2.1 US cents on a
weighted average number of shares in issue of 139.7 million.
The Group ended the year with a cash balance of US$12.9 million and drawn down
facilities of US$20.2 million, resulting in a net debt position of US$7.3
million and available undrawn facilities of US$69.0 million, compared to the
net debt position of US$21.3 million at the end of 2023. The improvement in
net debt of US$14.0 million is a testament to the Group's performance and
resilience despite the ongoing challenges in the diamond market.
Summary of financial performance
Refer to the full annual financial statements from page 106.
US$ million 2024 2023
Revenue from contracts with customers 154.2 140.3
Royalties and selling costs (16.5) (15.3)
Cost of sales1 (100.3) (102.1)
Corporate expenses (excluding depreciation) (7.7) (7.7)
Underlying EBITDA2 29.7 15.2
Depreciation and mining asset amortisation (11.4) (7.3)
Share-based payments (0.5) (0.3)
Other operating expenses (0.9) -
Foreign exchange gain 1.1 2.8
Net finance costs (6.5) (4.7)
Profit before tax for the year 11.5 5.7
Income tax expense (3.4) (4.1)
Profit after tax for the year 8.1 1.6
Non-controlling interests (5.2) (3.7)
Attributable profit/(loss) 2.9 (2.1)
Earnings/(loss) per share (US cents) 2.1 (1.5)
1 Including waste stripping amortisation but excluding depreciation
and mining asset amortisation.
2 Underlying EBITDA as defined in Note 4, Operating profit of the notes to
the consolidated financial statements.
Revenue
Revenue increased 10% compared to 2023, mainly due to a 5% increase in carats
sold of 109 967 carats compared to 104 520 in 2023. Rough diamond revenue of
US$152.8 million (2023: US$139.4 million) was generated at Letšeng, achieving
an average price of US$1 390 per carat (2023: US$1 334 per carat). The 4%
increase in the average price per carat achieved can be attributed to the
improved quality of recoveries and the increased number of larger than 100
carat diamonds sold (13 compared to five in 2023), as prices, on a
like-for-like basis, decreased during the year.
Additional revenue is generated through an arrangement with two diamond
manufacturing customers to supply polished diamonds to some of the world's
most premium luxury brands, and other partnership arrangements. These
agreements allow the Group to share in the margin uplift on the sale of
polished diamonds. In 2024, additional revenue of US$1.4 million (2023: US$0.9
million) was generated from these arrangements.
US$ million 2024 2023
Group revenue summary
Rough diamond sales 152.8 139.4
Polished diamond margin 1.4 0.9
Group revenue 154.2 140.3
Expenditure
Energy costs
Eskom imposed no load shedding for the last nine months of 2024, compared to a
total of 335 days of load shedding in 2023 that necessitated the use of
diesel-powered generators to sustain operations. The decrease in mining
activities due to lower volumes mined (refer to the COO Review on page 40)
further contributed to a significant decrease in diesel consumption during the
year.
The impact was a 6.4 million litre decrease in diesel consumption compared to
the prior year, and despite a 3% increase in the average cost per litre, an
overall decrease of 34% in diesel costs was achieve. In local currency, the
costs decreased to LSL222.6 million (US$12.1 million) from LSL336.0 million
(US$18.2 million) in 2023.
Grid electricity usage increased by 60% due to the increase in Eskom power
availability during the year. Maximum demand utilisation decreased by 4% due
to the effective management of these thresholds. Overall electricity costs
only increased by 10% to LSL60.3 million (US$3.3 million), notwithstanding
increased utilisation and a 9.6% tariff increase.
Overall energy costs, including diesel and electricity, amounted to
LSL283.0 million (US$15.4 million) in 2024 (2023: LSL390.9 million,
US$21.2 million), a 28% decrease from 2023 in local currency. Energy costs as
a percentage of direct cash costs decreased to 22% (2023: 27%), and the energy
cost per tonne treated decreased by 28% to LSL56.38 (US$3.07) from LSL77.79
(US$4.24) in 2023.
Letšeng unit cost analysis
Unit cost per tonne treated Direct cash Non-cash Total Waste cash
costs1 accounting charges operating costs per
and working cost waste tonne
capital movement2 mined
2024 (LSL) 252.39 113.95 366.34 61.87
2023 (LSL) 288.54 85.87 374.41 66.03
% change (13) 33 (2) (6)
2024 (US$) 13.77 6.21 19.98 3.37
2023 (US$) 15.63 4.66 20.29 3.58
% change (12) 33 (2) (6)
1 Direct cash costs represent all operating costs, excluding royalties and
selling costs.
2 Non-cash accounting charges and working capital movement include waste
stripping amortised, inventory and ore stockpile adjustments, and finance
lease costs, and exclude depreciation and mining asset amortisation.
Operating expenditure
Group cost of sales (excluding depreciation) decreased marginally by 2% in
2024 to US$100.3 million from US$102.1 million in 2023.
· Direct cash costs (excluding waste) decreased by 13% to
LSL1 266.7 million (US$69.1 million) compared to LSL1 449.8 million
(US$78.6 million) in 2023. In 2023, these costs were affected by increased
energy costs (detailed above), price increases from suppliers on explosives,
equipment, spare parts and tyres, and additional once-off severance payments
and consulting fees related to the right-sizing of the Letšeng operation.
Direct cash costs per tonne treated decreased by 13% to LSL252.39 (US$13.77)
from LSL288.54 (US$15.63) in 2023, in line with the overall decrease and due
to similar ore tonnes treated during the year of 5.0 million tonnes (2023: 5.0
million tonnes).
· Non-cash accounting charges and working capital movement refers
to waste amortisation, stockpile and diamond inventory movements and interest
and depreciation on IFRS 16 leases. These charges increased by 33% to LSL571.9
million (US$31.2 million) (2023: LSL431.5 million, US$23.4 million), mainly
due to an increase in stockpile and inventory on hand at the end of 2024. This
resulted in diamond inventory and stockpile movement of LSL112.3 million
(US$6.1 million) in the current year compared to a credit to the income
statement of LSL25.6 million (US$1.4 million) in 2023.
· Total operating costs in local currency decreased to
LSL1 838.5 million (US$100.3 million) from LSL1 881.3 million (US$102.1
million) in 2023, which includes the impact of direct cash costs, non-cash
accounting charges and working capital movements detailed above. The unit cost
per tonne treated decreased by 2% to LSL366.34 (US$19.98) per tonne treated
(2023: LSL374.41, US$20.29 per tonne treated), mainly due to the various cost
containment measures implemented during the year, such as the insourcing of
the mining and processing activities.
· Waste cash costs decreased by 43% to LSL335.4 million (US$18.3
million) from LSL583.8 million (US$31.6 million) in 2023, mainly due to the
39% reduction in waste tonnes mined (5.4 million tonnes compared to 8.8
million tonnes in 2023) driven by initiatives such as the steepening of slopes
in the Main pit. The insourcing of mining activities and other cost
containment initiatives, together with reduced diesel consumption resulted in
a 6% decrease in waste cash cost per waste tonne to LSL61.87 (US$3.37) from
LSL66.03 (US$3.58) in 2023, despite the significantly lower waste tonnes
mined.
US dollar-reported costs
Gem Diamonds' revenue is generated in US dollars, while the majority of
operational expenses are incurred in the relevant local currency in the
operational jurisdictions. Local currency rates for the Lesotho loti (LSL)
(pegged to the South African rand) were stronger against the US dollar on
average compared to 2023, although the year ended at weaker levels. This
increased the Group's US dollar-reported costs and decreased local currency
cash flow generation. The average and year-end exchange rates are set out in
the table below:
Exchange rates 2024 2023 % change
LSL per US$1.00
Average exchange rate 18.34 18.45 (1)
Year end exchange rate 18.87 18.29 3
BWP per US$1.00
Average exchange rate 13.56 13.36 1
Year end exchange rate 13.93 13.39 4
GBP per US$1.00
Average exchange rate 0.78 0.80 (3)
Year end exchange rate 0.80 0.78 3
Royalties and marketing costs
In terms of Letšeng's mining lease, royalties are paid to the Government of
the Kingdom of Lesotho on the value of rough diamonds sold. The Group's sales
and marketing operation in Belgium incurs costs relating to diamond selling
and marketing. Royalties and selling costs increased by 7% to US$16.5 million
(2023: US$15.3 million), in line with the increase in rough diamond revenue.
Corporate costs
The technical and administrative office in South Africa and the head office in
the UK provide expertise in all areas of the business to realise maximum value
from the Group's assets. Central costs are incurred in South African rand and
British pounds, respectively.
Corporate costs (excluding depreciation) were maintained at similar levels to
2023 at US$7.7 million. Project costs of US$0.3 million were incurred on the
ongoing sales process of Ghaghoo and investigating external growth
opportunities (2023: US$0.2 million).
Underlying EBITDA1 and attributable profit
Group underlying EBITDA1 increased by 95% to US$29.7 million (2023: US$15.2
million), mainly due to the increase in revenue in the current year. The
profit attributable to shareholders was US$2.9 million, which translates to a
profit of 2.1 US cents per share based on a weighted average number of shares
in issue of 139.7 million.
1 Underlying EBITDA as defined in Note 4, Operating profit of the
notes to the consolidated financial statements.
Statement of financial position - selected indicators
US$ million 2024 2023*
Property, plant and equipment 269.9 298.6
Non-current: receivables and other assets 7.3 4.5
Current: receivables and other assets 6.6 3.6
Inventory 34.1 37.6
Cash and short-term deposits 12.9 16.5
Net income tax (payable)/receivable (6.8) 3.7
Non-current: interest-bearing loans and borrowings (16.6) (5.2)
Current: interest-bearing loans and borrowings (4.4) (33.4)
Net deferred tax liabilities (65.0) (70.4)
Non-current: rehabilitation provisions (12.6) (15.7)
* Certain balances as previously presented were restated. Refer Note 28,
Restatement of prior year balances in the notes to the consolidated financial
statements.
Capital expenditure
Total capital expenditure (excluding waste stripping) was US$5.8 million
during the year (2023: US$30.4 million). In 2023, the mining fleet and
support equipment were acquired for US$22.7 million following the insourcing
of the mining activities at Letšeng. The capital spend in the current year
related to the upgrade of the recovery and sorthouse facilities, the upgrade
of the stores facilities to enhance inventory management, the expansion of the
Patiseng residue storage facility to build necessary capacity, and amounts
relating to the finalisation of the Resource and Reserve Statement that was
published in March 2024.
Cash on hand
The Group ended the year with cash on hand of US$12.9 million (2023:
US$16.5 million) and net debt of US$7.3 million (2023: US$21.3 million),
which reflects an improvement in net debt of US$14.0 million year on year.
Group cash generated by operations was US$68.3 million before capital and
waste investment of US$27.6 million.
Loans and borrowings
The Group-wide debt facilities for Letšeng (LSL450.0 million
(US$23.8 million) and ZAR300.0 million (US$15.9 million)) and Gem Diamonds
(US$30.0 million), which were concluded in December 2021 for an initial
three-year period, were due to expire in December 2024. These facilities were
successfully extended during the year for a further 24-month period, extending
the expiry date to 21 December 2026.
Letšeng has a ZAR100.0 million (US$5.3 million) general banking facility
with Nedbank Limited (acting through its Nedbank Corporate and Investment
Banking division), which is reviewed annually. The facility was utilised from
time to time during the year and was fully repaid by year end.
The funding partners for the existing facilities are Nedbank, Standard Bank
and Firstrand Bank (through their respective operations). Nedbank's portion of
the funding, totalling US$29.4 million, is a sustainability-linked loan
(SLL), an innovative structure that links the margin and resultant interest
rate on the SLL to the Group's ESG performance. The margin on the SLL
decreases subject to the Group meeting certain carbon reduction and water
conservation KPIs that are aligned with the Group's sustainability strategy.
These KPIs are assessed at the end of every financial year.
The two KPIs included for the SLLs both need to be met at each measurement
date before the margin reduction on these loans becomes effective. At 31
December 2023 and 31 December 2024, both the carbon emission and water
conservation KPIs were met, and therefore the margin reduction was applied to
outstanding balances in 2024 and will apply to outstanding balances in 2025.
In 2022, Letšeng implemented a four-and-a-half-year project facility
agreement with Nedbank for the replacement of the PCA for an amount of
ZAR132.0 million (US$7.2 million). The facility is underwritten by the Export
Credit Insurance Corporation of South Africa (ECIC). Quarterly repayments of
this facility commenced in Q1 2024, and at the end of 2024 an amount of
LSL94.3 million (US$5.0 million) was outstanding. The facility expires in
May 2027.
On 15 May 2024, Letšeng entered into a secured five-year term loan facility
of LSL200.0 million (US$10.6 million) jointly with Standard Lesotho Bank and
Nedbank Lesotho. The loan is secured by a special notarial bond over the
mining fleet and equipment acquired as part of the insourcing of the mining
activities at the end of 2023. The loan is repayable in equal monthly
instalments that commenced in May 2024, and expires on 30 April 2029.
At year end, the Group had utilised facilities of US$20.2 million, resulting
in a net debt position of US$7.3 million and available facilities of
US$69.0 million. Gem Diamonds, the Company, ended the year with
US$6.0 million of its facility drawn down (2023: US$6.0 million) and
US$24.0 million available. Letšeng ended the year with no utilisation of its
revolving credit facility (2023: US$24.6 million) and the full
US$39.7 million available.
Summary of loan facilities as at 31 December 2024
Company Term/ Lender Interest rate Amount Drawn down/ Available
description/ US$ million Balance due US$ million
expiry US$ million
Gem Diamonds Limited Extended two-year revolving credit facility Nedbank Facility A 30.0 6.0 24.0
(US$30 million):
Expires Standard Bank
21 December 2026
Term SOFR (4.33%) + 5.21%
Firstrand Bank
Letšeng Diamonds Extended two-year revolving credit facility Standard Lesotho Bank Facility B (LSL450 million): Central Bank of Lesotho rate (7.75%) + 3.25% 23.8 - 23.8
Expires Nedbank Lesotho
21 December 2026
First National Bank of Lesotho
Firstrand Bank
Nedbank Facility C (ZAR300 million): South African JIBAR (8.35%) + 3.00% 15.9 - 15.9
Letšeng Diamonds Four-and-a-half-year project facility Nedbank ZAR132 million 7.0 5.0 -
Expires Export Credit Insurance Corporation South African JIBAR (8.35%) + 2.50%
31 May 2027
Letšeng Diamonds Five-year term loan facility Standard Lesotho Bank LSL200 million 10.6 9.2 -
Expires Nedbank Lesotho Lesotho prime rate (11.25%) minus 1.5%
30 April 2029
Letšeng Diamonds General banking facility Nedbank ZAR100 million South African 5.3 - 5.3
Prime Lending Rate (11.25%) minus 0.70%
Reviewed annually
Total 92.6 20.2 69.0
Ghaghoo
The terms to relinquish the mining licence and hand over the Ghaghoo mine site
to the Botswana Department of Mines have been agreed, and the process is
expected to be finalised by 31 March 2025.
Care and maintenance cash costs decreased to US$1.6 million in 2024 (2023:
US$1.8 million), which is included in other operating expenses in the
financial results. An additional US$0.2 million (2023: US$0.2 million) on the
unwinding of the environmental rehabilitation provision resulted in a non-cash
interest charge which is included in finance costs. In addition, a US$0.6
million reduction in the rehabilitation provision has been included in
operating income and expenses.
The site has been cleaned up in preparation for the handover and will be
appropriately maintained until the process has been finalised.
Insurance
The perception of risk in the mining industry has improved, with insurers
offering more competitive rates for mining companies. In 2024, insurance
premiums for the Group increased marginally by 2% compared to 2023. The Group
is in the third year of a five-year multi-aggregate insurance policy to
mitigate the increased risk of higher deductibles in the unlikely event of an
unexpected loss.
Letšeng's business interruption claim for insured losses arising out of the
COVID-19-related shutdown in 2020, when the mine was required to be placed on
care and maintenance, is ongoing.
Share-based payments
The share-based payment charge for the year was US$0.5 million (2023: US$0.3
million). In line with the approved 2021 Remuneration Policy, on 17 April
2024, 1 996 048 nil-cost options were granted to certain key employees and
Executive Directors under the GDIP. Refer to Note 26, Share-based payments on
page 159 for more detail.
TAXATION
The Group applies all relevant principles in accordance with prevailing
legislation when assessing its tax obligations. The Group's effective tax rate
was 29.4%. Most of the Group's taxes are incurred in Lesotho, which has a
corporate tax rate of 25%. The effective tax rate is above the Lesotho
corporate tax rate mainly due to deferred tax assets not recognised on losses
incurred in other operations, the impact of the alignment of foreign tax at
different rates and withholding taxes paid, partially offset by a reduction of
the withholding tax provision on unremitted earnings. Refer to Note 6, Income
tax expense on page 139 for more detail.
The Group continues to pursue a long-standing legal matter relating to an
amended tax assessment that was issued to Letšeng by the Revenue Services
Lesotho in December 2019, contradicting the application of certain tax
treatments in the current Lesotho Income Tax Act, 1993. We expect to pursue
this matter in the courts in 2025. We have sought senior legal counsel, and
their advice indicates good prospects for success. Refer to the accounting
treatment for this matter, Note 1.2.26, Critical accounting estimates and
judgements, for further detail.
OUTLOOK
The diamond market is expected to remain under pressure, with signs of a
modest recovery in diamond prices seen in early 2025. The implementation of
Letšeng's updated mine plan will present material challenges for the
business, with no availability of Satellite Pipe ore until the end of 2029
while the steeper slopes are implemented. During this period, our focus will
remain on factors within our control, including cost containment, sound
capital allocation decisions, and maintaining operational efficiencies while
responsibly managing our cash resources.
Michael Michael
Chief Financial Officer
12 March 2025
CHIEF OPERATING OFFICER'S REVIEW
The Group delivered strong operational results in 2024, driven by a steadfast
focus on efficiency and commitment to safety.
The benefits of the structural changes implemented in 2023 - including
management, workforce, and operational methodology adjustments at Letšeng -
are evident in the 2024 operational results. Continuous optimisation of
Letšeng's mine plan has significantly reduced waste volumes and, together
with numerous initiatives implemented during the year to reduce costs, has
strengthened the operation's resilience to withstand the challenging
conditions that the diamond industry is facing.
As we continue to prioritise the safety and well-being of our workforce, we
are proud to report that we maintained an exceptional safety performance in
2024. Our AIFR reached a record low of 0.61, while we achieved an impressive
LTIFR of 0.18. These results reflect our unwavering commitment to a culture of
safety and operational excellence.
We remain fully committed to our decarbonisation target of a 30% reduction in
Scope 1 and 2 emissions by 2030, compared to our 2021 baseline. For a
comprehensive overview of our 2024 performance and progress toward this
target, refer to the Climate Change Report on page 47.
Following the release of the NI 43-101 Technical Report, which includes
Letšeng's 2024 Resource and Reserve Statement, in March 2024 (available on
our website at www.gemdiamonds.com (http://www.gemdiamonds.com) ), a key focus
this year was optimising Letšeng's long-term life of mine plan. Notably, a
steeper open pit concept was approved for the final cutback of the Satellite
pit, leading to an updated mine plan that was communicated to the market in
December 2024. For full details on Letšeng's updated mine plan, refer to page
43.
Jaco Houman joined the Group in 2016 and has been part of Executive Management
as Senior Manager: Technical and Projects since 2021. Jaco has decided to
pursue other opportunities and will be leaving in March 2025. I would like to
thank Jaco for his valuable contributions during his time with us and wish him
every success in his new endeavours.
GROUP SAFETY PERFORMANCE
Safety performance Unit 2024 2023 % change
Fatalities Number 0 0 -
LTIs Number 3 2 50
LTIFR 200 000 man hours 0.18 0.10 80
AIFR 200 000 man hours 0.61 0.67 (9)
Our safety culture is rooted in a commitment to zero harm. In 2024, the Group
maintained exceptional safety standards with zero fatalities (2023: zero) and
three LTIs (2023: two). We achieved a record-low AIFR of 0.61 (2023: 0.67),
though the LTIFR rose slightly to 0.18 (2023: 0.10) due to an additional LTI
and a 22% reduction in man hours from the workforce right-sizing and the
insourcing of mining and processing activities.
A dedicated safety programme, guided by independent subject matter experts,
provided mentorship to senior management on best-practice safety leadership,
and a critical control management strategy has been successfully implemented.
Our safety performance reflects the ongoing dedication of our executive and
operational management in relentlessly executing the safety maturity strategy,
which focuses on critical risk mitigation, enhanced leadership visibility, and
engaging the workforce to implement both engineering and behaviour-based
safety controls to prevent the occurrence of safety incidents.
The safety of our workforce remains our highest priority and we will continue
to strengthen our safety culture.
OPERATIONAL PERFORMANCE
Letšeng
The positive outcomes of initiatives implemented over the past 24 months are
clearly reflected in Letšeng's overall operational performance in 2024. These
efforts included the successful insourcing of key functions, including mining,
processing, and laundry and housekeeping services. Management and the
workforce are strategically aligned to continually improve operational
efficiencies while maintaining our focus on cost containment.
The initiative introduced in H2 2023 to control the ore feed rate into the
treatment plants continued through 2024. This approach yielded positive
results, with significant improvement seen in plant stability and an increase
in overall plant utilisation to 80% in 2024 (up from 78% in 2023 and 75% in
2022).
External factors, such as a reprieve from Eskom load shedding in the last nine
months of 2024, also contributed to enhanced plant stability, eliminating the
need for diesel-powered generator switch-overs and reducing both diesel
consumption and associated costs. For further details on energy cost
reductions, refer to the CFO Review on page 34.
Together with several other optimisation and cost-containment initiatives,
these efforts enabled Letšeng to effectively navigate the challenging market
conditions of 2024.
KPI Unit 2024 2023 % change
Waste mined tonnes 5 420 567 8 841 628 (39)
Ore mined tonnes 5 052 263 5 419 033 (7)
Ore treated tonnes 5 018 739 5 024 665 -
Carats recovered(1) carats 105 012 109 656 (4)
Grade cpht 2.09 2.18 (4)
Carats sold carats 109 967 104 520 5
Average price per carat US$/carat 1 390 1 334 4
1 Includes carats produced from the Letšeng plants and the fines tailings
treatment plants.
Waste tonnes mined
Through further short-term optimisation of the mine plan, total waste tonnes
mined in 2024 decreased by 39% to 5.4 million tonnes from 8.8 million tonnes
in 2023. This welcome reduction in waste mining aligned with the planned 2024
waste mining profile and was complemented by the benefits of initiatives
implemented in 2023, including the redesign of the Cut 4 West cutback in the
Main pit to minimise waste. The insourcing of mining services, coupled with
the successful implementation of a fit-for-purpose fleet management system,
significantly improved mining fleet productivity, availability, and
utilisation, further optimising waste mining operations and reducing costs.
Ore mined
Total ore tonnes mined in 2024 decreased 7% to 5.1 million tonnes from 5.4
million tonnes in 2023. This was in line with the 2024 mine plan, taking into
account the reduced ore treatment capacity following the initiative to reduce
the ore feed rate into the plants in H2 2023. The higher volumes in 2023 were
also driven by increased mining to the surface ore stockpiles.
Ore treated
Letšeng's two plants treated 5.0 million tonnes of ore in 2024 (2023: 5.0
million tonnes). The similar treatment volumes were driven by improved overall
plant utilisation in 2024, offset by the rate slow-down in the treatment
plants to enhance stability. Ore contribution from the Main Pipe totalled
2.8 million tonnes, while the Satellite Pipe contributed 2.2 million tonnes,
in line with the planned ore distribution between Main and Satellite Pipes for
2024.
Total carats recovered
Total carats recovered in 2024 decreased by 4% to 105 012 carats (2023:
109 656 carats) due mainly to the higher ore contribution from the
lower-grade Main Pipe.
4 484 carats (2023: 5 206 carats) were recovered by the fines tailings mobile
XRT sorting machine, which re-treated current fines recovery tailings. No
tailings were fed through the coarse tailings mobile XRT sorting machine
during the year, and it therefore recovered no carats in 2024 (2023:
367 carats).
The overall grade for 2024 was 2.09 cpht, a 4% decrease from 2.18 cpht in
2023. The lower grade achieved was in line with grade expectations for the ore
treated in 2024. The lower grade recovered in 2024 is primarily attributable
to the higher ore contribution from the lower-grade Main Pipe, which accounted
for 56% of ore treated during the year (2023: 41%).
Capital projects
Capital expenditure in 2024 was carefully scrutinised to ensure strict
alignment with operational needs and cash management requirements, with a
focus on necessity. Material capital projects at Letšeng in 2024 included:
· completion of the NI 43-101 Technical Report in March 2024,
including Letšeng's 2024 Resource and Reserve Statement;
· necessary modifications and upgrades to the recovery plant and
the fines, coarse and final sort;
· development of the next phase of the Patiseng coarse tailings
extension project to ensure future course tailings deposition capacity; and
· necessary upgrades to storage facilities.
Details of overall costs and capital expenditure incurred at Letšeng are
included in the CFO Review on page 33.
The planned capital spend at Letšeng for 2025 includes:
· the acquisition of essential mining fleet equipment to implement
and optimise the mining process in line with the updated mine plan;
· the removal of the scrubbing units in both treatment plants, to
be replaced with pre-primary screens that will enhance ore washing and sizing
before the primary screens (this being a more appropriate and cost-effective
solution to the replacement of the scrubbing units);
· the relocation of both the fines and coarse Tomra XRT units for
secure re-treatment of fines and coarse recovery tailings; and
· the purchase of a dry rotary "trommel" unit for sorting
high-value Satellite and Main Pipe stockpile material, heavily diluted by
basalt, for treatment.
Large diamond recoveries
In 2024, Letšeng recovered 13 diamonds greater than 100 carats, a significant
increase compared to five in 2023. Since 2006, a total of 144 diamonds
exceeding 100 carats have been recovered. The total number of diamonds greater
than 10 carats increased by 1% year on year, with notable gains in the 30 to
60 carat and over 100 carat size categories. Additionally, 23 diamonds sold
for over US$1.0 million each in 2024, generating US$63.7 million in revenue.
Number of large diamond recoveries 2024 2023 FY average
2008 - 2024
>100 carats 13 5 8
60 - 100 carats 8 13 18
30 - 60 carats 90 71 77
20 - 30 carats 100 107 113
10 - 20 carats 466 477 450
Total diamonds >10 carats 677 673 666
Diamond sales
Eight large and four small rough diamond tender viewings were held in Antwerp
during the year.
A total of 109 967 carats were sold in 2024 (2023: 104 520), and Letšeng
generated rough diamond revenue of US$152.8 million (2023: US$139.4 million)
at an average price of US$1 390 per carat (2023: US$1 334). The slightly
higher US$ per carat and 10% increase in revenue achieved in 2024 were driven
by the increased carats sold, particularly from diamonds greater than 100
carats, despite the ongoing downturn in the diamond market, as discussed in
the CEO Review on page 30.
The Group supports the GIA's blockchain technology to inform and assure
consumers about the ethical and socially supportive footprint of our diamonds.
Blockchain technology can link the source of rough diamonds to the final
polished diamonds, thereby proving their authenticity, provenance and
traceability and supporting ethical sourcing and processing in the diamond
value chain.
Long-term mine plan
The long-term mine plan for Letšeng incorporated key elements from the 2024
Resource and Reserve Statement, published in March 2024, and is available on
the Group's website at www.gemdiamonds.com
(https://www.gemdiamonds.com/operations.php#mine2) . Throughout 2024, a key
focus was the ongoing review of the mining strategy for both the Main and
Satellite Pipes, with efforts centred on optimising operations to reduce
waste, enhance efficiency, lower costs and ensure long-term sustainability.
Satellite Pipe review
Letšeng's previous long-term mine plan was based on a final cutback of the
Satellite pit (Satellite Cut 6 West (SC6W)) being mined using conventional
basalt slopes (28-metre benches and 10-metre berms), resulting in a stripping
ratio of approximately 7:1. The conventional pit design was reviewed to reduce
waste stripping, lower costs and decrease time to access associated ore. A
redesigned steeper slope pit design in the competent basalt hard-rock, with
28-metre benches and 7.5-metre berms, along with some quadruple benching,
underwent a thorough review by internal and external geotechnical and mining
experts. Given the reduced rockfall catchment in the revised design, an
independent panel of specialists in mine planning, geotechnical, mining and
rock blasting engineering was engaged to rigorously review the pit and lateral
support design. Following Board approval, the updated mine plan for SC6W was
formally communicated to the market on 3 December 2024.
The steeper slope pit design was limited to the competent basalt hard-rock
(waste) sectors of SC6W. Geotechnical experts successfully completed an
overall pit and inter-ramp slope stability analysis, which was used to design
the necessary lateral support and potential rockfall mitigation measures.
These measures include:
· improved blasting techniques and mechanical scaling;
· strategically placed catchment fences;
· rockfall barriers;
· wire-mesh draping; and
· removal, bolting and/or anchoring of unstable rock wedges/key
blocks.
These measures will be implemented according to design specifications and as
needed to ensure safe and responsible mining through the mitigation of
potential rockfall.
The approved redesign of a steeper SC6W reduces waste stripping by 65.8
million tonnes compared to the previous conventional design. This has resulted
in a significant saving of approximately US$180.0 million in future
waste-stripping costs. A reduced mining rate and the cost of implementing the
required additional support measures, estimated at US$15.0 million over the
five-year waste-stripping period, have been included in the updated plan.
The pit slope design for the kimberlite (ore) sectors of SC6W remains
unchanged, following the current conventional slope angle (14-metre benches
and 9-metre catchment berms), as applied in the current Satellite pit cutback
(SC5W). The revised SC6W waste slope design has resulted in a reduction of 2.4
million tonnes of ore compared to the previous design. An opportunity to
steepen the kimberlite slopes is currently being evaluated, which could
provide access to additional ore with minimal to no further waste stripping
required.
Main Pipe review
The updated long-term mine plan now incorporates 10.8 million tonnes of
additional Main Pipe ore without any additional waste stripping required,
thereby extending the life of the Main Pipe by approximately two years. The
additional ore relates to 9.9 million tonnes of inferred ore resource and 0.9
million tonnes of unclassified ore from the K2D Main Pipe ore domain, which
are both accessible within the current pit design, with no further incremental
stripping of waste.
The 9.9 million tonnes of inferred ore now included in the plan occurs at
depth, where 1.5 million tonnes will be mined in 2030 and 2031 from the bottom
benches of the MC4E cutback, and 8.4 million tonnes will be mined on the
bottom benches of the MC4W cutback from 2037 to 2039. A programme to formally
upgrade the classification of this inferred ore resource to indicated is being
assessed.
The inclusion of 0.9 million tonnes of unclassified K2D ore was a result of
successful discrete sampling during the year, and the performance of this ore
domain will continue to be monitored as mining progresses. This ore is
currently being mined in the MC4E cutback until 2028.
The 9.9 million tonnes of included inferred ore resource adds approximately
165.1k carats while the 0.9 million tonnes of unclassified K2D ore adds
approximately 17.2k carats to the updated mine plan.
Updated long-term mine plan
The updated long-term mine plan includes SC5W, MC4E, MC4W, the newly
redesigned SC6W based on steeper slopes, and an updated plant throughput rate
to life of mine of 5.1 million tonnes per annum. Waste stripping of the SC6W
cutback is currently scheduled to commence during the second half of 2025,
with initial ore scheduled to be available from the end of 2029, ramping up to
an extraction rate of 2.5 million tonnes per annum from 2031 to the life of
cutback.
In response to prevailing economic conditions in the diamond industry, the
long-term mine plan is under continuous review to identify optimisation
opportunities and ensure the viability of each cutback along with its impact
on the overall mine value. While flexibility to access additional ore in the
Main Pipe has been incorporated, the final cutback in the Main pit (MC4W) is
being reassessed. Specifically, we are exploring whether applying a steeper
slope design, similar to the approved SC6W steeper slope design in the
hard-rock basalt, could enhance the economic margin of this final cutback by
reducing waste and/or increasing ore. Results from this assessment are
expected in H2 2025.
In addition, our efforts remain focused on maximising the extraction of
high-value ore. We are actively exploring all opportunities to recover
additional ore from the bottom of SC5W as the cutback approaches its
completion in H1 2025. Early indications suggest that further Satellite ore
could be accessed by making design adjustments to the bottom of the SC5W pit,
with potential recovery occurring in H2 2025 and possibly extending into 2026.
However, this could delay the commencement of waste mining in SC6W until 2026.
Despite this, initial SC6W lateral support work above the starting elevation
of SC6W will continue as planned.
Ghaghoo
The terms for the handover of the Ghaghoo site and the relinquishment of the
mining licence to the Botswana Department of Mines have been finalised.
Partial rehabilitation and extensive site clean-up activities, which began in
the first half of 2023, have been completed safely and cost-effectively.
Salvage values from redundant infrastructure, equipment, and scrap metal
contributed to offsetting the rehabilitation and clean-up costs.
The required decommissioning and removal of the processing plant and
associated infrastructure started in August 2024 and was successfully
completed by year end. Once the final clean-up and the removal of related
civils have been completed, and following a final site inspection by the
Department of Mines and the Department of Environmental Affairs, scheduled for
March 2025, the Ghaghoo mining licence will be formally relinquished and the
site handed over.
We are pleased to report that no fatalities, no LTIs and no instances of
environmental disturbance were recorded at Ghaghoo in 2024.
OUR PLANS FOR 2025
We have several operational objectives for 2025. These include:
· Implementation of the updated mine plan, including the steeper
conventional concept in Satellite Cut 6 West.
· Extend the life of SC5W for additional Satellite Pipe ore in 2025
and potentially 2026.
· An enhanced focus on operational efficiencies while closely
managing operating costs and capital expenditure.
· Investing in appropriate renewable and/or alternative energy
sources. Viable renewable and/or alternative energy for the mine operations
remains a challenge at Letšeng.
DIRECTORS' REPORT
The Directors are pleased to submit the financial statements of the Group for
the year ended 31 December 2024.
As a British Virgin Islands-registered company, Gem Diamonds Limited (company
registration number: 669758) is not required to conform with the Companies
Act, 2006. The Directors have elected to conform with certain of these
requirements.
Accordingly, Directors must present a Strategic Report and a Directors' Report
to inform shareholders of the Group's performance and prospects and help them
evaluate whether the Directors performed their fiduciary duty. The Annual
Report and Accounts 2024 discloses how the Directors have performed their
duty to ensure the Group's continued success and sustainability, in line with
the Companies Act, 2006.
In line with Disclosure Guidance and Transparency Rules (DTR 4.1.5R(3) and DTR
4.1.8R), the required content of the Annual Financial Report and Management
Report can be found in the Strategic Report (page 1), the Performance Review
(page 29), the Governance section (page 53), the Directors' Report and other
sections of the Annual Report and Accounts 2024 as indicated by reference.
The Strategic Report can be found on pages 1 to 53. This will provide
shareholders with a balanced assessment of the Group's business including a
description of its principal risks and uncertainties. It may not be relied
upon by anyone, including the Company's shareholders, for any other purpose.
Forward-looking statements
The Strategic Report and other sections of this report contain forward-looking
statements. Forward-looking statements, by their nature, involve several
risks, uncertainties and future assumptions because they relate to events
and/or depend on circumstances that may or may not occur in the future. The
actual results and outcomes may differ materially from those expressed or
implied by the forward-looking statements. No assurance can be given that the
forward-looking statements in the Strategic Report will be realised.
Statements about the Directors' expectations, beliefs, hopes, plans,
intentions and strategies are subject to change and are based on expectations
and assumptions about future events, circumstances and other factors which
are, in many instances, outside the Company's control.
The information in the Strategic Report was prepared based on the knowledge
and information available to the Directors at the time of its preparation. The
Company is under no obligation to update or revise the Strategic Report during
2025. The expectations set out in the forward-looking statements are
reasonable but may be influenced by several variables which could cause actual
results or trends to differ materially. Forward-looking statements need to be
read in context with actual historic information provided. The Company's
shareholders are cautioned not to place undue reliance on the forward-looking
statements. Shareholders should note that the Strategic Report has not been
audited.
CORPORATE GOVERNANCE
DTR 7.2 requires certain information to be included in a corporate governance
statement set out in the Directors' Report. The Group has an existing practice
of issuing a separate Corporate Governance Code Compliance Report as part of
its Annual Report and Accounts. The information required by the Disclosure
Guidance and Transparency Rules and the UK Financial Conduct Authority's
Listing Rules (UKLR 6.6) is located on pages 53 to 101.
DIRECTORS
The Directors, as at the date of this report, are listed on pages 171 to 173
together with their biographical details. Details of the Directors' interests
in shares and share options of the Company can be found on page 99.
Directors who held office during the year and date of appointment
Appointment
Executive Directors
C Elphick 20 January 2006
M Michael 22 April 2013
Non-Executive Directors
H Kenyon-Slaney 6 June 2017
M Brown 1 January 2018
M Lynch-Bell 15 December 2015
M Maharasoa 1 July 2019
R Kainyah 1 May 2021
Appointment and re-election of Directors
The Board's formal Selection and Appointment Policy ensures that the procedure
for appointing new Directors is formal, rigorous and transparent, and
appointments are made on merit, against objective criteria. The Nominations
Committee makes appointments based on merit while considering diversity (of
gender, social and ethnic background), cognitive and personal strengths and
specialist skill sets.
Michael Lynch-Bell, the Senior Independent Director (SID) and Chair of the
Audit and Remuneration Committees, is retiring on 31 March 2025. The Board has
appointed Janet Blas as the new non-Executive Director effective 1 April 2025.
Janet will also take up the position of Chair of the Audit Committee, while
Rosalind Kainyah will be succeeding Michael as SID and Chair of the
Remuneration Committee.
The Articles of Association (82) provide that a third of Directors retire
annually by rotation and, if eligible, offer themselves for re-election.
However, in accordance with the Code, all the Directors retire at the AGM and,
subject to being eligible, offer themselves for election or re-election.
Payments for loss of office due to change of control
The basis for payments for loss of office to Executive Directors due to a
change in control can be found on page 88.
PROTECTION AVAILABLE TO DIRECTORS
By law, the Directors are ultimately responsible for most aspects of the
Group's business dealings. This means they face potentially significant
personal liability under criminal or civil law, or the UK Listing, Prospectus
and Disclosure and Transparency Rules, and face a range of penalties including
private or public censure, fines and/or imprisonment. In line with normal
market practice, the Group understands that it is in its best interests to
protect its Board members from the consequences of innocent error or omission.
This allows the Group to attract prudent individuals to act as Directors.
The Group maintains, at its expense, a Director and Officer's liability
insurance policy to provide indemnity, in certain circumstances, for the
benefit of Directors and other Group employees.
Refer to the Corporate Governance statement on page 62 for further details.
DIRECTORS' INTERESTS
No Director had, at any time during the year, a material interest in any
contract of significance in relation to the Company's business. The interests
of Directors in the shares of the Company are included on page 99.
SUPPLIERS AND CUSTOMERS
The Group engages extensively with suppliers and contractors to ensure
alignment, mutual understanding and the sustainability of all parties. The
insourcing of Letšeng's processing activities was concluded in December 2024.
The Group maintains sound relationships with its customers by interacting with
customers regularly in the normal course of business and at tenders. The Group
continues to hold regular diamond tender viewings in Antwerp and is able to
rely on its loyal customer base for support while the diamond market remains
under significant pressure. The agreement entered into in 2022 with two
diamond manufacturing customers to supply polished diamonds to some of the
world's most premium luxury brands remained in effect in 2024.
Refer to our stakeholder relationships section on pages 14 to 17 to for more
details on our engagement with suppliers, contractors and customers.
EMPLOYEE POLICIES AND PRACTICES
Equal opportunity is a fundamental principle of Gem Diamonds and the Group is
committed to achieving equality irrespective of gender, religion, race,
marital status or abilities. Refer to page 62 for more details on the Group's
employee policies and practices, specifically with regard to the employment of
persons with disabilities.
RESULTS AND DIVIDENDS
The Group's attributable profit after taxation amounted to US$2.9 million
(2023: loss of US$2.1 million).
The Group's detailed financial results are set out in the financial statements
on pages 106 to 165.
The Board is not proposing a dividend based on the 2024 financial results due
to the volatility in the current macro-economic outlook, the expected impact
thereof on the diamond market, the Group's available cash resources, and the
medium-term business outlook with the implementation of Letšeng's updated
mine plan, which will result in higher-value Satellite Pipe ore only being
accessible from the end of 2029.
The Group's dividend policy considers:
· The Group's cash resources.
· The level of free cash flow and earnings generated during the
year.
· Expected funding commitments for future capital projects.
The Board will consider special dividends in the event of significant diamond
recoveries and will consider further share buyback programmes if appropriate.
GOING CONCERN
The Group business activities, together with the factors likely to affect its
future development, performance and position, are set out in the Strategic
Report on pages 1 to 53. The financial position of the Group, its cash flows
and liquidity position are described in the Strategic Report on pages 33 to
39. In addition, Note 1.2.2, Note 25 and Note 27 to the financial statements
include the Group's going concern policy and its objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to credit and
liquidity risk.
The Directors have a reasonable expectation that the Group has adequate
financial resources to continue operations for the foreseeable future. This
follows a review of forecasts, budgets, timing of cash flows, availability of
debt facilities, various cost-reduction initiatives, sensitivity analyses and
the uncertainties disclosed in this report. For this reason, the Directors
continue to adopt the going concern basis in preparing the Annual Report and
Accounts of the Group.
VIABILITY STATEMENT
In accordance with provision 30 of the 2018 UK Corporate Governance Code, the
Directors have assessed the prospects of the Group over a period longer than
the 12 months required by the "going concern" provision. The viability
statement, aligned with Provision 31 of the UK Corporate Governance Code 2018,
is included in the Strategic Report on page 27.
SUBSEQUENT EVENTS
Refer to Note 29 of the financial statements for details of events subsequent
to the reporting date.
SHARE CAPITAL AND VOTING RIGHTS
Details of the authorised and issued share capital of the Company, including
the rights pertaining to each share class, are set out in Note 15 to the
financial statements.
As at 12 March 2025, there were 139.7 million fully paid ordinary shares of
US$0.01 each in issue and listed on the official list maintained by the
Financial Conduct Authority in its capacity as the UK Listing Authority. In
addition, the Company holds 1.5 million shares as treasury shares acquired
during the share buyback programme that was launched in 2022. These treasury
shares are not entitled to dividends and have no voting rights.
The Company has one class of ordinary shares. Shareholders have the right to
receive notice of and attend, speak and vote at any general meeting of the
Company. Shareholders may be present in person (or, being a corporation, by
representative) or by proxy at a general meeting. Every shareholder present in
person (or, being a corporation, by representative) or by proxy will have one
vote in respect of every ordinary share they hold. The appointment of a proxy
to vote at a general meeting must be received no less than 48 hours before the
meeting's appointed time.
Shareholders have the right to participate in dividends and other
distributions according to their respective rights and interests in the profit
of the Company.
No shareholders have any special rights with regard to the control of the
Company. The Company is not aware of any agreements between shareholders which
may result in restrictions on transfers or voting rights, save as mentioned
below.
There are no restrictions on the transfer of ordinary shares other than:
· As set out in the Company's Articles of Association.
· Certain restrictions may from time to time be imposed by laws and
regulations.
· Pursuant to the Company's share dealing code, whereby the
Directors and employees of the Company require approval to deal in the
Company's ordinary shares.
At the AGM held in June 2024, the Board noted the proportion of the votes cast
against the resolution referring to the authority of Directors to allot shares
(Resolution 13 passed with 69.9% of participating shareholders voting in
favour). The CEO met the significant shareholder who voted against Resolution
13 to discuss their voting policy, and although the shareholder has a standing
position on these resolutions, the Board will regularly consider its approach
to this matter. The resolution reflected UK-listed company market practice and
the Board considers the flexibility afforded by the authority to allot shares
to be in the best interest of the Company.
At the same AGM, shareholders authorised the Company to make on-market
purchases of up to 13 969 001 of its ordinary shares, representing
approximately 10% of the Company's issued share capital at that time. In 2022,
the Company purchased 1 520 170 of its ordinary shares, which are being held
as treasury shares and may be used to settle ESOP and GDIP awards.
At the 2025 AGM, shareholders will be requested to renew this authority. The
Directors continue to consider various options and keep the authorisation
under regular review. The 2025 Notice of AGM will set out the details
regarding exercising voting rights and proxy appointments.
MAJOR INTERESTS IN SHARES
Details of the major interests (at or above 3%) in the issued ordinary shares
of the Company are set out in the Strategic Report on page 15.
ARTICLES OF ASSOCIATION
Any proposed amendments to the Articles of Association of the Company need to
be approved by shareholders by special resolution.
RESOURCE DEVELOPMENT
The NI 43-101 Technical Report containing Letšeng's 2024 Resource and Reserve
Statement was published in March 2024 and is available on the Group's website
at www.gemdiamonds.com (http://www.gemdiamonds.com) . Following the approval
of the mine optimisation plan to steepen the slopes in the Satellite pit, an
updated mine plan has been designed which will significantly decrease waste
volumes. The COO Review on page 43 provides more detail on this.
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
Read more about the Group's 2024 Sustainability Performance, including CSI
investment, community participation and environmental management, in our
Sustainability Report 2024 which is available at www.gemdiamonds.com.
POLITICAL DONATIONS
The Group made no political donations or incurred any political expenditure
during 2024.
TCFD, CARBON EMISSIONS AND ENERGY CONSUMPTION SUMMARY
Information on the Group's decarbonisation strategy, adoption of the TCFD
recommendations, carbon footprint and energy consumption in 2024 can be found
in our Sustainability Report, which is available at www.gemdiamonds.com
(file://///g4/Gemdiamond/Accounts1/Reporting%20Periods/2024/Full%20year/Annual%20Report/Front%20end/RNS/www.gemdiamonds.com)
, and Climate Change Report on page 47.
DISCLOSURE OF INFORMATION TO AUDITOR
Each of the persons who are Directors at the time when this Directors' Report
is approved confirms that, so far as they are aware, there is no relevant
audit information of which the Company's auditor is unaware and that they have
taken all the steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
By order of the Board
Harry Kenyon-Slaney
Non-Executive Chairperson
12 March 2025
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS FOR THE YEAR ENDED 31 DECEMBER 2024
Notes 2024 2023
US$'000 US$'000
Revenue from contracts with customers 2 154 212 140 287
Cost of sales (111 400) (109 112)
Gross profit 42 812 31 175
Other operating (expense)/income 3 (999) 7
Royalties and selling costs (16 477) (15 340)
Corporate expenses (7 914) (7 905)
Share-based payments 26 (516) (332)
Foreign exchange gain 4 1 086 2 775
Operating profit 4 17 992 10 380
Net finance costs 5 (6 531) (4 696)
- Finance income 875 617
- Finance costs (7 406) (5 313)
Profit before tax for the year 11 461 5 684
Income tax expense 6 (3 375) (4 090)
Profit for the year 8 086 1 594
Attributable to:
Equity holders of parent 2 894 (2 125)
Non-controlling interests 5 192 3 719
Earnings per share (cents) 7
- Basic earnings/(loss) for the year attributable to ordinary equity holders 2.1 (1.5)
of the parent
- Diluted earnings/(loss) for the year attributable to ordinary equity holders 2.0 (1.5)
of the parent
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
2024 2023
US$'000 US$'000
Profit for the year 8 086 1 594
Items that could be reclassified to profit or loss in the future:
Exchange differences on translation of foreign operations, net of tax (7 187) (16 849)
Other comprehensive loss for the year, net of tax (7 187) (16 849)
Total comprehensive loss for the year 899 (15 255)
Attributable to:
Equity holders of parent (2 159) (14 082)
Non-controlling interests 3 058 (1 173)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
2024 2023*
Notes US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 8 269 859 298 594
Right-of-use assets 9 3 871 4 746
Intangible assets 10 10 118 10 440
Receivables and other assets 12 7 341 4 487
Deferred tax assets 21 4 313 6 814
295 502 325 081
Current assets
Inventories 13 34 064 37 633
Receivables and other assets 12 6 633 3 631
Income tax receivable 19 24 4 631
Cash and short-term deposits 14 12 878 16 503
53 599 62 398
Total assets 349 101 387 479
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 15 1 413 1 413
Treasury shares 15 (1 157) (1 157)
Share premium 885 648 885 648
Other reserves 15 (255 334) (250 797)
Accumulated losses (487 990) (490 884)
142 580 144 223
Non-controlling interests 80 320 81 550
Total equity 222 900 225 773
Non-current liabilities
Interest-bearing loans and borrowings 16 16 633 5 156
Lease liabilities 17 2 246 3 786
Provisions 20 12 614 15 664
Deferred tax liabilities 21 69 281 77 251
100 774 101 857
Current liabilities
Interest-bearing loans and borrowings 16 4 397 33 411
Lease liabilities 17 2 517 2 164
Trade and other payables 18 11 665 23 356
Income tax payable 19 6 848 918
25 427 59 849
Total liabilities 126 201 161 706
Total equity and liabilities 349 101 387 479
* Certain balances as previously presented were restated. Refer Note 28,
Restatement of prior year balances.
Approved by the Board of Directors on 12 March 2025 and signed on its behalf
by:
C Elphick
M Michael
Director
Director
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
Attributable to the equity holders of the parent
Issued capital Share premium Treasury shares Other reserves1 Accumulated (losses)/retained earnings Total Non-controlling interests Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2024 1 413 885 648 (1 157) (250 797) (490 884) 144 223 81 550 225 773
Total comprehensive (loss)/profit - - - (5 053) 2 894 (2 159) 3 058 899
Profit for the year - - - - 2 894 2 894 5 192 8 086
Other comprehensive loss - - - (5 053) - (5 053) (2 134) (7 187)
Share-based payments (Note 26) - - - 516 - 516 - 516
Dividends paid - - - - - - (4 288) (4 288)
As at 31 December 2024 1 413 885 648 (1 157) (255 334) (487 990) 142 580 80 320 222 900
As at 1 January 2023 as previously presented 1 410 885 648 (1 157) (239 169) (494 113) 152 619 80 428 233 047
Restatement - Refer Note 28 - - - - 5 354 5 354 2 295 7 649
Restated Balance at 1 January 2023 1 410 885 648 (1 157) (239 169) (488 759) 157 973 82 723 240 696
Total comprehensive loss - - - (11 957) (2 125) (14 082) (1 173) (15 255)
(Loss)/profit for the year - - - - (2 125) (2 125) 3 719 1 594
Other comprehensive loss - - - (11 957) - (11 957) (4 892) (16 849)
Share capital issued (Note 15) 3 - - (3) - - - -
Share-based payments (Note 26) - - - 332 - 332 - 332
As at 31 December 2023* 1 413 885 648 (1 157) (250 797) (490 884) 144 223 81 550 225 773
1 Other reserves relate to Foreign currency translation reserves and
Share-based equity reserves. Refer Note 15, Issued share capital and reserves
for further detail.
* Certain balances as previously presented were restated. Refer Note 28,
Restatement of prior year balances.
CONSOLIDATED STATEMENT
OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024
2024 2023
Notes US$'000 US$'000
Cash flows from operating activities 51 195 35 020
Cash generated by operations 22.1 68 306 56 150
Working capital adjustments 22.2 (16 337) (15 610)
Interest received 392 292
Interest paid (5 447) (4 216)
Income tax paid 19 (339) (1 596)
Income tax received 19 4 620 -
Cash flows used in investing activities (27 644) (57 146)
Purchase of property, plant and equipment 8 (5 758) (20 048)
Waste stripping costs capitalised 8 (22 302) (37 102)
Proceeds from sale of property, plant and equipment 416 4
Cash flows (used in)/generated from financing activities (26 733) 28 021
Lease liability capital repayment 17 (2 690) (2 092)
Net financial liabilities (repaid)/raised 22.3 (19 755) 30 113
Financial liabilities repaid (42 117) (45 103)
Financial liabilities raised 22 362 75 216
Dividends paid to non-controlling interests (4 288) -
Net (decrease)/increase in cash and cash equivalents 14 (3 182) 5 895
Cash and cash equivalents at beginning of year 16 503 8 721
Foreign exchange differences (443) 1 887
Cash and cash equivalents at end of year 14 12 878 16 503
The restatement of the prior year balances in the Statement of Financial
Position has had no impact on the cash flows from operating, investing and
financing activities. Refer Note 28, Restatement of prior year balances.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2024
1 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.1 Corporate information
1.1.1 Incorporation
The holding company, Gem Diamonds Limited (the Company), was incorporated on
29 July 2005 in the British Virgin Islands (BVI) and is domiciled in the
United Kingdom (UK). The Company's registration number is 669758.
These financial statements were authorised for issue by the Board on 12 March
2025.
The Group is principally engaged in operating diamond mines.
1.1.2 Operational information
The Company has the following investments directly and indirectly in
subsidiaries at 31 December 2024.
Name and registered address of company Share-holding Cost of investment1 Country of incorporation and functional currency Nature of business
Subsidiaries
Gem Diamond Technical Services (Proprietary) Limited2 100% US$17 RSA Technical, financial and management consulting services.
Illovo Corner
24 Fricker Road South African rand (ZAR)
Illovo Boulevard
Johannesburg
South Africa
Letšeng Diamonds (Proprietary) Limited2 70% US$126 000 303 Lesotho Diamond mining and holder of mining rights.
Letšeng Diamonds House
Corner Kingsway and Old School Roads Lesotho loti (LSL)
Maseru
Lesotho
Gem Diamonds Botswana (Proprietary) Limited2 100% US$5 844 579 Botswana Diamond mining; evaluation and development; and holder of mining licences and
concessions. Currently on care and maintenance.
The Courtyard unit 7A
Plot 54513 Village Botswana pula (BWP)
Gaborone
Botswana
Gem Diamonds Investments Limited3 100% US$24 692 016 UK Investment holding company holding 100% in each of Gem Diamonds Innovation
Solutions CY Limited, a company in Cyprus holding intellectual property
2 Eaton Gate (2023: relating to development of technology to innovate mining processes; Baobab
Technologies BV, a diamond analysis and valuation facility in Belgium; and Gem
London US$19 321 016) United States dollar (US$) and Diamonds Marketing Services BV, a marketing company in Belgium that sells the
Group's diamonds on tender.
SW1W 9BJ Euro (€)
United Kingdom
1 The cost of investment represents original cost of investments at
acquisition dates.
2 No change in the shareholding since the prior year.
3 In 2024, the Company subscribed for an additional 4.1 million shares
of £1.00 each in Gem Diamonds Investments Limited as part of an intercompany
restructuring process.
1.1.3 Segment information
For management purposes, the Group is organised into geographical units as its
risks and required rates of return are affected predominantly by differences
in the geographical regions of the mines and areas in which the Group
operates, or areas in which operations are managed. The below measures of
profit or loss, assets and liabilities are reviewed by the Chief Operating
Decision-Maker, i.e. the Board of Directors. The main geographical regions,
and the type of products and services from which each reporting segment
derives its revenue are:
· Lesotho (diamond mining activities);
· Belgium (sales, marketing and analysis of diamonds);
· BVI, RSA, UK and Cyprus (technical and administrative services);
and
· Botswana (diamond mining activities, currently on care and
maintenance).
Management monitors the operating results of the geographical units separately
for the purpose of making decisions about resource allocation and performance
assessment.
Segment performance is evaluated based on operating profit or loss.
Inter-segment transactions are entered into under normal arm's length terms in
a manner similar to transactions with third parties. Segment revenue, segment
expenses and segment results include transactions between segments. Those
transactions are eliminated on consolidation.
Segment revenue is derived from mining activities, polished manufacturing
margins and diamond analysis.
The following tables present revenue from contracts with customers,
profit/(loss) for the year, underlying EBITDA and asset and liability
information from operations regarding the Group's geographical segments:
Lesotho Belgium BVI, RSA, UK and Cyprus1 Botswana Total
Year ended 31 December 2024 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers
Total revenue 149 195 153 518 6 595 - 309 308
Intersegment (147 822) (679) (6 595) - (155 096)
External customers 1 373 152 839 - - 154 212
Depreciation and amortisation (46 376) (195) (356) (67) (46 994)
- Depreciation and mining asset amortisation (10 749) (195) (356) (67) (11 367)
- Waste stripping cost amortisation (35 627) - - - (35 627)
Cost of sales (64 644) 1 170 - (64 473)
Corporate expenses - - (7 914) - (7 914)
Royalties and selling costs (15 269) (1 208) - - (16 477)
Other non-material income/(costs) 636 (34) (235) (729) (362)
Segment operating profit/(loss) 26 266 857 (8 335) (796) 17 992
Net finance costs2 (4 710) (20) (1 641) (160) (6 531)
Profit/(loss) before tax 21 556 837 (9 976) (956) 11 461
Income tax (expense)/income (4 250) (46) 921 - (3 375)
Profit/(loss) for the year 17 306 791 (9 055) (956) 8 086
Underlying EBITDA3 36 378 1 085 (7 744) - 29 719
Segment non-current assets 280 793 1 200 1 606 249 283 848
Segment assets 335 667 2 074 6 509 538 344 788
Segment liabilities 45 129 1 311 8 000 2 480 56 920
Other segment information
Net cash/(debt) and short-term deposits4 (4 869) 692 (3 191) 63 (7 305)
Capital expenditure
- Property, plant and equipment 4 379 49 1 330 - 5 758
- Net movement in rehabilitation asset5 (3 698) - - - (3 698)
- Waste cost capitalised 22 302 - - - 22 302
Total capital expenditure 22 983 49 1 330 - 24 362
Average number of employees employed under contracts of service 663 6 20 27 716
1 No revenue was generated in BVI and Cyprus.
2 Finance income and costs are reflected on a net basis as this is the
measure used by the primary decision makers.
3 Underlying EBITDA as defined in Note 4, Operating profit.
4 Calculated as cash and short-term deposits less drawn down bank facilities
(excluding insurance premium financing and credit underwriting fees). Refer
Note 16, Interest-bearing loans and borrowings.
5 Non-cash movements in rehabilitation assets relating to changes in
rehabilitation estimates for the Lesotho segment.
Included in revenue for the current year is revenue from four customers who
individually contributed 10% or more to total revenue. This revenue in total
amounted to US$101.4 million arising from sales reported in the Belgium
segment.
Segment non-current assets do not include deferred tax assets of US$4.3
million and financial instruments of US$7.3 million. Included in the
non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current
assets located in the Company's country of domicile, the UK, of US$2.5
million.
Segment assets and liabilities do not include deferred tax assets and
liabilities of US$4.3 million and US$69.3 million respectively. Deferred tax
amounts are excluded because they are not operational in nature, do not
directly impact segment performance, and are not part of the asset base used
by management to make business decisions.
Revenue increased 10% compared to 2023 mainly due to an increase of 5% in
carats sold (109 967 carats compared to 104 520 in 2023). An average sales
price of US$1 390 per carat (2023: US$1 334 per carat) was achieved.
Lesotho Belgium BVI, RSA, UK and Cyprus1 Botswana Total
Year ended 31 December 2023 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers
Total revenue 140 905 140 121 6 733 - 287 759
Intersegment (140 051) (688) (6 733) - (147 472)
External customers 854 139 433 - - 140 287
Depreciation and amortisation (45 835) (194) (470) (10) (46 509)
- Depreciation and mining asset amortisation (6 641) (194) (470) (10) (7 315)
- Waste stripping cost amortisation (39 194) - - - (39 194)
Cost of sales (62 764) 1 150 - (62 613)
Corporate expenses - - (7 905) - (7 905)
Royalties and selling costs (14 091) (1 249) - - (15 340)
Other non-material income/(costs) 4 085 13 (309) (1 330) 2 459
Segment operating profit/(loss) 19 573 676 (8 550) (1 319) 10 380
Net finance costs2 (3 500) (23) (1 000) (173) (4 696)
Profit/(loss) before tax 16 073 653 (9 550) (1 492) 5 684
Income tax expense (3 678) 5 (417) - (4 090)
Profit/(loss) for the year 12 395 658 (9 967) (1 492) 1 594
Underlying EBITDA3 22 129 857 (7 754) - 15 232
Segment non-current assets* 308 973 1 347 369 327 311 016
Segment assets* 373 820 2 770 3 280 795 380 665
Segment liabilities 72 193 1 503 7 725 3 034 84 455
Other segment information
Net cash/(debt) and short-term deposits4 (17 908) 642 (4 082) 1 (21 347)
Capital expenditure
- Property, plant and equipment 30 014 25 34 311 30 384
- Net movement in rehabilitation asset5 (1 342) - - - (1 342)
- Waste cost capitalised 37 102 - - - 37 102
Total capital expenditure 65 774 25 34 311 66 144
Average number of employees employed under contracts of service 266 7 21 19 313
* Certain balances as previously presented were restated. Refer Note 28,
Restatement of prior year balances.
1 No revenue was generated in BVI and Cyprus.
2 Finance income and costs are reflected on a net basis as this is the
measure used by the primary decision makers.
3 Underlying EBITDA as defined in Note 4, Operating profit.
4 Calculated as cash and short-term deposits less drawn down bank facilities
(excluding the asset-based finance facility, insurance premium financing and
credit underwriting fees). Refer Note 16, Interest-bearing loans and
borrowings.
5 Non-cash movements in rehabilitation assets relating to changes in
rehabilitation estimates for the Lesotho segment.
Included in revenue for the 2023 year is revenue from three customers who
individually contributed 10% or more to total revenue. This revenue in total
amounted to US$55.4 million arising from sales reported in the Belgium
segment.
Segment non-current assets do not include deferred tax assets of US$6.8
million and financial instruments of US$4.5 million. Included in the
non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current
assets located in the Company's country of domicile, the UK, of US$20.7
thousand.
Segment assets and liabilities do not include deferred tax assets and
liabilities of US$6.8 million and US$77.3 million respectively.
1.2 Summary of material accounting policies
1.2.1 Basis of preparation
Whilst the financial information included in this Preliminary Announcement has
been prepared on the basis of International Accounting standards, this
announcement does not itself contain sufficient information to comply with
International Accounting Standards.
The financial information set out in this Preliminary Announcement does not
constitute the Group's Consolidated Financial Statements for the period ended
31 December 2024 but is derived from those Financial Statements which were
approved by the Board of Directors on 12 March 2025. The auditor, RSM UK Audit
LLP, has reported on the Group's Consolidated Financial Statements and the
report was unqualified.
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board (IASB). These financial statements
have been prepared under the historical cost basis except for assets and
liabilities measured at fair value. The accounting policies have been
consistently applied except for the adoption of the new standards and
interpretations detailed on the following pages.
The functional currency of the Company and certain of its subsidiaries is US
dollar, which is the currency of the primary economic environment in which the
entities operate. All amounts are presented in US dollar and rounded to the
nearest thousand. The financial results of subsidiaries whose functional and
reporting currency is in currencies other than US dollar have been converted
into US dollar on the basis as set out in Note 1.2.14, Foreign currency
translations. Refer Note 1.1.2, Operational information for details of the
subsidiaries and their functional currencies.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial
statements, are disclosed in Note 1.2.26, Critical accounting estimates and
judgements.
Changes in accounting policies and disclosures
New and amended standards and interpretations
The Group adopted certain standards and amendments for the first time, which
became effective for the Group on 1 January 2024 and are listed in the table
below. The amendments to IAS 1 have been assessed and covenant disclosures
relating to the Group's existing facility arrangements and RCFs are included
in Note 16, Interest-bearing loans and borrowings. The remaining amendments
did not have an impact on the consolidated financial statements of the Group
nor the accounting policies, methods of computation or presentation applied by
the Group. All other accounting policies are consistent with those of the
previous financial year.
Amendments and improvements Description
IFRS 16 Lease Liability in a Sale and Leaseback
Amendments to IAS 1 Classification of liabilities as Current or Non-current and Non-current
Liabilities with Covenants
Amendments to IAS 7 and IFRS 7 Supplier Finance Arrangements
Standards issued but not yet effective
The standards, amendments and improvements that are issued, but not yet
effective, up to the date of issuance of the Group's consolidated financial
statements are listed in the table below. These standards, amendments and
improvements have not been early adopted and it is expected that, where
applicable, these standards, amendments and improvements will be adopted on
each respective effective date. The impact of the adoption of these standards
has not been reasonably assessed at this stage.
New standards, amendments, and improvements Description Effective date*
Amendments to IAS 21 Lack of exchangeability 1 January 2025
Amendments to IFRS 9 and IFRS 7 Classification and measurement of financial instruments 1 January 2026
IFRS 18 Presentation and disclosure in financial statements 1 January 2027
* Annual periods beginning on or after.
1.2.2 Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, have been assessed by
management. The financial position of the Group, its cash flows and liquidity
position are presented in the Annual Report and Accounts. In addition, Note
25, Financial risk management, includes the Group's objectives, policies and
processes for managing its capital; its financial risk management objectives;
details of its financial instruments; and its exposures to market risk, credit
risk and liquidity risk.
The Group's net debt at 31 December 2024 was US$7.3 million (31 December 2023:
net debt US$21.3 million). The Group's available undrawn facilities at 31
December 2024 amounted to US$69.0 million (31 December 2023:
US$45.9 million), resulting in liquidity (defined as net debt/cash and
available undrawn facilities) of US$61.7 million (31 December 2023: US$24.6
million). The gross liquidity position of the Group (defined as gross cash and
available undrawn facilities) as at 31 December 2024 is US$81.9 million (31
December 2023: US$62.4 million). Following the successful extension in
December of the Group's Revolving Credit Facilities (RCFs), which total
US$69.7 million when fully unutilised, mature on 21 December 2026, which is
after the going concern period. In addition, there is a US$5.3 million general
banking facility with no set expiry date, but that is reviewed annually (refer
Note 16, Interest-bearing loans and borrowings). The impact on future cash
flows of the current diamond market conditions, cost increases and foreign
currency volatility were considered by performing sensitivities on diamond
pricing, costs and the weakening of the US dollar against the Lesotho loti.
After making enquiries which include reviews of forecasts and budgets, timing
of cash flows and sensitivity analyses, the Group's operations and production
levels and the various ongoing cost reduction initiatives, the Directors have
a reasonable expectation that the Group has adequate financial resources
without the use of mitigating actions to continue in operational existence for
the foreseeable future. For this reason, the Directors continue to adopt the
going concern basis in preparing the Group Financial Statements.
These financial statements have been prepared on a going concern basis which
assumes that the Group will be able to meet its liabilities as they fall due
for the foreseeable future.
1.2.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company as at 31 December 2024.
Subsidiaries
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date that such control ceases. An investor controls an investee when it is
exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over
the investee. To meet the definition of control in IFRS 10, all three of the
following criteria must be met: (a) an investor has power over an investee;
(b) the investor has exposure, or rights, to variable returns from its
involvement with the investee; and (c) the investor has the ability to use its
power over the investee to affect the amount of the investor's returns. The
financial statements of subsidiaries used in the preparation of the
consolidated financial statements are prepared for the same reporting year as
the parent company and are based on consistent accounting policies. All
intra-group balances and transactions, including unrealised gains and losses
arising from them, are eliminated in full.
Non-controlling interests
Non-controlling interests represent the equity in a subsidiary not
attributable, directly or indirectly, to the parent company and is presented
separately within equity in the consolidated statement of financial position,
separately from equity attributable to owners of the parent. Losses within a
subsidiary are attributed to the non-controlling interest even if that results
in a deficit balance.
1.2.4 Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources,
the determination of technical feasibility and the assessment of commercial
viability of an identified resource. Exploration and evaluation activity
includes:
· acquisition of rights to explore;
· researching and analysing historical exploration data;
· gathering exploration data through topographical, geochemical and
geophysical studies;
· exploratory drilling, trenching and sampling;
· determining and examining the volume and grade of the resource;
· surveying transportation and infrastructure requirements; and
· conducting market and finance studies.
Administration costs that are not directly attributable to a specific
exploration area are charged to the statement of profit or loss. Licence costs
paid in connection with a right to explore in an existing exploration area are
capitalised as intangible assets and thereafter reclassified as mining assets
within property, plant and equipment, and amortised over the term of the
permit once the mining asset is brought into the development phase.
Exploration and evaluation expenditure is capitalised as incurred. Capitalised
exploration expenditure is recorded as a component of property, plant and
equipment, as an exploration and development asset, at cost less accumulated
impairment charges. As the asset is not available for use, it is not
depreciated.
All capitalised exploration and evaluation expenditure is monitored for
indications of impairment. Where a potential impairment is indicated,
assessments are performed for each area of interest in conjunction with the
group of operating assets (representing a cash-generating unit (CGU)) to which
the exploration is attributed. To the extent that exploration expenditure is
not expected to be recovered, it is charged to the statement of profit or
loss. Exploration areas where reserves have been discovered, but require major
capital expenditure before production can begin, are continually evaluated to
ensure that commercial quantities of reserves exist or to ensure that
additional exploration work is under way as planned.
Management is required to make certain estimates and judgements when
determining whether the commercial viability of an identified resource has
been met and when determining whether indicators of impairment exist. There
were no exploration and evaluation activities during the year and therefore no
costs were capitalised.
1.2.5 Development expenditure
When proven and probable reserves are determined and development is
sanctioned, capitalised exploration and evaluation expenditure is reclassified
from exploration phase to development phase. As the asset is not available for
use, during the development phase, it is not depreciated. On completion of the
development phase, any capitalised exploration and evaluation expenditure
already capitalised to a development asset, together with the subsequent
development expenditure, is reclassified within property, plant and equipment
to mining assets and depreciated on the basis as laid out in Note 1.2.6,
Property, plant and equipment.
All development expenditure is monitored for indicators of impairment
annually. Management is required to make certain estimates and judgements when
determining whether indicators of impairment exist.
1.2.6 Property, plant and equipment
Property, plant and equipment is recorded at cost less accumulated
depreciation and accumulated impairment losses. Cost includes expenditure that
is directly attributable to the acquisition and construction of the items, to
get the asset in its condition and location for its intended use and among
others, include professional fees and, for qualifying assets, borrowing costs
capitalised in accordance with the Group's accounting policies.
Subsequent costs to replace a component of an item of property, plant and
equipment that is accounted for separately, is capitalised when the cost of
the item can be measured reliably, with the carrying amount of the original
component being written off. All repairs and maintenance are charged to the
statement of profit or loss during the financial period in which they are
incurred.
Depreciation commences when an asset is available for use. Depreciation is
charged so as to write off the depreciable amount of the asset to its residual
value over its estimated useful life, using a method that reflects the pattern
in which the asset's future economic benefits are expected to be consumed by
the Group.
Item Method Useful life
Mining assets Straight line Lesser of life of mine or period of mining lease
Decommissioning assets Straight line Lesser of life of mine or period of mining lease
Leasehold improvements Straight line Three years or lesser of life of mine or period of mining lease
Plant and equipment Straight line; units of production Three to 15 years; machine hours
Other assets Straight line Two to eight years
An item of property, plant and equipment and any significant part initially
recognised is derecognised upon disposal (i.e. at the date the recipient
obtains control) or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the statement of profit or loss
when the asset is derecognised.
The asset's residual values, useful lives and methods of depreciation are
reviewed annually. Changes in the expected residual values, expected useful
life or the expected pattern of consumption of future economic benefits
embodied in the asset are considered to modify the depreciation period or
method, as appropriate, and are treated as changes in accounting estimates,
and adjusted for prospectively, if appropriate.
Pre-production and in production stripping costs
Costs associated with removal of waste overburden are classified as stripping
costs.
Stripping activities that are undertaken during the production phase of a
surface mine may create two benefits, being either the production of inventory
or improved access to the ore to be mined in the future. Where the benefits
are realised in the form of inventory produced in the period, the production
stripping costs are accounted for as part of the cost of producing those
inventories. Where production stripping costs are incurred and the benefit is
the creation of mining flexibility and improved access to ore to be mined in
the future, the costs are recognised as a non-current asset if:
a) future economic benefits (being improved access to the orebody) are
probable;
b) the component of the orebody for which access will be improved can be
accurately identified; and
c) the costs associated with the improved access can be reliably measured.
The non-current asset recognised is referred to as a "stripping activity
asset" and is separately disclosed in Note 8, Property, plant and equipment.
If all the criteria are not met, the production stripping costs are charged to
the statement of profit or loss as operating costs. The stripping activity
asset is initially measured at cost, which is the accumulation of costs
directly incurred to perform the stripping activity that improves access to
the identified component of ore, plus an allocation of directly attributable
overhead costs.
If incidental operations are occurring at the same time as the production
stripping activity, but are not necessary for the production stripping
activity to continue as planned, these costs are not included in the cost of
the stripping activity asset. Given the deep vertical nature of the pit, all
stripping costs are capitalised on a cut/component basis for each cut in the
mine planning process.
The stripping activity asset is subsequently amortised over the expected
useful life of the identified component of the orebody that became more
accessible as a result of the stripping activity. The net book value of the
stripping asset and future expected stripping costs to be incurred for that
component is depreciated using the units of production over the proven and
probable reserves, in order to match the total stripping costs of the cut to
the economic benefits created by the cut. As a result, the stripping activity
asset is carried at cost less amortisation and any impairment losses. The
future stripping costs of the cut/component and the expected ore to be mined
from that cut/component are recalculated annually in light of additional
knowledge and changes in estimates. Changes in the stripping ratio are
accounted for prospectively as a change in estimate.
Management applies judgement to calculate and allocate the production
stripping costs to inventory and/or the stripping activity asset(s) as
referred under Note 1.2.26, Critical accounting estimates and judgements.
1.2.7 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily takes a substantial period
of time to get ready for its intended use or sale, are capitalised as part of
the cost of the asset. All other borrowing costs are expensed in the period in
which they occur. Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds.
1.2.8 Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of
the acquisition date fair value of the consideration transferred and the
amount recognised for the non-controlling interest (and where the business
combination is achieved in stages, the acquisition date fair value of the
acquirer's previously held equity interest in the acquiree) over the fair
value of the net identifiable amounts of the assets acquired and the
liabilities assumed in the business combination.
Assets acquired and liabilities assumed in transactions separate to the
business combinations, such as the settlement of pre-existing relationships or
post-acquisition remuneration arrangements, are accounted for separately from
the business combination in accordance with their nature and applicable IFRS.
Identifiable intangible assets, meeting either the contractual legal or
separability criterion are recognised separately from goodwill. Contingent
liabilities representing a present obligation are recognised if the
acquisition date fair value can be measured reliably.
If the aggregate of the acquisition date fair value of the consideration
transferred and the amount recognised for the non-controlling interest (and
where the business combination is achieved in stages, the acquisition date
fair value of the acquirer's previously held equity interest in the acquiree)
is lower than the fair value of the net identifiable amounts of the assets
acquired and the liabilities assumed in the business combination, the
difference is recognised in profit and loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purpose of impairment testing, goodwill acquired in
a business combination is, from the acquisition date, allocated to each of the
Group's CGUs (or groups of CGUs) that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units. Each unit or group of units to which
goodwill is allocated shall represent the lowest level within the entity at
which the goodwill is monitored for internal management purposes, and shall
not be larger than an operating segment before aggregation.
Where goodwill forms part of a CGU and part of the operation within that unit
is disposed of, the goodwill associated with the operation disposed of is
included in the carrying amount of the operation when determining the gain or
loss on disposal of the operation. Goodwill disposed of in this circumstance
is measured based on the relative values of the operation disposed of and the
portion of the CGU retained.
1.2.9 Financial instruments
The Group shall only recognise a financial instrument when the Group becomes a
party to the contractual provisions of the instrument. A financial instrument
is any contract that gives rise to a financial asset of one entity and a
financial liability or equity instrument of another entity.
Financial assets
Management determines the classification of its financial assets at initial
recognition and re-evaluates this designation at every reporting date based on
the business model for managing these financial assets and the contractual
cash flow characteristics. Currently the Group only has financial assets at
amortised cost which consist of receivables and other assets, and cash and
short-term deposits which is held within a business model to collect
contractual cash flows and for which the contractual cash flow characteristics
are solely payments of principal and interest. When financial assets are
recognised initially, they are measured at fair value plus (in the case of
financial assets not at fair value through profit or loss) directly
attributable transaction costs.
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
are included in current assets, except those with maturities greater than 12
months after the reporting date. These are classified as non-current assets.
Such assets are carried at amortised cost using the effective interest rate
method, if the time value of money is significant, less any allowance for
impairment. Gains and losses are recognised in the statement of profit or loss
when the financial assets at amortised cost are derecognised or impaired, as
well as through the amortisation process.
Derecognition
A financial asset is primarily derecognised when the rights to receive cash
flows from the asset have expired or the Group has transferred its rights to
receive cash flows from the asset. Gains or losses from derecognition of
financial assets are recognised in the statement of profit or loss.
Financial liabilities
Financial liabilities are initially measured at fair value net of (in the case
of financial liabilities not at fair value through profit or loss) directly
attributable transaction costs. The Group's interest-bearing loans and
borrowings and trade and other payables financial liabilities are subsequently
stated at amortised cost using the effective interest rate method, with any
difference between proceeds (net of transaction costs) and the redemption
value being recognised in the statement of profit or loss, unless capitalised
in accordance with Note 1.2.6, Property, plant and equipment, over the
contractual period of the financial liability.
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged, cancelled or expires. Gains or losses from derecognition of
financial liabilities are recognised in the statement of profit or loss.
1.2.10 Impairments
Non-financial assets
The Group assesses, at each reporting date, whether there is an indication
that an asset (or CGU) may be impaired in accordance with IAS 36. Goodwill is
assessed for impairment on an annual basis and when circumstances indicate
that the carrying value may be impaired. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset.
Non-financial assets that were previously impaired are reviewed for possible
reversal of the impairment at each reporting date. A previously recognised
impairment loss is reversed only if there has been a change in the estimates
used to determine the asset's recoverable amount since the last impairment
loss was recognised. If that is the case, the carrying amount of the asset is
increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such a reversal
is recognised in the statement of profit or loss. After such a reversal the
depreciation charge is adjusted in future periods to allocate the asset's
revised carrying amount, less any residual value, on a systematic basis over
its remaining useful life. Impairment losses relating to goodwill cannot be
reversed in future periods.
Financial assets
Financial assets carried at amortised cost
The Group recognises an allowance for expected credit losses (ECLs) in the
statement of profit or loss for all financial assets at amortised cost. ECLs
are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Group expects to
receive, discounted at the original effective interest rate. The expected cost
will include cash flows from the sale of collateral held, or other credit
enhancements that are integral to the contractual terms. For credit exposures
for which there has not been a significant increase in credit risk since
initial recognition, ECLs are provided for credit losses that result from
default events that are possible within the next 12-months (a 12-month ECL).
For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit
losses expected over the remaining life of the exposure, irrespective of the
timing of the default (a lifetime ECL).
1.2.11 Inventories
Inventories, which include rough diamonds, ore stockpiles and consumables, are
measured at the lower of cost of production on a weighted average basis or
estimated net realisable value. Cost of production includes directly
attributable costs and an allocation of fixed and variable production
overheads to bring the inventory to its present location and condition.
Borrowing costs are excluded from the cost of inventories.
Net realisable value is determined using the estimated selling price in the
ordinary course of business, less the estimated costs of completion into its
final product and the costs to be incurred in marketing, selling and
distribution. The amount of any write-down of inventories to net realisable
value is recognised in the period the write-down or loss occurs. Management
are required to make judgements when determining the net realisable value of
diamond inventory and ore stockpiles as referred under Note 1.2.26, Critical
accounting estimates and judgements.
Diamond inventory consists of run of mine production which is made up of a mix
of diamond sizes. The diamond inventory therefore consists of varying size and
quality. Costs are allocated to diamond inventory on a carat produced basis
irrespective of quality and value and cannot be costed separately. The net
realisable value of diamond inventory is determined on a holistic basis.
Ore stockpiles consist of various strategic stockpiles. Separately
identifiable costs are allocated to ore sourced from the Main and Satellite
Pipes. Net realisable value of ore stockpile is determined separately for the
Main and Satellite Pipes on a holistic basis.
1.2.12 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position
at amortised cost. Cash and cash equivalents comprise cash on hand, deposits
held on call with banks, and other short-term, highly liquid investments with
original maturities of three months or less that are held to meet the Group's
short-term cash commitments.
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts which are repayable on demand and form an integral
part of the Group's cash management.
1.2.13 Issued share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction from the proceeds.
Treasury shares
Own equity instruments that are reacquired are recognised at cost, including
transaction costs, and deducted from equity. These are disclosed as treasury
shares. No gain or loss is recognised in profit or loss in the purchase, sale,
issue or cancellation of the Group's own equity instruments. Any difference
between the carrying amount and the consideration, if reissued, is recognised
in equity.
1.2.14 Foreign currency translations
Presentation currency
The results and financial position of the Group's subsidiaries which have a
functional currency different from the Group's presentation currency are
translated into the Group's presentation currency as follows:
· statement of financial position items are translated at the
closing rate at the reporting date;
· income and expenses for each statement of profit or loss are
translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
· resulting exchange differences are recognised as a separate
component of equity.
· Details of the rates applied at the respective reporting dates
and for the statement of profit or loss transactions are detailed in Note 15,
Issued share capital and reserves.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains or losses resulting from the settlement of such transactions
and from the translation at the period-end exchange rates of monetary assets
and liabilities denominated in foreign currencies, are recognised in the
statement of profit or loss. Non-monetary items that are measured in terms of
cost in a foreign currency are translated using the exchange rates as at the
dates of the initial transactions. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rates at the date when
the fair value was determined. Monetary items for each statement of financial
position presented are translated at the closing rate at the reporting date.
1.2.15 Share-based payments
Employees (including senior executives) of the Group receive remuneration in
the form of share-based payment transactions, whereby employees render
services as consideration for equity instruments (equity-settled
transactions).
Equity-settled transactions
The cost of equity-settled transactions with employees are measured by
reference to the fair value of the equity instruments at the date at which
they are granted and is recognised as an expense over the vesting period,
which ends on the date on which the relevant employees become fully entitled
to the award. Fair value is determined using an appropriate pricing model. In
valuing equity-settled transactions, no account is taken of any vesting
conditions, other than conditions linked to the price of the shares of the
Company (market conditions).
On a cumulative basis, over the vesting period of an award, no expense is
recognised for awards that do not ultimately vest, except for awards where
vesting is conditional upon a market condition, which are treated as vesting
irrespective of whether or not the market condition is satisfied, provided
that all other performance conditions are satisfied.
At each reporting date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired, and
management's best estimate of the achievement of the vesting conditions or
otherwise of the non-market vesting conditions and of the number of equity
instruments that is expected to ultimately vest or, in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous reporting date is
recognised in the statement of profit or loss, with a corresponding entry in
equity.
Management applies judgement when determining whether share options relating
to employees who resigned before the end of the service condition period are
cancelled or forfeited.
The Group periodically releases the share-based equity reserve to retained
earnings in relation to lapsed and forfeited options subsequent to vesting
dates.
1.2.16 Provisions
Provisions are recognised when:
· the Group has a present legal or constructive obligation as a
result of a past event; and
· a reliable estimate can be made of the obligation.
Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation, using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the obligation. The increase in the provision due to the passage
of time is recognised as a finance cost.
1.2.17 Restoration and rehabilitation provision
The mining, extraction and processing activities of the Group normally give
rise to obligations for site restoration and rehabilitation. Rehabilitation
works can include facility decommissioning and dismantling, removal and
treatment of waste materials, land rehabilitation and site restoration. The
extent of the work required and the estimated cost of final rehabilitation,
comprising liabilities for decommissioning and restoration, are based on
current legal requirements, existing technology and the Group's environmental
policies, and is reassessed annually. Cost estimates are not reduced by the
potential proceeds from the sale of property, plant and equipment.
Provisions for the cost of each restoration and rehabilitation programme are
recognised at the time the environmental disturbance occurs. When the extent
of the disturbance increases over the life of the operation, the provision and
associated asset is increased accordingly. Costs included in the provision
encompass all restoration and rehabilitation activity expected to occur. The
restoration and rehabilitation provisions are measured at the expected value
of future cash flows, discounted to their present value, using a pre-tax
discount rate. Discount rates used are specific to the country in which the
operation is located or reasonable alternatives if in-country information is
not available. The value of the provision is progressively increased over time
as the effect of the discounting unwinds, which is recognised in finance
charges. Restoration and rehabilitation provisions are also adjusted for
changes in estimates.
When provisions for restoration and rehabilitation are initially recognised,
the corresponding cost is capitalised as a decommissioning asset where it
gives rise to a future benefit and depreciated over future production from the
operation to which it relates. Changes in the measurement of an existing
decommissioning, restoration and similar liability that result from changes in
the estimated timing or amount of the outflow of resources embodying economic
benefits required to settle the obligation, or a change in the discount rate,
are added to, or deducted from, the cost of the related asset in the current
period in line with the principles of IFRIC 1, Changes in Existing
Decommissioning, Restoration and Similar Liabilities. Where the related asset
has been fully depreciated any future reduction in the corresponding provision
is reflected as an adjustment to the Statement of Profit or Loss.
Management is required to make significant estimates and assumptions when
determining the amount of the restoration and rehabilitation provisions as
referred under Note 1.2.26, Critical accounting estimates and judgements.
1.2.18 Taxation
Income tax for the period comprises current and deferred tax. Income tax is
recognised in the statement of profit or loss except to the extent that it
relates to items charged or credited directly to equity or to other
comprehensive income, in which case the tax consequences are recognised
directly in equity and other comprehensive income respectively. Current tax
expense is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantively enacted at the reporting date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the statement of financial position liability
method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for taxation purposes.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised or the liability is
settled based on the tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
The Group offsets deferred income tax assets and deferred income tax
liabilities if, and only if, it has a legally enforceable right to set off
current tax assets and current tax liabilities and the deferred income tax
assets and deferred income tax liabilities
relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities which intend either to
settle current tax liabilities and assets on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
In respect of taxable temporary differences associated with investments in
subsidiaries, associates and jointly controlled entities, deferred tax is
provided except where the timing of the reversal of the temporary differences
can be controlled by the Group and it is probable that the temporary
differences will not reverse in the foreseeable future.
In respect of deductible temporary differences associated with investments in
subsidiaries, associates and jointly controlled entities, deferred tax assets
are only recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilised.
Withholding tax is recognised as part of the income tax expense in the
statement of profit or loss. Withholding tax is deducted at the source on
dividends or other services which give rise to that withholding tax in
accordance with applicable tax laws and treaties. Deferred tax is recognised
in respect of future withholding taxes on unremitted earnings based on the
expected timing and extent of future dividends from the Group subsidiaries
Refer to Note 21, Deferred taxation.
Uncertain tax positions
Uncertain tax positions are accounted for under IFRIC 23. In assessing
uncertain tax positions, the Group evaluates whether it is probable that a tax
authority will accept a particular tax treatment. A tax position is only
recognised when the likelihood of the tax authority accepting the treatment is
probable. If it is probable that the tax treatment will be accepted, the Group
measures the tax position based on the expected manner of settlement. If it is
determined that a tax position is not probable (i.e. uncertain), the Group
recognises the tax position based on the most likely outcome or expected value
of the outcome. Uncertain tax positions are re-evaluated at each reporting
date.
Royalties
Royalties incurred by the Group comprise mineral extraction costs based on a
percentage of sales paid to the local revenue authorities. These obligations
arising from royalty arrangements are recognised as current payables and
disclosed as part of royalty and selling costs in the statement of profit or
loss.
1.2.19 Employee benefits
Provision is made in the financial statements for all short-term employee
benefits. Liabilities for wages and salaries, including non-monetary benefits,
benefits required by legislation, annual leave, retirement benefits and
accumulating sick leave obliged to be settled within 12 months of the
reporting date, are recognised in trade and other payables and are measured at
the amounts expected to be paid when the liabilities are settled. Benefits
falling due more than 12 months after the reporting date are measured at the
amount the obligation is expected to be settled at, or discounted to present
value using a pre-tax discount rate where relevant or where time value of
money is expected to be significant. The Group recognises an expense for
contributions to the defined contribution pension fund in the period in which
the employees render the related service.
Bonus plans
The Group recognises a liability and an expense for bonuses. The Group
recognises a liability where contractually obliged or where there is a past
practice that has created a constructive obligation. These liabilities are
recognised in trade and other payables and are measured at the amounts
expected to be paid when the liabilities are settled.
1.2.20 Leases
At inception, the Group assesses whether a contract is or contains a lease.
This assessment involves the exercise of judgement whether it depends on a
specified asset, whether the Group obtains substantially all the economic
benefits from the use of that asset and whether the Group has the right to
direct the use of the asset. For leases that contain one lease component and
one or more additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease and non-lease component on the
basis of the individual relative stand-alone price of all lease and non-lease
components and the aggregate stand-alone price of all lease and non-lease
components. The lease component is accounted for under the requirements of
IFRS 16 and the non-lease component is accounted for using the relevant IFRS
standard based on the nature of the non-lease component.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease
(i.e. the date the underlying asset is available for use). Right-of-use assets
are measured at cost, less any accumulated depreciation and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities recognised,
initial direct costs incurred, costs to dismantle, restore and remove the
right-of-use asset, and lease payments made at or before the commencement date
less any lease incentives received. After the commencement date, the
right-of-use assets are measured using a cost model. Right-of-use assets are
depreciated on a straight-line basis over the shorter of the lease term and
the estimated useful lives of the assets. If ownership of the leased asset
transfers to the Group at the end of the lease term or the cost reflects the
exercise of a purchase option, depreciation is calculated using the estimated
useful life of the asset. Right-of-use assets are subject to impairment. Refer
Note 1.2.10, Impairments.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities
measured at the present value of lease payments to be made over the lease
term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a
purchase option reasonably certain to be exercised by the Group, and payments
of penalties for terminating a lease if the lease term reflects the Group
exercising the option to terminate. The variable lease payments that do not
depend on an index or a rate are recognised as an expense in the period in
which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the
incremental borrowing rate at the lease commencement date if the interest rate
implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification to the
terms and conditions of the lease or if there is a lease reassessment.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term
leases (i.e. those leases that have a lease term of 12 months or less from
the commencement date and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption to leases of office
equipment that are considered to be qualitatively and quantitatively of low
value. Lease payments on short-term leases and leases of low-value assets are
recognised as expenses on a straight-line basis over the lease term.
Group as a lessor
Where the Group is a lessor, it determines at inception whether the lease is a
finance or operating lease. When a lease transfers substantially all the risks
and rewards of ownership of the underlying asset then the lease is a finance
lease; otherwise the lease is an operating lease.
Where the Group is an intermediate lessor, the interest in the head lease and
the sub-lease is accounted for separately and the lease classification of a
sub-lease is determined by reference to the right-of-use-asset arising from
the head lease. Income from operating leases is recognised on a straight-line
basis over the lease term.
Revenue comprises net invoiced diamond sales to customers excluding VAT.
Diamond sales are made through a competitive tender process and other sales
channels, and recognised when the Group's performance obligations have been
satisfied at the time the buyer obtains control of the diamond(s), at an
amount that the Group expects to be entitled in exchange for the diamond(s).
Control of the diamond(s) are obtained by the buyer once funds have been
received by the Group at which point the diamond(s) are shipped to or
collected by the buyer. Where the Group makes rough diamond sales to customers
and retains a right to an interest in their future sale as polished diamonds,
the Group records the sale of the rough diamonds, but such contingent revenue
on the onward sale is only recognised at the date when the polished diamonds
are sold or when polished sales prices are mutually agreed between the
customer and the Group.
The following revenue streams are recognised:
· rough diamonds which are sold through a competitive tender
process, other sales channels, cooperation and partnership agreements;
· polished diamonds which are sold through direct sales channels;
and
· additional uplift (on the value from rough to polished) on
partnership and cooperation arrangements.
The sale of rough diamonds is the core business of the Group with other
revenue streams contributing marginally to total revenue.
Revenue through cooperation and partnership arrangements is recognised on the
sale of the rough diamond, with an additional uplift based on the polished
prices or polished margin achieved. The Group recognises the revenue on the
sale of the rough diamond when it is sold to a third party, as there is no
continuing involvement by management in the cutting and polishing process and
control has passed to the third party. Revenue from additional uplift is
considered to be a variable consideration.
The variable consideration on partnership agreements is significantly
constrained as it is subject to a range of variables that are highly
susceptible to factors outside the Group's influence, such as market
volatility and third party decisions. The Group recognises revenue on the
additional uplift when the polished diamond is sold by the third party or the
polished sales prices are mutually agreed between the third party and the
Group, and the additional uplift is guaranteed, as this is the point in time
at which the significant constraints are lifted or resolved from the polished
margin revenue.
The variable consideration on cooperation agreements is recognised at the time
of the sale of the rough diamond. The measurement of variable consideration is
subject to a constraining principle whereby revenue will only be recognised to
the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Such estimates are determined using
either the 'expected value' or 'most likely amount' method and are recognised
as a receivable.
1.2.22 Interest income
Interest income is recognised on a time proportion basis using the effective
interest rate method.
1.2.23 Dividend income
Dividend income is recognised when the amount of the dividend can be reliably
measured and the Group's right to receive payment is established.
1.2.24 Finance costs
Finance costs are recognised on a time proportion basis using the effective
interest rate method.
1.2.25 Dividend distribution
Dividend distributions to the Group's shareholders are recognised as a
liability in the Group's financial statements in the period in which the
dividends are approved by the Group's shareholders.
1.2.26 Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management
to make estimates and judgements and form assumptions that affect the reported
amounts of the assets and liabilities, the reported income and expenses during
the periods presented therein, and the disclosure of contingent liabilities at
the date of the financial statements. Estimates and judgements are continually
evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future and the
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the financial results or the financial
position reported in future periods are discussed below.
Business environment and country risk
The Group's operations are subject to country risk being the economic,
political and social risks inherent in doing business in certain areas of
Africa, Europe and the United Kingdom. These risks include matters arising out
of the policies of the government, economic conditions, imposition of or
changes to taxes and regulations, foreign exchange rate fluctuations and the
enforceability of contract rights.
The consolidated financial information reflects management's assessment of the
impact of these business environments and country risks on the operations and
the financial position of the Group. The future business environment may
differ from management's assessment.
Estimates
Ore reserves and associated life of mine (LoM)
There are numerous uncertainties inherent in estimating ore reserves and the
associated LoM. Therefore, the Group must make a number of assumptions in
making those estimations, including assumptions as to the prices of diamonds,
exchange rates, production costs and recovery rates. Assumptions that are
valid at the time of estimation may change significantly when new information
becomes available. Changes in the forecast prices of diamonds, exchange rates,
production costs or recovery rates may change the economic status of ore
reserves and may, ultimately, result in the ore reserves being restated. Where
assumptions change the LoM estimates, the associated depreciation rates,
residual values, waste stripping and amortisation ratios, and environmental
provisions are reassessed to take into account the revised LoM estimate. Refer
Note 8, Property, plant and equipment, Note 10, Intangible assets and Note 20,
Provisions.
Provision for restoration and rehabilitation
Significant estimates and assumptions are made in determining the amount of
the restoration and rehabilitation provisions. These deal with uncertainties
such as changes to the legal and regulatory framework, magnitude of possible
contamination, and the timing, extent and costs of required restoration and
rehabilitation activity. Refer Note 20, Provisions, for further detail.
Judgement
Ore stockpile and diamond inventory
Management exercises judgement when making assumptions about the valuation of
ore stockpiles and diamond inventory. Key considerations include conversion
factors, diamond prices, production grades, and costs to completion, which
collectively inform the Group's valuation approach. In forming these
assumptions, the Group relies on empirical data on prices achieved, grade and
expenditure. Ore stockpiles are surveyed regularly to determine the quantum of
ore in cubic metres at that time. A conversion factor called the Load Density
Factor (LDF) is applied to the cubic metres to determine the ore in tonnes.
The LDF varies depending on ore type, moisture content and compaction.
Impairment reviews
The Group determines if goodwill is impaired on at least an annual basis,
while all other significant operations are tested for impairment when there
are potential indicators which may require an impairment review. This requires
an estimation of the recoverable amount of the relevant CGU under review. The
recoverable amount is the higher of fair value less costs to sell and value in
use. While conducting an impairment review of its assets using value-in-use
impairment models, the Group exercises judgement in making assumptions about
future rough diamond prices, volumes of production, ore reserves and resources
included in the current LoM plans, production costs and macro-economic factors
such as inflation and discount rates. Changes in estimates used can result in
significant changes to the consolidated statement of profit or loss and
consolidated statement of financial position. Refer Note 11, Impairment
testing, for further estimates and judgements applied.
The key assumptions used in the recoverable amount calculations, determined on
a value-in-use basis, are listed below:
Valuation basis
Discounted present value of future cash flows.
LoM and recoverable value of reserves and resources
Economically recoverable reserves and resources, carats recoverable and grades
achievable are based on management's expectations of the availability of
reserves and resources at Letšeng and technical studies undertaken by
in-house and third-party specialists. Reserves remaining after the current LoM
plan have not been included in determining the value in use of the operations.
The LoM of Letšeng is currently up to 2039 (2023: 2038).
Cost and inflation rate
Operating costs for Letšeng are determined using 2024 actual costs,
management's experience and the use of contractors over a period of time whose
costs are fairly reasonably determinable. Processing costs have been based on
insourcing assumptions and estimates, following the recent insourcing of the
processing activities, and are lower than in the past due to an immediate
saving of contractor margin costs. In the longer term, management has applied
local inflation rates of 5.0% (2023: 5.0%) for operating costs beyond 2027. Up
to 2026, inflation rates applied ranged between 5.2% - 9.6% (2023: 5.4% -
8.9%).
Capital costs have been based on management's specific capital programme for
the first five years, the mining fleet replacement programme for the LoM to
service the updated mine plan and a fixed percentage of processing costs
(after the first five years) to determine the capital costs necessary to
maintain current levels of operations.
Exchange rates
Exchange rates are applied in line with IAS 36, Impairment of Assets. The US
dollar/Lesotho loti (LSL) exchange rate used was determined with reference to
the closing rate at 31 December 2024 of LSL18.87 (31 December 2023: LSL18.29).
Diamond prices
The short and medium term diamond prices used in the impairment test have been
set with reference to historical and recent prices achieved, recent market
trends, anticipated market supply and the Group's medium-term forecast.
Long-term diamond price escalation reflects the Group's assessment of market
supply/demand fundamentals.
Discount rate
The discount rate of 12.9% for revenue (2023: 10.4%) and 16.1% for costs
(2023: 12.4%) used for Letšeng represents the before-tax risk-free rate
adjusted for market risk, volatility and risks specific to the asset and its
operating jurisdiction. Management consider the use of two different discount
rates appropriate as the region in which the revenue is earned has a lower
risk profile to the region in which the costs are incurred.
Market capitalisation
Where the Group's asset carrying values exceed market capitalisation, it
serves as an indicator of impairment. The Group believes that this position
does not represent an impairment as all significant operations and individual
assets were assessed for impairment during the year and no impairments were
recognised.
Sensitivity
The value in use for Letšeng indicated sufficient headroom, and further
changes to key assumptions which could result in impairment are disclosed in
Note 11, Impairment testing.
Provision for restoration and rehabilitation and deferred tax thereon
Judgement is applied when calculating the closure costs associated with the
restoration of the Letšeng mine site. These include the following:
· there are no costs associated with the backfill of the open pits
due to no in-country legislation requirements; and
· there are no costs associated with dismantling permanent
buildings as these will be handed over to various parties in consultation with
the Lesotho Government when the end of life is reached.
At the Ghaghoo mine site, the following judgements were applied:
· the mine site will be left in a state which could enable a future
operator to operate on the site, and therefore certain infrastructure, such as
access roads to the mine, paving and walkways, a solar solution installation,
borehole pump and water treatment plant, will remain intact and, after
obtaining the necessary approvals, it will be handed over to the Government of
Botswana through the Ministry of Minerals and Energy. There are therefore no
costs associated with the rehabilitation of certain roads or rehabilitation
and dismantling of certain infrastructures; and
· the timing of the rehabilitation cost cash flows has been
estimated to be five years.
At Letšeng, deferred tax assets are recognised on provisions for
rehabilitation as management will implement appropriate tax planning
strategies to ensure sufficient taxable income is available to utilise all
deductions in the future. At Ghaghoo, no deferred tax assets have been
recognised on the provision for rehabilitation as management does not foresee
any taxable profits or taxable temporary differences against which the
deferred tax asset can be utilised due to the operation being under care and
maintenance.
Capitalised stripping costs (deferred waste)
Waste removal costs (stripping costs) are incurred during the development and
production phases at surface mining operations. The orebody needs to be
identified in its various separately identifiable components. An identifiable
component is a specific volume of the orebody that is made more accessible by
the stripping activity. Judgement is required to identify and define these
components (referred to as "cuts"), and also to determine the expected volumes
(tonnes) of waste to be stripped and ore to be mined in each of these
components. These assessments are based on a combination of information
available in the mine plans, specific characteristics of the orebody and the
milestones relating to major capital investment decisions.
Judgements and estimates are also used to apply the amortisation rate, future
stripping costs of the cut/component and the expected ore to be mined from
that cut/component. Refer Note 8, Property, plant and equipment.
Identifying uncertainties over tax treatments
As previously disclosed, an amended tax assessment was issued to Letšeng by
the Revenue Services Lesotho (RSL), in December 2019, contradicting the
application of certain tax treatments in the current Lesotho Income Tax Act
1993. An objection to the amended tax assessment was lodged with the RSL in
March 2020, which was supported by the opinion of senior counsel. The RSL
subsequently lodged a court application for the review and setting aside of
the applicable regulations to the Lesotho High Court pertaining to this
matter, which Letšeng is opposing. The amended court application process will
continue during 2025, with support from senior legal counsel.
Management do not believe a liability relating to an uncertain tax position
exists as:
· there is no ambiguity in the application of the published Lesotho
Income Tax Act;
· there has been no change in the application of the Income Tax Act
and resulting tax; and
· senior counsel advice, which is legally privileged, has been
obtained for the new circumstances. This advice still reflects good prospects
of success.
No provision or contingent liability has been raised in the 2024 Financial
Statements relating to
· the amended tax assessment in question; or
· any potential legal costs that could be incurred,
should the matter be found in favour of the RSL.
Offsetting of deferred tax assets and deferred tax liabilities of the Group's
subsidiary, Letšeng Diamonds
The Group's subsidiary, Letšeng Diamonds, is subject to the tax laws and
regulations enacted within Lesotho. The corporate tax laws and regulations
currently enacted by the RSL requires a taxpayer to file a claim for
offsetting current tax assets and current tax liabilities, and offsetting
deferred tax assets and deferred tax liabilities with the Commissioner within
four years after service of the notice of assessment for the year of
assessment to which the claim relates.
The Group, after applying significant judgement, is of the view that Letšeng
Diamonds does not have a legally enforceable right to offset current tax
assets against current tax liabilities, and deferred tax assets against
deferred tax liabilities within the Lesotho corporate tax jurisdiction as it
is subject to the Commissioner's approval of the claim submitted, for which
the outcome is highly uncertain as the approval is subject purely to the
discretion of the Commissioner. On this basis, the Group does not offset
Letšeng Diamonds' deferred tax assets and deferred tax liabilities, but
rather presents them on a gross basis in the consolidated statement of
financial position. Refer Note 1.2.18, Taxation.
Deferred Tax on Unremitted Earnings
Management applies judgement when assessing whether it has the intention and
ability to control the timing of profit distribution from its subsidiaries.
Deferred tax liabilities are recognised according to the Group's expected
distributions in the annual business plan, which is based on a three-year
period. Management believe the annual business plan reflects the best estimate
of the Group's distributions and are probable. Refer Note 21, Deferred
taxation
Determination of variable consideration in terms of revenue recognition
Judgement is exercised by estimating variable consideration on the polished
sales price of diamonds sold into cooperation agreements. The variable
consideration is determined having regard to past experience with respect to
the uplift earned on the sale of the polished diamonds. Revenue is only
recognised to the extent that it is highly probable that a significant
reversal in the amount of cumulative revenue recognised will not occur when
the uncertainty associated with the variable consideration is subsequently
resolved.
No variable consideration is recognised on the future uplift of the margin on
partnership arrangements as the future amounts are highly susceptible to
factors outside of the Group's control, as described in IFRS 15 par 57; being
market volatility, decisions and actions of third parties and that the
uncertainty is not expected to be resolved for a relatively long period. These
factors result in a significant estimation uncertainty and management
exercised judgement in not recognising the variable consideration until the
uncertainty associated with the variable consideration is subsequently
resolved.
2024 2023
US$'000 US$'000
2 REVENUE FROM CONTRACTS WITH CUSTOMERS
Sale of goods 152 839 139 433
Partnership arrangements 1 373 854
154 212 140 287
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$1.4 million (2023:
US$0.9 million) represents the additional uplift from partnership
arrangements for which revenue is recognised when the significant constraints
are lifted or resolved and the amount of revenue is guaranteed. At year end 1
236 carats (2023: 1 728 carats) have significant constraints in recognising
revenue relating to the additional uplift.
2024 2023
US$'000 US$'000
3 OTHER OPERATING (EXPENSES)/INCOME
Other operating (expenses)/income are categorised separately as they relate to
expenses or income which are minor or irregular and are incurred or sourced
outside of normal operations.
Sundry (expense)/income (206) 203
Ghaghoo reduction in rehabilitation provision 562 354
Proceeds from insurance claim 65 1 030
Proceeds from VAT refund1 - 251
Ghaghoo care and maintenance costs2 (1 572) (1 809)
Profit/(loss) on disposal and scrapping of property, plant and equipment 152 (22)
(999) 7
1 The VAT refund in the prior year relates to long-outstanding VAT refunds
received from the Revenue Service of Lesotho which had been previously written
off at Letšeng.
2 Includes depreciation recognised in the current year of US$67.0 thousand (31
December 2023: US$10.0 thousand).
2024 2023
US$'000 US$'000
4 OPERATING PROFIT
Operating profit includes operating costs and income as listed below:
Depreciation and amortisation
Depreciation and mining asset amortisation excluding waste stripping cost1 (9 238) (5 423)
Depreciation of right-of-use assets (2 129) (1 892)
Waste stripping costs amortised (35 627) (39 194)
(46 994) (46 509)
Inventories
Cost of inventories recognised as an expense (including the relevant portion (100 497) (102 204)
of waste stripping costs amortised)
Foreign exchange
Foreign exchange gain 1 086 2 775
Lease expenses not included in lease liability
Mine site property (180) (152)
Equipment and service lease (1) (9 728)
(181) (9 880)
Auditor's remuneration - RSM/EY2
Group financial statements (280) (328)
Statutory (167) (161)
(447) (489)
Auditor's remuneration - other audit firms
Statutory (41) (92)
Other non-audit fees - RSM/EY2
Other services - (7)
Other non-audit fees - other audit firms
Tax services advisory and consultancy (18) (31)
Employee benefits expense
Salaries and wages3 (20 353) (14 386)
Underlying earnings before interest, tax, depreciation and mining asset
amortisation (underlying EBITDA)
Underlying EBITDA is shown, as the Directors consider this measure to be a
relevant guide to the operational performance of the Group and excludes such
non-operating costs and income as listed below. The reconciliation from
operating profit to underlying EBITDA is as follows:
Operating profit 17 992 10 380
Other operating expenses/(income)4 932 (20)
Foreign exchange gain (1 086) (2 775)
Share-based payments 516 332
Depreciation and amortisation (excluding waste stripping cost amortised) 11 365 7 315
Underlying EBITDA 29 719 15 232
1 Includes a full year of depreciation relating to the mining fleet and
support equipment, acquired as part of the insourcing of the mining activities
in December 2023.
2 The Group's auditors changed from Ernst & Young Inc (EY) in the prior
year to RSM Audit UK LLP (RSM) in the current year.
3 Includes contributions to defined contribution plan of US$0.8 million (31
December 2023: US$0.4 million). An average of 716 employees excluding
contractors were employed during the period (2023: 313). The increased
number of employees was as a result of the insourcing of the mining and
processing activities.
4 Includes Ghaghoo-related care and maintenance and site rehabilitation costs
of US$1.6 million (31 December 2023: US$1.8 million), partially offset by a
reduction of US$0.6 million in the Ghaghoo rehabilitation provision, all of
which are considered non-operating.
2024 2023
US$'000 US$'000
5 NET FINANCE COSTS
Finance income
Bank deposits 392 292
Insurance asset 483 325
Total finance income 875 617
Finance costs
Finance costs on borrowings (5 339) (3 332)
Finance costs on lease liabilities (372) (497)
Finance costs on unwinding of rehabilitation and decommissioning provision (1 464) (1 484)
Fair value adjustment on loan receivable (231) -
Total finance costs (7 406) (5 313)
(6 531) (4 696)
Finance income relates to interest earned on cash, short-term deposits and
insurance assets.
Finance costs include interest incurred on borrowings and associated unwinding
of facility credit underwriting fees, finance lease liabilities and the
unwinding of rehabilitation provisions.
2024 2023
US$'000 US$'000
6 INCOME TAX EXPENSE
Current
- Foreign (6 443) (909)
Withholding tax
- Foreign (508) -
- Foreign: prior year refund1 - 596
Deferred
- Foreign 3 576 (3 777)
Income tax expense (3 375) (4 090)
Profit before taxation 11 461 5 684
% %
Reconciliation of tax rate
Applicable income tax rate 25.0 25.0
Non-deductible expenses1 3.1 5.4
Unrecognised deferred tax assets 1.8 32.9
Effect of foreign tax at different rates2 0.4 19.2
Unremitted earnings (5.3) -
Withholding tax 4.4 -
Withholding tax: prior year refund3 - (10.5)
Effective income tax rate 29.4 72.0
The tax rate reconciles to the statutory Lesotho corporation tax rate of 25%
as this is the jurisdiction in which the majority of the Group's taxes are
incurred.
1 Non-deductible expenses mainly comprise corporate social investment, legal
fees of a capital nature and share-based payments in both the current and
prior year.
2 In the prior year, a provision for uncertain tax positions was raised.
During the year, clarity was provided regarding the position and the provision
was no longer required and therefore released. Refer Note 23 Commitments and
contingencies.
3 This item relates to withholding tax previously overpaid and refunded in
full in the prior year by the Revenue Services Lesotho.
The effective tax rate is above the Lesotho statutory tax rate of 25%
primarily as a result of deferred tax assets not recognised on losses incurred
in non-trading operations in the Group, withholding taxes paid and the impact
of certain non-deductible expenses for tax purposes.
2024 2023
US$'000 US$'000
7 EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Profit for the year 8 086 1 594
Less: Non-controlling interests (5 192) (3 719)
Net profit/(loss) attributable to ordinary equity holders of the parent for 2 894 (2 125)
basic and diluted earnings
Number of ordinary shares outstanding at end of year ('000) 141 236 141 210
Weighted number of share options exercised during the year ('000) (9) (161)
Effect of share buyback - Treasury shares ('000) (1 520) (1 520)
Weighted average number of ordinary shares outstanding during the year ('000) 139 707 139 529
Basic earnings/(loss) per share attributable to ordinary equity holders of the 2.1 (1.5)
parent (cents)
Earnings/(loss) per share is calculated by dividing the net profit/(loss)
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings/(loss) per share is calculated by dividing the net
profit/(loss) attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year after
taking into account future potential conversion and issue rights associated
with the ordinary shares.
2024 2023
Number of Number of
shares shares
000's 000's
Weighted average number of ordinary shares outstanding during the year 139 707 139 529
Effect of dilution:
- Future share awards under the Employee Share Option Plan 4 262 2 509
Weighted average number of ordinary shares outstanding during the year 143 969 142 038
adjusted for the effect of dilution
Diluted earnings/(loss) per share attributable to ordinary equity holders of 2.0 (1.5)
the parent (cents)
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
8 PROPERTY, PLANT AND EQUIPMENT
Stripping activity asset Mining asset De- Lease- Plant and equip- Other assets2 Total
ment1
commis- hold
sioning assets improve-
ment
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 31 December 2024
Cost
As at 1 January 2024 604 372 100 827 3 255 50 892 112 812 9 336 881 494
Additions 22 302 - - 498 3 367 1 893 28 060
Net movement in rehabilitation provision (528) - (177) - (2 993) - (3 698)
Disposals - - - - (3 191) (643) (3 834)
Reclassifications3 - 3 222 - 189 (3 416) 5 -
Foreign exchange differences (19 288) (2 389) (104) (1 613) (3 676) (268) (27 338)
As at 31 December 2024 606 858 101 660 2 974 49 966 102 903 10 323 874 684
Accumulated depreciation/amortisation/impairment
As at 1 January 2024 437 154 39 026 3 255 32 544 64 503 6 418 582 900
Charge for the year 35 627 864 (177) 1 467 6 556 528 44 865
Disposals - - - - (3 190) (638) (3 828)
Reclassifications - - - 171 (171) - -
Foreign exchange differences (13 732) (1 655) (104) (1 072) (2 356) (193) (19 112)
As at 31 December 2024 459 049 38 235 2 974 33 110 65 342 6 115 604 825
Net book value at 31 December 2024 147 809 63 425 - 16 856 37 561 4 208 269 859
1 Included in plant and equipment are capital projects in progress of
US$0.9 million (31 December 2023: US$4.1 million).
2 Other assets comprise motor vehicles, computer equipment, furniture and
fittings, and office equipment.
3 The reclassifications in the current year related to capital projects in
progress in the prior year, included in plant and equipment, which are being
depreciated in the current year as mining assets.
Stripping activity asset Mining asset De- Lease- Plant and equip- Other assets1 Total
ment3
commis- hold
sioning assets improve-
ment
As at 31 December 2023
Cost
Balance at 1 January 2023 609 336 103 972 3 519 53 740 89 292 8 521 868 380
Restatement - Refer Note 28 - - - - 5 495 - 5 495
Restated balance at 1 January 2023 609 336 103 972 3 519 53 740 94 787 8 521 873 875
Additions2 37 102 2 056 - 17 27 056 1 255 67 486
Net movement in rehabilitation provision - - - - (1 342) - (1 342)
Disposals - - - - (588) (238) (826)
Reclassifications - 156 - 710 (1 153) 287 -
Foreign exchange differences (42 066) (5 357) (264) (3 575) (5 948) (489) (57 699)
As at 31 December 2023 604 372 100 827 3 255 50 892 112 812 9 336 881 494
Accumulated depreciation/ amortisation/impairment
As at 1 January 2023 425 316 42 564 3 519 33 140 63 727 6 615 574 881
Restatement - Refer Note 28 - - - - 2 731 - 2 731
Restated balance at 1 January 2023 425 316 42 564 3 519 33 140 66 458 6 615 577 612
Charge for the year 39 194 559 - 1 536 2 895 433 44 617
Disposals - - - - (571) (229) (800)
Foreign exchange differences (27 356) (4 097) (264) (2 132) (4 279) (401) (38 529)
As at 31 December 2023* 437 154 39 026 3 255 32 544 64 503 6 418 582 900
Net book value at 31 December 2023* 167 218 61 801 - 18 348 48 309 2 918 298 594
1 Other assets comprise motor vehicles, computer equipment, furniture and
fittings, and office equipment.
2 Includes purchase of mining fleet and support equipment (including
transaction costs capitalised) of US$22.8 million in terms of the insourcing
of the mining activities which is disclosed in the plant and equipment
category.
3 Included in plant and equipment are capital projects in progress of US$4.1
million (31 December 2022: US$14.1 million).
Plant and equipment Motor vehicles Buildings Total
US$'000 US$'000 US$'000 US$'000
9 RIGHT-OF-USE ASSETS
As at 31 December 2024
Cost
As at 1 January 2024 3 379 363 6 008 9 750
Additions 1 058 434 271 1 763
Derecognition of lease (738) (243) (349) (1 330)
Foreign exchange differences (113) (17) (130) (260)
As at 31 December 2024 3 586 537 5 800 9 923
Accumulated depreciation
As at 1 January 2024 1 450 103 3 451 5 004
Charge for the year 979 188 962 2 129
Derecognition of lease (444) (117) (349) (910)
Foreign exchange differences (60) (5) (106) (171)
As at 31 December 2024 1 925 169 3 958 6 052
Net book value at 31 December 2024 1 661 368 1 842 3 871
As at 31 December 2023
Cost
As at 1 January 2023 3 190 421 6 430 10 041
Additions 502 508 122 1 132
Derecognition of lease (94) (536) (225) (855)
Foreign exchange differences (219) (30) (319) (568)
As at 31 December 2023 3 379 363 6 008 9 750
Accumulated depreciation
As at 1 January 2023 688 115 2 898 3 701
Charge for the year 845 96 951 1 892
Derecognition of lease (42) (100) (225) (367)
Foreign exchange differences (41) (8) (173) (222)
As at 31 December 2023 1 450 103 3 451 5 004
Net book value at 31 December 2023 1 929 260 2 557 4 746
Plant and equipment mainly comprise pit dewatering and back-up power
generating equipment utilised at Letšeng. Motor vehicles mainly comprise
vehicles utilised by contractors at Letšeng. Buildings comprise office
buildings in Maseru, Antwerp, London, Gaborone and Johannesburg.
Right-of-use assets are depreciated on a straight-line basis over the shorter
of its estimated useful life and the lease term.
During the year, Gem Diamonds Limited and Gem Diamond Technical Services (Pty)
Ltd entered into new contracts for the rental of existing office space in
London and Johannesburg respectively. At Letšeng, lease contracts for
dewatering equipment and vehicles were either entered into or renegotiated
resulting in the recognition of associated right-of-use assets and lease
liabilities. The original contracts were cancelled and all associated assets
and liabilities were derecognised. Refer Note 17, Lease liabilities.
During the prior year new lease contracts were entered into for earth-moving
equipment and certain assets relating to catering and housekeeping resulting
in the recognition of right-of-use assets and lease liabilities associated
with the new lease.
Total gains of US$0.3 million (2023: US$30 thousand) have been recognised in
the consolidated statement of profit or loss relating to the derecognition of
leases in the Group during the year. Refer Note 17, Lease liabilities and Note
22.1, Cash generated by operations. During the year the Group recognised
income of US$0.3 million (2023: US$0.3 million) from the sub-leasing of
office buildings in Maseru.
Goodwill1
US$'000
10 INTANGIBLE ASSETS
As at 31 December 2024
Cost
Balance at 1 January 2024 10 440
Foreign exchange translation difference (322)
Balance at 31 December 2024 10 118
Accumulated amortisation
Balance at 1 January 2024 -
Amortisation -
Balance at 31 December 2024 -
Net book value at 31 December 2024 10 118
As at 31 December 2023
Cost
Balance at 1 January 2023 11 221
Foreign exchange translation difference (781)
Balance at 31 December 2023 10 440
Accumulated amortisation
Balance at 1 January 2023 -
Amortisation -
Balance at 31 December 2023 -
Net book value at 31 December 2023 10 440
1 Goodwill allocated to Letšeng Diamonds. Refer Note 11, Impairment
testing.
2024 2023
US$'000 US$'000
11 IMPAIRMENT TESTING
Goodwill impairment testing is undertaken on Letšeng Diamonds annually and
when there are indications of impairment. The most recent test was undertaken
at 31 December 2024. In assessing whether goodwill has been impaired, the
carrying amount of Letšeng Diamonds is compared with its recoverable amount.
For the purpose of goodwill impairment testing in 2024, the recoverable amount
for Letšeng Diamonds has been determined based on a value in use model,
similar to that adopted in the past.
Goodwill
Letšeng Diamonds 10 118 10 440
As at 31 December 2024 10 118 10 440
Movement in goodwill relates to foreign exchange translation from functional
to presentation currency, as disclosed within Note 10, Intangible assets.
The discount rates are outlined below and represent the nominal pre-tax rates.
These rates are based on the weighted average cost of capital (WACC) of the
Group and adjusted accordingly at a risk premium for Letšeng Diamonds, taking
into account risks associated therein.
2024 2023
% %
Discount rate - Letšeng Diamonds
Applied to revenue 12.9 10.4
Applied to costs 16.1 12.4
Value in use
The mining lease period at Letšeng extends to 2029 with an exclusive option
to renew for a further 10 years to 2039. The updated open pit mine plan which
has been used to project the cash flows, reflects that the open pit mining
(including inferred resources) is expected to cease in 2039 (31 December 2023:
2038). In terms of IAS 36, cash flows are projected for a period up to the
date of the LoM plan period, i.e. 2039, which now coincides with the mining
lease period of 2039. The mine plan takes into account the available reserves
and other relevant inputs such as diamond pricing, costs and geotechnical
parameters. It includes the next open pit cutback in the Satellite Pipe (C6W)
using a re-designed steeper slope concept which significantly reduced the
tonnes of waste previously required to be removed. The cost savings associated
with the recently concluded insourcing of the processing activities have been
included in the value-in-use model. Refer Note 1.2.26, Critical accounting
estimates and judgements.
Sensitivity to changes in assumptions
The Group will continue to test its assets for impairment where indications
are identified.
Refer Note 1.2.26, Critical accounting estimates and judgements, for further
details on impairment testing policies.
The short and medium-term diamond prices used in the impairment test have been
set with reference to historical and recent prices achieved, recent market
trends and anticipated market supply and the Group's medium-term forecast.
Long-term diamond price escalation reflects the Group's assessment, taking
into account independent diamond analyst views of market supply/demand
fundamentals. The valuation of Letšeng at 31 December 2024 exceeded the
carrying value by US$51.3 million (31 December 2023: US$63.3 million). The
valuation is sensitive to input assumptions particularly in relation to the
foreign exchange assumption of the US dollar (US$) to the Lesotho Loti (LSL)
at year end, future price growth for diamonds, increase in operating costs and
changes to the discount rates. The Group has assumed an appropriate price
increase for its diamonds following the significant pressure experienced in
the diamond market during the year.
A range of alternative scenarios have been considered in determining whether
there is a reasonable possible change in the foreign exchange rates, diamond
prices, operating costs and discount rates, which would result in the
recoverable amount equating to the carrying amount. Each sensitivity was
performed in isolation with all other valuation assumptions remaining the
same. A 7.0% strengthening of the LSL to the US$ from US$1:LSL18.87 to
US$1:LSL17.55 (31 December 2023: 7% to US$1:LSL17.00), or a reduction of 5.0%
(31 December 2023: 5.0%) to the starting diamond prices (at the year end
exchange rate), or a 7.9% (31 December 2023: 8.0%) increase in current
estimated operating costs of US$1.6 billion (31 December 2023: US$1.7 billion)
over the LoM, or an increase of 1.09 basis points or decrease of 1.79 basis
points to the discount rate applied to revenue and cost respectively, would
result in the recoverable amount equating to the current carrying amount, with
other valuation assumptions remaining the same.
As a result, no impairment charge was recognised for the Letšeng Diamonds CGU
during the year.
2024 2023
US$'000 US$'000
12 RECEIVABLES AND OTHER ASSETS
Non-current
Deposits 776 90
Insurance asset1 5 596 4 397
Other receivables2 969 -
7 341 4 487
Current
Trade receivables 592 23
Prepayments3 1 484 1 249
Deposits 29 24
Other receivables 498 374
VAT receivable4 4 030 1 961
6 633 3 631
The carrying amounts above approximate their fair value due to the nature of
the instruments.
Analysis of trade receivables based on their terms and conditions
Neither past due nor impaired - 2
> 120 days 19 21
19 23
1 This non-current asset relates to Letšeng's Multi-aggregate Protection
Insurance Policy with The Lesotho National Insurance Group (LNIGC) of LSL140.0
million (US$7.4 million) (31 December 2023: LSL140.0 million (US$7.7 million))
entered into in October 2021. This policy has a remaining tenure of
one-and-a-half years at year end (31 December 2023: two-and-a-half-years).
Premium payments of LSL30.0 million (US$1.6 million) (31 December 2023:
LSL30.0 million (US$1.6 million)) for the policy are payable annually in
advance. Refer Note 23, Commitments and contingencies. The policy gives
Letšeng the right to claim up to LSL75.0 million (31 December 2023: LSL75.0
million) for each-and-every-loss and LSL150.0 million ((31 December 2023:
LSL150.0 million) in the aggregate (subject to terms and conditions contained
in the policy). On expiry of the policy in June 2026, all unutilised funds
within the policy are due and payable to Letšeng. A non-current financial
asset has been recognised for the unutilised premium paid to date, net of
underwriting service fee of LSL 2.1 million (US$0.1 million) ((31 December
2023: LSL2.1 million (U$0.1 million)) as expensed as part of operating
expenses within the Statement of Profit or Loss. The non-current financial
asset is measured at amortised cost in line with IFRS 9 Financial
Instruments. Interest is earned on the unrealised premium and recognised as
finance income. The fourth premium payment of LSL30.0 million (US$1.6 million)
((31 December 2023: LSL30.0 million (US$1.6 million) was financed through a
10-month loan through Premium Finance Partners (Proprietary) Limited. This
non-current financial asset is ceded in favour of Premium Finance Partners
(Proprietary) Limited. Refer Note 16, Interest-bearing loans and borrowings.
2 Other non-current receivables relate to a financing arrangement provided to
a third party to assist with the exploration of possible expansion
opportunities.
3 Prepayments include insurance premiums prepaid at Letšeng of US$0.4 million
(31 December 2023: US$0.4 million) which were also funded through Premium
Finance Partners (Proprietary) Limited. This prepayment is ceded in favour of
Premium Finance Partners (Proprietary) Limited. Refer Note 16,
Interest-bearing loans and borrowings.
4 VAT receivable mainly comprises of US$3.8 million at Letšeng and US$0.2
million at Gem Diamond Technical Services (Pty) Ltd. Post year-end US$2.6
million has been received from the respective revenue authorities.
Based on the nature of the Group's customer base and the negligible exposure
to credit risk through its customer base, insurance asset and other financial
assets, the expected credit loss is insignificant and has no impact on the
Group.
2024 2023
US$'000 US$'000
13 INVENTORIES
Diamonds on hand 9 279 17 128
Ore stockpile 16 560 11 553
Consumable stores 8 225 8 952
34 064 37 633
Inventory is carried at the lower of cost or net realisable value.
In the current year, consumable stores at Ghaghoo were written down by
US$0.1 million to net realisable value (31 December 2023: nil).
2024 2023
US$'000 US$'000
14 CASH AND SHORT-TERM DEPOSITS
Cash on hand 3 3
Bank balances 6 032 5 101
Short term bank deposits 6 843 11 399
12 878 16 503
The amounts reflected in the financial statements approximate fair value due
to the short-term maturity and nature of cash and short-term deposits.
Cash at banks earn interest at floating rates based on daily bank deposit
rates. Short-term deposits are generally call deposit accounts and earn
interest at the respective short-term deposit rates.
The Group's cash surpluses are deposited with major financial institutions of
high-quality credit standing predominantly within Lesotho and the United
Kingdom.
At 31 December 2024, the Group had US$69.0 million (31 December 2023: US$45.9
million) of undrawn facilities, representing LSL450.0 million (US$23.8
million) (31 December 2023: LSL180.0 million (US$9.8 million)) and ZAR300.0
million (US$15.9 million) (31 December 2023: ZAR120.0 million (US$6.6
million)) of the two-year extended secured revolving credit facility at
Letšeng, ZAR100.0 million (US$5.3 million) (31 December 2023: ZAR100.0
million (US$5.5 million) of the Letšeng general banking facility, and US$24.0
million (31 December 2023: US$24.0 million) of the Company's two-year extended
secured revolving credit facility. For further details on these facilities,
refer Note 16, Interest-bearing loans and borrowings.
15 ISSUED SHARE CAPITAL AND RESERVES
Share capital
31 December 2024 31 December 2023
Number US$'000 Number US$'000
of shares of shares
'000 '000
Authorised - ordinary shares of US$0.01 each
As at year end 200 000 2 000 200 000 2 000
Issued and fully paid balance at beginning of year 141 210 1 413 140 923 1 410
Allotments during the year 26 - 287 3
Number of ordinary shares outstanding at end of year 141 236 1 413 141 210 1 413
Treasury shares
31 December 2024 31 December 2023
Number US$'000 Number US$'000
of shares of shares
'000 '000
Number of treasury shares outstanding at end of year (1 520) (1 157) (1 520) (1 157)
Share premium
Share premium comprises the excess value recognised from the issue of ordinary
shares above its par value.
Other reserves
Foreign Share- Total
currency based
translation equity
reserve reserve
US$'000 US$'000 US$'000
As at 1 January 2024 (257 924) 7 127 (250 797)
Other comprehensive loss (5 053) - (5 053)
Total comprehensive loss (5 053) - (5 053)
Share-based payment expense - 516 516
As at 31 December 2024 (262 977) 7 643 (255 334)
As at 1 January 2023 (245 967) 6 798 (239 169)
Other comprehensive loss (11 957) - (11 957)
Total comprehensive loss (11 957) - (11 957)
Share capital issue - (3) (3)
Share-based payment expense - 332 332
As at 31 December 2023 (257 924) 7 127 (250 797)
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange
differences arising from the translation of foreign entities. The South
African, Lesotho and Botswana subsidiaries' functional currencies are
different to the Group's presentation currency of US dollar. The rates used to
convert the operating functional currency into US dollar are as follows:
2024 2023
Currency US$'000 US$'000
Average rate ZAR/LSL to US$1 18.34 18.45
Year end ZAR/LSL to US$1 18.87 18.29
Average rate Pula to US$1 13.56 13.36
Year end Pula to US$1 13.93 13.39
Share-based equity reserves
For details on the share-based equity reserve, refer Note 26, Share-based
payments.
Capital management
In order to maintain or adjust the capital structure, the Group may adjust the
amounts of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The Group is subject to certain loan covenants and meeting these is given
priority in all capital risk management decisions. There have been no events
of default on the loans during the financial year.
For details on capital management, refer Note 25, Financial risk management.
Treasury shares
In 2022, the Board of Directors approved a share buyback programme to purchase
up to US$2.0 million of the Company's ordinary shares. The sole purpose of the
programme was to reduce the capital of the Company and the Company intends to
hold those ordinary shares purchased under the programme in treasury. Such
treasury shares are not entitled to dividends and have no voting rights. The
share buyback programme was initiated on 12 April 2022. At 31 December 2022,
1 520 170 shares had been bought back at the market value on the date of
each buyback, equating to a weighted average price of 60.05 GB pence (78.07 US
cents) per share, totalling US$1.2 million (including transaction costs).
This reduction in shares issued has been taken into account in calculating the
earnings per share. No further share buybacks have taken place since 2022.
16 INTEREST-BEARING LOANS AND BORROWINGS
The RCFs at Letšeng and Gem Diamonds Limited were extended for a 24-month
period through exercising the extension option included in the initial
facility agreement, following the required credit approval from the lenders.
Gem Diamonds Limited provides security for both the Letšeng Diamonds and Gem
Diamonds Limited revolving credit facilities over its bank accounts domiciled
in the United Kingdom (US$2.3 million) (31 December 2023: US$1.4 million) and
over its 70% shareholding in Letšeng Diamonds, refer Note 30, Material partly
owned subsidiary.
Effective from 1 January 2023, the interest-bearing loans and borrowings
subject to the US$ three-month LIBOR rate transitioned to a Secured Overnight
Financing Rate (SOFR), in line with the IBOR phase 2 Amendments which became
effective in 2021. The transition from the South African JIBAR rates to the
South African Rand Overnight Index Average (ZARONIA) is expected to be
completed by 2026. The interest-bearing loans and borrowings that remain
subject to the South African JIBAR rate include the ZAR132.0 million unsecured
project debt facility and the ZAR300.0 million revolving credit facility.
The Group will continue to assess the impact of the interest rate benchmark
reform on the Group's JIBAR interest-bearing loans and borrowings as the
revised benchmark rates are published or negotiated with the funders. The
developments on these facilities from 1 January 2024 and their carrying
amounts and maturities as at 31 December 2024 are disclosed in the note below.
Effective interest rate Maturity 2024 2023
US$'000 US$'000
Non-current
LSL450.0 million (US$23.8 million) and ZAR300.0 million (US$15.9 million) bank Central Bank of Lesotho rate (7.75%) + 3.25% and South African JIBAR (8.35%) + - -
loan facility 3.00%1
Credit underwriting fees 21 December 2026 (78) -
US$30.0 million bank loan facility Term SOFR (4.33%)+ 5.21%1 21 December 2026 6 000 -
Credit underwriting fees (60) -
ZAR132.0 million (US$7.0 million) million project debt facility South African JIBAR (8.35%) + 2.50% 31 May 2027 2 999 5 156
LSL200.0 million (US$10.6 million) term loan facility Lesotho prime rate (11.25%) 30 April 2029 7 772 -
minus 1.50%
16 633 5 156
Current
LSL450.0 million (US$23.8 million) and ZAR300.0 million (US$15.9 million) bank Central Bank of Lesotho rate (7.75%) + 3.25% and South African JIBAR (8.35%) + - 24 632
loan facility 3.00%1
Credit underwriting fees 21 December 2026 - (175)
US$30.0 million bank loan facility Term SOFR (4.33%)+ 5.21%1 - 6 000
Credit underwriting fees 21 December 2026 - (112)
ZAR132.0 million (US$7.0 million) million project debt facility South African JIBAR (8.35%) + 2.50% 31 May 2027 1 999 2 062
LSL200.0 million (US$10.6 million) term loan facility Lesotho prime rate (11.25%) 30 April 2029 1 413 -
minus 1.50%
LSL30.0 million (US$1.6 million) insurance premium finance 4.20% Repaid 1 April 2024 - 671
ZAR2.5 million (US$0.1 million) insurance premium finance 4.30% Repaid 1 April 2024 - 55
LSL12.4 million (US$0.7 million) insurance premium finance 4.20% Repaid 1 April 2024 - 278
LSL30.0 million (US$1.6 million) insurance premium finance 4.20% 1 April 2025 650 -
ZAR0.9 million (US$48 thousand) insurance premium finance 4.20% 1 April 2025 20 -
LSL14.6 million (US$0.8 million) insurance premium finance 4.20% 1 April 2025 315 -
4 397 33 411
1 A reduction of 0.05% on the margin of the Nedbank portion of the revolving
credit facilities were effective from 1 January 2024 as the KPIs relating to
the Sustainability Linked Loans were met as at the 31 December 2023
measurement date.
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 secured LSL450.0
million and ZAR300.0 million (US$39.7 million) five-year (following the
24-month extension) 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).
In November 2024, the 24-month extension option for this facility was
exercised following credit approval by the lenders. The revised maturity date
is 21 December 2026.
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 3.00% (31 December 2023: South African JIBAR plus 3.00%).
At the end of the current year there were no drawdowns on these facilities
resulting in LSL450.0 million (US$23.8 million) and ZAR300.0 million (US$15.9
million) remaining available.
The remaining balance of the credit underwriting fees capitalised is US$0.1
million (31 December 2023: US$0.2 million). The capitalised fees are amortised
and accounted for as finance costs within profit or loss over the term of the
facility.
US$30.0 million bank loan facility at Gem Diamonds Limited
This facility is a secured five-year (following the 24-month extension)
revolving credit facility with Nedbank Limited (acting through its London
branch), Standard Bank of South Africa Limited (acting through its Isle of Man
branch) and Firstrand Bank Limited (acting through its Rand Merchant Bank
division) for US$13.5 million, US$9.0 million and US$7.5 million,
respectively. All draw downs are made in these ratios.
In November 2024, the 24-month extension option for this facility was
exercised, following credit approval by the lenders. The revised maturity date
is 21 December 2026.
At year end US$6.0 million (31 December 2023: US$6.0 million) had been drawn
down resulting in US$24.0 million (31 December 2023: US$24.0 million)
remaining available. The remaining balance of the credit underwriting fees
capitalised is US$0.1 million (31 December 2023: US$0.1 million) at year end.
The capitalised fees are amortised and accounted for as finance costs within
profit or loss over the period of the facility.
The US$-based interest rate for this facility at 31 December 2024 was 9.54%
(31 December 2023: 10.65%) which comprises term SOFR plus a 0.21% credit
adjustment spread and 5.00% margin (31 December 2023: SOFR plus a 0.26% credit
adjustment and 5.00% margin).
Total interest for the year on this interest-bearing RCF was US$1.3 million
(31 December 2023: US$0.9 million).
The facility includes an additional US$20.0 million accordion option, the
utilisation of which is subject to all necessary credit and other approvals
from the lenders. There was no utilisation of this facility in the current or
prior years.
ZAR132.0 million (US$7.0 million) project debt facility at Letšeng Diamonds
This loan is an unsecured project debt facility with Nedbank Limited and
underwritten by the ECIC which was entered into on 29 November 2022 to fund
the replacement of the primary crushing area (PCA) at Letšeng. The loan is
repayable in equal quarterly payments which commenced in March 2024. The
outstanding balance at year end was ZAR94.3 million (US$5.0 million) (31
December 2023: ZAR132.0 million (US$7.2 million). This loan expires on 27 May
2027.
The South African rand-based interest rates for the facility at 31 December
2024 was 10.85% which comprises South African JIBAR plus 2.50%.
Total interest for the year on this interest-bearing loan was US$0.7 million
(31 December 2023: US$0.7 million).
LSL200.0 million (US$10.6 million) secured term loan facility at Letšeng
Diamonds
This loan is a five-year secured term loan facility signed jointly with
Standard Lesotho Bank and Nedbank Lesotho on 15 May 2024. The loan is secured
by a special notarial bond over the fleet and equipment acquired as part of
the insourcing of the mining activities at the end of 2023. The loan is
repayable in equal monthly instalments which commenced in May 2024. The
outstanding balance at the end of the year was LSL173.3 million (US$9.2
million). This loan expires on 30 April 2029. The interest rate on the loan is
9.75%, representing the Central Bank of Lesotho prime rate minus 1.50%.
Total interest for the year on this interest-bearing loan was US$0.6 million.
Loan covenants
The Group's revolving credit facilities, Letšeng Diamonds' ZAR132.0 million
(US$7.0 million) project debt facility and LSL200.0 million (US$10.6 million)
secured term loan facility are subject to certain financial covenants and
these are assessed at the end of each quarter. The loans will be repayable
immediately if these covenants are breached. The Group is not aware of any
facts or circumstances that indicate that it may have difficulty complying
with the covenants within 12 months after the reporting period.
Insurance premium finance for Multi-aggregate and Asset All Risk Insurance
policies
The Group, through its subsidiary Letšeng Diamonds, enters into financing
agreements for insurance premiums for the Multi-aggregate Insurance Policy and
its Asset All Risk Policy. All respective insurance premiums prepaid are ceded
in favour of Premium Finance Partners (Proprietary) Limited. The funding is
payable monthly in advance. Refer Note 12, Receivables and other assets.
During the year, all prior year outstanding insurance premium finance balances
for the Multi-aggregate Insurance Policy and its Asset All Risk Policy were
fully repaid by 1 April 2024. The total interest paid during the current year
relating to these liabilities was LSL0.3 million (US$17.4 thousand).
In July, the Group through its subsidiary Letšeng Diamonds, entered into a
LSL30.0 million (US$1.6 million) 10-month funding agreement with Premium
Finance Partners (Proprietary) Limited to finance the fourth premium of
LSL30.0 million on the Multi-aggregate Insurance Policy. At year end, LSL12.3
million (US$0.7 million) remains outstanding. The funding is repayable in 10
monthly instalments, payable in advance. Total interest on this funding is
LSL1.3 million (US$68.7 thousand) of which LSL1.0 million (US$56.0 thousand)
was paid during the year.
In July, the Group through its subsidiary Letšeng Diamonds also entered into
a LSL14.6 million (US$0.8 million) 10-month funding agreement with Premium
Finance Partners (Proprietary) Limited for insurance premium finance for its
annual Asset All Risk insurance premium. At year end LSL6.0 million (US$0.3
million) remains outstanding. The funding is repayable in 10 monthly
instalments, payable in advance. Total interest on this funding is LSL0.6
million (US$33.3 thousand) of which LSL0.5 million (US$27.2 thousand) was paid
during the year.
Other facilities
Letšeng Diamonds has a ZAR100.0 million (US$5.3 million) general banking
facility with Nedbank Limited (acting through its Nedbank Corporate and
Investment Banking division) which is reviewed annually. During the year the
facility was utilised from time to time based on cash flow requirements, but
repaid in full at year end.
2024 2023
US$'000 US$'000
17 LEASE LIABILITIES
Non-current 2 246 3 786
Current 2 517 2 164
Total lease liabilities 4 763 5 950
Reconciliation of movement in lease liabilities
As at 1 January 5 950 7 898
Additions 1 935 1 132
Interest expense 372 497
Lease payments (3 062) (2 589)
Derecognition of lease (318) (519)
Foreign exchange differences (114) (469)
As at 31 December 4 763 5 950
Lease payments comprise payments in principle of US$2.7 million (31 December
2023: US$2.1 million) and repayments of interest of US$0.4 million (31
December 2023: US$0.5 million).
Refer Note 9, Right-of-use assets for details on new leases entered into and
leases derecognised during the year.
During the prior year, the Group recognised variable lease payments of US$31.6
million which consisted of mining activities outsourced to a mining
contractor, before the insourcing of mining activities. Of this total cost
incurred, US$21.9 million was capitalised to the stripping asset. Refer Note
1.2.6, Property plant and equipment, Note 4, Operating profit and Note 8,
Property, plant and equipment.
2024 2023
US$'000 US$'000
18 TRADE AND OTHER PAYABLES
Current
Trade payables1,2 3 862 15 761
Accrued expenses1 4 864 4 066
Leave benefits 687 498
Royalties1 2 000 2 679
Withholding taxes1 76 224
Other 176 128
11 665 23 356
1 These amounts are both interest and non-interest bearing and are settled in
accordance with terms agreed between the parties.
2 US$9.7 million included in the prior year balance related to the remaining
portion of the purchase price for the mining fleet and support equipment
purchased in terms of the insourcing of the mining activities which was
completed in the prior year. This remaining portion was settled during the
current year.
Royalties consist of a levy payable to the Government of the Kingdom of
Lesotho on the value of rough diamonds sold by Letšeng. Withholding taxes
mainly consist of taxes payable on dividends and other services to the Revenue
Services Lesotho.
The carrying amounts above approximate fair value.
2024 2023
US$'000 US$'000
19 INCOME TAX PAYABLE/(RECEIVABLE)
Reconciliation of movement in income tax payable/(receivable)
As at 1 January (3 713) (2 268)
Payments made during the year (339) (1 596)
Refunds received during the year 4 620 -
Current income tax charge 6 443 909
Authorised offset - VAT receivable1 - (897)
Foreign exchange differences (187) 139
As at 31 December 6 824 (3 713)
Split as follows
Income tax receivable (24) (4 631)
Income tax payable 6 848 918
1 During the prior year, a VAT receivable from Revenue Services Lesotho (RSL)
of US$0.9 million (LSL16.6 million) was authorised by RSL for offset against
provisional tax payments due to RSL. No offset took place during the current
year.
2024 2023
US$'000 US$'000
20 PROVISIONS
Severance pay benefits1 1 621 1 494
Rehabilitation provisions 10 993 14 170
Total provisions 12 614 15 664
Reconciliation of movement in rehabilitation provisions
As at 1 January 14 170 15 387
Decrease in provision - Ghaghoo (563) (354)
Decrease in provision - Letšeng (3 698) (1 342)
Unwinding of discount rate 1 464 1 484
Foreign exchange differences (380) (1 005)
As at 31 December 10 993 14 170
1 The severance pay benefits arise due to legislation within the Lesotho
jurisdiction, requiring that two weeks of severance pay be provided for every
completed year of service, payable on retirement. This amount was reclassified
from trade and other payables to provisions in the current year.
Rehabilitation provisions
The provisions have been recognised as the Group has an obligation for
rehabilitation of the mining areas. The provisions have been calculated based
on total estimated rehabilitation costs, discounted back to their present
values over the estimated rehabilitation period at the mining operations. The
pre-tax discount rates are adjusted annually and reflect current market
assessments.
In determining the amounts attributable to the rehabilitation provision of
US$8.8 million (31 December 2023: US$11.5 million) at Letšeng, management
used a discount rate of 9.41% (31 December 2023: 11.4%), estimated
rehabilitation timing of 15 years (31 December 2023: 16 years) and an
inflation rate of 4.5% (31 December 2023: 7.2%). The Letšeng rehabilitation
quantum decreased from the prior year mainly driven by the annual reassessment
of the estimated closure costs performed at the operation, the effect of the
revised timing of the rehabilitation, discount rate and interest rate used to
present value the provision, and the weakening of the exchange rate, had an
overall impact of reducing the provision.
At Ghaghoo, which continued its care and maintenance state, an independent
rehabilitation assessment was performed during the year based on the
rehabilitation costs of certain areas of the mine which are expected to be
rehabilitated. Following discussions with the Ministry of Minerals and Energy
and the Department of Mines of Botswana, it is anticipated that the mine site
will be left in a state which could enable a future operator to operate on the
site, and therefore certain infrastructure, such as access roads to the mine,
paving and walkways, a solar solution and a borehole pump and water treatment
plant, will remain intact and handed over to the Government of Botswana
through the Ministry of Minerals and Energy.
In determining the amounts attributable to the rehabilitation provision of
US$2.2 million (31 December 2023: US$2.7 million) at Ghaghoo, management used
a discount rate of 6.8% (31 December 2023: 6.0%), estimated rehabilitation
timing of 5 years (31 December 2023: 5 years) and an inflation rate of 4.5%
(31 December 2023: 4.8%). The decrease in the provision at Ghaghoo is mainly
attributable to the rehabilitation activities carried out during the year,
including the dismantling and off-site transportation of the processing plant.
2024 2023*
US$'000 US$'000
21 DEFERRED TAXATION
Deferred tax assets
Lease liabilities 850 1 122
Accrued leave 159 111
Provisions 3 304 3 759
Tax losses1 - 1 822
4 313 6 814
Deferred tax liabilities
Property plant and equipment (67 549) (74 652)
Right of use assets (779) (966)
Prepayments 19 (55)
Unremitted earnings (972) (1 578)
(69 281) (77 251)
Net deferred tax liability (64 968) (70 437)
Reconciliation of net deferred tax liability
As at 1 January (70 437) (76 037)
Restatement - Refer Note 28 - 4 886
Restated balance as at 1 January (70 437) (71 151)
Movement in current period:
- Accelerated depreciation for tax purposes 5 082 (5 326)
- Accrued leave 52 (21)
- Unremitted earnings 606 -
- Prepayments 73 29
- Provisions (348) (205)
- Deferred tax asset (reversed)/raised on tax losses1 (1 817) 1 822
- Lease liabilities (224) (354)
- Right-of-use assets 151 294
- Foreign exchange differences 1 894 4 475
As at 31 December (64 968) (70 437)
* Certain balances as previously presented were restated. Refer Note 28,
Restatement of prior year balances.
1 In the prior year, deferred tax assets were recognised on tax losses
incurred by Letšeng as management believed Letšeng would generate future
taxable income against which the losses could be utilised. In the current
year, Letšeng generated taxable income and the previously recognised deferred
tax assets were utilised in full.
The Group has not recognised a deferred tax liability for all taxable
temporary differences associated with investments in subsidiaries because it
is able to control the timing of dividends and only part of the temporary
difference is expected to reverse in the foreseeable future. The gross
temporary difference in respect of the undistributed reserves of the Group's
subsidiaries for which a deferred tax liability has not been recognised is
US$127.1 million (31 December 2023: US$110.5 million).
The deferred tax liability on unremitted earnings is based on the timing of
expected dividends from the Group's subsidiaries over the next three years.
There are no income tax consequences attached to the payment of dividends by
Gem Diamonds Limited to its shareholders.
The Group has estimated tax losses of US$214.7 million (of which US$155.7
million relates to Gem Diamonds Botswana and US$50.8 million relates to Gem
Diamonds Limited) (31 December 2023: US$208.5 million, of which
US$155.7 million related to Gem Diamonds Botswana and US$44.5 million to Gem
Diamonds Limited) for which no deferred tax assets have been recognised as
management does not foresee any taxable profits or taxable temporary
differences against which to utilise these.
The majority of tax losses are generated in jurisdictions where tax losses do
not expire, except for tax losses incurred by Gem Diamonds Innovation
Solutions CY Limited, within the Cyprus jurisdiction, which has unrecognised
tax losses of US$2.2 million (31 December 2023: US$2.0 million) and if not
utilised, will expire as indicated in the table below:
2024 2023
US$ '000 US$ '000
Utilisation required within one year 317 350
Utilisation required between one and two years 376 415
Utilisation required between two and five years 1 317 1 217
2024 2023
Notes US$'000 US$'000
22 CASH FLOW NOTES
22.1 Cash generated by operations
Profit before tax for the year 11 461 5 684
Adjustments for:
Depreciation and amortisation excluding waste stripping 9 238 5 423
Depreciation on right-of-use assets 4, 9 2 129 1 892
Waste stripping cost amortised 4, 8 35 627 39 194
Finance income 5 (875) (617)
Finance costs 5 7 406 5 313
Unrealised foreign exchange differences (946) (2 001)
(Profit)/loss on disposal and scrapping of property, plant and equipment 3 (152) 22
Loss/(gain) on derecognition of leases 9 286 (30)
Environmental rehabilitation adjustment 3 (562) (354)
Write-down of inventories to net realisable value 150 -
Bonus, leave and severance provisions raised 4 028 1 292
Share-based payments 516 332
68 306 56 150
22.2 Working capital adjustment
Decrease/(increase) in inventory 3 482 (10 157)
(Increase)/decrease in receivables (4 377) 1 444
Decrease in payables (15 442) (6 897)
(16 337) (15 610)
22.3 Cash flows from financing activities (excluding lease liabilities)
As at 1 January 38 567 5 945
Net cash (used)/generated from financing activities (19 755) 30 113
- Financial liabilities repaid (42 117) (45 103)
- Financial liabilities raised 22 362 75 216
Interest paid (4 934) (3 719)
Non-cash movements 7 152 6 228
- Interest accrued 4 934 3 065
- Interest capitalised to property, plant and equipment - 654
- Amortisation of credit underwriting fees 264 265
- Financial liabilities raised1 2 480 2 434
- Foreign exchange differences (526) (190)
As at 31 December 16 21 030 38 567
1 This amount mainly relates to funding obtained for insurance premium
finance. The funding was paid directly by the lender to the third party and is
being repaid by the Group in monthly instalments to the lender. Refer Note 16,
Interest-bearing loans and borrowings.
2024 2023
US$'000 US$'000
23 COMMITMENTS AND CONTINGENCIES
Commitments
Mining leases
Mining lease commitments represent the Group's future obligation arising from
agreements entered into with local authorities in the mining areas that the
Group operates.
The period of these commitments is determined as the lesser of the term of the
agreements, excluding renewable periods, or the LoM. The estimated lease
obligation regarding the future lease period, accepting stable inflation and
exchange rates, is as follows:
- Within one year 252 218
- After one year but not more than five years 855 1 000
- More than five years - 628
1 107 1 846
Multi-aggregate protection policy
The Group, through its subsidiary Letšeng entered into a LSL140.0 million
(US$7.4stress million) Multi-aggregate Protection Insurance Policy with the
Lesotho National Insurance Group (LNIGC) in October 2021. The policy has a
tenure of four years and nine months and consists of five premium payments
each payable annually in advance.
As at 31 December 2024 the Group has committed to settle the final premium
payment, as well as the annual insurance risk finance service fee of 7% of the
annual premium and the surplus reserve finance cost fee of 1.5% on the
cumulative net premiums surplus balance carried over each year. These fees are
either deductible from premium or payable upfront at the option of Letšeng.
The Group has elected to deduct the fees from the annual premiums, therefore
there is no additional cash commitment relating to these fees and the future
cash flow commitments are stated at the future premiums payable over the
remaining insurance period. Refer Note 12, Receivables and other assets for
further detail on the policy.
- Within one year 1 590 1 640
- After one year but not more than five years - 1 640
1 590 3 280
Letšeng Diamonds Educational Fund
In terms of the mining agreement entered into between the Group and the
Government of the Kingdom of Lesotho, the Group has an obligation to provide
funding for education and training scholarships. The quantum of such funding
is at the discretion of the Letšeng Diamonds Education Fund Committee.
- Within one year 54 80
- After one year but not more than five years 77 42
131 122
Capital expenditure
Approved but not contracted for 1 621 3 645
Approved and contracted for 1 924 643
3 545 4 288
Capital expenditure approved mainly relates to additional mining fleet of
US$2.5 million in line with the requirements of the updated mine plan. Other
smaller capital expenditure, all at Letšeng, relates to the continued
investment in residue storage expansion of US$0.3 million and geotechnical
items required to enhance the slope monitoring of US$0.3 million. The
expenditure is expected to be incurred over the next 12 months.
Contingencies
The Group has conducted its operations in the ordinary course of business in
accordance with its understanding and interpretation of commercial
arrangements and applicable legislation in the countries where the Group
operates. 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$0.6 million (December 2023:
US$0.5 million) relating mainly to labour matters.
The Group monitors possible tax claims within the various jurisdictions in
which the Group operates. It is noted that tax legislation is highly complex
and subject to interpretation of the application of the law. It is common for
tax authorities to review tax returns, and in some instances, disputes may
arise over the interpretation and application of the prevailing tax
legislation. Due to the complexity of the legislation, significant judgement
is required to determine any effects of uncertainties in accounting for and
disclosure of income taxes. When uncertain tax positions have been determined
as being probable, they have been provided for and disclosed. There were no
uncertain tax positions in 2024. Refer Note 1.2.26, Critical accounting
estimates and judgements and Note 6, Income tax expense. While it is difficult
to predict the ultimate outcome in some cases, the Group does not anticipate
that there will be any material impact on the Group's results, financial
position or liquidity.
24 RELATED PARTIES
Related party Relationship
Jemax Management (Proprietary) Limited Common director
Government of the Kingdom of Lesotho Non-controlling interest
Refer Note 1.1.2, Operational information, for information regarding
shareholding in subsidiaries.
2024 2023
US$'000 US$'000
Compensation to key management personnel (including Directors)
Share-based equity transactions 481 252
Short-term employee benefits 3 973 3 577
Post-employment benefits (including severance pay and pension) 157 139
4 611 3 968
Fees paid to related parties
Jemax Management (Proprietary) Limited (75) (68)
Royalties paid to related parties
Government of the Kingdom of Lesotho (14 902) (14 215)
Lease and licence payments to related parties
Government of the Kingdom of Lesotho (61) (32)
Sales to/(purchases from) related parties
Jemax Management (Proprietary) Limited (4) (12)
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 (2 076) (3 176)
Dividends declared and paid
Government of the Kingdom of Lesotho (4 289) -
Jemax Management (Proprietary) Limited provided administrative services with
regards to the mining activities undertaken by the Group. A controlling
interest is held by an Executive Director of the Company.
The above transactions were made on terms agreed between the parties. The
amounts included in trade payables are non-interest bearing and have no
repayment terms.
25 FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group's activities expose it to a variety of financial risks:
· market risk (including commodity price risk, foreign exchange
risk and interest rate risk);
· credit risk; and
· liquidity risk.
The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the
Group's financial performance.
Risk management is carried out under policies approved by the Board of
Directors. The Board provides principles for overall risk management, as well
as policies covering specific areas, such as foreign exchange risk, interest
rate risk, credit risk, use of derivative financial instruments and
non-derivative financial instruments, and investing excess liquidity.
There have been no changes to the financial risk management policy since the
prior year.
Capital management
For the purpose of the Group's capital management, capital includes the issued
share capital, share premium and liabilities on the Group's statement of
financial position. The primary objective of the Group's capital management is
to ensure that it maintains a strong credit rating and healthy capital ratios
in order to support its business and maximise shareholder value. The Group
manages its capital structure and makes adjustments to it, in light of changes
in economic conditions. To maintain or adjust the capital structure, the Group
may issue new shares, buy back its shares, or restructure its debt facilities.
The management of the Group's capital is performed by the Board.
The Group's capital management, among other things, aims to ensure that it
meets financial covenants attached to its interest-bearing loans and
borrowings. Breaches in meeting the financial covenants would permit the bank
to immediately call loans and borrowings. There have been no breaches of the
financial covenants in the current year.
At 31 December 2024, the Group had US$69.0 million (31 December 2023: US$45.9
million) of undrawn debt facilities and continues to have the flexibility to
manage the capital structure more efficiently with the use of these debt
facilities, thus ensuring that an appropriate gearing ratio is achieved.
Refer Note 16, Interest-bearing loans and borrowings for detail on the debt
facilities within the Group.
a) Market risk
(i) Commodity price risk
The Group is subject to diamond price risk. Diamonds are not homogeneous
products and the price of rough diamonds is not monitored on a public index
system. The fluctuation of prices is related to certain features of diamonds
such as quality and size, together with diamond market fundamentals. Diamond
prices are marketed in US dollar and long-term US dollar per carat prices are
based on external market consensus forecasts. The Group does not have any
financial instruments that may fluctuate as a result of commodity price
movements.
(ii) Foreign exchange rate risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Lesotho
loti, South African rand and Botswana pula. Foreign exchange risk arises when
future commercial transactions, and recognised assets and liabilities are
denominated in a currency that is not the entity's functional currency.
The Group's sales are denominated in US dollar which is the functional
currency of the Company, but not the functional currency of all its
operations.
The currency sensitivity analysis below is based on the following assumptions:
· Differences resulting from the translation of the financial
statements of the subsidiaries into the Group's presentation currency of US
dollar, are not taken into consideration;
· The major currency exposures for the Group relate to the US
dollar and local currencies of subsidiaries. Foreign currency exposures
between two currencies where one is not the US dollar are deemed insignificant
to the Group and have therefore been excluded from the sensitivity analysis;
and
· The analysis of the currency risk arises because of financial
instruments which are denominated in a currency that is not the functional
currency of the relevant Group entity. The sensitivity has been based on
financial assets and liabilities at 31 December 2024 and 31 December 2023.
There has been no change in the assumptions or method applied from the prior
year.
Sensitivity analysis
At year-end, Letšeng had US$ 37.8 thousand cash on hand held in US$ (2023:
US$2.5 million). If the US dollar had appreciated/(depreciated) by 10% against
the LSL, the Group's profit before tax and equity at 31 December 2024 would
have been US$3.9 thousand higher/(lower) (31 December 2023: US$0.3 million).
(iii) Forward exchange contracts
From time to time, the Group enters into forward exchange contracts to hedge
the exposure to changes in foreign currency of future sales of diamonds at
Letšeng Diamonds. The Group performs no hedge accounting. At 31 December
2024, the Group had no forward exchange contracts outstanding (31 December
2023: nil).
(iv) Interest rate risk
The Group's income and operating cash flows are substantially independent of
changes in market interest rates. The Group's cash flow interest rate risk
arises from borrowings. Borrowings issued at variable rates expose the Group
to cash flow interest rate risk. At the time of taking new loans or
borrowings, management uses its judgement to decide whether it believes that a
fixed or variable rate borrowing would be more favourable to the Group over
the expected period until maturity.
Sensitivity analysis
If the interest rates on the interest-bearing loans and borrowings
(increased)/decreased by 100 basis points (2023: 100 basis points) during the
year, profit before tax and equity would have been US$60.0 thousand
(lower)/higher (31 December 2023: US$0.2 million).
(b) Credit risk
The Group's potential concentration of credit risk consists mainly of cash
deposits with banks, trade receivables, insurance asset and other receivables.
The Group's short-term cash surpluses are placed with banks that have
investment grade ratings, to minimise the exposure to credit risk to the
lowest level possible from the perspective of the Group's cash and cash
equivalents. The maximum credit risk exposure relating to financial assets is
represented by their carrying values as at the reporting dates.
The Group considers the credit standing of counterparties when making deposits
to manage the credit risk.
Considering the nature of the Group's ultimate customers and the relevant
terms and conditions entered into with such customers, the Group believes that
credit risk is limited as the customers pay and settle their accounts on the
date of receipt of goods.
The Group's insurance premiums are placed with insurers and underwriters that
have high-quality credit standings, to minimise the exposure to credit risk to
the lowest level possible from the perspective of the Group's insurance asset.
An ECL assessment was considered on the non-current other receivable, refer
note 12 Receivables and other assets. This receivable is not considered to be
impaired neither is it past its due date. The credit risk associated with this
receivable has therefore been assessed as low. If an ECL of 10% was applied,
profit before tax would have been US$0.1 million lower in the current year.
No material other financial assets are impaired or past due and accordingly,
no additional ECL or credit risk analysis has been provided.
The Group did not hold any form of collateral or credit enhancements for its
credit exposures during the 31 December 2024 and 31 December 2023 financial
reporting periods.
(c) Liquidity risk
Liquidity risk arises from the Group's inability to obtain the funds it
requires to comply with its commitments including the inability to realise a
financial asset in a short period of time at a price close to its fair value.
Management manages the risk by maintaining sufficient cash and marketable
securities and ensuring access to financial institutions and shareholding
funding. This ensures flexibility in maintaining business operations and
maximises opportunities. The Group has available undrawn debt facilities of
US$69.0 million at year end (2023: US$45.9 million). The Group's facilities
expire in December 2026.
The table below summarises the maturity profile of the Group's financial
liabilities at 31 December based on contractual undiscounted payments.
2024 2023
US$'000 US$'000
Floating interest rates
Interest-bearing loans and borrowings
- Within one year 5 104 35 037
- After one year but not more than three years 15 985 4 845
- After three years but not more than five years 2 826 1 068
Total 23 915 40 950
Lease liabilities
- Within one year 2 776 2 487
- After one year but not more than three years 1 750 3 236
- After three years but not more than five years 384 414
- After five years 256 448
Total 5 166 6 585
Trade and other payables
- Within one year 11 588 23 356
- After one year but not more than three years - 1 494
Total 11 588 24 850
26 SHARE-BASED PAYMENTS
2024 2023
US$'000 US$'000
The expense recognised for employee services received during the year is shown
in the following table:
Equity-settled share-based payment transactions charged to the statement of 516 332
profit or loss
The long-term incentive plans are described below:
Long-term incentive plan (LTIP)
Certain key employees are entitled to a grant of options, under the LTIP of
the Company. The vesting of the options is dependent on employees remaining in
service for a prescribed period (normally three years) from the date of grant.
Prior to the April 2022 award, the fair value of share options granted was
estimated at the date of the grant using an appropriate simulation model,
taking into account the terms and conditions upon which the options were
granted. It took into account projected dividends and share price fluctuation
co-variances of the Company. Since 2022, the fair value of the share options
granted have been based on the observable Gem Diamonds Limited share price on
the date of the award with no adjustments made to the price.
There is a nil exercise price for the options granted. The contractual life of
the options is 10 years and there are no cash settlement alternatives. The
Company has no past practice of cash settlement.
The Company's LTIP policy is reviewed every 10 years.
LTIP 2007 Award
Under the 2007 LTIP rules, there is one award where options are still
outstanding.
This award was awarded on the following basis:
To key employees (excluding Executive Directors):
· the award vests over a three-year period in tranches of a third
of the award each year;
· the vesting of the award is dependent on service conditions and
certain performance targets being met for the same three-year period
(classified as non-market conditions). These non-market condition awards are
referred to as nil value options in the tables below;
· if the performance or service conditions are not met, the options
lapse;
· the performance conditions relating to the non-market conditions
are not reflected in the fair value of the award at grant date;
· once the award vests, it is exercisable for seven years (i.e.
contractual term is 10 years); and
· the vested award is equity settled.
To Executive Directors:
· the award vests over a three-year period;
· the vesting of the award is dependent on service conditions and
both market and non-market performance conditions;
· 75% of the award granted is subject to non-market conditions
(referred to as nil value options in tables below) and 25% to market
conditions (referred to as Market Value options in tables below) by reference
to the Company's total shareholder return (TSR) as compared to a group of
principal competitors;
· if the performance or service conditions are not met, the options
lapse;
· the performance conditions relating to the non-market conditions
are not reflected in the fair value of the award at grant date;
· once the award vests, it is exercisable for seven years (i.e.
contractual term is 10 years); and
· the vested award is equity settled.
The fair value of the nil value award is based on the observable Gem Diamonds
Limited share price on the date of award with no adjustments to the price
made.
The following table reflects details of the award within the 2007 LTIP that
remains outstanding:
LTIP
March
2016
Number of options granted - Nil value 1 215 000
Number of options granted - Market value 185 000
Date exercisable 15 March 2019
Options outstanding 26 037
Dividend yield (%) 2.00
Expected volatility (%)1 39.71
Risk-free interest rate (%)2 0.97
Expected life of option (years) 3.00
Exercise price (US$) nil
Exercise price (GBP) nil
Weighted average share price (US$) 1.56
Fair value of nil value options (US$) 1.40
Fair value of nil value options (GBP) 0.99
Fair value of market value options (US$) 0.69
Fair value of market value options (GBP) 0.49
Model used Monte Carlo
1 Expected volatility was based on the average annual historic volatility of
the Company's share price over the previous three years.
2 The relevant risk-free interest rate is taken from a UK Treasury Bond
issued which closely matches the lifetime of the option.
LTIP 2017 Award
Under the 2017 LTIP rules, there are seven awards where options are still
outstanding.
Employee Share Option Plan 2017 Award (ESOP) - 17 April 2024 award
On 17 April 2024, 261 950 nil-cost options were granted to certain key
employees under the ESOP of the Company. In addition, 1 734 097 nil-cost
options were granted to certain Executive employees and the Executive
Directors on a similar basis as the 2007 LTIP. These options were granted in
line with the introduction of the Gem Diamonds Incentive Plan (GDIP) in 2021,
which integrated annual bonus awards with awards under the ESOP. The options
which vest in tranches of one-third per annum commencing on 17 April 2025 and
ending on 17 April 2027. The options are exercisable between the respective
vesting dates and 17 April 2034. The fair value of the award is based on the
observable Gem Diamonds Limited share price on the date of the award with no
adjustments to the price made.
This award was made under predominantly the same basis as the 2007 LTIP, with
the following differences:
To key employees (excluding Executive Directors):
· the number of awards granted are determined on the Group's
performance in the preceding financial year in terms of the Gem Diamonds
Incentive Plan (GDIP) introduced in 2021;
· the vesting of the award is dependent only on service conditions.
There are no future performance conditions attached to the award;
· if the service conditions are not met, the options lapse;
· the fair value of the awards is based on the observable Gem
Diamonds Limited share price on the date of award with no adjustments to the
price made;
· the awards are exercisable for 10 years from the award date; and
· the awards are subject to malus and clawback.
To Executive Directors and the Chief Operating Officer as a bonus share award
with the only additional criteria to the ones above being:
· the awards have a two-year holding period from the respective
vesting dates.
The following table reflects details of all the awards within the 2017 LTIP
that remain outstanding:
LTIP LTIP LTIP LTIP LTIP LTIP LTIP
April April April June March March July
2024 2023 2022 2020 2019 2018 2017
Number of options granted - Nil value 1 996 047 1 060 055 1 007 098 1 069 000 1 160 500 1 265 000 1 150 000
Number of options granted - Market value - - - 180 000 142 500 185 000 185 000
Date exercisable 17 April 2025 21 April 2024 4 April 2023 9 June 2023 20 March 2022 20 March 2021 4 July 2020
Options outstanding 1 996 047 1 018 347 941 573 349 391 244 035 226 072 45 185
Dividend yield (%) - - - - - - 2.00
Expected volatility (%)1 n/a n/a n/a 47.00 43.00 40.00 40.21
Risk-free interest rate (%)2 n/a n/a n/a 0.34 1.20 1.20 0.67
Expected life of option (years) 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Exercise price (US$) nil nil nil nil nil nil nil
Exercise price (GBP) nil nil nil nil nil nil nil
Weighted average share price (US$) 0.11 0.34 0.74 0.39 1.20 1.35 1.24
Fair value of nil value options (US$) 0.11 0.34 0.74 0.39 1.20 1.35 1.11
Fair value of nil value options (GBP) 0.09 0.27 0.58 0.31 0.90 0.96 0.86
Fair value of market value options (US$) - - - 0.19 0.58 0.74 0.72
Fair value of market value options (GBP) - - - 0.15 0.44 0.53 0.56
Model used n/a n/a n/a Monte Carlo Monte Carlo Monte Carlo Monte Carlo
1 Expected volatility was based on the average annual historic volatility of
the Company's share price over the previous three years.
2 The relevant risk-free interest rate is taken from a UK Treasury Bond issued
which closely matches the lifetime of the option.
The following table illustrates the number ('000) and movement in the
outstanding share options during the year:
2024 2023
'000 '000
Outstanding as at 1 January 2 825 2 648
Granted during the year 1 996 1 060
Exercised during the year1 (26) (253)
Forfeited during the year (71) (630)
Dividends allocated to vested options 122 -
Outstanding as at 31 December 4 846 2 825
Exercisable as at 31 December 1 908 1 244
1 Options were exercised regularly throughout the year. The weighted average
share price during the year was £0.11 (US$0.14) (2023: £0.21 (US$0.26)).
The weighted average remaining contractual life for the share options
outstanding as at 31 December 2024 was 7.4 years (2023: 7.7 years).
The weighted average fair value of the share options outstanding as at 31
December 2024 was US$0.26 (2023: US$0.40).
ESOP
In September 2017, 47 200 shares which were previously held in the Company
Employee Share Trust were granted to certain key employees involved in the
Business Transformation of the Group. The Company Employee Share Trust was
deregistered in 2017 following the grant of these shares. The fair value of
the award was valued at the share price of the Company at the date of the
award of £0.71 (US$0.96). These shares vested on 18 March 2019 and became
immediately exercisable. The fair value of these outstanding awards at 31
December 2024 was £0.11 (US$0.14) (2023: £0.13 (US$0.17)).
The shares outstanding at the end of the year are as follows:
2024 2023
US$'000 US$'000
Outstanding as at 1 January 10 10
Exercised during the year - -
As at 31 December 10 10
Exercisable as at 31 December 10 10
27 FINANCIAL INSTRUMENTS
Set out below is an overview of financial instruments, other than the current
portions of the prepayment disclosed in Note 12, Receivables and other assets,
which do not meet the criteria of a financial asset.
2024 2023
Notes US$'000 US$'000
Financial assets at amortised cost
Cash 14 12 878 16 503
Receivables and other assets 12 11 917 6 869
Total 24 795 23 372
Total non-current 7 341 4 487
Total current 17 454 18 885
Financial liabilities at amortised cost
Interest-bearing loans and borrowings 16 21 030 38 567
Trade and other payables 18 11 589 24 850
Total 32 619 63 417
Total non-current 16 633 6 650
Total current 15 986 56 767
The carrying amounts of the Group's financial instruments held approximate
their fair value.
There were no open hedges at year end (2023: nil).
28 RESTATEMENT OF PRIOR YEAR BALANCES
During the year management deemed it appropriate to reduce the deferred
taxation liability recognised on the elimination of inter-group transactions.
This has resulted in the reduction of the opening 2023 deferred taxation
liability by US$4.9 million. Refer Note 21, Deferred taxation.
Plant and equipment on intragroup sales was previously over depreciated by
US$2.8 million. These assets were restated resulting in an increase in the
2023 opening carrying value of plant and equipment. Refer Note 8, Property,
plant and equipment.
A summary of these adjustments and the impact on accumulated losses and
non-controlling interest on the 2023 Consolidated Statement of Financial
Position is set out below:
Balance as Adjustment Restated
previously balance
reported
2023 2023 2023
Notes US$'000 US$'000 US$'000
Property, plant and equipment 8 295 830 2 764 298 594
Total assets 384 715 2 764 387 479
Accumulated losses (496 238) 5 354 (490 884)
Non-controlling interests 79 255 2 295 81 550
Total equity 218 124 7 649 225 773
Deferred tax liabilities 21 82 137 (4 886) 77 251
Total liabilities 166 592 (4 886) 161 706
Total equity and liabilities 384 716 2 763 387 479
The restatement of prior balances in the Consolidated Statement of Financial
Position has had no impact on the prior year Consolidated Statement of Cash
Flows as there was no impact on cash flows from operating, investing and
financing activities as previously reported. There was also no impact on the
2023 Consolidated Statement of Profit and Loss as previously reported.
29 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.
30 MATERIAL PARTLY OWNED SUBSIDIARY
Financial information of Letšeng Diamonds, a 70% held subsidiary which has a
material non-controlling interest, with the remaining 30% being held by the
Government of the Kingdom of Lesotho, is provided below. This information is
based on amounts before intercompany eliminations.
2024 2023
US$'000 US$'000
Name Country of incorporation and operation
Letšeng Diamonds (Proprietary) Limited Lesotho
Accumulated balances of material non-controlling interest 68 087 68 543
Profit allocated to material non-controlling interest 4 306 3 981
Summarised statement of profit or loss for the year ended 31 December
Revenue 149 196 140 905
Cost of sales (111 400) (109 959)
Gross profit 37 796 30 946
Royalties and selling costs (15 368) (14 747)
Other operating income 809 4 162
Operating profit 23 237 20 361
Net finance costs (4 710) (3 500)
Profit before tax 18 527 16 861
Income tax expense (4 173) (3 590)
Profit for the year 14 354 13 271
Total comprehensive income 14 354 13 271
Attributable to non-controlling interest 4 306 3 981
Dividends paid to non-controlling interest (4 289) -
Summarised statement of financial position as at 31 December
Assets
Non-current assets
Property, plant and equipment, deferred tax assets, intangible assets and 291 506 320 186
receivables and other assets
Current assets
Inventories, receivables and other assets, and cash and short-term deposits 48 888 60 711
Total assets 340 394 380 897
Non-current liabilities
Interest-bearing loans and borrowings, trade and other payables, provisions, 90 605 101 278
lease liabilities and deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings, trade and other payables and lease 22 830 51 144
liabilities
Total liabilities 113 435 152 422
Total equity 226 959 228 475
Attributable to:
Equity holders of parent 158 872 159 932
Non-controlling interest 68 087 68 543
Summarised cash flow information for the year ended 31 December
Operating cash inflows 55 313 43 548
Investing cash outflows (26 921) (56 827)
Financing cash (outflows)/inflows (35 542) 22 543
Foreign exchange differences 2 523 1 848
Net (decrease)/increase in cash and cash equivalents (4 627) 11 112
REPORT ON PAYMENTS TO GOVERNMENTS
INTRODUCTION
This report provides an overview of the payments made to governments by Gem
Diamonds Limited and its subsidiaries (the Group) for the 31 December 2024
financial year, as required under the UK Report on Payments to Governments
Regulations 2014 (as amended December 2015). These UK Regulations enact
domestic rules in line with Directive 2013/34/EU (the EU Accounting Directive
2013) and apply to companies that are involved in extractive activities. This
report is unaudited.
This report is also filed with the National Storage Mechanism intended to
satisfy the requirements of the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority in the UK.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67.
BASIS FOR PREPARATION
Reporting entities
This report includes payments to governments made by subsidiaries in the Group
that are engaged in extractive activities. During the 2024 financial year,
extractive activities were conducted in Lesotho while the operation in
Botswana was under care and maintenance. All payments made in relation to the
Botswana entity were under the materiality level and are therefore not
reported.
Extractive activities
Extractive activities relate to the exploration, prospection, discovery,
development and extraction of minerals, oil, natural gas deposits or other
materials. Gem Diamonds Limited, through its subsidiaries, is engaged in
diamond mining activities.
Scope of payments
The report discloses only those significant payments made to governments
arising from extractive activities.
Government
Government includes any national, regional, or local authority of a country.
It includes a department, agency or undertaking (i.e. corporation) controlled
by that authority.
Payment types disclosed at legal entity level
Production entitlements
There were no payments of this nature for the year ended 31 December 2024.
Taxes
These are payments on the entity's income, production, or profits, excluding
taxes levied on consumption such as value added taxes, personal income taxes
or sales taxes in line with in-country legislation.
Royalties
These are payments for the right to extract diamonds and are determined on
percentage of sales in terms of in-country legislation and/or mining lease
agreements.
Dividends
These are dividend payments, other than dividends paid to a government as an
ordinary shareholder of an entity unless paid in lieu of production
entitlements or royalties. There were no dividend payments of this nature to
governments for the year ended 31 December 2024.
Signature, discovery, and production bonuses
There were no payments of this nature to governments for the year ended 31
December 2024.
Licence fees
These are fees paid for acquisition of leases and licences, including annual
renewal fees, in order to obtain and maintain access to the areas in which
extractive activities are performed.
Payments for infrastructure improvements
There were no payments of this nature to governments for the year ended 31
December 2024.
Cash flow basis
Payments reported are on a cash flow basis and may differ from amounts
reported in the Gem Diamonds Limited 2024 Annual Report and Accounts, which
are prepared on an accrual basis.
Materiality level
In line with the guidance provided in the Report on Payments to Governments
Regulations, payments made as a single payment, or as a series of related
payments, which are equal to or exceed US$107 706 (£86 000), are disclosed
in this report. All payments below this threshold have been excluded.
Reporting currency
The payments to government have been reported in US dollar.
Payments made in currencies other than US dollar were translated at the
relevant annual average exchange rate for the year ended 31 December 2024.
Summary report
Operation Country Taxes1 Royalties Licence fee Total US$'000
US$'000 US$'000 US$'000
Letšeng Diamonds (Proprietary) Limited Lesotho (4 620) 15 791 179 11 350
Total (4 620) 15 791 179 11 350
Lesotho Taxes1 Royalties Licence fee Total US$'000
Letšeng Diamonds (Proprietary) Limited US$'000 US$'000 US$'000
Revenue Services Lesotho (4 620) - - (4 620)
Government of the Kingdom of Lesotho - 15 791 179 15 970
1 Letšeng Diamonds (Proprietary) Limited was in a net refund position during
the year due to refunds on income taxes received which were paid in 2023.
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