REG - Gem Diamonds Limited - Half Year 2022 Results
01/09/2022 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220901:nRSA8260Xa&default-theme=true
RNS Number : 8260X Gem Diamonds Limited 01 September 2022
Thursday, 1 September 2022
Gem Diamonds Limited
Half Year 2022 Results
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the
"Group") announces its Half Year Results for the six months ending 30 June
2022 (the "Period").
FINANCIAL
· Revenue of US$100.0 million (H1 2020: US$104.5 million)
· Cash on hand of US$24.2 million at 30 June 2022 (US$19.3 million
attributable to Gem Diamonds)
· The Group has unutilised facilities of US$69.9 million
· Underlying EBITDA of US$20.9 million (H1 2021: US$34.7 million)
· Earnings per share from continuing operations of 3.4 US cents per
share (H1 2021: 7.6 US cents)
OPERATIONAL AND HEALTH AND SAFETY
· Zero fatalities and two lost time injuries
· Average price of US$1 745 per carat achieved (H1 2021: US$1 886
per carat)
· Three diamonds larger than 100 carats recovered (H1 2021: Three)
· Recovered 55 157 carats (H1 2021: 58 831 carats)
· Waste tonnes mined of 6.3 million tonnes in accordance with mine
plan (H1 2021: 10.2 million tonnes)
· Ore treated of 3.0 million tonnes (H1 2021: 3.1 million tonnes)
Diamond market
Strong demand and robust prices achieved for Letšeng's diamonds reflected the
continued positive sentiment in the diamond market. The Group hosted another
Dubai tender viewing in March 2022 which was well-attended and contributed
positively to the firm prices achieved during the Period.
Operations
The Letšeng operation has operated in line with expectations during the
Period despite challenges presented by severe weather conditions such as a
high rainfall season and snow, which impacted both mining and treatment
activities; increased frequency of electricity disruptions and increased
operating costs, most notably diesel and explosive consumables.
Commenting on the results today, Clifford Elphick, Chief Executive Officer of
Gem Diamonds, said:
"The financial results during the Period reflect continued strong demand for
Letšeng's high-quality rough diamonds.
A solid operational performance has been achieved despite exceptionally high
rainfall over the period to April and grid electricity interruptions which
have necessitated increased reliance on diesel power generation resulting in
cost increases as well as supply chain disruptions from adverse global events.
"
The Company will host a live audio webcast presentation of the half year
results today, 1 September 2022, at 9:30 GMT. This can be viewed on the
Company's website: www.gemdiamonds.com (http://www.gemdiamonds.com) .
The page references in this announcement refer to the Half Year Report, which
can be found on the Company's website: www.gemdiamonds.com
(http://www.gemdiamonds.com) .
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Susan Wallace, Company Secretarial Department
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Felicity Winkles
Tel: +44 (0) 208 434 2643
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value diamonds. The
Company owns 70% of the Letšeng mine in Lesotho. The Letšeng mine is famous
for the production of large, top colour, exceptional white diamonds, making it
the highest dollar per carat kimberlite diamond mine in the world.
INTERIM BUSINESS REVIEW
OVERVIEW
The Group is pleased to report its results for the six months ended 30 June
2022 (the Period) which saw continued positive demand for Letseng's high
quality diamonds with global events impacting operational costs.
The global economic backdrop for the Period has been challenging with
unprecedented high levels of inflation and interest rates experienced in major
economies. The World Bank downgraded its global real GDP forecast for 2022 to
2.9% compared to a high-water mark of 5.7% in 2021(1). The Russian invasion of
Ukraine has contributed significantly to slowing down global economic growth
by disrupting supply chains worldwide and impacting energy and commodity
prices. The global diamond market, however, has continued to recover into
2022. The sanctions imposed on Alrosa in Russia, a major diamond producer, has
caused a shortage of rough diamonds in the market which has supported strong
demand and robust prices being achieved for Letšeng's high-quality white
diamonds. During the Period, a record number of average bids per lot was
received and an average price of US$1 745 per carat was achieved. These
results do not include the sale of three greater than 100 carat diamonds that
were recovered in June and sold subsequent to Period end, in July.
Our sustainability strategy and maintaining our social licence to operate are
of the utmost importance to the Group and we are proud that Gem Diamonds won
three awards at the Investing in African Mining Indaba Junior ESG Awards in
May, in the following categories; Health and Safety, Responsible Water and
Protection of Biodiversity. These awards recognise the work to deliver our
commitment to the environment, workforce and project-affected communities.
The safety of our workforce remains a top priority and numerous initiatives
that commenced in 2021 to mature the organisational safety culture at
Letšeng, have been fully implemented during the Period. The identification
and implementation of further initiatives continue.
Our Letšeng operation has operated in line with expectations during the
Period, despite numerous challenges presented by severe weather conditions
such as a high rainfall season and snow which impacted both mining and
treatment activities; increased frequency of electricity supply disruptions
and increased operating costs. Waste tonnes mined during the Period were 6.3
million tonnes (H1 2021: 10.2 million) in accordance with the mine plan, ore
tonnes treated were 3.0 million tonnes (H1 2021: 3.1 million), 55 157 carats
were recovered (H1 2021: 58 831) and the mine's 2022 production metrics remain
on track. The decrease in volume of recoveries during the Period is due to
lower tonnes treated and the reduced contribution for the higher-grade
Satellite pit compared to H1 2021. Three greater than 100 carat diamonds were
recovered during the Period which were sold in July, compared to three that
were recovered and sold in H1 2021.
(1 )
https://www.worldbank.org/en/publication/global-economic-prospects
Revenue decreased by 4% to US$100.0 million, compared to H1 2021, achieving an
average of US$1 745 per carat (H1 2021: US$1 886 per carat). This, together
with the extraordinary increases in operating costs, most notably diesel
prices and explosive consumables, resulted in a decrease in underlying EBITDA
from continuing operations to US$20.9 million (H1 2021: US$34.7 million), with
attributable profit decreasing to US$3.8 million (H1 2021: US$9.3 million).
The Group ended the Period with a cash balance of US$24.2 million (31 December
2021: US$31.1 million) and drawn down facilities of US$12.1 million (31
December 2021: US$10.2 million), resulting in a net cash position of US$12.1
million (31 December 2021: US$20.9 million) and unutilised available
facilities of US$69.9 million (31 December 2021: US$74.3 million).
In line with our commitment to deliver sustainable shareholder returns, the
Board proposed a dividend of 2.7 US cents per share (US$3.8 million) in March
which was approved at the Annual General Meeting on 8 June. In addition, a
share buyback programme was launched on 12 April, and during the Period, 1 520
170 shares were purchased for US$1.2 million and held as treasury shares. The
weighted average purchase price was 60.05 GB pence (78.07 US cents) per share.
We continue to work towards our 2022 objectives as set out in the three-year
Task Force on Climate-related Financial Disclosures (TCFD) adoption roadmap
that commenced in 2021. The members of the TCFD Adoption Steering Committee
are participating in the UN Global Compact Climate Ambition Accelerator
programme. The Climate Ambition Accelerator is a six-month programme designed
to equip companies with the knowledge and understanding needed to set
science-based emissions reduction targets aligned with the 1.50C pathway. For
more details, refer to the Our Approach to Climate Change Half-Year Report
available on our website at www.gemdiamonds.com.
LOOKING AHEAD
We are driving initiatives to reduce the impact of the significant
uncontrollable cost increases experienced during the Period, to drive
efficiencies and effectively manage operating costs in the current volatile
environment.
The Group is advancing the implementation of its critical control management
strategy, a safety risk mitigation initiative that is on track to be completed
by the end of the year.
OPERATIONS REVIEW: LETŠENG
H1 2022 IN REVIEW
· Zero fatalities and two LTIs
· Zero significant environmental or social incidents
· Recovered three diamonds greater than 100 carats (H1
2021: Three)
· Achieved an average price of US$1 745 per carat (H1
2021: US$1 886 per carat)
· The highest price achieved was US$66 059 per carat for
an 8.41 carat pink diamond
SUSTAINABILITY
The Group's safety approach is founded on our commitment to zero harm and
belief that all injuries are preventable. The organisational safety maturity
campaign continues to be implemented at Letšeng to address specific actions
identified during the 2021 'Stop for Safety' campaign. Group and operational
leadership have reaffirmed their commitment to proactively leading
safety-focused improvement through regular engagements with the workforce and
have established a 'leading indicator safety committee'. In addition to the
initiatives that form part of the organisational safety maturity campaign,
best practice engagements are planned to focus on further safety performance
improvement.
The LTIFR and AIFR are tabled below:
2018 2019 2020 2021 H1 2022
LTI frequency rate 0.15 0.28 0.04 0.24 0.16
AIFR 1.45 0.93 0.76 0.93 0.82
The Group has spent approximately US$0.3 million on corporate social
responsibility projects during the Period. Three tertiary scholarships were
awarded in 2022 to enhance skills in Lesotho in mining, engineering and
emergency medical care. In support of our dairy project, an additional 15 cows
have been purchased and in support of our communities we have provided
additional access to water and sanitation infrastructure which includes the
construction of 50 ablution facilities, construction of a water storage tank
for supply of clean water from a natural spring catchment and the installation
of standpipe taps in a local village. Our focused CSRI strategy and
initiatives support our social licence to operate and our commitment to the UN
Sustainable Development Goals.
The measures implemented during 2021, as part of the TCFD adoption strategy
and carbon emissions reduction objectives, have resulted in a reduction of our
H1 2022 carbon emissions footprint by approximately 10% compared to H1 2021.
The carbon emissions reduction was primarily driven by mining initiatives
aimed at optimising waste mining and reducing hauling and travel distances of
mining equipment.
PRODUCTION OVERVIEW
Unit H1 2022 H1 2021 % variance
Waste mined tonnes 6 289 380 10 167 526 (38)
Ore mined tonnes 3 219 615 3 175 880 1
Ore treated tonnes 3 017 664 3 139 719 (4)
Carats recovered carats 55 157 58 831 (6)
Recovered grade cpht(1) 1.83 1.87 (2)
(1) Carats per hundred tonnes.
Waste mining decreased by 38% to 6.3 million tonnes (H1 2021: 10.2 million) in
accordance with the mine plan. 3.0 million ore tonnes were treated, of which
the two Letšeng plants treated 2.6 million tonnes (H1 2021: 2.6 million
tonnes), with the remaining 0.4 million tonnes (H1 2021: 0.5 million tonnes)
treated by Alluvial Ventures (AV), the third-party processing contractor. The
contract with AV ended on 30 June and with the start of the next cut-back in
the Main Pipe, the contractor has commenced decommissioning of its plant. The
opportunity to replace the 1.0 to 1.2 million tonnes per annum previously
treated by AV, through the construction of a third plant, is being considered.
The Group recovered 55 157 carats (H1 2021: 58 831 carats). The decrease in
volume of recoveries during the Period is due to the reduced contribution from
the higher-grade Satellite pit compared to H1 2021, and lower tonnes treated
in May and June due to operational challenges, primarily severe weather
conditions and more frequent disruptions in grid electricity supply.
The mobile coarse X-ray sorting machine recovered 367 carats (H1 2021: 592)
and an additional 472 carats were recovered by the mobile fines X-ray sorting
machine that was commissioned in 2021.
The overall grade for H1 2022 was 1.83 cpht (H1 2021: 1.87 cpht), representing
a decrease of 2% from H1 2021, mainly driven by a lower contribution from
Satellite pipe material which accounted for 46% of all material treated during
the Period (H1 2021: 53%). The grade recovered is in line with the expected
reserve grade.
The plant stabilisation initiatives that were implemented for Plant 1 in 2021
were rolled out to Plant 2 during the Period. The benefits were evidenced in
the improved production performance from January to April which was offset by
lower tonnes treated in May and June as mentioned above.
Due to the significant increase in operating costs during the Period,
specifically diesel prices and explosive consumables, a number of
cost-reduction initiatives have been implemented in an effort to manage these
costs. These initiatives mainly focus on reducing hauling and travel distances
of mining equipment and the introduction of saver plugs in ore blasting
practices.
Frequency of large diamond recoveries
Number of diamonds H1 2022 H1 2021 FY average
2008 - 2021
>100 carats 3 3 8
60 - 100 carats 8 9 19
30 - 60 carats 42 43 77
20 - 30 carats 63 59 114
10 - 20 carats 258 317 442
Total diamonds >10 carats 374 431 660
DIAMOND SALES
The average price achieved during the Period was US$1 745 per carat (H1 2021:
US$1 886 per carat) for 57 075 carats generating rough diamond revenue of
US$99.6 million (H1 2021: 55 123 carats at a value of US$104.0 million).
The highest price achieved was for an 8.41 carat pink diamond that sold for
US$66 059 per carat.
15 diamonds sold for more than US$1.0 million each, generating revenue of
US$25.8 million (H1 2021: 10 diamonds sold for more than US$1.0 million each,
generating revenue of US$36.1 million).
The Group hosted another Dubai tender viewing in March 2022 which was
well-attended and contributed positively to the firm prices achieved during
the Period. The next Dubai viewing will be held in September.
GHAGHOO
Following the lapse of the sales agreement with Botswana Diamonds in May 2022
we continue to pursue potential sales opportunities while closure and other
disposal alternatives are being investigated.
CAPITAL PROJECTS
The replacement of the primary crushing area (PCA) has commenced and is
progressing well with commissioning expected in Q2 2023. The resource core
drilling programme to inform Letšeng's Resource and Reserve Statement, was
completed in June. The Resource statement is expected in Q4 2022 and the
Reserve Statement by Q1 2023.
The first phase of the underground feasibility study has commenced to review
the financial viability of the Blast Hole Open Stope and Sub-Level Cave Mining
methods.
The design of a bioremediation plant has advanced, and construction is planned
to commence in Q3 with implementation of the first phase expected in Q4.
GROUP FINANCIAL PERFORMANCE
H1 2022 IN REVIEW
· Revenue achieved of US$100.0 million (H1 2021: US$104.5
million)
· Underlying EBITDA(1) decreased to US$20.9 million (H1
2021: US$34.7 million)
· Attributable profit from continuing operations
decreased to US$4.9 million (H1 2021: US$10.6 million)
· Dividend paid of 2.7 US cents per share (H1 2021: 2.5
US cents)
· Loss from discontinued operations relating to Ghaghoo
reduced to US$1.1 million (H1 2021: US$1.3 million)
PROFITABILITY AND LIQUIDITY
US$ million H1 2022 H1 2021
Revenue 100.0 104.5
Royalty and selling costs (10.8) (11.0)
Cost of sales(2) (63.2) (53.6)
COVID-19 costs/standing costs (0.1) (0.4)
Corporate expenses (5.0) (4.8)
Underlying EBITDA(1) from continuing operations 20.9 34.7
Depreciation and mining asset amortisation (4.3) (4.2)
Share-based payments (0.1) (0.3)
Foreign exchange loss - (0.1)
Net finance costs (2.1) (1.8)
Profit before tax from continuing operations 14.4 28.3
Income tax expense (5.0) (10.0)
Profit for the Period from continuing operations 9.4 18.3
Non-controlling interests (4.5) (7.7)
Attributable profit from continuing operations 4.9 10.6
Loss from discontinued operations (1.1) (1.3)
Attributable net profit 3.8 9.3
Earnings per share from continuing operations (US cents) 3.4 7.6
Loss per share from discontinued operations (US cents) (0.8) (1.0)
(1) Underlying earnings before interest, tax, depreciation and mining
asset amortisation (EBITDA) as defined in Note 6 of the condensed notes to the
consolidated interim financial statements.
(2) Including waste stripping amortisation costs but excluding
depreciation and mining asset amortisation.
The Group generated an underlying EBITDA(1) of US$20.9 million (H1 2021:
US$34.7 million). The profit attributable to shareholders from continuing
operations was US$4.9 million (H1 2021: US$10.6 million), equating to earnings
per share from continuing operations of 3.4 US cents (H1 2021: 7.6 US cents)
on a weighted average number of shares in issue of 142.1 million (H1 2021:
139.8 million shares). After including the loss of US$1.1 million from
Ghaghoo, which remains classified as a discontinued operation, the Group's
attributable profit was US$3.8 million, resulting in earnings per share after
discontinued operations of 2.6 US cents (H1 2021: 6.6 US cents).
Revenue
US$ million H1 2022 H1 2021
Sales - rough 99.6 104.0
Sales - polished margin 0.3 0.2
Impact of carry over rough diamonds 0.1 0.3
Group revenue 100.0 104.5
The Group's revenue of US$100.0 million was mainly generated by the sale of 55
075 carats at an average price of US$1 745 per carat.
These results do not include the sale of three greater than 100 carat diamonds
that were recovered in June and sold subsequent to Period end, in July.
Costs
The Group continues to closely manage its costs and preserve cash resources to
maintain strong margins and appropriate liquidity. The Russian invasion of
Ukraine has contributed significantly to increasing energy and commodity
prices and disrupting supply chains worldwide, which has had an impact on the
Group's short term operating expenses.
OPERATING EXPENSES
The biggest impact on the Letšeng's operating expenses has been an increase
in fuel prices and explosive consumables. Diesel prices have increased 87%
from LSL10.87 per litre in June 2021 to LSL20.32 per litre in June 2022.
Letšeng consumed an estimated 8 million litres of diesel during the Period.
Electricity supply disruptions which necessitate an increase in the use of
diesel-powered generators also significantly increased diesel consumption on
the mine site. In addition, the price of explosives has also increased by an
estimated 83% compared to H1 2021.
Total direct cash costs, including waste, increased by 4% to LSL1 076.0
million from LSL1 033.3 million in H1 2021, notwithstanding the decrease in
waste tonnes mined in accordance with the mine plan. The anticipated decrease
in costs due to the lower waste volumes was negated by the increase in
commodity prices and inflation experienced during the Period. The impact on
unit costs is tabled below:
Letšeng Unit Cost Analysis
Unit cost per tonne treated Direct cash costs(1) Third plant operator costs Total direct cash operating costs(1) Non-cash accounting charges(2) Total operating cost Waste cash costs per waste tonne mined
H1 2022 (LSL) 223.76 14.28 238.04 85.67 323.71 56.88
H1 2021 (LSL) 172.43 12.52 184.95 64.34 249.29 44.52
% change 29 30 28
H1 2022 (US$) 14.52 0.93 15.45 5.55 21.00 3.69
H1 2021 (US$) 11.86 0.86 12.72 4.43 17.15 3.06
% change 21 22 21
(1) Direct mine cash costs represent all operating costs, excluding
royalty and selling costs.
(2 ) Non-cash accounting charges include waste stripping cost
amortised, inventory and ore stockpile adjustments, and the impact of adopting
IFRS 16 Leases, and exclude depreciation and mining asset amortisation.
Third plant operator costs increased by 10% in local currency compared to H1
2021. The cost is a function of the revenue generated by the sales of diamonds
recovered through the contractor plant. The increase is driven by a number of
higher-value diamonds that were recovered during the Period.
Non-cash accounting charges comprise waste amortisation which was similar to
H1 2021. The increase was mainly due to inventory movement during the Period
and an increase in the volume of tonnes added to the stockpile.
CORPORATE EXPENSES
Corporate office costs are incurred to provide expertise in all areas of the
business to realise maximum value from the Group's assets. These costs are
incurred by the Group through its technical and administrative offices in
South Africa (in South African rand) and head office in the UK (in British
pounds).
General corporate costs were US$5.0 million (H1 2021: US$4.8 million). The
increase was mainly due to an increase in travel costs after the suspension of
travel restrictions and an increase in insurance premiums due to the
tightening of the insurance market, set off by the weaker South African Rand
and British Pound against the US Dollar.
DISCONTINUED OPERATION - GHAGHOO
The operation, currently on care and maintenance, continues to be classified
as a discontinued operation per IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations. Care and maintenance costs reduced to US$1.1 million
(H1 2021: US$1.3 million) and have been recognised and disclosed separately in
the Interim Consolidated Statement of Profit or Loss.
Following the lapse of the sales agreement with Botswana Diamonds in May 2022
we continue to pursue potential sales opportunities while closure and other
disposal alternatives are being investigated.
EXCHANGE RATE IMPACTS
While revenue is generated in US dollars, the majority of operational expenses
are incurred in the relevant local currency of the operational jurisdictions.
Local currency rates for the Lesotho loti (LSL) (pegged to the South African
rand) and Botswana pula (BWP) weakened significantly against the US dollar
(compared to H1 2021) which decreased the Group's US dollar reported costs and
increased local currency cash flow generation.
Exchange rates H1 2022 H1 2021 % change
LSL per US$1.00
Average exchange rate for the Period 15.41 14.54 6
Period end exchange rate 16.38 14.28 15
BWP per US$1.00
Average exchange rate for the Period 11.79 10.87 8
Period end exchange rate 12.40 10.92 14
US$ per GBP1.00
Average exchange rate for the Period 1.30 1.39 (6)
Period end exchange rate 1.21 1.38 (12)
FINANCIAL POSITION
The LSL closed 3% weaker against the US dollar at the end of the Period
compared to 31 December 2021. This resulted in a decrease in the US dollar
reported values in the Interim Consolidated Statement of Financial Position.
The changes to and key drivers of selected totals of the Interim Consolidated
Statement of Financial Position are detailed below.
US$ million H1 2022 FY 2021 % variance
Non-current assets 316.0 315.1
Current assets 61.4 67.4
Assets associated with discontinued operation 1.9 2.1
Total assets 379.3 384.6 (1)
Equity attributable to parent company 154.1 159.8
Non-controlling interest 85.2 86.8
Total equity 239.3 246.6 (3)
Non-current liabilities 114.4 108.0
Current liabilities 21.7 25.9
Liabilities associated with discontinued operation 3.9 4.1
Total liabilities 140.0 138.0 (1)
Key asset drivers
US$ million H1 2022 H1 2021 % variance
Waste cost capitalised 26.6 35.7 (25)
Waste stripping cost amortised 21.9 23.0 (4)
Depreciation and mining asset amortisation 4.3 4.2 2
Capital expenditure 2.3 1.9 21
Waste cost capitalised decreased due to the lower volumes of waste tonnes
mined. This decrease was set off by an increase in operating expenses,
specifically diesel prices and explosive consumables. The waste stripping cost
amortised decreased to US$17.5 million. Depreciation and mining asset
amortisation increased to US$4.3 million (H1 2021: US$4.2 million).
During the Period, the majority of capital spent related to the replacement of
the PCA to the amount of US$1.9 million. Other capital projects include the
resource core drilling programme required to inform Letšeng's Resource and
Reserve statement and the design work for the expansion of the Patiseng coarse
tailings storage facility.
Liquidity and solvency
The Group ended the Period with cash on hand of US$24.2 million (31 December
2021: US$33.9 million) of which US$19.3 million is attributable to Gem
Diamonds. The Group generated cash from operating activities of US$30.1
million (30 June 2021: US$29.9 million).
At Period end, the Group had utilised facilities of US$12.1 million, resulting
in a net cash position of US$12.1 million (31 December 2021: US$20.9 million)
and available facilities of US$69.9 million, comprising US$18.0 million at Gem
Diamonds and US$51.9 million at Letšeng.
The decrease in net cash was mainly due to the share buyback programme and the
payment of dividends to Gem Diamonds' shareholders of US$5.0 million and the
Lesotho Government's portion of dividends and withholding taxes extracted from
Letšeng of US$4.3 million.
The Group has a LSL750.0 million and a US$30.0 million revolving credit
facility expiring in December 2024. Letšeng also has a LSL100.0 million
general banking facility that is reviewed annually. The Group engages
regularly with lenders and credit providers to ensure continued access to
funding and to manage the Group's cash flow requirements.
Summary of loan facilities as at 30 June 2022:
Company Term/description/expiry Lender Interest rate Amount Drawn down US$ million Available
US$ million US$ million
Gem Diamonds Limited Three-year revolving credit facility (RCF) Nedbank Facility A: 30.0 12.0 18.0
Expires Standard Bank (US$30 million) LIBOR + 5.00%
22 December 2024 FirstRand Bank
Letšeng Diamonds Three-year revolving credit facility Standard Lesotho Bank Facility B 27.5 - 27.5
Expires Nedbank Lesotho (LSL450 million): Central Bank of Lesotho rate
22 December 2024 First National Bank + 3.25%
of Lesotho
Nedbank Facility C 18.3 - 18.3
(ZAR300 million): JIBAR + 3.05%
Letšeng Diamonds 5.5-year project facility Nedbank/ Tranche A 2.1 0.1 -
Tranche A: expires September 2022 Export Credit Insurance Corporation (LSL35 million)
JIBAR + 6.75%
Tranche B: expired March 2022 Tranche B (R180 million) - - -
JIBAR + 3.15%
Letšeng Diamonds Overdraft facility Nedbank South African prime rate minus 0.7% 6.1 - 6.1
Annual review in March
Total 84.0 12.1 69.9
Dividends and share buyback programme
In line with the Group's commitment to deliver sustainable shareholder
returns, the Board proposed a dividend of 2.7 US cents per share (US$3.8
million) which was approved at the Annual General Meeting on 8 June.
In addition, the Board launched a share buyback programme on 12 April and
purchased 1 520 170 shares that are held as treasury shares. The weighted
average purchase price was 60.05 GB pence (78.07 US cents) per share. An
amount of US$1.2 million was spent up to 7 June, which is the date that the
Board authority lapsed. At the AGM on 8 June shareholders again authorised Gem
Diamonds to purchase its own shares within the permitted parameters. No
further share buyback programme has commenced due to the current volatility in
the current economic situation and the potential impact on the Group's cash
flow.
Tax matters
The forecast effective tax rate for the full year is 35.2% and has been
applied to the actual results for the Period. This rate is the result of
profits generated by Letšeng being taxed at 25% and deferred tax assets not
recognised on losses incurred in non-trading operations.
As disclosed in the 2021 Annual Report and Accounts, an amended tax assessment
was issued to Letšeng by the Lesotho Revenue Authority (LRA), contradicting
the application of certain tax treatments in the current Lesotho Income Tax
Act, 1993. An objection to the amended tax assessment was lodged with the LRA
in March 2020, which was supported by the opinion of senior counsel.
On 7 February 2022, Letšeng received an application from the LRA to amend its
original grounds for the court application. Letšeng's counsel continues to
review the LRA's proposed amendment and has opposed the new application by the
LRA.
Going concern
The projections of the Group's current and expected profitability, considering
reasonable possible changes in operations, key assumptions and inputs, such as
the renewed facilities, indicate that the Group will be able to operate as a
going concern for the foreseeable future. See the financial statements on page
10.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group's principal risks and uncertainties, both current and emerging, that
could have a material financial, operational and compliance impact on its
performance and long-term growth are presented in the Annual Report and
Accounts for 2021 (pages 37 to 44). The Group's principal risks as presented
in the Annual Report and Accounts for 2021 remain unchanged in the medium to
long term and take into consideration current market and operational
conditions of the Group's operations and global markets. The Group's risk
management strategy aims to manage Group risk in such a way as to minimise
threats and maximise opportunities.
The assessment of emerging risks is embedded within the risk framework of the
Group. Any emerging risks identified are reported to and considered by the
Board.
The Group continues to monitor areas of unpredictability, in particular the
immediate and evolving impact on all Group risks resulting from increased
commodity prices, disruption of global supply chains and excessive inflation
caused by the Russian invasion of Ukraine and related sanctions. Lesotho
elections are scheduled for 7 October 2022 and the Group continues to monitor
the political environment in the build-up to the elections.
All appropriate controls implemented in response to the COVID-19 pandemic,
remain effective in mitigating the COVID-19 risk ensuring the safety of our
workforce and the achievement of the Group's objectives. As in previous years,
insurers have continued to decrease their exposure to the mining industry due
to the current risk perception within the industry. The Group has adopted a
risk transfer strategy to address the substantial changes in the insurance
market by implementing a sustainable insurance solution for the Group in the
medium to long term.
Climate change is one of the most significant risks facing organisations. The
Financial Conduct Authority (FCA) has published new proposals on
climate-related disclosure rules for premium listed companies to promote
climate and sustainability-related financial disclosures. The aim is to
provide investors and consumers with a better understanding of the impact of
climate change on our operations and to ensure potential climate
change-related impacts are considered in all decision making. The Group is
integrating the recommendations of the TCFD into its governance and risk
management structures, strategy and reporting platforms to adequately report
on the financial and strategic considerations related to climate change.
The Group's strong operational and safety results demonstrate its resilience
and the maturity of the risk management process to enable rapid response and
flexibility in a fast-evolving and challenging operating environment.
Clifford Elphick
Chief Executive Officer
31 August 2022
HALF-YEAR FINANCIAL STATEMENTS
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT
AND FINANCIAL STATEMENTS
PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES (DTR) 4.2.10
The Directors confirm that, to the best of their knowledge, this condensed set
of financial statements has been prepared in accordance with IAS 34 Interim
Financial Reporting and that the Half-Year Report includes a fair review of
the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
(a) an indication of important events that have occurred during
the first six months of the financial year and their impact on this condensed
set of financial statements
(b) material related-party transactions in the first six months
of the year and any material changes in the related-party transactions
described in the Gem Diamonds Limited Annual Report 2021.
The names and functions of the Directors of Gem Diamonds Limited are listed in
the Annual Report for the year ended 31 December 2021.
For and on behalf of the Board
Michael Michael
Chief Financial Officer
31 August 2022
INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Notes 30 June 2022(1) 30 June 2021(1)
US$'000
US$'000
CONTINUING OPERATIONS
Revenue from contracts with customers 4 99 951 104 525
Cost of sales (67 430) (57 757)
Gross profit 32 521 46 768
Other operating expense 5 (93) (340)
Royalties and selling costs (10 781) (11 038)
Corporate expenses (5 004) (4 813)
Share-based payments 17 (125) (295)
Foreign exchange gain/(loss) 20 (122)
Operating profit 16 538 30 160
Net finance costs (2 098) (1 848)
- Finance income 73 88
- Finance costs (2 171) (1 936)
Profit before tax for the Period from continuing operations 14 440 28 312
Income tax expense 8 (5 075) (9 953)
Profit after tax for the Period from continuing operations 9 365 18 359
DISCONTINUED OPERATION
Loss after tax for the Period from discontinued operation 15 (1 075) (1 329)
Profit for the Period 8 290 17 030
Attributable to:
Equity holders of parent 3 755 9 288
Non-controlling interests 4 535 7 742
Earnings per share (cents)
- Basic earnings for the Period attributable to ordinary equity holders of the 2.68 6.64
parent
- Diluted earnings for the Period attributable to ordinary equity holders of 2.64 6.53
the parent
Earnings per share (cents) for continuing operations
- Basic earnings for the Period attributable to ordinary equity holders of the 3.44 7.59
parent
- Diluted earnings for the Period attributable to ordinary equity holders of 3.40 7.47
the parent
(1 ) Unaudited
INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2022
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Profit for the Period 8 290 17 030
Other comprehensive income that will be reclassified to the Interim
Consolidated Statement of Profit or Loss in subsequent periods
Exchange differences on translation of foreign operations, net of tax (6 916) 6 142
Other comprehensive (loss)/income for the Period, net of tax (6 916) 6 142
Total comprehensive income for the Period, net of tax 1 374 23 172
Attributable to:
Equity holders of parent (938) 13 686
Non-controlling interests 2 312 9 486
(1) Unaudited
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Notes 30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 10 289 798 293 627
Right-of-use assets 11 7 363 3 137
Intangible assets 12 11 653 11 962
Receivables and other assets 13 1 260 1 278
Deferred tax assets 5 985 5 117
316 059 315 121
Current assets
Inventories 31 508 31 158
Receivables and other assets 13 5 711 4 095
Income tax receivable 17 1 232
Cash and short-term deposits 14 24 145 30 913
61 381 67 398
Asset held for sale 15 1 864 2 097
Total assets 379 304 384 616
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 16 1 410 1 406
Treasury shares(3) 16 (1 157) -
Share premium 885 648 885 648
Other reserves (231 269) (226 697)
Accumulated losses (500 566) (500 550)
154 066 159 807
Non-controlling interests 85 247 86 843
Total equity 239 313 246 650
Non-current liabilities
Interest-bearing loans and borrowings 18 11 402 8 340
Lease liabilities 19 7 122 3 851
Trade and other payables 2 189 2 095
Provisions 11 450 11 202
Deferred tax liabilities 82 205 82 472
114 368 107 960
Current liabilities
Interest-bearing loans and borrowings 18 464 2 704
Lease liabilities 19 1 939 973
Trade and other payables 18 337 22 188
Income tax payable 988 41
21 728 25 906
Liabilities directly associated with the asset held for sale 15 3 895 4 100
Total liabilities 139 991 137 966
Total equity and liabilities 379 304 384 616
(1) Unaudited
(2 ) Audited
(3 ) Shares repurchased by Gem Diamonds Limited. Refer Note 16,
Issued capital.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Attributable to the equity holders of the parent
Issued capital Share premium Treasury shares(1) US$'000 Other Reserves(2) Accumulated (losses)/retained earnings Total Non-controlling Total equity
US$'000 US$'000 US$'000 US$'000 US$'000 interests US$'000
US$'000
Balance at 1 January 2022 1 406 885 648 - (226 697) (500 550) 159 807 86 843 246 650
Profit for the Period - - - - 3 755 3 755 4 535 8 290
Other comprehensive loss - - - (4 693) - (4 693) (2 223) (6 916)
Total comprehensive (loss)/income - - - (4 693) 3 755 (938) 2 312 1 374
Share capital issued (Note 16) 4 - - (4) - - - -
Share buyback (Note 16) - - (1 157) - - (1 157) - (1 157)
Share-based payments (Note 17) - - - 125 - 125 - 125
Dividends paid (Note 9, Note 22) - - - - (3 771) (3 771) (3 908) (7 679)
Balance at 30 June 2022(3) 1 410 885 648 (1 157) (231 269) (500 566) 154 066 85 247 239 313
Attributable to discontinued operation - - - (53 792) (198 409) (252 201) - (252 201)
Balance at 1 January 2021 1 397 885 648 - (212 164) (511 808) 163 073 84 422 247 495
Profit for the Period - - - - 9 288 9 288 7 742 17 030
Other comprehensive income - - - 4 398 - 4 398 1 744 6 142
Total comprehensive income - - - 4 398 9 288 13 686 9 486 23 172
Share capital issued (Note 16) 8 - - (8) - - - -
Share-based payments (Note 17) - - - 296 - 296 - 296
Dividends paid (Note 9) - - - - (3 509) (3 509) - (3 509)
Balance at 30 June 2021(3) 1 405 885 648 - (207 478) (506 029) 173 546 93 908 267 454
Attributable to discontinued operation (Note 15) - - - (53 027) (193 581) (246 608) - (246 608)
(1 ) Being shares repurchased from the owners of Gem Diamonds
Limited. Refer Note 16, Issued capital.
(2 ) Other reserves relate to Foreign currency translation
reserves and Share based equity reserves.
(3 ) Unaudited
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Notes 30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Cash flows from operating activities 30 095 29 905
Cash generated by operations 20.1 42 995 57 438
Working capital adjustments 20.2 (9 841) (10 501)
Interest received 73 88
Interest paid (1 453) (1 182)
Income tax paid (2 940) (15 937)
Income tax received 1 261 -
Cash flows used in investing activities (28 983) (37 576)
Purchase of property, plant and equipment 10 (2 376) (1 898)
Waste stripping costs capitalised 10 (26 607) (35 683)
Proceeds from sale of property, plant and equipment - 5
Cash flows from financing activities (8 617) (9 038)
Lease liabilities repaid (850) (1 067)
Net financial liabilities raised/(repaid) 20.3 600 (1 667)
- Financial liabilities raised 4 298 1 000
- Financial liabilities repaid (3 698) (2 667)
Share buyback 16 (1 157) -
Dividends paid to holders of the parent (3 302) (3 509)
Dividends paid to non-controlling interests (3 908) (2 795)
Net decrease in cash and cash equivalents (7 505) (16 709)
Cash and cash equivalents at beginning of Period 31 057 49 827
Foreign exchange differences 639 868
Cash and cash equivalents 24 191 33 987
Cash and cash equivalents at end of Period - continuing operations 14 24 145 33 929
Cash and cash equivalents held at banks 24 145 33 929
Cash and cash equivalents at end of Period - discontinued operation 15 46 58
Cash and cash equivalents held at banks 46 58
(1 ) Unaudited
CONDENSED NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 JUNE 2022
1. CORPORATE INFORMATION
1.1 Incorporation and authorisation
The holding company, Gem Diamonds Limited (the Company), was incorporated on
29 July 2005 in the British Virgin Islands (BVI). The Company's registration
number is 669758.
The financial information shown in this report relating to Gem Diamonds
Limited and its subsidiaries (the Group) was approved by the Board of
Directors on 31 August 2022, is unaudited and does not constitute statutory
financial statements. The report of the auditor on the Group's 2021 Annual
Report and Accounts was unqualified.
The Group is principally engaged in operating diamond mines.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of presentation
The condensed consolidated interim financial statements for the six months
ended 30 June 2022 (the Period) have been prepared in accordance with IAS 34
Interim Financial Reporting. The condensed consolidated interim financial
statements do not include all the information and disclosures required in the
annual financial statements and should be read in conjunction with the Group's
Annual Financial Statements for the year ended 31 December 2021. The Condensed
financial statements are unaudited and
do not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. The financial information for the year to 31 December 2021
included in this report was derived from the statutory accounts for the year
ended 31 December 2021, a copy of which has been delivered to the Registrar of
Companies. The auditor's report on these accounts was unqualified, did not
include a reference to any matters to which the auditor drew attention by way
of an emphasis of matter and did not contain a statement under sections 498
(2) or (3) of the Companies Act 2006.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out on pages 1 to 3.
The financial position of the Group, its cash flows and liquidity position are
described in the Group Financial Performance on pages 4 to 8. The Group's net
cash at 30 June 2022 was US$12.1 million (31 December 2021: net cash of
US$20.9 million) and with its undrawn facilities of US$69.9 million (31
December 2021: US$74.3 million), its liquidity (defined as net cash and
undrawn facilities) of US$82.0 million (31 December 2021: US$95.2 million)
remains strong. The Group's Revolving Credit facilities, which total US$75.8
million when fully unutilised, mature on 22 December 2024.
After making enquiries which include reviews of forecasts and budgets, timing
of cash flows and sensitivity analyses, and considering the continued impact
of the COVID-19 pandemic and the impact of the Russian invasion of Ukraine on
consumable and commodity prices on both the wider macro-economic environment
(including demand for the Group's products and realised prices) and the
Group's operations and production levels, the Directors have a reasonable
expectation that the Group and the Company have adequate financial resources
without the use of mitigating actions to continue in operational existence for
the foreseeable future. For this reason, the Directors continue to adopt the
going concern basis in preparing this half-year report and accounts of the
Group.
2.2 Significant accounting policies
The accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those followed
in the preparation of the Group's Annual Financial Statements for the year
ended 31 December 2021. A new policy on Treasury shares has been adopted,
following a share buyback programme introduced during the Period.
Treasury shares
Own equity instruments that are reacquired are recognised at cost, including
transaction costs, and deducted from equity. No gain or loss is recognised in
profit or loss in the purchase, sale, issue or cancellation of the Group's own
equity instruments. Any difference between the carrying amount and the
consideration, if reissued, is recognised in equity.
Minor amendments to existing standards, also became effective on 1 January
2022 and have been adopted by the Group. The adoption of these amendments has
not had a significant impact on the accounting policies, methods of
computation or presentation applied by the Group.
Amendments to standards
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest rate
benchmark reform
The amendment addresses issues that might affect financial reporting when an
existing interest rate benchmark is replaced with an alternative benchmark
interest rate. The Group and its funders commenced a comprehensive debt
refinancing programme of the Group's facilities. The refinancing programme
incorporates the consideration of any risk posed to the Group by phase two of
the IBOR reform, which was effective from 1 January 2021. The IBOR reform may
potentially have an impact on the JIBAR and LIBOR linked interest-bearing
loans and borrowings within the Group, Refer Note 18, Interest-bearing loans
and borrowings for more information regarding the maturities and the related
benchmark rates subject to the IBOR reform on these loans. At Period end, it
is not possible to estimate the potential impact of the amendment as no
alternative rates have been published by the regulatory bodies or negotiated
with the funders. The Group will continue to assess the impact of the interest
rate benchmark reform as the revised benchmark rates are published.
Standards issued but not yet effective
The standards, amendments and improvements that are issued, but not yet
effective, up to the date of issuance of the Group's consolidated interim
financial statements are listed in the table below. The standards, amendments
and improvements have not been early adopted and it is expected that, where
applicable, these standards and amendments will be adopted on each respective
effective date. The impact of the adoption of these standards cannot be
reasonably assessed at this stage.
Standards, amendments, and improvements Description Effective date*
IFRS 17 Insurance contracts 1 January 2023
Amendments to IAS 37 Onerous contracts - cost of fulfilling a contract 1 January 2022
Amendments to IFRS 3 Reference to the Conceptual Framework 1 January 2022
Amendments to IAS 16 Property, plant and equipment proceeds before intended use 1 January 2022
Amendments to IAS 1 Classification of liabilities as current or non-current 1 January 2023
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Pending
Venture
Amendments to IAS 8 Definition of Accounting Estimates 1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies 1 January 2023
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single 1 January 2023
Transaction
Improvement IFRS 1 Subsidiary as a first-time adopter 1 January 2022
Improvement IFRS 9 Fees in the '10 per cent' test for derecognition of financial liabilities 1 January 2022
Improvement IAS 41 Agriculture - Taxation in fair value measurements 1 January 2022
(* ) Annual periods beginning on or after.
2.3 Significant accounting matters
During the six months ended 30 June 2022, the significant accounting matters
addressed by management focused on the assessment of any continued COVID-19
impacts, climate-related disclosures and the impact of the Russian invasion of
Ukraine.
COVID-19 continued impact
The Group has considered the impact of COVID-19 on its significant accounting
judgements and estimates. The Group's main source of estimation uncertainty is
in relation to assumptions used for the assessment of impairment and
impairment reversal of assets. No further significant estimates have been
identified as a result of COVID-19. Although the pandemic has increased the
level of uncertainty inherent in all future cash flow forecasts, the pandemic
has had a reduced impact compared to previous periods.
Task Force on Climate-related Financial Disclosures (TCFD)
Management has considered the impact of climate change, particularly in the
context of the phased approach strategy which the Group has adopted in
implementing the TCFD requirements and the high level overview of some
climate-related risks and opportunities. These considerations did not have a
material impact on the financial reporting estimates and judgements,
consistent with the assessment that climate change is not expected to have a
significant impact on the Group's going concern assessment to August 2023.
These considerations also had no material impact on any Property, Plant and
Equipment or Commitments. For Letšeng, the physical risks identified of
severe weather conditions, are similar to its current operating conditions of
drought, high wind, snow and rainfall. The operation is therefore well set up
to manage these conditions within its current reporting and accounting
framework. As users of grid-supplied and fossil fuel energy, our short-term
focus is on improving energy efficiencies in our operational processes and to
reducing combustion related fossil fuel use. Due to the uncertainty of the
cost and timing of implementation of carbon-related taxes, the impact of such
taxes on the Group's operations and cash flows has been excluded from the
going concern and impairment review.
The Russian invasion of Ukraine
The Russian invasion of Ukraine has significantly increased the price of
consumables, especially diesel and explosive costs used in the mining
activities, and inflation rates across the jurisdictions where the Group
operates. Management has considered the impact of increased costs on future
cashflows, and whether these costs and inflation rates are short or long term
in nature. Management has used current pricing and inflation estimates for
shorter term forecasts, and normalised these to levels of the previous year
for the medium to long term.
3. SEGMENT INFORMATION
For management purposes, the Group is organised into geographical units as its
risks and required rates of return are affected predominantly by differences
in the geographical regions of the mines and areas in which the Group operates
or areas in which operations are managed. The below measures of profit or
loss, assets and liabilities are reviewed by the Board of Directors. The main
geographical regions and the type of products and services from which each
reporting segment derives its revenue from are:
· Lesotho (diamond mining activities);
· Belgium (sales, marketing and manufacturing of
diamonds);
· BVI, RSA, UK and Cyprus (technical and administrative
services); and
· Botswana (diamond mining activities), classified as a
discontinued operation since 30 June 2019.
Management monitors the operating results of the geographical units separately
for the purpose of making decisions about resource allocation and performance
assessment.
Gem Diamonds Botswana (Ghaghoo Diamond Mine), which was classified as a
discontinued operation held for sale and disclosed separately in 2019,
continues to be classified as such at Period end as management remain
committed to the sales process. Refer Note 15, Asset held for sale.
Segment performance is evaluated based on operating profit or loss.
Intersegment transactions are entered into under normal arm's length terms in
a manner similar to transactions with third parties. Segment revenue, segment
expenses and segment results include transactions between segments. Those
transactions are eliminated on consolidation.
Segment revenue is derived from mining activities, polished diamond
manufacturing margins and Group services.
The following tables present revenue from contracts with customers,
profit/(loss) for the Period, EBITDA and asset and liability information from
operations regarding the Group's geographical segments:
Six months ended Lesotho Belgium BVI, RSA, UK and Cyprus(2) Total continuing operations Discontinued operations Total
30 June 2022(1)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts
with customers
Total revenue 98 435 100 037 3 660 202 132 - 202 132
Intersegment (98 128) (393) (3 660) (102 181) - (102 181)
External customers 307 99 644 - 99 951 - 99 951
Segment operating profit/(loss) 21 383 635 (5 480) 16 538 (966) 15 572
Net finance costs (1 506) (4) (588) (2 098) (109) (2 207)
Profit/(loss) before tax 19 877 631 (6 068) 14 440 (1 075) 13 365
Income tax expense (4 760) (89) (226)(3) (5 075) - (5 075)
Profit/(loss) for the Period 15 117 542 (6 294) 9 365 (1 075) 8 290
EBITDA 24 937 830 (4 860) 20 907 (960) 19 947
(1) Unaudited.
(2) No revenue was generated in BVI and Cyprus.
(3) This includes the adjustment to align the forecast effective tax rate
for the full year, to the actual results for the Period. Refer Note 8, Income
tax expense.
Lesotho Belgium BVI, RSA, UK and Cyprus Total continuing operations Discontinued operations Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Segment assets
30 June 2022(1) 360 305 3 463 7 688 371 456 1 864 373 320
31 December 2021(2) 369 105 1 985 6 312 377 402 2 097 379 499
Net cash/(debt) and short-term deposits(3)
30 June 2022(1) 16 153 1 615 (5 764) 12 004 46 12 050
31 December 2021(2) 24 175 1 561 (5 014) 20 722 144 20 866
Segment liabilities
30 June 2022(1) 37 586 1 975 14 328 53 889 3 895 57 784
31 December 2021(2) 39 440 351 11 603 51 394 4 100 55 494
(1) Unaudited
(2) Audited
(3) Calculated as cash and short-term deposits less drawn down bank
facilities (excluding the asset-based finance facility). Refer Note 18,
Interest bearing loans and borrowings.
Included in revenue for the Period is revenue from one customer who
individually contributed 10% or more to total revenue. This revenue in total
amounted to US$12.5 million (30 June 2021: US$38.0 million from two customers)
arising from the sales reported in the Belgium segment.
Segment assets and liabilities do not include deferred tax assets and
liabilities of US$6.0 million and US$82.2 million respectively (31 December
2021: deferred tax asset US$5.1 million, deferred tax liabilities US$82.5
million).
Total revenue for the Period is slightly lower than that of the prior period.
Although the volume of carats sold of 57 075 carats was 4% higher than the
prior period (55 123 carats), the $ per carat achieved of $1 745 was 7% lower
than the prior period ($1 886 per carat) based on the reduced contribution
from the higher grade Satellite pit.
( )
Six months ended Lesotho Belgium BVI, RSA, UK and Cyprus(2) Total continuing operations Discontinued operations Total
30 June 2021(1)
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers
Total revenue 102 949 104 659 3 388 210 996 - 210 996
Intersegment (102 714) (369) (3 388) (106 471) - (106 471)
External customers 235 104 290 - 104 525 - 104 525
Segment operating profit/(loss) 35 235 720 (5 795) 30 160 (1 216) 28 944
Net finance costs (1 190) (2) (656) (1 848) (113) (1 961)
Profit/(loss) before tax 34 045 718 (6 451) 28 312 (1 329) 26 983
Income tax expense (8 237) (94) (1 622)(3) (9 953) - (9 953)
Profit/(loss) for the Period 25 808 624 (8 073) 18 359 (1 329) 17 030
EBITDA 38 379 915 (4 616) 34 678 (1 184) 33 494
(1) Unaudited
(2) No revenue was generated in BVI and Cyprus
(3) This includes the adjustment to align the forecast effective tax rate
for the full year, to the actual results for the Period. Refer Note 8, Income
tax expense.
4. REVENUE FROM CONTRACTS WITH CUSTOMERS
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Sale of goods 99 627 104 277
Partnership arrangements 306 235
Rendering of services 18 13
99 951 104 525
(1) Unaudited
The revenue from the sale of goods represents the sale of rough diamonds, for
which revenue is recognised at the point in time at which control transfers.
The revenue from partnership arrangements of US$0.3 million (30 June 2021:
US$0.2 million) represents the additional uplift from partnership arrangements
for which revenue is recognised when the significant constraints are lifted or
resolved and the amount of revenue is guaranteed. At Period end 527 carats (30
June 2021: 852 carats) have significant constraints in recognising revenue
relating to the additional uplift.
The revenue from the rendering of services mainly represents the sales of
rough diamonds on behalf of third parties, for which revenue is recognised at
the time when performance obligations are met, and services rendered on
third-party diamond analysis and manufacturing, for which the revenue is
recognised over time as the services are rendered.
No revenue was generated from joint operation arrangements during the current
or prior periods.
( )
5. OTHER OPERATING EXPENSES
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Sundry income - 85
Sundry expenses - (12)
Loss on disposal and scrapping of property, plant and equipment - (4)
Other operating income - 69
COVID-19 related costs (93) (409)
Other operating expenses (93) (340)
(1) Unaudited
6. UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET
AMORTISATION (UNDERLYING EBITDA) BEFORE DISCONTINUED OPERATION
Underlying EBITDA is shown, as the Directors consider this measure to be a
relevant guide to the operational performance of the Group and excludes such
non-operating costs and income as listed below. The reconciliation from
operating profit to underlying EBITDA is as follows:
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Operating profit 16 538 30 160
Other operating expense(2) - (69)
Foreign exchange (gain)/loss (20) 122
Share-based payments 125 295
Depreciation and amortisation (excluding waste stripping cost amortised) 4 264 4 170
Underlying EBITDA before discontinued operation 20 907 34 678
(1) Unaudited
(2) Excludes COVID-19 related costs which are considered operating costs.
7. SEASONALITY OF OPERATIONS
The Group's sales environment with regard to its diamond sales is not
materially impacted by seasonal and cyclical fluctuations. The mining
operations may be impacted by seasonal weather conditions. Appropriate mine
planning and ore stockpile build-up ensures that operations can continue
during adverse weather conditions.
8. INCOME TAX EXPENSE
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Current
- Foreign (3 940) (4 958)
Withholding tax
- Foreign (550) (90)
Deferred
- Foreign (585) (4 905)
Income tax expense (5 075) (9 953)
(1) Unaudited
The forecast effective tax rate for the full year from continuing operations
is 35.2% (31 December 2021: 33.4%) and has been applied to the actual results
from continuing operations for the Period. The asset held for sale (refer to
Note 15, Asset held for sale), has been excluded from the forecast effective
tax rate for the full year and taxed separately. There is no tax effect on the
loss from the asset held for sale.
The effective tax rate is above the Lesotho statutory tax rate of 25%
primarily as a result of deferred tax assets not recognised on losses incurred
in non-trading operations.
9. DIVIDENDS PAID
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Dividends on ordinary shares declared and paid
Final ordinary dividend for 2021: 2.7 US cents per share (2020: 2.5 US cents) (3 771) (3 509)
(1) Unaudited
The 2022 proposed dividend based on the 2021 full-year results was approved at
the Annual General Meeting on 8 June 2022 and a final cash dividend of US$3.8
million was paid on 21 June 2022.
The Directors intend on applying a similar dividend policy in the current year
on the 2022 full year results as has been adopted previously. The dividend
policy is dependent on the results of the Group's operations, its financial
position, cash requirements, future prospects, profits available for
distribution and other factors deemed to be relevant at that time.
10. PROPERTY, PLANT AND EQUIPMENT
During the Period, the Group invested US$2.4 million (30 June 2021: US$1.9
million) into property, plant and equipment, of which US$2.3 million (30 June
2021: US$1.8 million) related to Letšeng.
Letšeng's capital spend was incurred mainly on the design, planning work and
commencement of construction of the primary crushing area of US$1.9 million
(30 June 2021: US$0.2 million).
Letšeng further invested US$26.6 million (30 June 2021: US$35.7 million) in
deferred stripping costs which were capitalised. Amortisation of the deferred
stripping asset (waste stripping cost amortisation) of US$21.9 million (30
June 2021: US$23.0 million) was charged to the Interim Consolidated Statement
of Profit or Loss during the Period. The amortisation is directly related to
the areas that were mined during the Period and their associated waste to ore
strip ratios.
Depreciation and amortisation of US$3.4 million (30 June 2021: US$3.1 million)
was charged to the Interim Consolidated Statement of Profit or Loss during the
Period.
In addition to the above, foreign exchange movements on translation affecting
property, plant and equipment decreased the asset balances by US$7.5 million
(30 June 2021: US$8.4 million increase).
11. RIGHT-OF-USE ASSETS
Right-of-use assets
Plant and equipment Motor vehicles Buildings Total
As at 30 June 2022(1)
Cost
Balance at 1 January 2022 56 94 5 761 5 911
Additions 3 461 316 1 611 5 388
Derecognition of lease - - (672) (672)
Foreign exchange differences (207) (23) (125) (355)
Balance at 30 June 2022(1) 3 310 387 6 575 10 272
Accumulated depreciation
Balance at 1 January 2022 20 63 2 691 2 774
Charge for the year 325 42 538 905
Derecognition of lease - - (672) (672)
Foreign exchange differences (20) (4) (74) (98)
Balance at 30 June 2022(1) 325 101 2 483 2 909
Net book value at 30 June 2022(1) 2 985 286 4 092 7 363
As at 31 December 2021(2)
Cost
Balance at 1 January 2021 2 217 364 6 444 9 025
Additions - - 507 507
Derecognition of lease (2 141) (260) (768) (3 169)
Foreign exchange differences (20) (10) (422) (452)
Balance at 31 December 2021(2) 56 94 5 761 5 911
Accumulated depreciation
Balance at 1 January 2021 1 737 255 2 210 4 202
Charge for the year 437 75 1 173 1 685
Derecognition of lease (2 141) (260) (523) (2 924)
Foreign exchange differences (13) (7) (169) (189)
Balance at 31 December 2021(2) 20 63 2 691 2 774
Net book value at 31 December 2021(2) 36 31 3 070 3 137
(1) Unaudited
(2) Audited
Plant and equipment mainly comprise printing equipment utilised at Gem Diamond
Technical Services. Motor vehicles mainly comprise vehicles utilised by
contractors at Letšeng. Buildings comprise office buildings in Maseru,
Antwerp, London and Johannesburg.
Right-of-use assets are depreciated on a straight-line basis over the shorter
of their estimated useful life and the lease term.
During the Period, the lease for back-up power generating equipment at
Letšeng (which expired in 2021) was renewed resulting in the recognition of
assets and liabilities associated with the new lease. Furthermore, Gem
Diamonds Marketing Services and Baobab Technologies entered into new contracts
for the rental of office space in Antwerp. The new contracts were assessed as
containing leases, which resulted in the recognition of the new associated
right-of-use assets and lease liabilities. The original contracts were both
cancelled and all associated assets and liabilities were derecognised. Refer
Note 19, Lease Liabilities and Note 20.1, Cash generated by operations.
During the Period, the Group recognised income of US$0.2 million (30 June
2021: US$0.2 million) from the sub-leasing of office buildings in Maseru.
The Group expects to receive the following income from its sub-leasing
activities:
US$'000
1 July 2022 - 30 June 2023 360
1 July 2023 - 30 June 2024 384
1 July 2024 - 30 June 2025 317
1 July 2025 - 30 June 2026 119
12. INTANGIBLE ASSETS
Intangibles Goodwill(1) Total
US$'000 US$'000 US$'000
As at 30 June 2022(2)
Cost
Balance at 1 January 2022 - 11 962 11 962
Foreign exchange differences - (309) (309)
Balance as at 30 June 2022(2) - 11 653 11 653
Accumulated amortisation
Balance at 1 January 2022 - - -
Amortisation for the Period - - -
Balance as at 30 June 2022(2) - - -
Net book value as at 30 June 2022(2) - 11 653 11 653
As at 31 December 2021(3)
Cost
Balance at 1 January 2021 791 12 997 13 788
Foreign exchange difference - (1 035) (1 035)
Scrapping (791) - (791)
Balance at 31 December 2021(3) - 11 962 11 962
Accumulated amortisation
Balance at 1 January 2021 791 - 791
Amortisation - - -
Scrapping (791) - (791)
Balance at 31 December 2021(3) - - -
Net book value at 31 December 2021(3) - 11 962 11 962
(1) Goodwill is allocated to Letšeng Diamonds.
(2) Unaudited
(3) Audited
13. RECEIVABLES AND OTHER ASSETS
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
Non-current
Deposits 96 109
Insurance Asset 1 164 1 169
1 260 1 278
Current
Trade receivables 23 25
Prepayments(3) 1 918 975
Deposits 17 19
Other receivables 198 122
VAT receivable 3 555 2 954
Total current 5 711 4 095
(1) Unaudited.
(2 ) Audited.
(3 ) Prepayments mainly comprise advance payments made by Letšeng Diamonds
to suppliers for long lead items relating to the primary crushing area capital
project.
( )
Based on the nature of the Group's client base and the negligible exposure to
credit risk through its client base, its insurance asset and other financial
assets, the expected credit loss is insignificant and has no impact on the
Group.
14. CASH AND SHORT-TERM DEPOSITS
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
Cash on hand 2 3
Bank balances 20 950 27 673
Short-term bank deposits 3 193 3 237
24 145 30 913
(1) Unaudited
(2) Audited
The amounts reflected in the financial statements approximate fair value due
to the short-term maturity and nature of cash and short-term deposits.
Cash at banks earn interest at floating rates based on daily bank deposit
rates. Short-term deposits are generally called deposit accounts and earn
interest at the respective short-term deposit rates.
The Group's cash surpluses are deposited with major financial institutions of
high-quality credit standing predominantly within Lesotho and the United
Kingdom.
Finance income relates to interest earned on cash and short-term deposits.
Finance costs include interest incurred on bank overdraft and borrowings and
associated unwinding of facility credit underwriting fees, finance lease
liabilities and the unwinding of rehabilitation provisions.
At 30 June 2022, the Group had US$69.9 million (31 December 2021: US$74.3
million) of undrawn facilities, representing the LSL750.0 million (US$45.8
million) three-year secured revolving working capital facility and the
ZAR100.0 million (US$6.1 million) general banking facility, both at Letšeng,
and US$18.0 million from the Company's secured revolving credit facility. For
further details on these facilities refer Note 18, Interest-bearing loans and
borrowings.
15. ASSET HELD FOR SALE
Since 2019, in line with the strategic objective to dispose of non-core
assets, the Board of Directors and Management have remained committed to the
sale of Gem Diamonds Botswana (Pty) Ltd (GDB), which owns the Ghaghoo diamond
mine. In May 2022, the sales agreement which Gem Diamonds Limited had entered
into with Okwa Diamonds (Pty) Ltd (Okwa Diamonds) lapsed, following the
inability of Okwa Diamonds' owners to secure a funding partner for the
transaction. There has been no new agreement entered into for the sale of the
asset by Period end, although a number of interested parties are performing
due diligence procedures. GDB continued to be disclosed as a discontinued
operation held for sale at Period end.
The asset held for sale is carried at a net liability value of US$2.0 million,
which is lower than fair value less costs to sell. The fair value is based on
prior unobservable market offers from potential buyers, accordingly the
non-recurring fair value measurement is included in level 3 of the fair value
hierarchy.
The trading results of the operation continue to be classified as a
discontinued operation held for sale and are presented as follows:
( )
30 June 2022(1) 30 June 2021(2)
US$'000 US$'000
Gross profit - -
Other costs (966) (1 198)
Inventory write-down - (16)
Share-based payments - (1)
Foreign exchange loss - (1)
Operating loss (966) (1 216)
Net finance costs (109) (113)
Loss for the Period before tax from discontinued operation (1 075) (1 329)
Income tax expense - -
Loss for the Period after tax from discontinued operation attributable to (1 075) (1 329)
Equity holders of the parent
Loss per share from discontinued operation (cents)
Basic (0.8) (1.0)
Diluted (0.8) (0.9)
(1) Unaudited
(2) Audited
Gem Diamonds Botswana incurred rental expenses from short-term leases of
US$0.3 million (30 June 2021: US$0.3 million) during the Period.
Gem Diamonds Botswana has estimated tax losses of US$173.2 million (30 June
2021: US$184.3 million), which carry no expiry date, for which no deferred tax
asset has been recognised. Deferred tax assets of US$0.3 million (31 December
2021: US$0.3 million) were recognised to the extent of the deferred tax
liabilities. These have been offset in the table below.
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 1 350 1 413
Current assets
Inventories 444 477
Receivables and other assets 24 63
Cash and cash short-term deposits 46 144
514 684
Total assets 1 864 2 097
LIABILITIES
Non-current liabilities
Provisions 3 570 3 654
Current liabilities
Trade and other payables 325 446
Total liabilities 3 895 4 100
The net cash flows attributable to the discontinued operation held for sale
are as follows:
Operating cash outflows (1 086) (2 186)
Investing - -
Financing cash inflows(3) 990 2 332
Foreign exchange loss on translation of cash balance (3) (9)
Net cash (outflow)/inflow (99) 137
(1) Unaudited
(2) Audited
(3) Financing provided by Gem Diamonds Limited, being Gem Diamonds
Botswana's holding company, to fund care and maintenance costs.
16. ISSUED CAPITAL
30 June 2022(1) 31 December 2021(2)
Number of shares US$'000 Number of shares US$'000
'000 '000
Authorised - ordinary shares of US$0.01 each as at Period/Year end 200 000 2 000 200 000 2 000
Issued and fully paid balance at beginning of Period/Year 140 515 1 406 139 612 1 397
Allotments during the Period/Year 408 4 903 9
Subtotal 140 923 1 410 140 515 1 406
Share buyback during the Period/Year (1 520) (1 157) - -
Balance at end of Period/Year 139 403 253 140 515 1 406
(1) Unaudited
(2) Audited
Share buyback
During the Period, the Board of Directors approved a share buyback programme
to purchase up to US$2.0 million of the Company's ordinary shares. The sole
purpose of the programme is to reduce the capital of the Company and the
Company intends to hold those ordinary shares purchased under the programme in
treasury. Such treasury shares are not entitled to dividends and have no
voting rights. The share buyback programme was initiated on 12 April 2022. At
30 June 2022, 1 520 170 shares were bought back at a weighted average price of
60.05 GB pence, totalling US$1.2 million (including transaction costs). This
reduction in shares issued will be taken into account in calculating the
earnings per share.
( )
17. SHARE-BASED PAYMENTS
Long-term Incentive Plan 2017 Award (LTIP) - 4 April 2022 award
On 4 April, 165 930 nil-cost options were granted to certain key employees
under the Long-term Incentive Plan 2017 of the Company. The value of the award
was determined based on the Group performance for the prior 2021 financial
year. The vesting of the options will be subject to the satisfaction of
certain service conditions which are classified as non-market conditions. The
award is subject to malus and clawback conditions in line with the Group's
LTIP.
In addition, 841 168 nil-cost options were granted to certain Executive
employees and the Executive Directors on the same terms as detailed above.
These options were granted in line with the introduction of the Gem Diamonds
Incentive Plan (GDIP) in the prior year, which integrates annual bonus awards
with awards under the LTIP. These options are also subject to a two-year
holding period after the vesting date.
All the options vest over a three-year period in tranches of 1/3 commencing on
4 April 2023 and ending on 4 April 2025. The options are exercisable between
the respective vesting dates and 3 April 2032. If the service conditions are
not met, the options lapse. The performance conditions are not reflected in
the fair value of the award at grant date, and therefore the Company will
assess the likelihood of these conditions being met with a relevant adjustment
to the cumulative charge as required at each financial year end. The option
grants are settled by issuing shares. The fair value of the nil-cost options
is £0.58 (US$0.74), representing the Company's share price on the date of the
award. The expense disclosed in the Interim Consolidated Statement of Profit
or Loss is made up as follows:
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Equity-settled share-based payment transactions - charged to the Statement of 125 295
Profit or Loss - continuing operations
Equity-settled share-based payment transactions - charged to the Statement of - 1
Profit or Loss - discontinued operation
125 296
(1) Unaudited
18. INTEREST-BEARING LOANS AND BORROWINGS
On 28 February 2022, Gem Diamonds Limited provided security for both the
Letšeng Diamonds and Gem Diamonds Limited RCF facilities over its bank
accounts domiciled in the United Kingdom and on 15 March 2022 the security
over its 70% shareholding in Letšeng Diamonds was implemented. This security
had the impact of decreasing the interest rate margin on all facilities by
1.5% from 15 March 2022 and converting the facilities into secured facilities.
Effective interest rate Maturity 30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
Non-current
ZAR12.8 million asset-based finance facility South African Prime Lending Rate 1 January 2024 108 202
(repaid on 15 July 2022)
LSL450.0 million and - 22 December 2024 (425) (525)
ZAR300.0 million bank loan
facility Credit underwriting fees
US$30.0 million bank loan facility London US$ three-month 22 December 2024 11 719 8 663
LIBOR + 5%
11 402 8 340
Current
LSL7.3 million insurance 2.35% 1 June 2022 - 305
premium finance
ZAR3.5 million insurance premium finance 2.5% 1 July 2022 22 155
LSL20.0 million insurance premium finance 3.2% 1 July 2022 125 880
LSL215.0 million bank loan facility
Tranche A South African JIBAR + 6.75% 30 September 2022 142 439
Tranche B South African JIBAR + 3.15% 31 March 2022 - 752
ZAR12.8 million asset-based finance facility South African Prime Lending Rate 1 January 2024 175 173
(repaid on 15 July 2022)
464 2 704
(1) Unaudited
(2) Audited
LSL450.0 million and ZAR300.0 million (US$45.8 million) bank loan facility at
Letšeng Diamonds
Following the consolidated refinancing on 23 December 2021, the Group, through
its subsidiary Letšeng Diamonds, has a secured LSL450.0 million and ZAR300.0
million (US$45.8 million in total) three-year revolving credit facility
jointly with Nedbank Lesotho Limited, Standard Lesotho Bank Limited, First
National Bank of Lesotho Limited, Firstrand Bank Limited (acting through its
Rand Merchant Bank division) and Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division).
The facility expires on 22 December 2024 and has a 24-month renewal option.
The LSL450.0 million facility is subject to interest at the Central Bank of
Lesotho rate plus 3.25% and the ZAR300.0 million facility is subject to South
African JIBAR plus 3.05%. There were no draw downs on these facilities at
Period end.
Credit underwriting fees of US$0.4 million (31 December 2021: US$0.5 million)
relate to the balance of the amortised fees which were capitalised to the
Group's consolidated interest-bearing loans and borrowings at the end of the
previous year.
US$30.0 million bank loan facility at Gem Diamonds Limited
This secured facility is a three-year RCF with Nedbank Limited (acting through
its London branch), Standard Bank of South Africa Limited (acting through its
Isle of Man branch) and Firstrand Bank Limited (acting through its Rand
Merchant Bank division) for US$13.5 million, US$9.0 million and US$7.5
million, respectively. All drawdowns are made in these ratios.
The facility expires on 22 December 2024 and has a 24-month renewal option.
An additional US$3.0 million had been drawn down during the Period, resulting
in a total outstanding balance of US$12.0 million (31 December 2021: US$9.0
million) at Period end and a remaining undrawn balance of US$18.0 million (31
December 2021: US$21.0 million). The disclosure of a net US$11.7 million (31
December 2021: US$8.7 million) loan balance, is net of the capitalised credit
underwriting fees which are amortised and accounted for as finance costs
within profit or loss over the period of the facility. The balance of the
credit underwriting fees at Period end was US$0.3 million (31 December 2021:
US$0.3 million).
The US$-based interest rate for this facility at 30 June 2022 was 7.25% (31
December 2021: 6.72%) which comprises London US$ three-month LIBOR plus 5.0%
(31 December 2021: London US$ three-month LIBOR plus 6.5%).
Total interest for the Period on this interest-bearing RCF was US$0.5 million
(31 December 2021: US$1.0 million).
ZAR12.8 million (US$0.8 million) Asset-Based Finance facility
In January 2019, the Group, through its subsidiary, Gem Diamond Technical
Services, entered into a ZAR12.8 million (US$0.8 million) Asset Based Finance
(ABF) facility with Nedbank Limited for the purchase of a coarse mobile X-Ray
transmission machine (the asset). The asset serves as security for the
facility and has a carrying value of ZAR1.4 million (US$85 thousand) (31
December 2021: ZAR2.5 million (US$0.2 million)). At Period end ZAR4.6 million
(US$0.4 million) remains outstanding (31 December 2021: ZAR6.0 million (US$0.4
million). Post Period end, the facility was fully repaid before maturity on 15
July 2022.
Total interest for the Period on this interest-bearing ABF was US$13 thousand
(31 December 2021: US$34 thousand).
Insurance premium finance
At Period end, the following insurance premium finance balances were
outstanding and were fully repaid post Period end on 1 July 2022:
· LSL20.0 million (US$1.2 million) at Letšeng Diamonds
for the Multi-aggregate Insurance Policy of which total interest paid for the
Period on this interest-bearing loan was LSL0.4 million (US$25 thousand).
· ZAR3.5 million (US$0.2 million) at Gem Diamond
Technical Service for the Group Umbrella liability insurance premium of which
total interest paid for the Period on this interest-bearing loan was ZAR55
thousand (US$4 thousand).
Furthermore, the LSL7.3 million (US$0.4 million) funding agreement at Letšeng
Diamonds for its Asset All Risk insurance premium was fully repaid on 1 June
2022. Total interest charge for the Period was LSL0.1 million (US$7 thousand).
Other facilities
In addition, Letšeng Diamonds has a ZAR100.0 million (US$6.1 million) general
banking facility with Nedbank Limited (acting through its Nedbank Corporate
and Investment Banking division), which is renewable annually. There was no
draw down on this facility at Period end.
19. LEASE LIABILITIES
30 June 2022(1) 31 December 2021(2)
US$'000 US$'000
Non-current 7 122 3 851
Current 1 939 973
Total lease liabilities 9 061 4 824
Reconciliation of movement in lease liabilities
As at 1 January 4 824 6 738
Additions 5 388 507
Interest expense 365 525
Lease payments (1 215) (2 185)
Derecognition of lease - (352)
Foreign exchange differences (301) (409)
As at 30 June/31 December 9 061 4 824
(1) Unaudited
(2) Audited
Lease payments comprise payments in principle of US$0.8 million (31 December
2021: US$1.7 million) and repayments of interest of US$0.4 million (31
December 2021: US$0.5 million).
During the Period the Group recognised variable lease payments in the Interim
Consolidated Statement of Profit or Loss, for which no lease liability can be
recognised, of US$21.3 million (30 June 2021: US$25.9 million). These payments
consist of mining activities outsourced to a mining contractor of which
US$15.5 million (30 June 2021: US$22.0 million) has been capitalised to the
Stripping Asset within Property, Plant and Equipment.
During the Period, the lease for back-up power generating equipment at
Letšeng Diamonds was renewed. This lease contains residual value guarantees
of US$45 thousand (31 December 2021: Nil) which represents the cost to
decommission and return the power generating equipment to the supplier at the
end of the lease term. Refer Note 11, Right-of-use assets for details on new
leases entered into during the Period.
20. CASH FLOW NOTES
Notes 30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
20.1 Cash generated by operations
Profit before tax for the Period - continuing operations 14 440 28 312
Loss for the Period - discontinued operation (1 075) (1 329)
Adjustments for:
Depreciation and amortisation excluding waste stripping 3 409 3 060
Depreciation on right-of-use assets 905 1 110
Waste stripping cost amortised 21 880 22 988
Finance income (73) (88)
Finance costs 2 280 2 049
Unrealised foreign exchange differences 431 (1 766)
Loss on disposal of property, plant and equipment - 4
Gain on derecognition of leases - (92)
Inventory write down - 16
Bonus, leave and severance provisions raised 673 2 878
Share-based payments 125 296
42 995 57 438
20.2 Working capital adjustment
Increase in inventories (2 766) (2 892)
Increase in receivables (2 357) (652)
Decrease in trade and other payables (4 718) (6 957)
(9 841) (10 501)
20.3 Cash flows from financing activities (excluding lease liabilities)
Balance at beginning of Period 11 043 16 086
Net cash raised/(used) in financing activities 600 (1 667)
- Financial liabilities raised 4 298 1 000
- Financial liabilities repaid (3 698) (2 667)
Interest paid (1 084) (896)
Non-cash movements 1 306 1 181
- Interest accrued 1 084 896
- Amortisation of capitalised facility fees 147 150
- Foreign exchange differences 75 135
Balance at Period end 11 865 14 704
(1 ) Unaudited
21. COMMITMENTS AND CONTINGENCIES
The Board has approved capital projects of US$19.0 million (31 December 2021:
US$20.2 million), mainly relating to the new primary crushing area at Letšeng
of US$7.1 million and underground studies for pit development of US$5.1
million (US$4.9 million of which will only be committed if a Phase 1 analysis
costing US$0.2 million informs the continuation of further underground
studies) at Letšeng. Other smaller capital expenditure, all at Letšeng,
relates to the construction of a bioremediation plant of US$1.8 million,
investment in continued tailings storage extension and studies of US$1.1
million, the construction of an employee recreation centre of US$0.8 million
linked to the successful completion of the Business Transformation target and
further mineral resource and reserve studies of US$0.8 million. This
expenditure is expected to be incurred over the next 12 - 18 months.
Of the total approved capital projects, US$10.0 million (31 December 2021:
US$0.9 million) has been contracted at 30 June 2022, the majority of which
relates to the new primary crushing area at Letšeng.
The Group has conducted its operations in the ordinary course of business in
accordance with its understanding and interpretation of commercial
arrangements and applicable legislation in the countries where the Group has
operations. In certain specific transactions, however, the relevant third
party or authorities could have a different interpretation of those laws and
regulations that could lead to contingencies or additional liabilities for the
Group. Having consulted professional advisers, the Group has identified
possible disputes approximating US$0.2 million (31 December 2021: US$0.2
million) mainly relating to ongoing employee-related legal costs.
The Group monitors possible tax claims within the various jurisdictions in
which the Group operates. Management applies judgement in identifying
uncertainties over tax treatments and concluded that there were no uncertain
tax treatments during the Period. There remains a risk that further tax
liabilities may potentially arise. While it is difficult to predict the
ultimate outcome in some cases, the Group does not anticipate that there will
be any material impact on the Group's results, financial position or
liquidity.
As disclosed in the 2021 Annual Report and Accounts, an amended tax assessment
was issued to Letšeng by the Lesotho Revenue Authority (LRA) in December
2019, contradicting the application of certain tax treatments in the current
Lesotho Income Tax Act 1993. There has been no significant change in this
matter during the Period and therefore there has been no change in the
judgement applied and the accounting treatment compared to prior year. An
objection to the amended tax assessment was lodged with the LRA in March 2020,
which was supported by the opinion of senior counsel.
On 7 February 2022, Letšeng received an application from the LRA to amend its
original grounds for the court application. Letšeng's counsel continues to
review the LRA's proposed amendment and has opposed the new application by the
LRA. There has been no change in the judgement applied and the accounting
treatment for this matter.
22. RELATED PARTIES
Relationship
Jemax Management (Proprietary) Limited Common director
Government of the Kingdom of Lesotho Non-controlling interest
30 June 2022(1) 30 June 2021(1)
US$'000 US$'000
Compensation to key management personnel (including Directors)
Share-based equity transactions 92 126
Short-term employee benefits 2 808 2 795
Post-employment benefits (including severance pay and pension) 155 162
Fees paid to related parties
Jemax Management (Proprietary) Limited (44) (47)
Royalties paid to related parties
Government of the Kingdom of Lesotho (9 947) (10 226)
Lease and licence payments to related parties
Government of the Kingdom of Lesotho (96) (54)
Purchases from related parties
Jemax Management (Proprietary) Limited (2) (2)
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited (7) (8)
Amounts owing to related party
Government of the Kingdom of Lesotho (2 365) (4 476)
Dividends paid
Government of the Kingdom of Lesotho (3 908) (2 795)
(1) Unaudited
Jemax Management (Proprietary) Limited provided administrative services with
regard to the mining activities undertaken by the Group. A controlling
interest is held by an Executive Director of the Company.
The above transactions were made on terms agreed between the parties and were
made on terms that prevail in arm's length transactions.
23. EVENTS AFTER THE REPORTING PERIOD
No other fact or circumstance has taken place between the Period end and the
approval of the financial statements which, in our opinion, is of significance
in assessing the state of the Group's affairs.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BKDBKABKDBFNRecent news on Gem Diamonds
See all newsREG - Gem Diamonds Limited - Q1 2025 Trading Update
AnnouncementREG - Gem Diamonds Limited - Notification of Q1 2025 Trading Update
AnnouncementREG - Gem Diamonds Limited - 2024 Annual Report and Notice of the 2025 AGM
AnnouncementREG - Gem Diamonds Limited - Block Listing Six Monthly Return
AnnouncementREG - Gem Diamonds Limited - Notifications of transactions by PDMRs
Announcement