Thursday, 14 March
2024
Gem Diamonds Limited
Full Year 2023 Results
Gem Diamonds Limited (LSE: GEMD)
("Gem Diamonds", the "Company" or the "Group") announces its Full
Year Results for the year ending 31 December 2023 (the
"Period").
FINANCIAL RESULTS:
· Revenue of US$140.3 million (US$188.9 million in
2022)
· Underlying EBITDA of US$15.2 million
(US$43.7 million in 2022)
· Profit for the year of US$1.6 million
(US$20.2 million in 2022)
· Attributable loss of US$2.1 million (profit of
US$10.2 million in 2022)
· Loss
per share of 1.5 US cents (earnings per share of 7.3 US cents in
2022)
· Cash
on hand of US$16.5 million as at 31 December
2023 (US$12.3 million attributable to Gem
Diamonds)
OPERATIONAL RESULTS:
Letšeng
· Carats recovered of 109 656 (106 704 carats in
2022)
· Waste
tonnes mined of 8.8 million tonnes (10.2 million tonnes
in 2022)
· Ore
treated of 5.0 million tonnes (5.5 million tonnes in
2022)
· Average value of US$1 334 per carat achieved
(US$1 755 in 2022)
· The
highest dollar per carat achieved for a white rough diamond during
the year was US$36 399 per carat
Safety performance
Letšeng's safety performance in
2023 was excellent with zero fatalities (2022: zero), two LTIs
(2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our
lowest AIFR on record of 0.67 (2022: 0.70).
Financial performance
The turbulent global economic
conditions from the previous year continued into 2023 with high
inflation, interest rate hikes and slow overall economic growth in
major economies which impacted the diamond market. The pressure
experienced on the diamond market significantly impacted rough and
polished diamond prices which resulted in a 26% decrease in
revenue. Despite the implementation of numerous cost containment
measures, EBITDA decreased by 65%.
Operational performance
Significant changes were made to
management, workforce and operating methodologies at Letšeng and
Ghaghoo in 2023 to meet the challenges of lower revenues and
increasing costs. The implementation of a number of initiatives in
H2 2023 to slow down the rate at which ore is fed into the
treatment plants significantly improved overall stability which
materially improved the consistency of higher daily overall plant
utilisation.
TCFD and Climate
The Group concluded the final phase
of its three-year TCFD roadmap in 2023. The Group achieved a 26%
reduction of its scope 1 and scope 2 carbon emissions compared to
its target of a 30% reduction by 2030.
Resource & Reserve
Statement
Following an in-depth resource
development programme that involved extensive core resource
drilling, pit surface mapping, 3D-modelling, and petrography, the
Group has concluded its NI 43-101 Technical Report containing
Letšeng's 2024 Resource and Reserve Statement which will be
available on the Group's website at www.gemdiamonds.com.
Commenting on the results today,
Clifford Elphick, Chief Executive Officer of Gem Diamonds,
said:
"2023 was a challenging year
globally with surging inflation and interest rate increases in
major economies, two international conflicts and a subdued overall
global economic outlook which had a significant negative impact on
the diamond industry. Our financial results suffered primarily as a
result of a decrease in revenue because of lower diamond prices. We
have relentlessly focused on cost control measures, enhanced
operational efficiencies, rigorous evaluation of capital projects
and the deferment of non-essential longer-term projects.
We are proud of our excellent
safety performance in 2023 which is a testament to the focus and
dedication of our workforce to mature the organisational safety
culture, a programme that commenced in 2021.
We also released Letšeng's 2024
Resource and Reserve statement today, the result of a lot of hard
work over the past number of years. We will continue to optimise
our mine plan to ensure sustainable returns for our
stakeholders.
The pressure on the diamond market
has persisted into 2024, although there have been some signs of
price recovery. We are cautiously optimistic that prices will
stabilise and that there will be some growth towards the end of
2024."
The Company will host a live audio
webcast of the full year results today, 14 March 2024, at 9:00
GMT. If you would like to attend the webcast please register
here:
2023 Full Year results webcast
The page references in this
announcement refer to the Annual Report and Accounts 2023 which can
be found on the Company's website: www.gemdiamonds.com.
The Gem Diamonds Limited LEI number
is 213800RC2PGGMZQG8L67
FOR FURTHER
INFORMATION:
Gem Diamonds Limited
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
The Board steered the Group
through another challenging year in the face of the global
cost-of-living crisis, international conflicts and the resultant
downturn in the natural diamond market.
Dear shareholders,
On behalf of the Board of
Directors, I am pleased to share with you the Gem Diamonds Annual
Report and Accounts for 2023, which outlines the Group's
performance over the past year and highlights some of our focus
areas for the year ahead.
We entered 2023 with the ongoing
Russian invasion of Ukraine and the cost-of-living crisis which saw
global economies grappling with accelerating inflation, rising
interest rates and continued supply chain challenges. The slowdown
of global economic growth in 2023 was further impacted by the
conflict in Gaza that began in October 2023, and in early 2024, the
attacks launched by Yemen's Houthi rebels on cargo vessels in the
Red Sea.
The diamond industry suffered in
the face of these challenges. Demand and prices for rough and
polished diamonds exhibited material weakness and, as reported by
some of the world's major diamond producers, declined year-on-year
by as much as 40% in certain categories of diamonds.
The past four years, starting with
the COVID-19 pandemic, have been difficult for our business, with
the result that our workforce, their families and the wider
communities within which we operate have all had to adapt to the
new economic environment. The resilience and fortitude they have
displayed has been inspiring and commendable.
At Letšeng, the impact of a wide
array of operating costs rising at a rate markedly higher than
inflation put enormous strain on the business. In particular, the
fact that Letšeng is reliant on South African grid electricity
supplier Eskom, which is currently plagued with poor operating
performance leading to frequent load shedding, resulted in a sharp
rise in our use of more expensive diesel-powered generators. These
higher input costs, combined with a 26% decrease in revenue due to
lower diamond prices, led to EBITDA reducing by 65% compared to
2022. Management moved swiftly to address these external challenges
by tightening cost controls even further and by taking a range of
tough decisions to align the organisational structure with the
market conditions. The financial results are discussed in the CFO
Review on page 34 and the financial statements are available from
page 118.
Letšeng performed well
operationally, especially in the second half of the year, with ore
throughput in the plants being steady and consistent. The COO
review on page 41 contains the full details of Letšeng's
operational performance during 2023.
The sale, closure and/or handover
options for Ghaghoo continue to be actively managed while the site
is being appropriately maintained and safeguarded, and we will
continue to support management through this process.
We are pleased to report that there
were no major or significant environmental or social incidents
reported at any of our operations during the year.
GOVERNANCE MATTERS IN
2023
The Governance section from page 62
provides full details of all corporate governance matters relevant
to the Group in 2023.
I can report that there were no
changes to the makeup of the Board of Directors during 2023, and
that the current governance structure is aligned with the
independence requirements of the UK Corporate Governance Code and
is fully representative with respect to both gender and minority
groups.
The findings from the external
Board evaluation concluded at the end of 2022 were reviewed. It is
encouraging that the report was complimentary of the functioning of
the Board, offering only minor improvement opportunities which we
implemented during 2023.
In line with past practice, Gem
Diamonds was again able to derive 99% of the workforce at Letšeng
from within Lesotho. Increasing female representation in our
workforce remains a priority, and we have implemented various
initiatives in local communities and schools to create awareness of
the many possible careers that exist within the mining sector, and
to promote Letšeng as an employer of choice for women.
Shareholders will be aware that
Matekane Mining Investment Company (Proprietary) Limited (MMIC) has
held the contract to conduct mining operations at the Letšeng mine
since 2005. In October 2022, Mr Sam Matekane (the ultimate owner of
MMIC) was elected as the new Prime Minister of Lesotho. In order to
avoid any potential conflicts of interest between Mr Matekane's
political appointment and his business with Letšeng, we concluded a
mutually agreed early termination of the mining services agreement
and all mining activities were taken over by Letšeng. I would like
to take this opportunity to thank both the Prime Minister and
Letšeng's management for the professionalism with which this
important transition was undertaken.
The financial and operational
details of this transaction are included in the CFO Review on page
34 and the COO Review on page 41.
THE BOARD'S PRIORITIES IN
2023
· Considering the
way forward for the Letšeng orebody, including the finalisation of
the 2024 Resource and Reserve Statement
· Overseeing the
implementation of initiatives to improve the maturity of the
Group's organisational safety culture
· Overseeing the execution of the Group's decarbonisation
strategy and the completion of its TCFD adoption roadmap
· Advancing efforts to sell or exit the Ghaghoo mine in
Botswana, which remains on care and maintenance
· Implementing the opportunities identified by the external
Board evaluation concluded in 2022
· Considering external growth opportunities
IMPROVEMENT IN SAFETY PERFORMANCE
AND CULTURE
We regard the safety and health of
our employees as our single most important priority, and I am very
pleased to report that in 2023 Letšeng reported its best All Injury
Frequency Rate on record at 0.67. We would like to congratulate and
thank Letšeng's management and workforce for this notable
accomplishment. The Board would like to express its gratitude for
the effort and commitment that was applied to drive forward the
various initiatives that were developed following the 24-hour
stop-for-safety shutdown in June 2021. We recognise that it
requires relentless focus and close attention to detail to achieve
these results. Despite this achievement we all appreciate the need
to remain constantly vigilant and alert to existing and new hazards
and risks, and to continue to build a mature and collaborative
safety culture where employees and management actively look out for
each other's safety and health at all times.
The COO Review on page 41 contains
full details of Letšeng's safety performance during
2023.
THE FUTURE DEVELOPMENT OF
LETŠENG
With the Letšeng open pit mine
progressing deeper every year, the Board carefully considered the
future development of Letšeng's orebodies during 2023. An
underground study carried out during the year indicated that
underground mining of the Satellite pipe is not currently an
economically viable option and we therefore continue with
optimising open pit mining at Letšeng.
Following an in-depth resource
development programme that involved extensive core resource
drilling, pit surface mapping, 3D modelling, and petrography, we
have concluded our NI 43-101 Technical Report. The report contains
Letšeng's 2024 Resource and Reserve Statement and will be published
on the Group's website at www.gemdiamonds.com.
Refer to the COO Review for more
details on the underground study on page 44 and the 2024 Resource
and Reserve Statement on page 45.
DECARBONISATION
STRATEGY
During 2023 we made notable
progress on our decarbonisation strategy with the Group completing
its three-year TCFD adoption roadmap as planned. At the beginning
of 2023, we also announced that our decarbonisation target would be
a commitment to reduce our Scope 1 and Scope 2 carbon emissions by
30% (as measured against our 2021 emissions) by 2030.
Our primary focus is now on
identifying and implementing ways to reduce our energy usage and at
the same time searching for ways to lower our dependence on the
unreliable and high-carbon grid electricity supplied by Eskom. We
continue to actively investigate alternative large-scale, long-term
energy solutions that will not only underpin the sustainability of
the business but also contribute to offsetting the wider suite of
climate change risks. The energy consumption of the Group in 2023
is detailed in the Climate change report on page 51.
COMMUNITY AND GOVERNMENT
ENGAGEMENT
The Lesotho Government is a
significant shareholder in the Letšeng mine and we seek at all
times to maintain sound and constructive relationships with
government departments and officials. Accordingly, I am very
pleased that during the past year we were able work constructively
with the new government following the elections in Lesotho in late
2022. Honest communication with all stakeholders is crucial, and
has been particularly so during the political and economic
challenges of recent years. Their ongoing support will be
tremendously important as we seek to steer Letšeng's operations
through the current period of challenging market
conditions.
We consider all stakeholders'
concerns and inform them about our business and the broader
political, social and operational environment that we require in
order to thrive. This dialogue is conducted through a range of
stakeholder engagement forums which meet regularly and which
routinely pass details of the issues discussed to the Board for its
consideration.
LOOKING TO THE FUTURE
At the time of writing, it would
seem that many of the challenges we faced during 2023 will be
evident again during the coming year - a difficult economic environment
with slow economic growth impeded by several international
conflicts. The prospect of declining inflation and early
indications of a reduction in interest rates in major economies
suggest a stabilisation of the global economy towards the end of
2024. Until then, we will have to remain resilient through
effective cost control and delivery of further operational
efficiencies.
We will define the future
development pathway for the Letšeng orebody based on the 2024
Resource and Reserve Statement, and we will communicate widely and
consult as necessary with all relevant stakeholders.
Our exit from the Ghaghoo mine
remains a priority, and negotiations are continuing with the
Government of Botswana on closure, handover and/or rehabilitation
should a sale not be possible.
The Group's revolving credit
facilities are expiring at the end of 2024, and we will actively
oversee the extension of these facilities with the Group's
lenders.
We will stay abreast of
developments in the diamond market and respond appropriately by
selling Letšeng's rough diamonds through appropriate channels and
available diamond centres in order to achieve the highest
obtainable market prices.
APPRECIATION
On behalf of the Board, I would
like to thank every single person who has contributed to the
Group's performance in 2023, especially our executive and senior
management for steering the Group through a very challenging year.
We thank our employees, contractors, community partners, the
Government of the Kingdom of Lesotho and our shareholders for their
ongoing support. I also wish to thank my fellow Directors for their
commitment and valuable contributions during 2023.
Harry Kenyon-Slaney
Chairperson
13 March 2024
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
The Board is responsible for the
overall approach to risk management for the 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. It confirms that the process is appropriately aligned
with the Group's strategy and performance objectives.
At the quarterly risk review
meeting, the Board reviews the risk register, assesses management's
scenarios and plans, interrogates the most critical risks in
detail, and challenges mitigating plans with management.
|
|
Top-down approach -
the Board sets the risk appetite and tolerances,
strategic objectives and accountability for the management of the
framework
|
|
|
|
|
|
|
|
|
Governance
|
|
Audit Committee
The Audit Committee monitors the
Group's risk management processes, reviews the status of risk
management, and reports to the Board on a quarterly basis. It is
responsible for addressing the corporate governance requirements of
risk management.
|
Sustainability Committee
The
Sustainability Committee provides assurance to the Board that
appropriate systems are in place to identify and manage health,
safety, social, environmental and climate change-related risks. It
monitors the Group's 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.
|
|
|
|
|
Responsibility
|
|
Management
Management develops, implements,
communicates and monitors risk management 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.
|
|
Bottom-up approach -
ensures a sound risk management process and
establishes formal reporting structures
|
|
|
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.Variability in cash generation
|
Risk:
Marginal cash resources and
variability of cash flows could negatively affect the Group's
ability to effectively operate, repay debt and fund capital
projects, and impacts strategic short and long-term
decision-making. The risk is directly impacted by other principal
risks such as rough diamond demand and prices, variability of the
resource, economic viability of reserves and volatility of exchange
rate.
|
Risk response:
•Rigorous
cost and capital discipline is in place
•Funding
facilities are in place to manage variability in the short to
medium term
•Focus on
cost discipline to achieve greater operational
efficiencies
•Ongoing
drive for continuous improvement to deliver operational
efficiencies
|
Strategic impact:
Extracting maximum value from our
operations
Preparing for our future
|
2.Diamond
resources and
reserves
|
Risk:
Letšeng's low-grade orebodies make
the operation sensitive to resource variability. Unexpected
variability in key resource/reserve criteria, such as volume,
tonnage, grade and price, could significantly impact mine planning,
forecasting and financial stability, both in the short and medium
term, and could influence decisions regarding future
growth.
|
Risk response:
•Gathering
geological evidence on variations within the resource (lithology,
density, volume/tonnage, grade, diamond population size and value
distribution), applying industry best practice and engaging
independent experts to audit and provide advice
•Optimised
mine plan
•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
|
Strategic impact:
Extracting maximum value from our
operations
Preparing for our future
|
|
|
|
|
3.Rough
diamond demand and prices
|
Risk:
Numerous factors beyond our control
could affect the price and demand for diamonds. These factors include geopolitical
tension, macro-economic conditions, global
diamond production levels and consumer trends. Medium to long-term demand is forecast to outpace supply, but
short-term uncertainty and liquidity constraints within the diamond
sector may negatively impact rough diamond pricing.
|
Risk response:
•Monitoring market conditions and trends
•Flexibility in sales processes and utilisation of multiple
sales and marketing channels including additional viewing
opportunities
•Ability
to enter into partnership agreements to share in the upside of
polished diamonds
•Maintaining the integrity of the tender process
|
Strategic impact:
Extracting maximum value from our
operations
Preparing for our future
|
4.Availability of sustainable and reliable power
supply
|
Risk:
Regular power interruptions (load
shedding by the South African power utility, Eskom) compound the
need for and cost of self-generated power and escalated diesel
prices. Unscheduled power interruptions and poor quality of power
supply reduce the available processing time and negatively
influence the reliability and stability of plant
equipment.
|
Risk response:
•Exploring
solutions with the Lesotho Electricity Company (LEC) for grid
and/or renewable power
•Assessing
the potential to generate renewable energy for own use
•Prioritisation of load and allocation of power
•Identification and implementation of consumption-reduction
initiatives
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
Preparing for our future
|
5.Growth
and access to capital
|
Risk:
The volatility of the Group's share
price and lack of growth opportunities negatively impact the
Group's market capitalisation. Constrained cash flows add pressure
on returns to shareholders. The Group currently relies on a single
mine with a finite life for its revenues, profits and cash
flows.
|
Risk response:
The Group's strategic objectives
are to drive share price growth through:
•Assessing
mergers and acquisitions and diversification
opportunities
•Focusing
on existing operations to unlock further value through
rationalisation and efficiency improvements
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
Preparing for our future
|
6.Workforce
|
Risk:
Achieving the Group's objectives and
sustainable growth depend on the ability to attract and retain
suitably qualified, experienced and ethical employees. Gem Diamonds
operates in an environment and industry where shortages in
experience and skills are prevalent.
|
Risk response:
•Human
resource practices are designed to identify skills shortages and
implement development programmes and succession planning for
employees
•Remuneration practices and incentives are in place to
appropriately remunerate and retain skills
•Training
and coaching plans are in place to address skills and experience
shortages
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
Preparing for our future
|
|
|
|
|
7.Information Technology (IT) and Operational Technology (OT)
systems, and cybersecurity
|
Risk:
The Group's operations rely on
secure OT and IT systems to process financial and operating data in
its information management systems. If these systems are
compromised, there could be a material adverse impact on the Group
through a lack of production and/or compromised recovery
parameters.
|
Risk response:
•Application of technical and process IT controls and policies
in line with industry-accepted standards
•Appropriate back-up procedures, firewalls and other
appropriate security applications in place
•Vulnerability assessments to define gaps and devise corrective
actions
|
Strategic impact:
Extracting maximum value from our
operations
Preparing for our future
|
8.Production interruption
|
Risk:
Material mine and/or plant
shutdowns, pit closures or periods of decreased production could
arise due to various events. These events could lead to personal
injury or death, environmental impacts, damage to infrastructure
and delays in mining and processing activities and could result in
financial losses and possible legal liability.
|
Risk response:
•Robust
business continuity plans are in place to ensure limited delays due
to disruptions
•Appropriate levels of critical resources (fuel, ore
stockpiles, etc) are maintained to mitigate the impact of any
production interruptions
•Appropriate insurance is maintained
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
|
9.Health,
safety and wellness
|
Risk:
The probability of a major health
or safety incident occurring is inherent to mining operations. Such
incidents could impact the well-being of employees, PACs, our
licence to operate, the Group's reputation, and compliance with our
mining lease agreement. The health and safety of our people is
critical to the business.
|
Risk response:
•Appropriate health and safety policies and practices and
training and awareness campaigns are in place
•Dam
safety management framework has been implemented in alignment with
the ICMM's GISTM
•ISO 45001
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 the organisational safety culture maturity to
address current and emerging issues
|
Strategic impact:
Extracting maximum value from our
operations
Preparing for our future
|
|
|
|
|
10.Security of product
|
Risk:
Theft is an inherent risk in the
diamond industry. The high-value nature of the product at Letšeng
makes it susceptible to theft and could result in significant
losses that would negatively affect revenue, cash flows and
strategic short and long-term mine plan decision-making.
|
Risk response:
•Zero
tolerance of non-conformance to diamond security policies and
regulations
•Advanced
security access control and surveillance system is in
place.
•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
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
Preparing for our future
|
11.Social
licence to operate
|
Risk:
The Group's social licence to
operate is underpinned by the support of its stakeholders,
particularly employees, regulators, PACs and society. This support
is an outcome of the way the Group manages issues such as ethics,
labour practices and sustainability in our wider environment, as
well as our risk management and engagement activities with
stakeholders.
|
Risk response:
•The
implementation of an appropriate CSI strategy based on a community
needs analysis that provides infrastructure and access to education
and healthcare and supports local economic development
•Adoption
of relevant standards, best practices and strategies
•Appropriate governance structures across all levels of the
Group, including established Employee Engagement
Committee
•Regular
engagement with all stakeholders, including government, regulators,
community leadership and PACs
|
Strategic impact:
Working responsibly and maintaining
our social licence
Preparing for our future
|
12.Climate change
|
Risk:
Climate change-related risks
(transitional and physical risks) are recognised 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 climate change present significant current and future
risks to the Group which, if not identified and managed
responsibly, could negatively impact the Group's long-term
operational and financial resilience.
|
Risk response:
•TCFD
recommendations adopted and climate change strategy
developed
•Adoption
of a Group decarbonisation strategy and 2030 target
•Governance and management practices implemented to oversee the
implementation of the adopted strategy and 2030 target
•New
reporting standards adopted
•Adoption
of UN SDG framework
•Carbon
emissions monitoring and reporting
|
Strategic impact:
Working responsibly and maintaining
our social licence
Preparing for our future
|
13.Environmental
|
Risk:
Failure to manage vital natural
resources, environmental regulations and pressure from neighbouring
communities could affect the Group's ability to operate
sustainably. Furthermore, investors and stakeholders are
increasingly focused on environmental practices.
|
Risk response:
•Appropriate sustainability and environmental policies are in
place and regularly reviewed
•The
current behaviour-based care programme embeds environmental
stewardship
•A dam
safety management framework has been implemented
•Annual
social and environmental management plan audit programme has been
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
•Concurrent rehabilitation strategy implemented
|
Strategic impact:
Extracting maximum value from our
operations
Working responsibly and maintaining
our social licence
Preparing for our future
|
EMERGING RISKS
The Group risk framework includes
an assessment of emerging risks, which considers those 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:
· lab-grown diamonds attracting a larger market
share;
· 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 to assess the
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$71.0 million in RCFs when fully available. Of these RCFs,
US$37.8 million was utilised at the end of the year. The
Group's RCFs mature on 22 December 2024. The existing facility
agreement includes an option to extend the facilities for a period
of 24 months (subject to lender approval). The Group may also
decide to renew these facilities for a potentially longer period of
36 months. These facilities have been in place since 2011 and have
been renewed on three previous occasions through expanding the
lender group and increasing the overall facility amount. In
addition, there is a general banking facility of
US$5.5 million with no set expiry date, but which is reviewed
annually by the lenders. This facility was fully available at the
end of the year.
ROUGH DIAMOND MARKET
Demand and prices for rough and
polished diamonds exhibited material weakness and declined
year-on-year by as much as 40% in certain categories of diamonds,
as reported by some of the world's major diamond producers. The
offloading of large, high-value polished diamonds by other
producers has had a detrimental effect on the top end of the
diamond market. All of these factors placed severe pressure on
rough and polished diamond prices during 2023.
RISING COSTS
At Letšeng, the impact of a wide
array of operating costs rising at a rate markedly higher than
inflation put strain on the business. In particular, the fact that
Letšeng is reliant upon South African grid electricity supplier
Eskom, which is currently plagued with poor operating performance
leading to frequent load shedding, resulted in a rise in the use of
more expensive diesel-powered generators. The price of diesel also
remains high which has a direct impact on costs due to the large
volumes of diesel used in the loading and hauling of ore and waste
tonnes. The Group strives to mitigate these rising costs through
stringent cost control and efficient mining, evidenced through the
recent right-sizing and insourcing initiatives.
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
has been conducted whereby the short to medium and longer-term
physical risks were assessed. 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
the context 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, EBITDA1, 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 extension of the current 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 production volumes caused by
unforeseen production disruption due to climate-related events,
electricity grid disruptions or any other events.
|
22%
|
•Rough
diamond demand and prices
•Production interruption
•Diamond
damage
•Diamond
resources and reserves
|
•Entire
business model, ie inputs, activities, outputs and
outcomes
|
|
A strengthening of local currencies
to the US dollar from expected market forecasts.
|
19%
(R15.25:$1)
|
•Variability in cash generation
|
•Financial
capital inputs and outcomes
|
|
An increase in mine operating costs
caused by volatility in diesel, explosives and other consumable
prices.
|
27%
|
•Variability in cash generation
|
•Financial
capital inputs and outcomes
|
|
|
|
|
|
|
|
| |
1
Refer Note 4, Operating profit on page 147 for the definition of
non-GAAP measures.
CONCLUSION
The Group ended the year in a net
debt1 position of
US$21.3 million and undrawn available credit facilities of
US$45.9 million. These facilities expire on 22 December 2024
and have an option to extend the facilities for a period of 24
months (subject to lender approval). The Group will follow all
necessary processes to extend the facilities for this available
period or renew the facilities for an extended period, as has been
the practice in the past.
During the final year of the
viability period, in 2026, there will be no Satellite pipe ore
available for processing which will negatively impact overall
revenue and cashflows and access to RCFs will be required. It is
estimated, based on the current life of mine plan, that the
availability of this higher-value ore will resume in
2030.
Letšeng, the Group's core asset, is
cash generative over the viability period and remains flexible in
being able to adjust its operating plans within the normal course
of business. In the unlikely event that the RCFs are not renewed
further cost-reduction initiatives could be implemented during the
viability period, and ongoing optimisation of the mine plan (as
mentioned in the COO Review on page 48) may further reduce the cost
profile in the period. Based on the robust assessment of the
principal risks, prospects and viability of the Group, and the
successful extension 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 2026.
1 Net
debt is calculated as cash and short-term deposits less drawn down
bank facilities (excluding asset-based finance facility and
insurance premium financing).
CHIEF EXECUTIVE OFFICER'S
REVIEW
Challenging macro-economic
conditions negatively impacted the diamond market in
2023.
2023 was a challenging year
globally, with surging inflation and interest rates in major
economies, two international conflicts and a subdued overall global
economic outlook. The Israel-Hamas conflict in Gaza is detrimental
to the diamond market because Tel Aviv is one of the world's most
important diamond trading centres. The attacks by Yemen's Houthi
rebels on cargo vessels in the Red Sea from the beginning of 2024
are expected to further challenge supply chains not yet fully
recovered after the COVID-19 pandemic.
In the diamond industry, aggressive
overstocking post-COVID-19 led to high inventory levels resulting
in an inevitable oversupply of polished diamonds. Given China's
importance as a consumer of polished diamonds, the sluggish growth
of its economy contributed to the decrease in demand, which was
exacerbated by slow economic growth in other important consumer
markets such as the US and the rest of Asia. There is evidence of
below market sales of large, high-value polished diamonds by
certain manufacturers that has had a detrimental effect on the top
end of the diamond market. These factors have placed severe
pressure on rough and polished diamond prices during
2023.
The manufacturing of lab-grown
diamonds has continued to double every year since 2015 and is
forecast to reach 20 million carats in 2024. Although lab-grown
diamonds have increased in availability and popularity due largely
to their favourable price point, we have not seen it impact the
demand for Letšeng's large, high-value diamonds; these goods are on
the opposite side of the spectrum when it comes to value and
quality. Lab-grown diamonds have taken the place of other natural
diamond look-alikes such as cubic zirconia and moissanite, and are
regarded as consumer goods, not investments. Lab-grown diamonds can
be compared to what "fast fashion" is to the premium clothing
industry. In order to clearly differentiate them from natural
diamonds, and avoid any confusion of the two by consumers, it is
notable that the French Government recently ruled that these
diamonds may only be referred to as "synthetic".
The Letšeng mine continued to
grapple with increased operating costs, mainly because of inflation
and higher diesel consumption due to Eskom's continued load
shedding, which increased its reliance on diesel-powered
generators. Considering these challenges, there was no choice but
to relentlessly focus on cost control measures, enhance operational
efficiencies, rigorously evaluate capital projects against
measurable returns, and defer non-essential longer-term
projects.
As reported in our Half-year Report
2023, a further right-sizing programme commenced at Letšeng in
March 2023 and the workforce element of the programme was completed
in June. The programme was aimed at more effectively and
efficiently aligning the workforce to operational
requirements.
Letšeng concluded the early
termination of the mining services agreement with MMIC on 1
December. It is pleasing to report the smooth transition to owner
mining, which included the transfer of all relevant equipment and
employees to Letšeng. Employment was effective 1 February 2024 and
MMIC employees remained on contract until this date. The process
was well managed by senior management, and we are already seeing
significant benefits from this transaction, both financially and
operationally. The full details of the transaction are included in
the CFO Review on page 34.
Several changes were made to the
senior leadership structure at Letšeng. Kelebone Leisanyane retired
from his position as CEO of Letšeng at the expiration of his
contract at the end of June. We would like to thank Kelebone for
his valuable contribution during his tenure as CEO. He was
succeeded by Motooane Thinyane, previously the Head of Operations.
Motooane has been a senior manager and executive of Letšeng for the
past eight years. An important part of his role will be
spearheading the identification and implementation of appropriate
alternative energy solutions. Gideon Scheepers was appointed to the
position of Operations Director. Gideon has 32 years of extensive
experience in diamond mining and related processes, many of these
in the Lesotho diamond mining industry.
Glenn Turner, the Chief Commercial
and Legal Officer of the Group, retired at the end of April.
Glenn's expertise and leadership was invaluable to the Group over
the past 16 years. I have worked with Glenn for many years both at
De Beers and subsequently at Gem. We have relied heavily on him as
an experienced and deeply trusted colleague. His sound judgement,
legal knowledge and commercial experience have helped steer the
Group through challenging times and his absence will leave a huge
gap. We wish him all the best with this new chapter in his
life.
We continue to work well with the
newly elected Lesotho Government. Three new non-Executive Directors
appointed by the Lesotho Government joined the Letšeng Board during
the year. We welcome them and look forward to their valuable
contribution and support while we navigate a challenging
macro-economic and operating environment. We would also like to
thank the outgoing Directors for their dedication and commitment
during the time they served on the Letšeng Board.
We concluded the implementation of
our TCFD adoption strategy in 2023 and 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 in 2023 we achieved a 26% reduction against
the 2021 baseline of our decarbonisation target.
Letšeng's underground
pre-feasibility study was completed during the year and the results
show that underground mining in the Satellite pipe is not currently
economically viable. These options for both the Main and Satellite
pipes may be revisited when macro-economic and diamond market
conditions improve. Letšeng will therefore, on current and
foreseeable economics, continue with open pit mining and pursue
mine plan optimisation options to ensure maximum value for all
stakeholders.
Our NI 43-101 Technical Report
containing Letšeng's 2024 Resource and Reserve Statement will be
published following an in-depth resource development programme over
the past number of years. The detailed documents will be available
on the Group's website at www.gemdiamonds.com.
Refer to the COO Review for more
details on the underground study on page 44 and the 2024 Resource
and Reserve statement on page 45.
EXTRACTING MAXIMUM VALUE FROM OUR
OPERATIONS
We have operated safely,
responsibly and efficiently during the year with an ongoing focus
on cost containment and control and enhancing operational
efficiencies. Production stabilised and volumes of ore treated
increased in H2 2023 compared to H1 2023, with the implementation
of targeted initiatives to improve plant stabilisation and increase
diamond recoveries.
Five diamonds greater than 100
carats were recovered during the year. Exceptional sales during the
year included a 7 carat pink diamond that was sold for US$282 889
per carat, the third-highest dollar per carat achieved for a
Letšeng diamond. In addition, three large high-quality Type IIa
white diamonds of 58 carats each were sold for US$36 399 per carat,
US$34 441 per carat and US$34 252 per carat,
respectively.
We have an effective, transparent
and competitive tender sales process in Antwerp. The limited supply
agreement that was concluded in 2022 with two important diamond
manufacturing customers who supply polished diamonds to some of the
world's most premium luxury brands has continued. These diamonds
are polished to precise specifications required by the brands and
additional value is realised 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, Lesotho as the
origin and therefore to achieve premium prices for its
diamonds.
The operational performance of the
Letšeng mine is discussed in more detail in the COO Review on page
41.
The challenging macro-economic
environment and downturn in the diamond market resulted in pressure
on rough diamond prices, which had a direct and significant impact
on our financial results. The average price achieved decreased to
US$1 334 per carat compared to US$1 755 per carat in
2022. The lower prices achieved resulted in total revenue of
US$140.3 million and underlying EBITDA1 of US$15.2 million. The Group ended
the year in a net debt2 position of US$21.3
million.
Full details of the Group's
financial performance are included in the CFO Review on
page 34.
1 Refer
Note 4, Operating profit on page 147 or 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
One of our proudest accomplishments
in 2023 was the Group's safety performance. There were no
fatalities for the fourth consecutive year, two LTIs
(2022: three), and we achieved an overall AIFR of 0.67 (2022:
0.70), our lowest AIFR on record. The drive to mature the
organisational safety culture since June 2021 has yielded positive
results of which we are very proud. 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. We are proud to report that Gem
Diamonds' work in sustainable water treatment and community water
initiatives during 2022 was recognised by the award in the Water
category conferred by the Mining Indaba Sustainability Committee
Junior ESG Awards Committee in February 2023.
In order to improve the quality of
water from the mine, we introduced two small-scale mobile
bioremediation plants in 2023. Results from these plants indicate
an effective reduction in nitrates in the water flowing through
these plants. Construction of a ∼300 kilolitre per day plant
was completed in December 2023 and commissioned in February
2024.
Our residue storage facility
management process aligns with the ICMM's GISTM. Our residue
storage and freshwater facilities are subject to regular
inspections by external experts. These professional external
reviews, together with the internal governance, management,
monitoring and reporting processes, ensure that our residue storage
and freshwater dam management is both effective and closely
monitored.
In 2023, we adopted two additional
UN SDGs, being Zero Hunger and Climate Action. Our CSI activities
are focused on supporting infrastructure development, education and
health while assisting and stimulating small businesses. In 2023,
we supported small agricultural operations including those in egg,
vegetable and dairy production, provided scholarships for tertiary
education, and constructed classrooms at schools. From 2016 to 2023
the Group invested US$4.8 million in sustainable CSI
initiatives.
In 2023, Letšeng contributed a
total of US$15.5 million (LSL285.8 million) to the Lesotho fiscus
in the form of taxes and royalties alone. We are proud of our
contribution to this developing economy and our position as a
significant taxpayer and employer.
PREPARING FOR THE
FUTURE
In 2024, we aim to deliver the
business plan approved by the Board. This includes achieving our
financial and operational targets with a focus on cost control
measures and improved operational efficiencies. Every single
contract, capital project and expense is being interrogated and
scrubbed for absolute necessity. We will continue to focus on our
safety performance by maintaining the cadence of safety
interventions, critical control management, visual safety
leadership and communication with the workforce.
The increase in load shedding and
consequent reliance on diesel-powered generators with their
associated costs have intensified our need to identify and
implement alternative energy solutions for the short, medium and
long term. The criteria for these solutions are that they must be
renewable, reliable and reduce costs. We are making progress on
this important workstream.
Our capital plans include funding
for projects that will sustain growth and value creation. The
planned capital-intensive projects in 2024, although not
financially significant, include recovery plant and sort house
enhancements, the required extension of the Patiseng coarse residue
storage facility to align its capacity with future mining
activities, and necessary screen replacements in both the treatment
plants.
Now that the NI 43-101 Technical
Report containing Letšeng's 2024 Resource and Reserve Statement
will be published, we will carefully consider our long-term mine
plan to ensure the delivery of sustainable value for all
stakeholders.
OUTLOOK
Pressure on the diamond market has
persisted into 2024, although there have been some signs of price
recovery at the top and bottom end. We are cautiously optimistic
that prices will stabilise and that there will be some growth
towards the end of 2024. Global economic growth outlooks for major
economies and important diamond consumer markets such as the US and
China remain uncertain. It is worth noting that almost half of the
global population is expected to participate in national elections
during 2024, which will likely cause further economic and
geopolitical uncertainty.
It is pleasing to note that the
global luxury market continued to grow in 2023 and remains poised
to expand further in 2024. The luxury market appears well
positioned to cope with economic turbulence, with a larger and more
resilient consumer base.
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. 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 thank the Board for
their support and commitment in 2023. We are grateful for our
workforce and appreciate the dedication required to deliver the
safety performance we saw in 2023. We also appreciate their
commitment to delivering our strategic goals and to living our
values. I would like to thank our customers for their continued
trust in Letšeng's diamonds, and our shareholders for their
support. Finally, I would like to thank the Government of the
Kingdom of Lesotho for their support and open and transparent
communication. We look forward to a productive 2024.
Clifford Elphick
Chief Executive Officer
13 March 2024
CHIEF FINANCIAL OFFICER'S
REVIEW
The financial performance of the
Group in 2023 was disappointing, driven by a downturn in the
diamond market that resulted in lower diamond prices
achieved.
The turbulent global economic
conditions from the previous year continued into 2023 with high
inflation, interest rate hikes and slow overall economic growth in
major economies. The continued Russian invasion of Ukraine and the
recent conflict in Gaza further impacted the global economy and
specifically the diamond market. Locally, the ever-increasing load
shedding by the South African grid electricity supplier, Eskom, put
pressure on the operating environment and costs. These factors had
a significant impact on diamond prices achieved and costs incurred
during the year, resulting in lower EBITDA compared to 2022. This
necessitated a renewed focus on cost containment and improvement in
operational efficiencies.
Operationally, Letšeng performed in
line with expectations despite several challenges posed by high
rainfall and increased electricity supply disruptions (refer to the
COO Review on page 41). The pressure experienced on the diamond
market significantly impacted rough and polished diamond prices and
resulted in an average price of US$1 334 per carat for the
year, with revenue from the sale of rough diamonds of
US$139.4 million. In addition, US$0.9 million of margin
uplift was generated, bringing total revenue for the year to
US$140.3 million.
Underlying EBITDA decreased to
US$15.2 million from US$43.7 million in 2022. The Group reported a
loss attributable to shareholders for the year of
US$2.1 million, equating to a basic loss per share of 1.5 US
cents on a weighted average number of shares in issue of 139.5
million.
The Group ended the year with a
cash balance of US$16.5 million and drawn down facilities of
US$37.8 million, resulting in a net debt position of US$21.3
million and available undrawn facilities of US$45.9
million.
Summary of financial
performance
Refer to the full annual financial
statements from page 118.
|
|
|
US$ million
|
2023
|
2022
|
|
|
|
Revenue from contracts with
customers
|
140.3
|
188.9
|
Royalties and selling
costs
|
(15.3)
|
(20.3)
|
Cost of sales1
|
(102.1)
|
(116.3)
|
Corporate expenses (excluding
depreciation)
|
(7.7)
|
(8.6)
|
Underlying
EBITDA2
|
15.2
|
43.7
|
Depreciation and mining asset
amortisation
|
(7.3)
|
(8.4)
|
Share-based payments
|
(0.3)
|
(0.3)
|
Other operating
income/(expenses)
|
-
|
(2.4)
|
Foreign exchange gain
|
2.8
|
1.9
|
Net finance costs
|
(4.7)
|
(4.1)
|
Profit before tax for the
year
|
5.7
|
30.4
|
Income tax expense
|
(4.1)
|
(10.2)
|
Profit after tax for the
year
|
1.6
|
20.2
|
Non-controlling interests
|
(3.7)
|
(10.0)
|
Attributable
(loss)/profit
|
(2.1)
|
10.2
|
|
|
|
(Loss)/earnings per share (US
cents)
|
(1.5)
|
7.3
|
1
Including waste stripping costs 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 decreased 26% compared
to 2022, mainly due to lower prices achieved as a result of a
downturn in the diamond market and a decrease of 3% in carats sold
(104 520 carats compared to 107 498 in 2022). Rough
diamond revenue of US$139.4 million (2022: US$188.6 million) was
generated at Letšeng, achieving an average price of US$1 334
per carat (2022: US$1 755 per carat).
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
2023, additional revenue of US$0.9 million (2022: US$0.3 million)
was generated from these arrangements.
|
|
|
US$ million
|
2023
|
2022
|
|
|
|
Group revenue summary
|
|
|
Rough diamond sales
|
139.4
|
188.6
|
Polished diamond margin
|
0.9
|
0.3
|
Group revenue
|
140.3
|
188.9
|
Insourcing of the mining
activities
Matekane Mining Investment Company
(Proprietary) Limited (MMIC) has been the provider of mining
services to Letšeng since 2005. Following the election of Mr Sam
Matekane (the ultimate owner of MMIC) as Prime Minister of Lesotho
in October 2022, Letšeng carefully considered its options to
resolve the potential conflict of interest created by being in a
business relationship with a politically exposed person.
Effective 1 December 2023, Letšeng
reached an agreement with MMIC to early terminate the mining
services contract, 11 months ahead of its scheduled contractual end
date of 31 October 2024, and insourced these activities. Letšeng
acquired the mining fleet and support equipment that was used
exclusively for Letšeng, and offered employment to those MMIC
employees working exclusively for Letšeng, in line with operational
requirements. Employment was effective 1 February 2024 and MMIC
employees remained on contract until this date.
The total purchase price, which was
determined with the assistance of external third-party valuators,
was US$22.7 million. Payment terms were agreed whereby US$13.0
million was paid on the effective date, US$9.3 million was paid in
January 2024, and a retainer of US$0.4 million was withheld for
equipment under repair at the effective date and subsequently
settled in early March 2024.
The full purchase price was
capitalised to the statement of financial position and the fleet
and equipment will be depreciated over the useful life of each
asset based on the available production hours. The financial
results for the year include one month of depreciation on the
acquired fleet.
This transition to owner mining
creates further opportunities for Letšeng to maximise mining
efficiencies, reduce costs through eliminating contractor margins,
and manage mining procurement directly, and enables further
flexibility in the planning and execution of its mining activities.
All these factors will contribute to a more efficient and
cost-effective operation. The full benefit of the insourcing of the
mining activities will be seen from 2024 onwards.
Expenditure
Energy costs
The increased load shedding by
Eskom in 2023, which impacted 335 days of the year (compared to 205
in 2022), has necessitated an increase in diesel usage due to
Letšeng's reliance on diesel-powered generators to operate the
treatment plants uninterruptedly. This increase was partially set
off by a decrease in diesel usage for mining activities due to
lower volumes mined (refer to the COO Review on page 41) and the
full year benefit of previously implemented lower-energy
consumption initiatives.
The net impact was a
0.1 million litre increase in diesel consumption compared to
the prior year. The average cost per litre of diesel decreased by
2% from 2022. Overall, it resulted in a 1% decrease in diesel
costs, in local currency, to LSL336.0 million
(US$18.2 million) from LSL340.6 million
(US$20.8 million) in 2022.
Grid electricity usage decreased
due to increased load shedding during the year. The marginal 3%
decrease in cost to LSL54.9 million (US$3.0 million) was
set off by a 7.9% rate increase.
Overall energy costs, including
diesel and electricity, amounted to LSL390.9 million
(US$21.2 million) in 2023 (2022: LSL397.0 million,
US$24.3 million), a 2% decrease from 2022 in local
currency. Energy costs as a percentage of direct cash costs
remained unchanged at 27%, and the energy cost per tonne treated
increased by 8% from LSL72.09 in 2022 to LSL77.79 in 2023, driven
by lower volumes of tonnes treated.
|
|
|
|
|
|
|
|
|
Letšeng Unit Cost
Analysis
|
|
|
Unit cost
per tonne treated
|
Direct
cash
costs1
|
Third plant
operator costs
|
Total direct
cash
operating costs
|
Non-cash
accounting
charges2
|
Total
operating
cost
|
|
Waste cash
costs per
waste tonne
mined
|
|
|
|
|
|
|
|
|
2023 (LSL)
|
288.54
|
-
|
288.54
|
85.87
|
374.41
|
|
66.03
|
2022 (LSL)
|
252.50
|
10.57
|
263.07
|
82.02
|
345.09
|
|
66.74
|
% change
|
14
|
(100)
|
10
|
5
|
8
|
|
(1)
|
|
15.63
|
-
|
15.63
|
4.66
|
20.29
|
|
3.58
|
2022 (US$)
|
15.42
|
0.65
|
16.07
|
5.01
|
21.08
|
|
4.08
|
% change
|
1
|
(100)
|
(3)
|
(7)
|
(4)
|
|
(12)
|
1 Direct cash
costs represent all operating costs, excluding royalties and
selling costs.
2 Non-cash accounting charges 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 by 12% in 2023 to US$102.1 million from
US$116.3 million in 2022.
· Direct cash costs (excluding waste) remained virtually
unchanged at LSL1 449.8 million (2022:
LSL1 448.6 million). In 2023 these costs were affected by
energy costs (detailed above), price increases from suppliers on
explosives, equipment, spare parts and tyres, and additional
once-off severance payments and related consulting fees due to the
right-sizing of the Letšeng operation (refer to the COO Review on
page 43). Direct cash costs per tonne treated increased by 14% to
LSL288.54 from LSL252.50 in 2022, impacted by the lower volume of
tonnes treated in the year. The third plant operator's (Alluvial
Ventures or AV) contract expired on 30 June 2022. Ore tonnes
treated decreased 9% to 5.0 million tonnes (2022: 5.5 million
tonnes of which AV contributed 0.4 million tonnes). On a
like-for-like basis (excluding the impact of AV), the 2022 unit
costs would be LSL274.48 per tonne treated, resulting in a
year-on-year increase of 11%, which is driven by the additional
costs mentioned above.
· Non-cash accounting charges refers to
waste amortisation, stockpile and diamond inventory movements and
finance lease costs. These charges decreased 4% to LSL431.5
million (2022: LSL451.7 million), mainly due to the combination of
an increase in total waste amortisation charges of LSL723.2 million
(2022: LSL594.0 million), despite lower tonnes treated during the
year, and the impact of the increase in stockpile tonnes on hand
from 0.7 million tonnes in 2022 to 1.1 million tonnes in 2023. The
increase in waste amortisation charges was mainly driven by the
reduction of the anticipated future ore tonnes from SC6W as a
consequence of an updated pit design (refer to the COO Review on
page 47). In US dollar terms, waste amortisation charges increased
by 8% to US$39.2 million compared to US$36.3 million in
2022.
· Total operating costs in local
currency decreased marginally to LSL1 881.3 million
(2022: LSL1 900.3 million), which includes the impact of
direct cash costs and non-cash accounting charges detailed above.
The unit cost per tonne treated increased 8% to LSL374.41 per
tonne treated (2022: LSL345.09 per tonne treated), mainly due
to the 9% decrease in tonnes treated in the year.
· Waste cash costs decreased by 14% to LSL583.8 million from LSL677.7 million in
2022, which is in line with the 13% reduction in waste tonnes mined
(8.8 million tonnes compared to 10.2 million tonnes in 2022).
Initiatives such as the steepening of slopes in the Main pit and
decreasing of waste hauling distances, implemented in 2022,
resulted in a 1% decrease in waste cash cost per waste tonne to
LSL66.03 (2022: LSL66.74) despite the 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) and Botswana pula (BWP) were
weaker against the US dollar compared to 2022, which decreased the
Group's US dollar-reported costs and increased local currency cash
flow generation. The fluctuation of the exchange rates are set out
in the table below:
|
|
|
|
Exchange rates
|
2023
|
2022
|
% change
|
|
|
|
|
LSL per US$1.00
|
|
|
|
Average exchange rate
|
18.45
|
16.37
|
13
|
Year end exchange rate
|
18.29
|
17.02
|
7
|
BWP per US$1.00
|
|
|
|
Average exchange rate
|
13.36
|
12.37
|
8
|
Year end exchange rate
|
13.39
|
12.75
|
5
|
GBP per US$1.00
|
|
|
|
Average exchange rate
|
0.80
|
0.81
|
(1)
|
Year end exchange rate
|
0.78
|
0.83
|
(6)
|
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 decreased by 25% to US$15.3
million (2022: US$20.3 million) in line with the decrease in
revenue.
Corporate costs
The technical and administrative
office in South Africa and 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 US$7.7 million, representing a 10% decrease from
2022. In 2023, US$0.2 million of project costs were incurred
on the ongoing sales process of Ghaghoo and investigating external
growth opportunities (2022: US$0.1 million).
Underlying
EBITDA1 and
attributable profit
Group underlying
EBITDA1 decreased by 65% to US$15.2 million (2022: US$43.7
million), mainly due to the decline in revenue in the current year.
The loss attributable to shareholders was US$2.1 million, which
translates to a loss of 1.5 US cents per share based on a weighted
average number of shares in issue of 139.5 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
|
|
|
|
2023
|
2022
|
|
|
|
Property, plant and
equipment
|
|
|
Non-current: receivables and other
assets
|
|
|
Current: receivables and other
assets
|
|
|
|
|
|
Net income tax receivable
|
|
|
Cash and short-term
deposits
|
|
|
Non-current: interest-bearing loans
and borrowings
|
|
|
Current: interest-bearing loans and
borrowings
|
|
|
Net deferred tax
liabilities
|
|
|
Non-current: rehabilitation
provisions
|
|
|
|
|
|
Capital expenditure
Total capital expenditure
(excluding waste stripping) was US$30.4 million during the
year (2022: US$11.9 million). The increase in 2023 was mainly
due to the acquisition of the mining fleet and support equipment
from MMIC for US$22.7 million, as detailed on page 35. The
replacement of the PCA and the underground study that commenced in
2022 were completed. Three bioremediation plants were constructed,
with the large-scale, ∼300 kilolitre per day plant being commissioned
in February 2024.
Cash on hand
The Group ended the year with cash
on hand of US$16.5 million (2022: US$8.7 million) and net
debt of US$21.3 million, which was a decrease in net cash of
US$24.6 million year on year. Group cash generated by
operations was US$56.1 million before capital and waste
investment of US$57.1 million.
Loans and borrowings
The Group-wide debt facilities for
Letšeng (LSL450.0 million and ZAR300.0 million) and Gem
Diamonds (US$30.0 million), which were concluded in December
2021 for an initial three-year period, are due to expire in
December 2024. The process to extend or renew the revolving credit
facilities will commence in Q2 2024.
Letšeng has a ZAR100.0 million
(US$5.5 million) general banking facility with Nedbank Limited
(acting through its Nedbank Corporate and Investment Banking
division) reviewed annually. The facility was utilised from time to
time during the year and was fully repaid by year end.
The funding partners to the
existing facilities are Nedbank, Standard Bank and Firstrand Bank
(through their respective operations). Nedbank's portion of the
funding, totalling US$29.9 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 will decrease 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,
both the carbon emission and water conservation KPIs were met and
therefore the margin reduction is expected to apply to any
outstanding balance on these facilities in 2024.
In 2022, Letšeng implemented a
four-and-a-half-year facility agreement with Nedbank for the
replacement of the PCA for an amount of ZAR136.4 million (US$8.0
million). The facility is underwritten by the Export Credit
Insurance Corporation of South Africa (ECIC). At the end of the
availability period on 30 November 2023, an amount of
LSL132.0 million (US$7.2 million) was utilised and the
remaining balance expired. Quarterly repayments of this facility
will commence from Q1 2024 until May 2027.
At year end, the Group had utilised
facilities of US$37.8 million, resulting in a net debt
position of US$21.3 million and available facilities of
US$45.9 million. Gem Diamonds, the Company, ended the year
with US$6.0 million of its facility drawn down (2022: nil) and
US$24.0 million available. Letšeng ended the year with
US$24.6 million (2022: nil ) of its revolving credit
facility utilised and US$16.4 million available.
Summary of loan facilities as at
31 December 2023
|
|
|
|
|
|
|
Company
|
Term/description/expiry
|
Lender
|
Interest rate
|
Amount
US$ million
|
Drawn down/
Balance due
US$ million
|
Available
US$ million
|
|
|
|
|
|
|
|
Gem Diamonds Limited
|
Three-year revolving credit
facility
Expires
22 December 2024
|
Nedbank
Standard Bank
Firstrand Bank
|
Facility A
(US$30 million):
Term SOFR + 5.26%
|
30.0
|
6.0
|
24.0
|
Letšeng Diamonds
|
Three-year revolving credit
facility
Expires
22 December 2024
|
Standard Lesotho Bank
Nedbank Lesotho
First National Bank of
Lesotho
Firstrand Bank
|
Facility B (LSL450 million):
Central Bank of Lesotho rate + 3.25%
|
24.6
|
14.8
|
9.8
|
|
|
Nedbank
|
Facility C (ZAR300 million):
South African JIBAR + 3.05%
|
16.4
|
9.8
|
6.6
|
Letšeng Diamonds
|
Four-and-a-half-year project
facility
Expires
31 May 2027
|
Nedbank
Export Credit Insurance
Corporation
|
ZAR136 million
South African JIBAR +
2.50%
|
7.2
|
7.2
|
-
|
Letšeng Diamonds
|
General banking facility
Annual review in March
|
Nedbank
|
ZAR100 million South
African
Prime Lending Rate minus
0.70%
|
5.5
|
-
|
5.5
|
Total
|
|
|
|
83.7
|
37.8
|
45.9
|
Ghaghoo
The Board and management remain
committed to exiting the Ghaghoo Diamond Mine in Botswana, either
by sale, closure or handover of the mine. Ghaghoo ceased to be
classified as a discontinued operation held for sale as at 31
December 2022 due to the highly probable requirements set out in
IFRS 5 not being met.
Care and maintenance cash costs
decreased to US$1.8 million in 2023 (2022: US$1.9 million),
which amount is included in other operating expenses in the
financial results. An additional US$0.2 million (2022:
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$0.4 million
reduction in the rehabilitation provision has been included in
operating income and expenses.
A solar power solution was
installed during the year. The solar plant was commissioned in
January 2024 and completely replaces the existing diesel generator.
This will result in future cost savings as it will eliminate costs
related to generator rentals, diesel usage and
transport.
The operation has also commenced
site clean-up activities to prepare it for handover, the costs of
which are included in the above cash costs.
Insurance
The perception of risk in the
mining industry has improved, with insurers offering more
competitive rates for mining companies. In 2023, insurance premiums
for the Group were 15% lower compared to 2022. 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 insurance claim relating
to diesel theft, which was identified in 2021, was settled during
the year and is included in other operating income in the financial
results. The business interruption claim for insured losses arising
out of the COVID-19-related shutdown in 2020, where the mine was
required to be placed on care and maintenance, is ongoing and we
hope to receive an appropriate settlement in 2024.
Share-based payments
The share-based payment charge for
the year was US$0.3 million (2022: US$0.3 million). At the AGM on 2
June 2021, shareholders approved the 2021 Remuneration Policy,
which included the introduction of a post-termination shareholding,
an employee pension alignment plan, as well as the new Gem Diamonds
Incentive Plan (GDIP) for Executive Directors. On 21 April
2023, 1 060 055 nil-cost options were granted to certain
key employees and Executive Directors under the GDIP. Refer to Note
26, Share-based payments on page 167 for more
detail.
TAXATION
The Group applies all relevant
principles in accordance with prevailing legislation in assessing
its tax obligations. The Group's effective tax rate was 72.0%. 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, partially offset by withholding
tax overpaid in prior periods and refunded in full by the Revenue
Services Lesotho (RSL) during the year. Refer to Note 6, Income tax
expense on page 148 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 RSL 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 2024. 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
In light of the many external
macro-economic factors negatively impacting our business, we have
renewed our focus on cost containment measures, tightening capital
allocation decision-making and enhancing operational efficiencies.
The insourcing of the mining activities is expected to deliver
significant savings. A key focus for 2024 will be the extension or
renewal the Group's facilities which expire on 22 December
2024.
Michael Michael
Chief Financial Officer
13 March 2024
CHIEF OPERATING OFFICER'S
REVIEW
The overall operational
performance of the Group in 2023 was pleasing, driven by a focus on
safety and operational efficiency.
Market conditions and the
continuing pressure on revenue in 2023, coupled with the
ever-rising cost of operating, including longer hauling distances
due to deeper pits, and increased load shedding, necessitated a
reinforcement of our focus on operational efficiencies and cost
containment, while at all times ensuring that we meet our
production targets safely, responsibly and sustainably.
The challenges of lower revenues
and increasing costs are not always within our control. To meet
these challenges head-on however, we made significant changes to
management, workforce and operating methodologies at Letšeng and
Ghaghoo in 2023. This required a direct focus on operating more
efficiently to reduce, or at the very least contain, those
operational costs that are within our control.
The implementation and integration
of sustainability initiatives at our operations over the past few
years, in particular our focus on reducing energy consumption and
associated costs, positioned the Group well to navigate a difficult
financial year in 2023. This is evident in reduced costs and
decarbonisation related to waste mining in particular, and the
successful implementation of several other energy-efficiency
initiatives. In 2023, we recorded a 26% decrease in our Scope 1 and
2 emissions and a 25% decrease in diesel consumption-related
emissions when compared to our 2021 baseline carbon emission
footprint.
One of our proudest achievements in
2023 is our safety performance. The health and safety of our
workforce remains paramount, and it is very pleasing to reap the
rewards of a three-year safety campaign that started with a 24-hour
stop-for-safety in June 2021. Achieving our lowest all injury
frequency rate (AIFR) on record is testament to our commitment to
achieving a zero harm operation and the relentless focus of
leadership, management and each employee to achieve
this.
We have also completed the NI
43-101 Technical Report containing Letšeng's 2024 Resource and
Reserve Statement, which will be available on the Group's website
at www.gemdiamonds.com.
PERFORMANCE
Safety
|
|
|
|
|
Safety performance
|
Unit
|
2023
|
2022
|
% change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group's safety culture is
founded on our commitment to zero harm and our strong belief that
all injuries can be prevented. Letšeng's safety performance in 2023
was of the highest standard, with zero fatalities (2022: zero), two
LTIs (2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our
lowest AIFR on record of 0.67 (2022: 0.70). Our improved safety
performance does not happen by chance but is a direct result of the
relentless effort and commitment of executive leadership and
operational management in the implementation of the organisational
safety maturity strategy. This strategy addresses critical safety
risks, enhances safety-specific leadership visibility, and engages
with the workforce to implement engineering and behaviour-focused
controls to more specifically prevent safety incident
reoccurrences. A focused safety programme was guided by independent
subject matter experts and included mentoring senior management on
best practice safety leadership and successfully implementing a
critical control management strategy.
The safety of our workforce remains
our highest priority and we will continue to build on the
organisational safety maturity at our operations, which is founded
on and entrenched in a safety culture of visible safety-focused
leadership, individual responsibility and accountability, mutual
care and collaboration.
Operations
|
|
|
|
|
KPI
|
Unit
|
2023
|
2022
|
% change
|
|
|
|
|
|
Ore mined
|
tonnes
|
5 419 033
|
5 732 493
|
(5)
|
Waste mined
|
tonnes
|
8 841 628
|
10 153 846
|
(13)
|
Ore treated
|
tonnes
|
5 024 665
|
5 506 576
|
(9)
|
Carats recovered1
|
carats
|
109 656
|
106 704
|
3
|
Grade
|
cpht
|
2.18
|
1.94
|
12
|
Carats sold
|
carats
|
104 520
|
107 498
|
(3)
|
Average price per carat
|
US$/carat
|
1 334
|
1 755
|
(24)
|
1 Includes carats produced from the Letšeng plants and the
coarse and fines tailings treatment plants.
Operationally, 2023 was a year of
two halves. Following a positive start in Q1 2023, Letšeng faced
numerous challenges and changes in Q2 2023, culminating in the
finalisation of the right-sizing programme and a change in senior
management in June 2023. Operational challenges at Letšeng during
this period included high rainfall, instability in the performance
of the treatment plants and continued load shedding by Eskom, which
resulted in poor overall treatment efficiencies and increased
reliance on more expensive diesel generators to power operations.
An intensified focus on the identification and implementation of
initiatives to optimise and improve operational performance and
efficiencies and to significantly reduce costs commenced in Q3
2023, resulting in a marked improvement in operational performance
seen in H2 2023 compared to H1 2023.
The implementation of a number of
initiatives to slow down the instantaneous rate at which ore is fed
into the treatment plants significantly improved overall stability.
This in turn materially improved the consistency of higher daily
overall plant utilisation. The newly built Primary Crushing Area
(PCA), which was commissioned in Q4 2023, further contributed to
the improved performance by providing the plant with a consistent
feed of well-fragmented ore. The initial benefit of these
initiatives when comparing H2 2023 to H1 2023 is set out in the
table below:
|
|
|
|
|
KPI
|
Unit
|
H2 2023
|
H1 2023
|
% change
|
Overall plant utilisation
|
%
|
81
|
75
|
8
|
Ore treated
|
tonnes
|
2 557 415
|
2 467 250
|
4
|
Carats recovered
|
carats
|
59 055
|
50 601
|
17
|
Grade
|
cpht
|
2.48
|
2.05
|
21
|
The 4% increase in ore treated in
H2 2023 can largely be attributed to the improved plant stability
and higher overall daily utilisation. Overall plant utilisation
improved from 75% in H1 2023 to 81% in H2 2023. Plant stability
further contributed to improved recoveries in H2 2023, with a
notable 17% increase in carats recovered and a 21% improvement in
the grade.
Waste tonnes
mined
Total waste tonnes mined in
2023 decreased 13% to 8.8 million tonnes from 10.2
million tonnes in 2022. This was in line with the planned 2023
waste mining profile, which was further reduced in Q4 2023 to align
with the ore treatment performance. Initiatives to further optimise
waste mining and reduce associated costs continued to be
implemented, and during 2023 this included a re-design of the Cut 4
West cutback in the Main pit to reduce waste, and the
implementation of a new fleet management system that improved fleet
productivity, availability and utilisation.
Ore mined
Total ore tonnes mined in 2023
decreased 5% to 5.4 million tonnes from 5.7 million tonnes in 2022.
This was in line with the 2023 mine plan, taking into account the
reduced ore treatment capacity in 2023 following the expiry of the
Alluvial Ventures (AV) processing contract on 30 June 2022. This
was partially off set by increased mining to the surface ore
stockpiles in 2023.
Ore treated
Letšeng's two plants treated 5.0
million tonnes of ore during 2023 (2022: 5.5 million tonnes). The
reduction in total ore tonnes treated in 2023 compared to 2022 was
primarily due to the expiry of AV's processing contract, which
contributed 0.4 million tonnes in 2022. The balance of the fewer
tonnes treated in 2023 compared to 2022 was mainly as a result of
plant performance and instability experienced in H1 2023. Of the
total ore treated, 2.0 million tonnes were sourced from the
Main pipe and 3.0 million from the Satellite pipe, this being
in line with the planned Satellite/Main pipe ore contribution for
2023.
The biggest operational challenge
in 2023 was the continued occurrence of more frequent and longer
periods of load shedding by Eskom, the South African grid
electricity supplier. Letšeng's generator capacity is sufficient
and the synchronised switch-over from grid to generator power is
effective (provided Eskom adheres to its load shedding schedule),
but the additional running hours and strain on what was designed as
a back-up generator system requires increased maintenance and
heightens the risk of generator plant and equipment breakdowns. The
increased utilisation of diesel generators, resulting in
considerably higher volumes of diesel being consumed by the
treatment plants in the year, had a significant negative impact on
treatment operating costs.
Total carats recovered
Total carats recovered in
2023 increased 3% to 109 656 carats (2022:
106 704 carats), due primarily to differences in ore mix year
on year and improvements in plant stability in H2 2023, resulting
in improved recoveries.
The coarse tailings mobile XRT
sorting machine recovered 367 carats in 2023 (2022:
774 carats) from re-treating current coarse recovery tailings,
and an additional 5 206 carats (2022: 2 657 carats) were recovered
by the fines tailings mobile XRT sorting machine, which re-treated
current fines recovery tailings.
The overall grade for 2023 was 2.18
cpht, a 12% increase compared to 1.94 cpht in 2022, which was
marginally better than expected. The contribution of higher grade
material from the Satellite pipe accounted for 59% of ore treated
during the year (2022: 55%).
Capital projects
Capital expenditure allocation
during 2023 was thoroughly interrogated against necessity and
applied in line with operational and cash management requirements.
Material capital projects at Letšeng in 2023 included:
· completion of the PCA replacement project, which was
successfully commissioned in Q4 2023;
· completion of the Satellite pipe underground study;
· final
design and construction of the bioremediation plant; and
· purchase of the mining fleet and equipment in the transition
to owner mining.
Details of overall costs and
capital expenditure incurred at Letšeng are included in the CFO
Review on page 34.
The planned capital spend at
Letšeng for 2024 includes necessary modifications and upgrades to
the recovery plant and final sort, the development of the next
phase of the Patising coarse tailings extension project to ensure
future capacity, and other smaller projects, including necessary
upgrades to storage facilities, Plant 1 scrubber shell replacement
and resource drilling.
Enhancing operational
efficiencies
A change in operational
requirements, together with significant pressure to further reduce
operating expenses in line with challenging market conditions and
lower rough diamond prices, required Letšeng to critically review
all aspects of its business to maximise operational efficiency and
effectively control costs to ensure continued business
sustainability.
The right-sizing programme at
Letšeng, which affected a total of 327 positions, including
contractors, was completed in June. The programme was aimed at more
effectively and efficiently aligning the workforce to operational
requirements. In addition, a number of changes were made to the
management team at Letšeng, including the appointment of Gideon
Scheepers to the position of Operations Director. Gideon has 32
years of extensive experience in diamond mining, treatment and
related processes, and following his appointment in June, drove the
implementation of significant improvements at the operation in H2
2023, particularly in mining, treatment and site
management.
A smooth transition to owner mining
was concluded in Q4 2023 (refer to the CFO Review on page 35), with
no interruption to production or mining activities. In addition to
an immediate decrease in operating costs, there is room to further
improve operational efficiencies as Letšeng management now has
direct control over its mining fleet and execution of the mine
plan. This will also assist in reducing "day-works" costs for other
necessary projects around site, including concurrent
rehabilitation.
The management of the recovery
plant was brought in-house from Minopex to ensure direct control
and management over what is arguably the most important part of the
treatment process along with the final sort.
In addition, a revision to the
catering and housekeeping contract on site resulted in the
housekeeping and laundry activities being insourced, with the
contractor providing the catering services only for the remainder
of the contract term.
All operational contracts are
undergoing rigorous reviews to ensure optimisation, efficiency and
effective cost control management as a top priority.
Large diamond
recoveries
In 2023, Letšeng recovered five
diamonds greater than 100 carats (2022: four), including three high-quality
Type IIa white diamonds of 120.43 carats, 117.47 carats and 112.46
carats, respectively. A total of 131 greater than 100 carat
diamonds have been recovered at Letšeng since 2006, and we are
pleased to report that three more greater than 100 carat diamonds
have been recovered to date in Q1 2024. Total diamonds recovered
greater than 10 carats decreased by 5% year on year, mostly in the
10 to 20 carat and 60 to 100 carat size categories. The lower
number of diamonds in the larger categories can be primarily
attributed to the resource domains that were mined in both the
Satellite and Main pipes in 2023. 22 diamonds sold for over US$1.0
million each in 2023, generating revenue of
US$40.8 million.
|
|
|
|
Number of large diamond
recoveries
|
2023
|
2022
|
|
|
|
|
|
>100 carats
|
5
|
4
|
8
|
60 - 100 carats
|
13
|
18
|
18
|
30 - 60 carats
|
71
|
69
|
76
|
20 - 30 carats
|
107
|
108
|
114
|
10 - 20 carats
|
477
|
507
|
449
|
Total diamonds >10
carats
|
673
|
706
|
664
|
Diamond sales
Eight large and four small rough
diamond tender viewings were held in Antwerp during the
year.
A total of 104 520 carats were
sold in 2023 (2022: 107 498) and Letšeng generated rough
diamond revenue of US$139.4 million (2022:
US$188.6 million) at an average price of US$1 334 per
carat (2022: US$1 755). The significant challenges experienced
in the diamond market, discussed in the CEO Review on page 30,
coupled with the reduced volume of large high-value diamonds in
2023, were the primary factors behind the lower average price and
revenue achieved in 2023.
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.
Underground study
A conceptual desktop study for an
underground mining operation in the Satellite pipe post the current
Cut 5 West (SC5W) open pit cutback was completed in November 2021.
The outcome indicated potential for underground mining and
recommended that a comprehensive Underground Feasibility Study be
undertaken to confirm the feasibility thereof to most optimally and
economically extend the life of mine for the Satellite pipe. The
objective of the proposed study was to upgrade the desktop study to
the confidence level of a feasibility study and to develop a
transition model for an underground operation once the life of the
Satellite pit reached maximum depth achievable through the current
open pit mining. The study commenced in mid-2022 to (i) assess the
viability of an earlier shift to underground mining of the
Satellite pipe, and (ii) inform the trade-off between an
underground mining option and the next open pit cutback in the
Satellite pipe Cut 6 West (SC6W) post the completion of SC5W in
2024/5.
The project focused on the
viability of the mining block within the indicated resources zone
of the Satellite pipe, but also included the assessment of
additional levels, to the point where the project no longer added
positive financial returns. Following numerous iterations of the
mining strategy, a three-level sub-level retreat was identified
with the caving method as the most efficient and appropriate
underground mining method for the available ore within the
Satellite pit. To improve the economic viability of the mine, the
study focused on several optimisation strategies, particularly with
regards to mining costs. A detailed analysis of the cost breakdown
was conducted to identify areas of potential savings and to explore
alternative contracting models.
The economic viability and
performance of the underground operation was determined through
developing a detailed financial model founded on the results
derived from the study and other available information.
Unfortunately, at a mid-point review held in June 2023, the
preliminary analysis at that time revealed a negative net present
value of such an underground project in the Satellite pipe. Further
sensitivity analysis was conducted in H2 2023 to ascertain the
impact on project value due to potential variability in significant
value drivers such as capital expenditure, diamond selling prices
and operating costs. Following this analysis and a further review
of capital expenditure and operating costs in particular, it was
clear that the underground project for the extension of life of the
Satellite pipe was not economically viable under current
macro-economic conditions and the current state of the diamond
market. The study was therefore halted at a pre-feasibility level
to avoid spending unnecessarily on further geotechnical and
hydro-technical drilling work at this time. Underground mining for
both the Main and Satellite pipes may again be reconsidered should
macro-economic and diamond market conditions improve.
In the meantime, various strategies
to optimise open pit mining activities in both the Satellite and
Main pits are continually being investigated and implemented as
appropriate. A steeper conventional concept for C6W in the
Satellite pit, which will significantly reduce the strip ratio, is
currently under review.
Resource and Reserve
Statement
Following the publication of
Letšeng's 2015 SAMREC Mineral Resource and Reserve Statement,
efforts were focused on improving confidence in the geological
models and the predictability of the large +100 carat Type II
diamonds, which contribute materially to Letšeng's
value.
Initial petrography and
microdiamond studies in the latter part of 2015 suggested that the
geological complexity in both the Main and Satellite pipes may have
been greater than that reflected in the broader resource categories
at the time. What set out as an exercise to better understand the
internal variability of the existing resource domains in the Main
pipe (KMain, K6 and K4) and Satellite pipe (NVK and SVK),
transformed into a comprehensive drilling and resource development
programme spanning eight years and culminating in a new
appreciation of the complexity within the Letšeng orebodies, as
reflected in the current Resource and Reserve Statement.
The 2024 Mineral Resource and
Reserve Statement was prepared in line with the Canadian Institute
of Mining, Metallurgy and Petroleum's (CIM) Estimation of Mineral
Resources and Mineral Reserves Best Practice Guidelines dated
November 2019, and the Definition Standards for Mineral Resources
and Mineral Reserves published May 2014, and is reported in
accordance with the Canadian Securities Administrators' National
Instrument 43-101 Standards of Disclosure for Mineral
Projects.
Letšeng's 2024 Mineral Resource
Statement is informed by a suite of geological studies that (i)
enabled differentiation between the various known and newly
recognised kimberlite domains, (ii) delineated the internal
boundaries between the kimberlite domains, and (iii) characterised
them in terms of their diamond populations, volumes, tonnages,
grades and value.
The 2024 Resource and Reserve
Statement and NI 43-101 Technical Report is based on an extensive
drilling and resource development programme that commenced in 2015
and was completed in 2023 and included the following
workstreams:
· Three
phases of additional diamond core drilling: 2017-2020 (31
drillholes, 8 386 metres), 2021-2022 (24 drillholes, 8 640 metres)
and 2022-2023 (8 drillholes, 2 235 metres).
· Petrographic analysis and mineral chemistry conducted between
2015 and 2023 in both the Satellite and Main pipes.
· Microdiamond analysis: initial studies in late 2015 followed
by more detailed studies in 2019-2020.
· Discrete sampling, production and updated sales data was
analysed for diamonds recovered from the dominant domains within
each pipe.
· In-pit mapping data of internal and external domain
contacts.
· 3D
geological models for both the Satellite and Main pipes were
updated.
· Updated Size Frequency Distributions (SFD) for each
domain.
· As-built survey of the open pit topography as of 31 December
2023.
The Reserve Statement has been
prepared on a Life of Mine plan including SC6W on current slope
angles (refer to page 47). An opportunity to optimise this plan
with a steeper conventional concept is discussed below on page
48.
The NI 43-101 Technical Report
containing Letšeng's 2024 Resource and Reserve Statement will be
available on the Group's website at www.gemdiamonds.com.
Letšeng's 2024 Resource and Reserve
Statements are set out in the tables below (Note: the tables and accompanying
notes below are presented as a direct extraction from the NI 43-101
Technical Report):
|
|
|
|
|
|
|
|
Resource statement
|
|
|
|
|
|
Average Value
|
|
|
Pipe
|
Domain
|
Density
|
Mass
|
Diamond Grade
|
Diamond Price
|
Contained Carats
|
|
|
|
g/cm³
|
(kt)
|
(cpht)
|
(US$/ct)
|
(kct)
|
Indicated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Main pipe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Satellite pipe
|
|
|
|
|
|
Total indicated
|
2.51
|
75 546.2
|
1.86
|
1 484
|
1 405.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Value
|
|
|
Pipe
|
Domain
|
Density
|
Mass
|
Diamond Grade
|
Diamond Price
|
Contained Carats
|
|
|
|
g/cm³
|
(kt)
|
(cpht)
|
(US$/ct)
|
(kct)
|
Inferred
|
Main Pipe
|
K1A
|
2.52
|
5 929.9
|
1.56
|
2 170
|
92.5
|
|
K1B-1
|
2.51
|
7 152.9
|
1.59
|
980
|
113.7
|
|
|
2.51
|
396.7
|
1.59
|
980
|
6.3
|
|
K1B-2
|
2.51
|
1 371.0
|
1.59
|
980
|
21.8
|
|
K1C
|
2.51
|
348.7
|
1.59
|
980
|
5.5
|
|
XENO-BSLT
|
2.66
|
1 154.9
|
0.40
|
1 130
|
4.6
|
|
K4
|
2.52
|
697.5
|
1.10
|
360
|
7.7
|
|
K6
|
2.48
|
4 952.6
|
2.47
|
825
|
122.3
|
Total Main pipe
|
2.51
|
22 126.2
|
1.70
|
1 217
|
376.3
|
Satellite Pipe
|
SVK
|
2.45
|
1 539.3
|
2.26
|
2 535
|
34.8
|
|
GVK
|
2.45
|
309.7
|
3.46
|
970
|
10.7
|
|
KIMB7
|
2.47
|
597.1
|
2.28
|
2 475
|
13.6
|
Total Satellite pipe
|
2.45
|
2 446.1
|
2.42
|
2 238
|
59.1
|
Total inferred
|
2.51
|
24 572.3
|
1.77
|
1 356
|
435.4
|
Notes:
1.
The effective date of the Mineral Resource
Statement is 31 December 2023. The QP for the estimate is Cliff
Revering, P.Eng., an employee of SRK Consulting (Canada)
Inc.
2.
Mineral Resources are not Mineral Reserves and do
not have demonstrated economic viability. All numbers have been
rounded to reflect accuracy of the estimate.
3.
Mineral Resources are inclusive of in-situ
Mineral Reserves and are exclusive of all mine stockpile
material.
4.
Mineral Resources are quoted above a +2.00 mm
square-mesh bottom cut-off and have been factored to account for
diamond losses within the smaller sieve classes.
5.
Inferred Mineral Resources are estimated on the
basis of limited geological evidence and sampling, sufficient to
imply but not verify geological grade and continuity. They have a
lower level of confidence than that applied to an Indicated Mineral
Resource and cannot be directly converted into a Mineral
Reserve.
6.
Average diamond value estimates are based on
diamond sales data to the end of 2023 provided by Gem Diamonds
Ltd.
7.
Mineral Resources have been estimated with no
allowance for mining dilution and mining
recovery.
|
|
|
|
|
|
|
|
Reserve statement
|
|
|
|
|
Average Value
|
|
|
|
Pipe
|
Domain
|
Mass
|
Diamond Grade
|
Diamond Price
|
Contained Carats
|
Value
|
|
|
|
(kt)
|
(cpht)
|
(US$/ct)
|
(kct)
|
(US$'000)
|
Probable
|
Main Pipe
|
K1A Grouping
|
9 450.1
|
1.55
|
2 170
|
146.5
|
317 888.3
|
|
K1B Grouping
|
14 790.2
|
1.58
|
980
|
233.6
|
228 910.4
|
|
K1C
|
935.0
|
1.57
|
980
|
14.7
|
14 392.6
|
|
K2
|
17 512.4
|
1.60
|
1 130
|
279.6
|
315 958.5
|
|
K6
|
5 250.8
|
2.48
|
825
|
130.2
|
107 432.2
|
Total
Main pipe
|
47 938.6
|
1.68
|
1 224
|
804.6
|
984 582.0
|
Satellite Pipe
|
NVK
|
3 442.5
|
2.16
|
2 185
|
74.4
|
162 658.6
|
|
SVK
|
6 164.0
|
2.22
|
2 535
|
136.6
|
346 341.6
|
|
GVK
|
1 673.5
|
3.45
|
970
|
57.8
|
56 067.3
|
|
GVK-SVK_Mixed
|
1 674.4
|
3.09
|
1 420
|
51.7
|
73 413.4
|
|
KIMB7
|
1 200.9
|
2.20
|
2 475
|
26.4
|
65 248.7
|
Total
Satellite pipe
|
14 155.5
|
2.45
|
2 028
|
346.9
|
703 729.6
|
Stockpiles
|
Live Stockpile
|
11.2
|
1.95
|
1 754
|
0.2
|
382.5
|
|
Main Pipe Stockpile
|
900.7
|
1.25
|
1 190
|
11.2
|
13 380.2
|
|
Satellite Pipe Stockpile
|
176.6
|
1.41
|
2 287
|
2.5
|
5 693.6
|
Total
Stockpiles
|
1 088.5
|
1.28
|
1 394
|
14.0
|
19 456.3
|
Total probable
|
63 182.5
|
1.84
|
1 465
|
1 165.5
|
1 707 767.9
|
Notes:
1. The effective
date of the Mineral Reserve Statement is 31 December 2023. The QP
for the estimate is Dr Anoush Ebrahimi, P. Eng., an employee of SRK
Consulting (Canada) Inc.
2. Figures have been rounded to the
appropriate level of precision for
reporting.
3. Due to rounding,
some columns or rows may not compute exactly as
shown.
4. Grades quoted as
recovered and dry, pre-acid wash.
5. The Mineral
Reserves are stated as in‐situ dry metric
tonnes.
6. K1A Grouping
includes K1A, RFW-K1S: K1AS and RFW-K1S:
XENO-BSLT.
7. K1B Grouping
includes K1B-1, RFW-K1S: K1B-1s, K1B-2 and RFW-K1S:
K1B-2.
8. The Mineral
Reserves were prepared under the guidelines of the CIM, for
reporting under NI 43‐101.
9. Average diamond
value estimates are based on diamond sales data to the end of 2023
provided by Gem Diamonds Ltd.
10. Modifying factors for
mining recovery of 88% and waste dilution of 12% applied on pipe
contact blocks.
11. Probable Mineral
Reserves were derived from Indicated Mineral
Resources.
12. Mineral Reserves are
inclusive of Mineral Resources.
13. There are no known
legal, political, environmental, or other risks that could
materially affect the Probable Mineral
Reserves.
14. Stockpiles comprise
surface loose stocks of material including high-value, low-value
and highly diluted kimberlite contact ore. Stockpiles of low-value
and highly diluted kimberlite contact ore will be processed at the
end of life of open pit mining.
15. The Mineral Reserves
reported in this table are attributable solely to the ore to be
mined (and processed or stockpiled for later processing) from the
open pit mining operations at Letšeng
Mine.
Long-term mine plan
Letšeng's long-term mine plan has
incorporated all relevant attributes of the 2024 Resource and
Reserve Statement discussed above. The previous long-term mine plan
was predicated on SC5W being completed in 2024 at an extraction
rate of 3.0 million tonnes of Satellite ore per annum. The
extraction rate of Satellite ore from the SC5W cutback has been
revised down in 2024 to c.2.0 million tonnes with the remaining
c.0.9 million tonnes of ore from this cutback to be mined out by Q2
2025. Cost containment, the potentially unsafe conditions created
when mining above SC5W before ore extraction is complete, and the
opportunity to finalise the study of a steeper conventional concept
for SC6W to avoid unnecessary waste stripping on the conventional
slope angles, has necessitated that the commencement of waste
stripping in SC6W be pushed out, from Q1 2024 to Q3
2025.
In addition, the anticipated ore
from SC6W has been reduced, as instantaneous triple and double
benches on the kimberlite basalt contact areas around the pipe had
to be removed from the updated pit design. The strategy of
transitioning from basalt to kimberlite was revised in the 2024
mine plan to include flatter angles around the basalt/kimberlite
contact areas. The revised strategy was in response to the latest
geological mapping results, which revealed the curvature and dip of
the pipe contact not supporting the double and triple benching
previously planned along the pipe contact. Consequently, about 1.3
million tonnes of ore of the previous SC6W mine plan can no longer
be accessed safely.
During the annual review of the
long-term mine plan in the first half of 2023, it was observed that
the in-situ revenue per tonne for certain ore domains in the Main
pipe had decreased, impacting the economics of the final cutbacks
in the Main pit (MC4). The latest pit optimisation model indicated
a smaller MC4 than in the previous long-term mine plan. MC4 West
was therefore redesigned in line with this outcome, which resulted
in reduced waste required to be mined and an estimated 10.0 million
tonnes of ore no longer being economically viable to extract. The
2024 mine plan was updated to include the revised waste and ore
volumes for MC4W, thereby reducing the previously published mine
plan by approximately two years from 2040 to 2038.
The long-term mine plan has also
been updated using the latest resource models discussed above. For
most of the ore domains, except K2 (Main pipe) and NVK (Satellite
pipe), the indicated and inferred resource interface levels were
shallower than in the 2015 resource models. This resulted in some
ore that was included as indicated in the previous mine plan now
being excluded in line with the mineral reserves declaration rules.
Pending possible further upgrade of the inferred resources in both
the Main and Satellite pipes, the revised final pit shell has been
designed to include only indicated resources with minimal inferred
resources being included. This has shortened the updated life of
mine plan by an additional two years, from 2038 to 2036/7. Refer to
the updated long-term mine plan in the graph below.
The updated long-term mine plan
includes SC5W, MC4E, a smaller MC4W and SC6W (each based on current
slope angles) and an updated plant throughput rate to life of mine
of 5.3 million tonnes per annum. Waste stripping of the SC6W
cutback is currently scheduled to commence in 2025 with ore
estimated to be available from end 2030 at an extraction rate of
2.5 million ore tonnes per annum thereafter.
Life of Mine optimisation
projects
Steeper conventional pit concept
in Satellite C6W
Slope steepening carried out at
Letšeng in a safe and responsible way has had a significant
positive effect on the economic value of open pit mining by
reducing the stripping ratio. An initiative to introduce a steeper
conventional design in the basalt of SC6W cutback commenced pit
designs of a steeper slope concept with the final cutback
commencing from within the current SC5W pit have been completed.
The slope design has been approved by independent slope design
experts in Q4 2023 and the requisite support design and costs are
being analysed to fully evaluate the factor of safety, economics
and overall feasibility of the concept. Results of this study are
expected to be completed by Q3 2024. In the event that we are able
to safely execute the steeper conventional concept in SC6W, with
the benefit of significantly reduced waste, the above long-term
mine plan adopted in our 2024 Reserve Statement will be amended
accordingly.
Upgrading inferred
resource
The updated long-term mine plan
shown in the graph above could be extended by an additional two
years (c.12.5 million tonnes) without any incremental stripping of
waste by upgrading the inferred resource in the Main pipe to
indicated resource. Once upgraded, the ore could then confidently
be included in the long-term mine plan with no incremental
stripping of waste, given the flexibility that has been
incorporated in the current final pit design.
Ghaghoo
We remain committed to exiting the
Ghaghoo Diamond Mine in Botswana, which has been on care and
maintenance since March 2017. In the absence of a sale, closure
and/or handover options are being actively pursued and affected
stakeholders have been widely consulted.
The site is being well maintained
in a safe and responsible manner. Employees on site have
consistently demonstrated adherence to safety protocols and
environmental regulations, with no instances of activities causing
any disturbance to the environment being reported, and we are
pleased to report that there were no LTIs recorded at Ghaghoo in
2023.
In preparation for possible closure
or partial closure and handover to government, extensive site
clean-up and partial rehabilitation activities commenced in H1
2023. This has been carried out in a cost-effective manner and
included the removal and sale of a significant amount of scrap
metal and other redundant infrastructure and materials. The salvage
values received for these contributed significantly to the cost of
the clean-up project. At the end of 2023, a solar power solution
was implemented to power the necessary camp and reverse osmosis
water plant requirements. The solar plant was fully commissioned
from 1 January 2024 and has completely replaced the existing diesel
generator power supply. Securing long-term power supply for the
Ghaghoo operation allows for the site to be handed over without
additional diesel generator associated costs, and also supports the
immediate rehabilitation and decarbonisation objectives of the
Group.
OUR PLANS FOR
2024
We have several operational
objectives for 2024. These include:
· Optimising and improving the long-term mine plan of Letšeng
with particular focus on the SC6W cutback.
· Further enhancing operational efficiencies and reducing
overall operating costs.
· Investing in appropriate renewable and/or alternative energy
sources. Providing a consistent source of power for the mine
operations remains a challenge at Letšeng. In the meantime, the
focus remains on reducing power consumption throughout the Group,
and low energy-usage alternatives continue to be investigated and
implemented.
DIRECTORS'
REPORT
The Directors are pleased to submit
the financial statements of the Group for the year ended 31
December 2023.
As a British Virgin
Islands-registered company, Gem Diamonds Limited (company
registration number: 669758) is not required to conform with the
Companies Act, 2006. However, the Directors have elected to conform
to the requirements of the Companies Act, 2006.
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 2023
Annual Report and Accounts 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 Management Report can be found in the Strategic
Report, the Performance Review and the Directors' Report, the
Governance section and other sections of the 2023 Annual Report and
Accounts, indicated by a reference.
The Strategic Report can be found
on pages 2 to 62. This will provide the 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 2024. 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 (LR 9.8.6) is located on pages 2
to 113.
DIRECTORS
The Directors, as at the date of
this report, are listed on pages 179 to 181 together with their
biographical details. Details of the Directors' interests in shares
and share options of the Company can be found on page
111.
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.
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
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 100.
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 72 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 111.
SUPPLIERS AND CUSTOMERS
We engage extensively with
suppliers and contractors to ensure alignment, mutual understanding
and the sustainability of all parties. The early termination (by
mutual agreement) of the mining services contract and subsequent
insourcing thereof was concluded in December 2023.
We have sound relationships with
our customers. We interact with customers regularly in the normal
course of business and at tenders. We continued to hold regular
diamond tender viewings in Antwerp during the year. We were able to
rely on the loyal customer base for support during the year while
the diamond market was under significant pressure. The agreement
entered 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 2023.
Refer to our stakeholder
relationships section on pages 14 to 17 for more details on
our engagement with suppliers, contractors and
customers.
RESULTS AND DIVIDENDS
The Group's attributable loss after
taxation amounted to US$2.1 million (2022: profit of
US$10.2 million).
The Group's detailed financial
results are set out in the financial statements on pages 118 to
173.
The Board is not proposing a
dividend based on the 2023 financial results due to the volatility
in the current economic outlook, the Group's available cash
resources and the current business outlook.
The Group's dividend policy sets
the appropriate dividend each year, and 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 2 to 62. The financial position of the Group, its cash flows
and liquidity position are described in the Strategic Report on
pages 34 to 40. 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, the likely
successful renewal of its 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 13 March 2024, 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 2023, the
Board noted the proportion of the votes cast against the resolution
referring to the authority of Directors to allot shares (Resolution
12 passed with 69.5% of participating shareholders voting in
favour). The CEO met the significant shareholder who voted against
Resolution 12 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 14 121
018 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 2024 AGM, shareholders will
be requested to renew this authority. The Directors continue to
consider various options and keep the authorisation under regular
review. The 2024 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 will be
available on the Group's website at www.gemdiamonds.com.
The COO Review on page 45 provides more detail on this.
CORPORATE SOCIAL RESPONSIBILITY
AND SUSTAINABILITY
Read more about the Group's 2023
Sustainability Performance, including CSI investment, community
participation and environmental management, in our Sustainability
Report 2023 which is available at www.gemdiamonds.com.
POLITICAL DONATIONS
The Group made no political
donations during 2023.
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 2023 can be found in the
Sustainability and Climate Change reports on pages 49 and 51
respectively.
By order of the Board
Harry Kenyon-Slaney
Non-Executive
Chairperson
RESPONSIBILITY STATEMENT OF THE
DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL
STATEMENTS
The Directors are responsible for
preparing the Annual Report and the Group financial statements in
accordance with International Financial Reporting Standards (IFRS).
Having taken advice from the Audit Committee, the Board considers
that this report and financial statements taken as a whole, are
fair, balanced and understandable and that they provide the
information necessary for shareholders to assess the Group's
performance, business model and strategy.
The Strategic Report and Directors'
Report include a fair review of the development and performance of
the business and the position of the Group and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that the Group
faces.
PREPARATION OF THE FINANCIAL
STATEMENTS
In preparing the Group financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make
judgements and estimates that are reasonable and
prudent;
· state
whether they have been prepared in accordance with IFRS;
· state
whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the Group financial
statements; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for
keeping adequate accounting records that are sufficient to show and
explain the Group's transactions and disclose, with reasonable
accuracy at any time, the financial performance, the financial
position and cash flow of the Group. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors confirm that the
financial statements, prepared in accordance with IFRS, give a true
and fair view of the assets, liabilities, financial position at
year end and profit or loss for the year then ended of the Group
and the undertakings included in the consolidation taken as a
whole. In addition, suitable accounting policies have been selected
and applied consistently.
Information, including accounting
policies, has been presented in a manner that provides relevant,
reliable, comparable and understandable information, and additional
disclosures have been provided when compliance with the specific
requirements in IFRS have been insufficient to enable users to
understand the financial impact of particular transactions, other
events and conditions on the Group's financial position, cash flow
and financial performance. Where necessary, the Directors have made
judgements and estimates that are considered reasonable and
prudent.
The Directors of the Company have
elected to comply with the Companies Act, 2006, in particular the
requirements of Schedule 8 to The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2013 of the United
Kingdom pertaining to Directors' remuneration which would otherwise
only apply to companies incorporated in the UK.
Michael Michael
Chief Financial Officer
13 March 2024
INDEPENDENT AUDITOR'S
REPORT
To the Shareholders of Gem
Diamonds Limited
REPORT ON THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Opinion
We have audited the consolidated
financial statements of Gem Diamonds Limited and its subsidiaries
('the Group') set out on pages 123 to 173, which comprise the
consolidated statement of financial position as at 31 December
2023, and the consolidated statement of profit or loss, the
consolidated statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of
cash flows for the year then ended, and notes to the consolidated
financial statements, including material accounting policy
information.
In our opinion, the consolidated
financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at 31 December
2023, and its consolidated financial performance and consolidated
cash flows for the year then ended in accordance with International
Financial Reporting Standards ("IFRS").
Basis for Opinion
We conducted our audit in
accordance with International Standards on Auditing ("ISAs"). Our
responsibilities under those standards are further described in
the Auditor's Responsibilities for the
Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in
accordance with the Independent Regulatory
Board for Auditors' Code of Professional Conduct for Registered
Auditors ("IRBA Code") and other
independence requirements applicable to performing audits of
financial statements of the Group and in South Africa. We have
fulfilled our other ethical responsibilities in accordance with the
IRBA Code and in accordance with other ethical requirements
applicable to performing audits of the Group and in South Africa.
The IRBA Code is consistent with the corresponding sections of
the International Ethics Standards Board
for Accountants' International Code of Ethics for Professional
Accountants (including International
Independence Standards). We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters
that, in our professional judgement, were of most significance in
our audit of the consolidated financial statements of the current
period. These matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the
responsibilities described in the Auditor's Responsibilities for the Audit of the Consolidated
Financial Statements section of our report,
including in relation to this matter. Accordingly, our audit
included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial
statements. The results of our audit procedures, including the
procedures performed to address the matter below, provide the basis
for our audit opinion on the accompanying consolidated financial
statements.
|
|
Key Audit Matter
|
How the matter was addressed in
the audit
|
GOODWILL IMPAIRMENT
Management performs an annual
impairment test on goodwill as required by IAS 36 Impairment of
Assets using discounted future cash flows to determine the
recoverable amount. Goodwill relates to the Group's investment in
the Letšeng Diamond mine. The carrying value of goodwill
amounts to US$11.2 million (2021:US$12.0 million).
As disclosed in Note 11 Impairment
testing and Note 1.2.28 Critical accounting estimates and
judgements, the Group uses discounted cash flows to determine the
recoverable amount for each cash generating unit, on the basis of
the following key assumptions:
· Diamond prices;
· Inflation rates;
· Production costs and volumes; and
· Discount rates
The current year impairment model
further include certain assumptions that materially impact the
recoverable amount - these include: next open pit cutback in
Satellite pipe (C6W), optimisation and right-sizing cost savings
and steeper slope angles.
Given the above factors, the
goodwill impairment, required significant audit effort including
the use of our valuation experts in the audit of the recoverable
amount.
|
Our audit procedures included
amongst others the following:
•We
involved our internal valuation specialists as part of our team to
assist in evaluating management's impairment methodology and key
assumptions used in the impairment calculations;
•Our
valuation specialists evaluated the valuation methodology against
acceptable industry methods and accounting standards;
•Our
valuation specialists calculated two independent weighted average
cost of capital (WACC) rates (Revenue and costs) to compare to
management's WACC's. Our independent WACC recalculations were based
on publicly available market data for comparable companies for the
Letšeng Cash Generating Unit (CGU);
•Our
valuation specialists assessed the reasonability of the significant
inputs and assumptions used in the impairment models, such as
diamond prices, inflation rates, by comparing them to independent
sources. Assumptions such as production costs and volumes
were considered for reasonability with reference to history and the
mine plan;
•We have
performed sensitivity analyses around the key assumptions used in
the impairment model. We did this by increasing and decreasing the
following assumptions in the model to determine the impact on the
headroom (difference between the carrying value of the CGU and the
recoverable amount). These included:
▪WACC;
and
▪Diamond
prices
•We
considered the appropriateness of the inclusion of next open pit
cutback in Satellite pipe (C6W), optimisation and right-sizing cost
savings and steeper slope angles in the recoverable
amount.
•We
assessed the adequacy of the Group's disclosures in terms of IAS
36, in the notes to the consolidated financial
statements.
|
Other Information
Management is responsible for the
other information. The other information comprises the information
included in the 183‑page document titled "Gem Diamonds Annual
Report and Accounts 2023. The other information does not include
the consolidated financial statements and our auditor's reports
thereon.
Our opinion on the consolidated
financial statements does not cover the other information and we do
not express an audit opinion or any form of assurance conclusion
thereon.
In connection with our audit of the
consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements, or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of Management for
the Consolidated Financial Statements
Management is responsible for the
preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control
as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated
financial statements, management is responsible for assessing the
Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to
liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor's Responsibilities for the
Audit of the Consolidated Financial Statements
Our objectives are to obtain
reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor's report that
includes our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted in
accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance
with ISAs, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
· Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by management.
· Conclude on the appropriateness of management's use of the
going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a
going concern.
· Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision, and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged
with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with
governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards
applied.
From the matters communicated with
those charged with governance, we determine those matters that were
of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless
law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Ernst & Young Inc.
Director - Philippus Dawid
Grobbelaar
Registered Auditor
Chartered Accountant
(SA)
13 March 2024
102 Rivonia Road
Sandton
Private Bag X14
Sandton
2146
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS
FOR THE YEAR ENDED 31
DECEMBER 2023
|
|
|
|
|
|
|
Notes
|
|
2023
|
2022
|
|
|
|
|
US$'000
|
US$'000
|
|
Revenue from contracts with
customers
|
2
|
|
140 287
|
188 937
|
|
Cost of sales
|
|
|
(109 112)
|
(124 113)
|
|
Gross profit
|
|
|
31 175
|
64 824
|
|
Other operating
income/(expense)
|
3
|
|
7
|
(1 937)
|
|
Royalties and selling
costs
|
|
|
(15 340)
|
(20 328)
|
|
Corporate expenses
|
|
|
(7 905)
|
(8 997)
|
|
Share-based payments
|
26
|
|
(332)
|
(253)
|
|
Foreign exchange gain
|
4
|
|
2 775
|
1 914
|
|
Impairment of non-current
assets
|
4
|
|
-
|
(702)
|
|
Operating profit
|
4
|
|
10 380
|
34 521
|
|
Net finance costs
|
5
|
|
(4 696)
|
(4 089)
|
|
- Finance income
|
|
|
617
|
413
|
|
- Finance costs
|
|
|
(5 313)
|
(4 502)
|
|
|
|
|
|
|
|
Profit before tax for the
year
|
|
|
5 684
|
30 432
|
|
Income tax expense
|
6
|
|
(4 090)
|
(10 277)
|
|
Profit for the year
|
|
|
1 594
|
20 155
|
|
Attributable to:
|
|
|
|
|
|
Equity holders of parent
|
|
|
(2 125)
|
10 178
|
|
Non-controlling interests
|
|
|
|
|
|
Earnings per share
(cents)
|
7
|
|
|
|
|
- Basic (loss)/earnings for the year
attributable to ordinary equity holders of the parent
|
|
|
(1.5)
|
7.3
|
|
- Diluted (loss)/earnings for the
year attributable to ordinary equity holders of the
parent
|
|
|
(1.5)
|
7.2
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED
31 DECEMBER 2023
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
Profit for the year
|
|
1 594
|
20 155
|
Items that could be reclassified to
profit or loss in the future:
|
|
|
|
Exchange differences on translation
of foreign operations, net of tax
|
|
(16 849)
|
(18 534)
|
Other comprehensive loss for the
year, net of tax
|
|
(16 849)
|
(18 534)
|
Total comprehensive (loss)/income
for the year
|
|
(15 255)
|
1 621
|
Attributable to:
|
|
|
|
Equity holders of parent
|
|
(14 082)
|
(2 513)
|
Non-controlling interests
|
|
(1 173)
|
4 134
|
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER
2023
|
|
|
|
|
|
2023
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
|
|
|
Intangible assets
|
10
|
10 440
|
11 221
|
Receivables and other
assets
|
12
|
4 487
|
2 916
|
Deferred tax assets
|
21
|
6 814
|
5 994
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables and other
assets
|
|
|
|
|
|
|
|
Cash and short-term
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity attributable to equity
holders of the parent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing loans and
borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity and
liabilities
|
|
|
|
Approved by the Board of Directors
on 13 March 2024 and signed on its behalf by:
C
Elphick
M Michael
Director
Director
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
FOR THE YEAR ENDED 31
DECEMBER 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the equity holders
of the parent
|
|
|
|
|
Issued capital
|
Share premium
|
Treasury shares
|
Other reserves1
|
Accumulated (losses)/retained
earnings
|
Total
|
Non-controlling
interests
|
Total equity
|
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'00
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
|
As at 1 January 2023
|
|
1 410
|
885 648
|
(1 157)
|
(239 169)
|
(494 113)
|
152 619
|
80 428
|
233 047
|
|
|
Total comprehensive loss
|
|
-
|
-
|
-
|
(11 957)
|
(2 125)
|
(14 082)
|
(1 173)
|
(15 255)
|
|
|
(Loss)/profit for the
year
|
|
-
|
-
|
-
|
-
|
(2 125)
|
(2 125)
|
3 719
|
1 594
|
|
|
Other comprehensive loss
|
|
-
|
-
|
-
|
(11 957)
|
-
|
(11 957)
|
(4 892)
|
(16 849)
|
|
|
Share capital issued (Note
15)
|
|
3
|
-
|
-
|
(3)
|
-
|
-
|
-
|
-
|
|
|
Share-based payments (Note
26)
|
|
-
|
-
|
-
|
332
|
-
|
332
|
-
|
332
|
|
|
As at 31 December 2023
|
|
1 413
|
885 648
|
(1 157)
|
(250 797)
|
(496 238)
|
138 869
|
79 255
|
218 124
|
|
|
As at 1 January 2022
|
|
1 406
|
885 648
|
-
|
(226 697)
|
(500 550)
|
159 807
|
86 843
|
246 650
|
|
|
Total comprehensive
(loss)/income
|
|
-
|
-
|
-
|
(12 691)
|
10 178
|
(2 513)
|
4 134
|
1 621
|
|
|
Profit for the year
|
|
-
|
-
|
-
|
-
|
10 178
|
10 178
|
9 977
|
20 155
|
|
|
Other comprehensive loss
|
|
-
|
-
|
-
|
(12 691)
|
-
|
(12 691)
|
(5 843)
|
(18 534)
|
|
|
Share capital issued (Note
15)
|
|
4
|
-
|
-
|
(4)
|
-
|
-
|
-
|
-
|
|
|
Share-based payments (Note
26)
|
|
-
|
-
|
-
|
253
|
-
|
253
|
-
|
253
|
|
|
Share buyback (Note 15)
|
|
-
|
-
|
(1 157)
|
-
|
-
|
(1 157)
|
-
|
(1 157)
|
|
|
Transfer between
reserves
|
|
-
|
-
|
-
|
(30)
|
30
|
-
|
-
|
-
|
|
|
Dividends declared (Note
28)
|
|
-
|
-
|
-
|
-
|
(3 771)
|
(3 771)
|
(10 549)
|
(14 320)
|
|
|
As at 31 December 2022
|
|
1 410
|
885 648
|
(1 157)
|
(239 169)
|
(494 113)
|
152 619
|
80 428
|
233 047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
1 Other reserves relate to Foreign currency translation
reserves and Share-based equity reserves. Refer Note 15, Issued
share capital and reserves for further detail.
CONSOLIDATED STATEMENT OF CASH
FLOWS
FOR THE YEAR ENDED 31
DECEMBER 2023
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
Notes
|
|
|
US$'000
|
US$'000
|
|
|
Cash flows from operating
activities
|
|
|
|
35 020
|
63 032
|
|
|
Cash generated by
operations
|
22.1
|
|
|
56 150
|
82 799
|
|
|
Working capital
adjustments
|
22.2
|
|
|
(15 610)
|
(9 889)
|
|
|
Interest received
|
|
|
|
292
|
303
|
|
|
Interest paid
|
|
|
|
(4 216)
|
(2 933)
|
|
|
Income tax paid
|
19
|
|
|
(1 596)
|
(8 435)
|
|
|
Income tax received
|
19
|
|
|
-
|
1 187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing
activities
|
|
|
|
(57 146)
|
(59 672)
|
|
|
Purchase of property, plant and
equipment
|
8
|
|
|
(20 048)
|
(11 920)
|
|
|
Waste stripping costs
capitalised
|
8
|
|
|
(37 102)
|
(47 948)
|
|
|
Proceeds from sale of property,
plant and equipment
|
|
|
|
4
|
196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in) financing
activities
|
|
|
|
28 021
|
(24 909)
|
|
|
Lease liability capital
repayment
|
17
|
|
|
(2 092)
|
(1 846)
|
|
|
Net financial liabilities
raised/(repaid)
|
22.3
|
|
|
30 113
|
(7 734)
|
|
|
Financial liabilities
repaid
|
|
|
|
(45 103)
|
(17 627)
|
|
|
Financial liabilities
raised
|
|
|
|
75 216
|
9 893
|
|
|
Share buyback
|
15
|
|
|
-
|
(1 157)
|
|
|
Dividends paid to holders of the
parent
|
|
|
|
-
|
(3 623)
|
|
|
Dividends paid to non-controlling
interests
|
|
|
|
-
|
(10 549)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and
cash equivalents
|
14
|
|
|
5 895
|
(21 549)
|
|
|
Cash and cash equivalents at
beginning of year
|
|
|
|
8 721
|
31 057
|
|
|
Foreign exchange
differences
|
|
|
|
1 887
|
(787)
|
|
|
Cash and cash equivalents at end of
year
|
14
|
|
|
16 503
|
8 721
|
|
|
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER
2023
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 13 March 2024.
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
2023.
|
|
|
|
|
Name and registered address of
company
|
Share-holding
|
Cost of
investment1
|
Country of
incorporation
|
Nature of business
|
Subsidiaries
|
|
|
|
|
Gem Diamond Technical Services
(Proprietary) Limited2
Illovo Corner
24 Fricker Road
Illovo Boulevard
Johannesburg
South Africa
|
100%
|
US$17
|
RSA
|
Technical, financial and management
consulting services.
|
Letšeng Diamonds (Proprietary)
Limited2
Letšeng Diamonds House
Corner Kingsway and Old School
Roads
Maseru
Lesotho
|
70%
|
US$126 000 303
|
Lesotho
|
Diamond mining and holder of
mining rights.
|
Gem Diamonds Botswana (Proprietary)
Limited2
The Courtyard unit 7A
Plot 54513 Village
Gaborone
Botswana
|
100%
|
US$5 844 579
|
Botswana
|
Diamond mining; evaluation and
development; and holder of mining licences and concessions.
Currently on care and maintenance.
|
Gem Diamonds Investments
Limited2
6th Floor,
60 Gracechurch Street Broadway,
London
EC3V 0HR United Kingdom
|
100%
|
US$17 531 316
|
UK
|
Investment holding company holding
100% in each of Gem Diamonds Innovation Solutions CY Limited, a
company holding intellectual property relating to development of
technology to innovate mining processes; Baobab Technologies BV, a
diamond analysis and valuation facility in Belgium; and Gem
Diamonds Marketing Services BV, a marketing company that sells the
Group's diamonds on tender in Antwerp.
|
1 The cost of investment represents original cost of
investments at acquisition dates.
2 No
change in the shareholding since the prior year.
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, ie 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, 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. 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 manufacturing margins, and diamond
analysis and manufacturing services.
The following tables presents
revenue from contracts with customers, profit/(loss) for the year,
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
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)
|
|
|
|
|
|
|
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
|
Share-based equity
transactions
|
(21)
|
(2)
|
(309)
|
-
|
(332)
|
Segment operating
profit/(loss)
|
19 573
|
676
|
(8 550)
|
(1 319)
|
10 380
|
Net finance costs
|
(3 500)
|
(23)
|
(1 000)
|
(173)
|
(4 696)
|
Profit/(loss) before tax
|
16 073
|
653
|
(9 550)
|
(1 492)
|
5 684
|
Income tax
(expense)/income
|
(3 678)
|
5
|
(417)
|
-
|
(4 090)
|
Profit/(loss) for the
year
|
12 395
|
658
|
(9 967)
|
(1 492)
|
1 594
|
EBITDA
|
22 129
|
857
|
(7 754)
|
-
|
15 232
|
Segment non-current
assets
|
308 973
|
1 347
|
369
|
327
|
311 016
|
Segment assets
|
371 056
|
2 770
|
3 280
|
795
|
377 901
|
Segment liabilities
|
72 193
|
1 503
|
7 725
|
3 034
|
84 455
|
Other segment information
|
|
|
|
|
|
Net cash/(debt) and short-term
deposits2
|
(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
asset3
|
(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
|
1 No
revenue was generated in BVI and Cyprus.
2 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.
3 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 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$82.1 million respectively.
Revenue decreased 26% compared
to 2022 mainly due to lower prices achieved as a result of a
downturn in the diamond market, a decrease of 3% in carats sold
(104 520 carats compared to 107 498 in 2022) and lower
than average recoveries of large diamonds. An average sales price
of US$1 334 per carat (2022: US$1 755 per carat) was
achieved.
|
|
|
|
|
|
|
Lesotho
|
Belgium
|
BVI, RSA, UK and
Cyprus1
|
Botswana
|
Total
|
Year ended 31 December
2022
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
Revenue from contracts with
customers
|
|
|
|
|
|
Total revenue
|
186 087
|
189 497
|
7 326
|
-
|
382 910
|
Intersegment
|
(185 782)
|
(865)
|
(7 326)
|
-
|
(193 973)
|
External customers
|
305
|
188 632
|
-
|
-
|
188 937
|
Depreciation and
amortisation
|
43 267
|
263
|
1 081
|
80
|
44 691
|
- Depreciation and mining asset
amortisation
|
6 982
|
263
|
1 081
|
80
|
8 406
|
- Waste stripping cost
amortisation
|
36 285
|
-
|
-
|
-
|
36 285
|
Share-based equity
transactions
|
(33)
|
(2)
|
(218)
|
-
|
(253)
|
Segment operating
profit/(loss)
|
46 060
|
1 307
|
(10 158)
|
(2 688)
|
34 521
|
Net finance costs
|
(2 569)
|
(17)
|
(1 294)
|
(209)
|
(4 089)
|
Profit/(loss) before tax
|
43 491
|
1 290
|
(11 452)
|
(2 897)
|
30 432
|
Income tax expense
|
(10 236)
|
(195)
|
154
|
-
|
(10 277)
|
Profit/(loss) for the
year
|
33 255
|
1 095
|
(11 298)
|
(2 897)
|
20 155
|
EBITDA
|
50 842
|
1 625
|
(8 781)
|
-
|
43 686
|
Segment non-current
assets
|
308 889
|
1 516
|
627
|
28
|
311 060
|
Segment assets
|
350 640
|
2 411
|
6 676
|
518
|
360 245
|
Segment liabilities
|
43 987
|
1 677
|
2 097
|
3 401
|
51 162
|
Other segment information
|
|
|
|
|
|
Net cash and short-term
deposits2
|
(2 627)
|
660
|
5 231
|
1
|
3 265
|
Capital expenditure
|
|
|
|
|
|
- Property, plant and
equipment
|
11 894
|
7
|
19
|
-
|
11 920
|
- Net movement in rehabilitation
asset3
|
858
|
-
|
-
|
(573)
|
285
|
- Waste cost capitalised
|
47 948
|
-
|
-
|
-
|
47 948
|
Total capital expenditure
|
60 700
|
7
|
19
|
(573)
|
60 153
|
Average number of employees employed
under contracts of service
|
322
|
7
|
22
|
19
|
370
|
1 No revenue was generated in BVI and Cyprus.
2 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.
3 Non-cash movements in rehabilitation assets relating to
changes in rehabilitation estimates for the Lesotho
segment.
Included in revenue for the 2022
year is revenue from two customers who individually contributed 10%
or more to total revenue. This revenue in total amounted to US$48.7
million arising from sales reported in the Belgium
segment.
Segment non-current assets do not
include deferred tax assets of US$6.0 million and financial
instruments of US$2.9 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$19.4
thousand.
Segment assets and liabilities do
not include deferred tax assets and liabilities of US$6.0 million
and US$82.0 million respectively.
1.2 Summary
of material accounting policies
1.2.1 Basis of
preparation
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.
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 2023 and are listed in the table below. The
adoption of these new accounting pronouncements has not had a
significant impact on the consolidated financial statements of the
Group nor the accounting policies, methods of computation or
presentation applied by the Group. Other than the changes described
below, the accounting policies are consistent with those of the
previous financial year.
|
|
Amendments and new
standards
|
Description
|
IFRS 17
|
Insurance contracts
|
Amendments to IAS 8
|
Definition of Accounting
Estimates
|
Amendments to IAS 1
|
Disclosure of Accounting
Policies
|
Amendments to IAS 12
|
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
|
Amendments to IAS 12
|
International Tax Reform - Pillar
Two Model Rules
|
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 cannot be reasonably assessed at this
stage.
|
|
|
New standards, amendments, and
improvements
|
Description
|
Effective date*
|
Amendments to IAS 1
|
Classification of liabilities as
Current or Non-current and Non-current Liabilities with
Covenants
|
1 January 2024
|
Amendments to IFRS 16
|
Lease Liability in a Sale and
Leaseback
|
1 January 2024
|
Amendments to IAS 7 and IFRS
7
|
Supplier Finance
Arrangements
|
1 January 2024
|
Amendments to IAS 21
|
Lack of exchangeability
|
1 January 2025
|
Amendments to IFRS 10 and IAS
28
|
Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
|
Pending
|
* 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
2023 was US$21.3 million (31 December 2022: net cash US$3.3
million). The Group's available undrawn facilities at 31 December
2023 amounted to US$45.9 million (31 December 2022:
US$82.6 million), resulting in liquidity (defined as net
debt/cash and available undrawn facilities) of US$24.6 million (31
December 2022: US$85.9 million). The gross liquidity position of
the Group (defined as gross cash and available undrawn facilities)
as at 31 December 2023 is US$62.4 million (31 December 2022:
US$91.3 million). The Group's Revolving Credit Facilities (RCF),
which total US$71.0 million when fully unutilised, mature on 22
December 2024. In addition, there is a US$5.5 million general
banking facility with no set expiry date, but is reviewed annually
(Refer Note 16, Interest-bearing loans and borrowings).The impacts
on future cash flows of Eskom's continued electricity outages, the
current diamond market conditions, the ongoing Russian invasion on
Ukraine and the conflict in Gaza, were considered by performing
sensitivities on costs, diamond pricing and the unlikely weakening
of the US dollar against the Lesotho loti.
The Group's RCFs mature on 22
December 2024. The existing facility agreement includes an option
to extend the facilities for a period of 24 months (subject to
lender approval). The Group may also decide to renew these
facilities for a potentially longer period of 36 months. These
facilities have been in place since 2011 and have been renewed on
three previous occasions through expanding the lender group and
increasing the overall facility amount. The Directors believe that
in considering the future cash flows, the long-standing
relationships with the wider lender group and the history of the
successful renewals of the facilities, it is more than likely that
the facilities be extended or renewed during 2024. In the unlikely
event that the RCFs are not renewed, the Directors believe that
various mitigation actions such as the deferment or further
optimisation of waste stripping activities could be implemented in
the short term.
After making enquiries which
include reviews of forecasts and budgets, timing of cash flows and
sensitivity analyses, the Group's operations and production levels,
the various cost reduction initiatives and considering the likely
successful renewal of the Group's RCFs, 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
2023.
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 mining assets within property, plant and equipment,
and amortised over the term of the permit.
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.
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
among others, 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 (ie, 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 where 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 of 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. Purchases or sales of financial
assets that require delivery of assets within a timeframe
established by regulation or convention in the marketplace (regular
way trades) are recognised on the trade date.
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
or 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.
1.2.11 Inventories
Inventories, which include rough
diamonds, ore stockpiles and consumables, are measured at the lower
of cost and net realisable value. The amount of any write-down of
inventories to net realisable value and all losses, is recognised
in the period the write-down or loss occurs. Cost is determined as
the average cost of production, using the weighted average method.
Cost includes directly attributable mining overheads, but excludes
borrowing costs.
Net realisable value is the
estimated selling price in the ordinary course of business, less
the estimated costs of completion and the estimated costs to be
incurred in marketing, selling and distribution.
The Group maintains strategic
stockpiles in line with operational and insurance requirements. In
normal mining activities, lower grade (highly diluted) ore is
consequentially mined and maintained in a separate stockpile.
Although this lower grade (highly diluted) stockpile could be
processed as emergency plant feed, it is likely that it will be
processed at the end of life of mine. As a result, the associated
mining costs for this stockpile are allocated at the net realisable
value and the balance of the costs are allocated to the Main pipe
strategic stockpiles.
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 at
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 as referred under Note1.2.26, Critical
accounting estimates and judgements.
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.
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 in the statement of
profit or loss when dividends or other services which give rise to
that withholding tax are declared or accrued respectively.
Withholding tax is disclosed as part of current tax.
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.
Royalties and revenue-based taxes
are accounted for under IAS 12 when they have the characteristics
of an income tax. This is considered to be the case when they are
imposed under government authority and the amount payable is based
on taxable income - rather than based on quantity produced or as a
percentage of revenue. For such arrangements, current and deferred
tax is provided on the same basis as described above for other
forms of taxation. The royalties incurred by the Group are
considered not to meet the criteria to be treated as part of income
tax.
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 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 (ie, 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 on 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 (ie, 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 expense 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.
1.2.21 Revenue from contracts with
customers
Revenue comprises net invoiced
diamond sales to customers excluding VAT. Diamond sales are made
through a competitive tender process 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). 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,
partnership agreements and joint operation arrangements;
· polished diamonds and other products which are sold through
direct sales channels;
· additional uplift (on the value from rough to polished) on
partnership arrangements; and
· additional uplift (on the value from rough to polished) on
joint operation arrangements.
The sale of rough diamonds is the
core business of the Group, with other revenue streams contributing
marginally to total revenue.
Revenue through partnership
arrangements is recognised for the sale of the rough diamond, with
an additional uplift based on the polished margin achieved.
Management 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. This variable
consideration will generally be significantly constrained. This is
on the basis that the ultimate additional uplift received will
depend on a range of factors that are highly susceptible to factors
outside the Group's influence. Management 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.
Rendering of services
Revenue from services relating to
third-party diamond manufacturing is recognised in the accounting
period in which the services are rendered, when the Group's
performance obligations have been satisfied, at an amount that the
Group expects to be entitled to in exchange for the
services.
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.
Task Force on Climate-related
Financial Disclosures (TCFD)
In preparing the Consolidated
Financial Statements management continues to consider the impact of
climate change, particularly in the context of the disclosures
included in the Strategic Report detailing the now implemented 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 March 2025, after which management will
assess the impact on the Group's going concern. 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 on
reducing 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, viability assessment and
impairment review.
The ongoing Russian invasion of
Ukraine and the conflict in Gaza
The supply chain challenges caused
by the ongoing 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. The slowdown of global
economic growth in 2023 was further impacted by the conflict in
Gaza that began in October 2023 and the subsequent attacks launched
by Yemen's Houthi rebels on cargo vessels in the Red Sea at the
start of 2024. The diamond industry has suffered in the face of
these challenges. Management has incorporated the impact of the
current and historical diamond prices, increased costs and current
inflation when assessing its future cash flows.
Insourcing of the mining
activities
Matekane Mining Investment Company
(Proprietary) Limited (MMIC) has been the provider of mining
services to Letšeng since 2005. Following the election of Mr Sam
Matekane (the ultimate owner of MMIC) as Prime Minister of Lesotho
in October 2022, Letšeng carefully considered its options to
resolve the potential conflict of interest created by being in a
business relationship with a politically exposed person. This
transition to owner mining further creates an opportunity for
Letšeng to maximise mining efficiencies, reduce costs through
eliminating contractor margins, manage mining procurement directly
and enables further flexibility in the planning and execution of
its mining activities. All these factors will contribute to a more
efficient and cost effective operation. Effective 1 December 2023,
Letšeng reached agreement with MMIC to early terminate the mining
equipment and service lease contract, eleven months ahead of its
scheduled contractual end date (31 October 2024) without any
termination penalties and insourced these activities. Letšeng
acquired the mining fleet and support equipment that was used
exclusively for Letšeng, and offered employment to those MMIC
employees working exclusively for Letšeng, in line with operational
requirements, effective 1 February 2024. The MMIC employees
remained as contract workers from 1 December 2023.
The total purchase price, which was
determined with the assistance of external third-party
valuators,was US$22.7 million. A payment mechanism was agreed
whereby US$13.0 million was paid on 1 December 2023, the effective
date, US$9.3 million was paid in January 2024, and a retainer of
US$0.4 million, withheld for equipment under repair was paid in
early March 2024. The US$9.7 million portion of the purchase price
not settled in cash on the effective date of the acquisition has
been presented as part of current trade and other payables in the
consolidated statement of financial position.
In assessing whether this
transaction met the criteria of an asset acquisition or a business
combination, the criteria set out in IFRS 3 Business Combinations
was considered. Management opted to apply the optional test, being
a concentration test, which permits a simplified quantitative
assessment of whether an acquired set of activities and assets is
not a business. Based on the results from the concentration test,
the Group concluded that the acquisition is not a business
combination but rather an asset acquisition due to substantially
all the fair value of the gross assets acquired being concentrated
into a group of similar identifiable assets which are the same in
nature and exposed to the same risk in terms of managing and
creating outputs from the mining activities at Letšeng. The total
purchase price was allocated to all the identifiable IAS 16
Property, plant and equipment assets acquired on the basis of their
relative fair values at the effective date of the acquisition. The
capitalised total purchase price has been disclosed as additions
within Note 8, Property, plant and equipment mainly within the
plant and equipment category amounting to US$22.7 million. Directly
attributable transaction costs of US$0.1 million were allocated to
all of the individual identifiable IAS 16 Property, plant and
equipment assets acquired on the basis of their relative fair
values at the effective date of the acquisition. These assets will
be depreciated over the useful life of each asset based on the
available production hours. The financial results for 31 December
2023 includes one month of depreciation. The US$13.0 million
portion of the purchase price and the directly attributable
transaction costs of US$0.1 million that were settled in cash
during the current financial reporting period have been presented
in the purchase of property, plant and equipment line item within
cash flows used in investing activities.
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
Impairment reviews
The Group determines if goodwill
is impaired at least on an annual basis, while all other
significant operations are tested for impairment when there are
potential indicators which may require impairment review. This
requires an estimation of the recoverable amount of the relevant
CGU under review. 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 mine sites 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 to 2038 (2022: 2040). The earlier life
was mainly as a result of a redesign of the Main pit.
Cost and inflation rate
Operating costs for Letšeng are
determined based on management's experience and the use of
contractors over a period of time whose costs are fairly reasonably
determinable. Mining costs have been based on owner-mining
assumptions and estimates, following the insourcing of the mining
activities, and are lower than in the past due to an immediate
saving of contractor margin costs. Processing costs in the short
term have been based on historical trends and agreements with
relevant contractors. More recently there has been a significant
focus on cost efficiencies in the processing plants, which have
yielded positive results consistently for two months. These costs
have been reduced to recently achieved levels from 2025. In the
longer term, management has applied local inflation rates of 5.0%
(2022: 5.0%) for operating costs beyond 2026. Up to 2026, inflation
rates applied ranged between 5.4% - 8.9% (2022: 5.5% -
8.9%).
Capital costs for the first five
years have been based on management's capital programme after which
a fixed percentage of operating costs has been applied 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 2023 of LSL18.29 (31 December 2022:
LSL17.02).
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 and
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 10.4% for
revenue (2022: 12.5%) and 12.4% for costs (2022: 15.4%) 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.
Market capitalisation
In the instance where the Group's
asset carrying values exceed market capitalisation, this results in
an indicator of impairment. The Group believes that this position
does not represent an impairment as all significant operations were
assessed for impairment during the year and no impairments were
recognised.
Sensitivity
The value in use for Letšeng
indicated sufficient headroom, and the 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;
· concurrent rehabilitation of the waste rock dump and residue
storage facilities will take place during the operational phase;
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 new 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. 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
ensure appropriate tax planning 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 of that
cut/component. Refer Note 8, Property, plant and equipment.8,
Property, plant and equipment.
Share-based payments
Judgement is applied by management
in determining whether the share options relating to employees who
resigned before the end of the service condition period have been
cancelled or forfeited in light of their leaving status. Where
employees do not meet the requirements of a good leaver as per the
rules of the long-term incentive plan (LTIP), no award will vest
and this will be treated as cancellation by forfeiture. The
expenses relating to these charges previously recognised are then
reversed. Where employees do meet the requirements of a good leaver
as per the rules of the LTIP, some or all of an award will vest and
this will be treated as a modification to the original award. The
future expenses relating to these awards are accelerated and
recognised as an expense immediately. Refer Note 26, Share-based
payments, for further detail.
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 2024, with support from senior legal counsel.
Management do not believe 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, 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 has been raised in the 2023 Annual
Financial Statements.
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 asset 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 legal 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 purely subject 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.
Equipment and service
lease
Prior to the insourcing of
Letšeng's mining activities on 1 December 2023, these activities
were outsourced to a mining contractor, MMIC, that performed these
functions using their own equipment. Management applied judgement
when evaluating whether the contract between Letšeng and MMIC
contained a lease. While it was concluded there was a lease, lease
payments were variable in nature as the lease payments varied based
on the tonnes of ore and waste mined and hence no right of use
asset or liability could be measured. From the beginning of the
current year until 1 December 2023, a portion of the lease payment
was expensed in the consolidated statement of profit or loss, and
the portion relating to waste removal/stripping costs was
capitalised to the waste stripping asset in the proportions
referred to under the estimate and judgements applied to the
capitalised stripping costs (deferred waste) above. Refer Note
1.2.26, Critical accounting estimates and judgements, Capitalised
stripping costs (deferred waste) and Note 23, Commitments and
contingencies.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
2.
|
REVENUE FROM CONTRACTS WITH
CUSTOMERS
|
|
|
|
Sale of goods
|
139 433
|
188 615
|
|
Partnership arrangements
|
854
|
306
|
|
Rendering of services
|
-
|
16
|
|
|
140 287
|
188 937
|
The revenue from the sale of goods
mainly represents the sale of rough diamonds, for which revenue is
recognised at the point in time at which control
transfers.
The revenue from partnership
arrangements of US$0.9 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 (2022:
US$0.3 million). At year end 1 728 carats (2022: 1 457 carats)
have significant constraints in recognising revenue relating to the
additional uplift.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
3.
|
OTHER OPERATING
INCOME/(EXPENSES)
|
|
|
|
Sundry income
|
206
|
61
|
|
Ghaghoo reduction in rehabilitation
provision
|
354
|
-
|
|
Proceeds from insurance
claim1
|
1 030
|
-
|
|
Proceeds from VAT
refund2
|
251
|
-
|
|
Ghaghoo care and maintenance
costs3
|
(1 809)
|
(2 053)
|
|
(Loss)/profit on disposal and
scrapping of property, plant and equipment
|
(22)
|
195
|
|
COVID-19 related costs
|
(3)
|
(140)
|
|
|
7
|
(1 937)
|
1 Proceeds from insurance claim includes a payout of US$1.0
million for a claim on diesel theft at Letšeng which occurred
between June 2020 and June 2021.
2 Proceeds from VAT refund relates to long-outstanding VAT
refunds received from the Revenue Service of Lesotho which had been
previously written off at Letšeng.
3 Includes depreciation recognised in the current year of
US$10.0 thousand (31 December 2022: US$80.0 thousand) relating to
right of use assets.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'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
|
(5 423)
|
(6 588)
|
|
Depreciation of right-of-use
assets
|
(1 892)
|
(1 818)
|
|
Waste stripping costs
amortised
|
(39 194)
|
(36 285)
|
|
|
(46 509)
|
(44 691)
|
|
Inventories
|
|
|
|
Cost of inventories recognised as an
expense (including the relevant portion of waste stripping costs
amortised)
|
(102 204)
|
(116 382)
|
|
Foreign exchange
|
|
|
|
Foreign exchange gain
|
2 775
|
1 914
|
|
Lease expenses not included in lease
liability
|
|
|
|
Mine site property
|
(152)
|
(142)
|
|
Equipment and service
lease
|
(9 728)
|
(11 154)
|
|
Contingent rental - Alluvial
Ventures
|
-
|
(3 556)
|
|
|
(9 880)
|
(14 852)
|
|
Impairment of non-current
assets
|
-
|
(702)
|
|
|
|
|
|
Auditor's remuneration -
EY
|
|
|
|
Group financial
statements
|
(328)
|
(411)
|
|
Statutory
|
(161)
|
(242)
|
|
|
(489)
|
(653)
|
|
Auditor's remuneration - other audit
firms
|
|
|
|
Statutory
|
(92)
|
(26)
|
|
Other non-audit fees - EY
|
|
|
|
Other services
|
(7)
|
(56)
|
|
Other non-audit fees - other audit
firms
|
|
|
|
Tax services advisory and
consultancy
|
(31)
|
(74)
|
|
Employee benefits expense
|
|
|
|
Salaries and
wages2
|
(14 386)
|
(17 239)
|
|
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
|
10 380
|
34 521
|
|
Other operating
(income)/expenses3
|
(20)
|
1 718
|
|
Impairment of non-current
assets
|
-
|
702
|
|
Foreign exchange gain
|
(2 775)
|
(1 914)
|
|
Share-based payments
|
332
|
253
|
|
Depreciation and amortisation
(excluding waste stripping cost amortised)
|
7 315
|
8 406
|
|
Underlying EBITDA
|
15 232
|
43 686
|
1 Includes depreciation for the
month of December, of US$0.2 million, relating to the mining fleet
and support equipment, acquired as part of the insourcing of
the mining activities. Refer Note 1.2.26, Critical accounting
estimates and judgements.
2 Includes contributions to
defined contribution plan of US$0.4 million (31 December 2022:
US$0.5 million). An average of 313 employees excluding contractors
were employed during the period (2022: 370).
3 Excludes COVID-19-related costs of US$3.3 thousand (31
December 2022: US$0.1 million) which are considered as operating
costs. Includes Ghaghoo-related care and maintenance costs of
US$1.8 million (31 December 2022: US$2.1 million), and an insurance
payout of US$1.0 million for a claim on diesel theft at Letšeng,
which are considered non-operating.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
5.
|
NET FINANCE COSTS
|
|
|
|
Finance income
|
|
|
|
Bank deposits
|
292
|
303
|
|
Insurance asset
|
325
|
110
|
|
Total finance income
|
617
|
413
|
|
Finance costs
|
|
|
|
Finance costs on
borrowings
|
(3 332)
|
(2 552)
|
|
Finance costs on lease
liabilities
|
(497)
|
(666)
|
|
Finance costs on unwinding of
rehabilitation and decommissioning provision
|
(1 484)
|
(1 284)
|
|
Total finance costs
|
(5 313)
|
(4 502)
|
|
|
(4 696)
|
(4 089)
|
Finance income relates to interest
earned on cash, short-term deposits and insurance
assets.
Finance costs include interest
incurred on borrowings and associated unwinding of facility credit
underwriting fees, finance lease liabilities and the unwinding of
rehabilitation provisions.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
6.
|
INCOME TAX EXPENSE
|
|
|
|
Current
|
|
|
|
- Foreign
|
(909)
|
(6 054)
|
|
Withholding tax
|
|
|
|
- Foreign
|
-
|
(1 356)
|
|
- Foreign: prior year over
payment2
|
596
|
-
|
|
Deferred
|
|
|
|
- Foreign
|
(3 777)
|
(2 867)
|
|
Income tax expense
|
(4 090)
|
(10 277)
|
|
Profit before taxation
|
5 684
|
30 432
|
|
|
|
|
|
|
%
|
%
|
|
Reconciliation of tax
rate
|
|
|
|
Applicable income tax
rate
|
25.0%
|
25.0%
|
|
Permanent
differences1
|
5.4%
|
0.4%
|
|
Unrecognised deferred tax
assets
|
32.9%
|
6.4%
|
|
Effect of foreign tax at different
rates3
|
19.2%
|
2.8%
|
|
Unremitted
earnings4
|
-%
|
(5.3)%
|
|
Withholding tax4
|
-%
|
4.5%
|
|
Withholding tax: prior year over
payment2
|
(10.5)%
|
-%
|
|
Effective income tax rate
|
72.0%
|
33.8%
|
|
|
|
|
|
The tax rate reconciles to the
statutory Lesotho corporation tax rate of 25% as this is the
jurisdiction in which the majority of the Group's taxes are
incurred.
|
|
|
|
|
1 This
item relates to withholding tax previously overpaid and refunded in
full in the current year by the Revenue Services Lesotho after
acknowledgment thereof.
2 Permanent differences comprise non-deductible expenses for
tax purposes, namely corporate social investment, legal fees of a
capital nature and share-based payments in both the current and
prior year.
3 Includes provision for uncertain tax positions. Refer Note
23 Commitments and contingencies.
4 These
amounts were disclosed on a net basis in the prior year and have
been disaggregated and disclosed separately in the current year and
had no impact in the consolidated financial statements of the
Group.
The corporate income tax rate in
the United Kingdom was increased from 19% to 25% for companies
effective from 1 April 2023. This is applicable to Gem Diamonds
Limited, the Groups' parent company. This increase did not have a
material impact on the Group.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'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
|
1 594
|
20 155
|
|
Less: Non-controlling
interests
|
(3 719)
|
(9 977)
|
|
Net (loss)/ profit attributable to
ordinary equity holders of the parent for basic and diluted
earnings
|
(2 125)
|
10 178
|
|
Number of ordinary shares
outstanding at end of year ('000)
|
141 210
|
140 923
|
|
Weighted number of share options
exercised during the year ('000)
|
(161)
|
(145)
|
|
Effect of share buyback - Treasury
shares ('000)
|
(1 520)
|
(977)
|
|
Weighted average number of ordinary
shares outstanding during the year ('000)
|
139 529
|
139 801
|
|
Basic (loss)/earnings per share
attributable to ordinary equity holders of the parent
(cents)
|
(1.5)
|
7.3
|
(Loss)/earnings per share is
calculated by dividing the net (loss)/profit attributable to
ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year.
Diluted (loss)/earnings per share
is calculated by dividing the net (loss)/profit 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.
|
|
|
|
|
|
2023
|
2022
|
|
|
Number of
shares
000's
|
Number of
shares
000's
|
|
Weighted average number of ordinary
shares outstanding during the year
|
139 529
|
139 801
|
|
Effect of dilution:
|
|
|
|
- Future share awards under the
Employee Share Option Plan
|
2 509
|
1 857
|
|
Weighted average number of ordinary
shares outstanding during the year adjusted for the effect of
dilution
|
142 038
|
141 658
|
|
Diluted (loss)/earnings per share
attributable to ordinary equity holders of the parent
(cents)
|
(1.5)
|
7.2
|
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-
commis-
sioning assets
|
Lease-
hold
improve-
ment
|
Plant and equip-
ment3
|
Other assets1
|
Total
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
As at 31 December 2023
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
As at 1 January 2023
|
609 336
|
103 972
|
3 519
|
53 740
|
89 292
|
8 521
|
868 380
|
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
|
107 317
|
9 336
|
875 999
|
Accumulated
depreciation/amortisation/impairment
|
|
|
|
|
|
|
|
As at 1 January 2023
|
425 316
|
42 564
|
3 519
|
33 140
|
63 727
|
6 615
|
574 881
|
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
|
61 772
|
6 418
|
580 169
|
Net book value at 31 December
2023
|
167 218
|
61 801
|
-
|
18 348
|
45 545
|
2 918
|
295 830
|
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. Refer Note
1.2.26 Critical accounting estimates and
judgements.
3 Included in plant and equipment are capital projects in
progress of US$4.1 million (31 December 2022: US$14.4
million).
|
|
|
|
|
|
|
|
|
Stripping activity asset
|
Mining asset
|
De-
commis-
sioning assets
|
Lease-
hold
improve-
ment
|
Plant and equip-
ment
|
Other assets1
|
Total
|
As at 31 December 2022
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
Balance at 1 January 2022
|
599 558
|
107 999
|
3 769
|
51 418
|
74 504
|
7 304
|
844 552
|
Additions - Ghaghoo (Note
15)
|
-
|
585
|
-
|
6 135
|
10 594
|
1 240
|
18 554
|
Additions
|
47 948
|
242
|
-
|
-
|
11 391
|
287
|
59 868
|
Net movement in rehabilitation
provision
|
858
|
-
|
-
|
(307)
|
(266)
|
-
|
285
|
Disposals
|
-
|
-
|
-
|
-
|
(23)
|
(116)
|
(139)
|
Reclassifications
|
-
|
262
|
-
|
113
|
(685)
|
310
|
-
|
Foreign exchange
differences
|
(39 028)
|
(5 116)
|
(250)
|
(3 619)
|
(6 223)
|
(504)
|
(54 740)
|
As at 31 December 2022
|
609 336
|
103 972
|
3 519
|
53 740
|
89 292
|
8 521
|
868 380
|
Accumulated depreciation/
amortisation/impairment
|
|
|
|
|
|
|
|
As at 1 January 2022
|
414 706
|
44 874
|
3 769
|
26 648
|
55 544
|
5 384
|
550 925
|
Additions - Ghaghoo (Note
15)
|
-
|
585
|
-
|
5 567
|
9 746
|
1 243
|
17 141
|
Charge for the year
|
36 080
|
958
|
-
|
2 925
|
2 388
|
522
|
42 873
|
Impairment2
|
-
|
-
|
-
|
161
|
541
|
-
|
702
|
Disposals
|
-
|
-
|
-
|
-
|
(21)
|
(116)
|
(137)
|
Foreign exchange
differences
|
(25 470)
|
(3 853)
|
(250)
|
(2 161)
|
(4 471)
|
(418)
|
(36 623)
|
As at 31 December 2022
|
425 316
|
42 564
|
3 519
|
33 140
|
63 727
|
6 615
|
574 881
|
Net book value at 31 December
2022
|
184 020
|
61 408
|
-
|
20 600
|
25 565
|
1 906
|
293 499
|
1 Other assets comprise motor vehicles, computer equipment,
furniture and fittings, and office equipment.
2 The
impairment relates to the assets impaired at Gem Diamonds Botswana
(Proprietary) Limited (Ghaghoo Diamond Mine) following it ceasing
to be classified as a discontinued operation held for sale during
the prior year. The recoverable amount of all items of property,
plant and equipment at Ghaghoo was assessed and an impairment
charge of US$0.7
million was recognised, reducing
the carrying value of the leasehold improvements and plant and
equipment categories to zero. This impairment has been included in
the Botswana segment in Note 1.1.3, Segment information.
|
|
|
|
|
|
|
|
|
|
|
Plant and equipment
|
Motor vehicles
|
Buildings
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
US$'000
|
9.
|
RIGHT-OF-USE ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
As at 31 December 2022
|
|
|
|
|
|
Cost
|
|
|
|
|
|
As at 1 January 2022
|
56
|
94
|
5 761
|
5 911
|
|
Additions
|
3 259
|
384
|
1 644
|
5 287
|
|
Derecognition of lease
|
(27)
|
(38)
|
(672)
|
(737)
|
|
Foreign exchange
differences
|
(98)
|
(19)
|
(303)
|
(420)
|
|
As at 31 December 2022
|
3 190
|
421
|
6 430
|
10 041
|
|
Accumulated depreciation
|
|
|
|
|
|
As at 1 January 2022
|
20
|
63
|
2 691
|
2 774
|
|
Charge for the year
|
695
|
96
|
1 027
|
1 818
|
|
Derecognition of lease
|
(24)
|
(38)
|
(672)
|
(734)
|
|
Foreign exchange
differences
|
(3)
|
(6)
|
(148)
|
(157)
|
|
As at 31 December 2022
|
688
|
115
|
2 898
|
3 701
|
|
Net book value at 31 December
2022
|
2 502
|
306
|
3 532
|
6 340
|
Plant and equipment mainly comprise
back-up power generating equipment utilised at Letšeng. Motor
vehicles mainly comprise vehicles utilised by contractors at
Letšeng. Buildings comprise office buildings in Maseru, Antwerp,
London, Gaborone and Johannesburg.
Right-of-use assets are depreciated
on a straight-line basis over the shorter of its estimated useful
life and the lease term.
During the year, Gem Diamonds
Limited entered into a new contract for the rental of its London
office space as the original lease came to an end. At Letšeng, the
lease contract for certain assets relating to blasting services was
renegotiated resulting in the recognition of associated
right-of-use assets and lease liabilities. The original contract
was cancelled and all associated assets and liabilities were
derecognised. Furthermore, two new contracts were entered into for
the rental of earth-moving equipment and certain assets relating to
catering, housekeeping and laundry services. Both contracts were
assessed as containing a lease resulting in the recognition of the
new associated right-of-use assets and lease liabilities. Refer
Note 17, Lease liabilities.
During the prior year, a new lease
contract for back-up power generating equipment at Letšeng was
entered into resulting in the recognition of right-of-use assets
and lease 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 as the
original contracts both came to an end. The new contracts were
assessed as containing leases, which resulted in the recognition of
the new associated right-of-use assets and lease liabilities. Refer
Note 17, Lease liabilities and Note 22.1, Cash generated by
operations.
Total gains of US$30 thousand
(2022: nil) 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 (2022: US$0.3 million) from the
sub-leasing of office buildings in Maseru. The Group expects to
receive the following lease payments from the operating sub-leasing
in future
years in line with current lease
terms:
|
|
|
US$ '000
|
1 January 2024 - 31 December
2024
|
340
|
1 January 2025 - 31 December
2025
|
205
|
|
|
|
|
|
Goodwill1
|
|
|
US$'000
|
10.
|
INTANGIBLE ASSETS
|
|
|
As at 31 December 2023
|
|
|
Cost
|
|
|
Balance at 1 January 2023
|
11 221
|
|
Foreign exchange translation
difference
|
(781)
|
|
Balance at 31 December
2023
|
10 440
|
|
Accumulated amortisation
|
|
|
Balance at 1 January 2023
|
-
|
|
Amortisation
|
-
|
|
Balance at 31 December
2023
|
-
|
|
Net book value at 31 December
2023
|
10 440
|
|
As at 31 December 2022
|
|
|
Cost
|
|
|
Balance at 1 January 2022
|
11 962
|
|
Foreign exchange translation
difference
|
(741)
|
|
Balance at 31 December
2022
|
11 221
|
|
Accumulated amortisation
|
|
|
Balance at 1 January 2022
|
-
|
|
Amortisation
|
-
|
|
Balance at 31 December
2022
|
-
|
|
Net book value at 31 December
2022
|
11 221
|
1 Goodwill allocated to Letšeng
Diamonds. Refer Note 11, Impairment testing.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'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 2023. 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 2023, 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
|
10 440
|
11 221
|
|
As at 31 December 2023
|
10 440
|
11 221
|
|
|
|
|
| |
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 represents the nominal pre-tax rate. 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.
|
|
|
|
|
|
2023
|
2022
|
|
|
%
|
%
|
|
Discount rate - Letšeng
Diamonds
|
|
|
|
Applied to revenue
|
10.4
|
12.5
|
|
Applied to costs
|
12.4
|
15.4
|
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 latest 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 2038 (31
December 2022: 2040). In terms of IAS 36, cash flows are projected
for a period up to the date of the life of mine plan period, ie
2038, as it is earlier than the ceasing of the current mining lease
period of 2039. During the prior period the IAS 36 cash flows were
projected for a period up to the end of the mining lease period of
2039 as it was earlier than the life of mine plan period which was
up to 2040. 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) and steeper slope angles implemented in
the Main pit Cut 4 East and Cut 4 West cutbacks. The cost savings
associated with the recently concluded owner-mining initiative have
been included in the value-in-use model. Refer Note1.2.26, 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
of market supply/demand fundamentals. The valuation of Letšeng at
31 December 2023 exceeded the carrying value by US$63.3 million (31
December 2022: US$92.2 million). The valuation is sensitive to
input assumptions particularly in relation to the foreign exchange
assumption of the US dollar (US$) to the Lesotho loti (LSL) at year
end, future price growth for diamonds and increase in operating
costs. 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, operating costs and
diamond prices, which would result in the recoverable amount
equating to the carrying amount. A 7% strengthening of the LSL to
the US$ to US$1:LSL17.00 (31 December 2022: 8% to US$1:LSL15.60) or
a reduction of 5.0% (31 December 2022: 6.5%) to the starting
diamond prices (at year end exchange rate) would result in the
recoverable amount equating to the current carrying value, with
other valuation assumptions remaining the same. As a result of the
variability in consumable prices such as diesel and explosive
costs, a third sensitivity on changes in costs was performed. An 8%
(31 December 2022: 8%) increase in current estimated operating
costs of US$1.7 billion (31 December 2022: US$2.5 billion) over the
life of mine would result in the recoverable amount equating to the
current carrying amount, with other valuation assumptions remaining
the same.
As a result, no impairment charge was
recognised for the Letšeng Diamonds CGU during the year.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
12.
|
RECEIVABLES AND OTHER
ASSETS
|
|
|
|
Non-current
|
|
|
|
Deposits
|
90
|
96
|
|
Insurance asset1
|
4 397
|
2 820
|
|
|
4 487
|
2 916
|
|
Current
|
|
|
|
Trade receivables
|
23
|
23
|
|
Prepayments2
|
1 249
|
1 350
|
|
Deposits
|
24
|
21
|
|
Other receivables
|
374
|
249
|
|
Vat receivable
|
1 961
|
3 212
|
|
|
3 631
|
4 855
|
|
The carrying amounts above
approximate their fair value due to the nature of the
instruments.
|
|
|
|
Analysis of trade receivables based
on their terms and conditions
|
|
|
|
Neither past due nor
impaired
|
2
|
-
|
|
Past due but not
impaired:
|
|
|
|
> 120 days
|
21
|
23
|
|
|
23
|
23
|
1 This
non-current asset relates to Letšeng's Multi-aggregate Protection
Insurance Policy with The Lesotho National Insurance Group (LNIGC)
of M140.0 million (US$7.7 million) (31 December 2022: LSL140.0
million) entered into in October 2021. This policy has a remaining
tenure of two-and-a-half years at year end (31 December 2022:
three-and-a-half-years). Premium payments of LSL30.0 million
(US$1.6 million) (31 December 2022: LSL30.0 million (US$1.8
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 2022: LSL75.0
million) for each-and-every-loss and LSL150.0 million (31 December
2022: 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 2022: 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 third
premium payment of LSL 30.0 million (US$1.6 million) (31 December
2022: LSL30.0 million (US$1.8 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 Prepayments include insurance premiums prepaid at Letšeng of
US$0.4 million (31 December 2022: US$0.4 million) which were also
funded through Premium Finance Partners (Proprietary) Limited. This
prepayment is ceded in favour of Premium Finance Partners
(Proprietary) Limited. Refer Note 16, Interest-bearing loans and
borrowings.
Based on the nature of the Group's
customer base and the negligible exposure to credit risk through
its customer base, insurance asset and other financial assets, the
expected credit loss is insignificant and has no impact on the
Group.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
13.
|
INVENTORIES
|
|
|
|
Diamonds on hand
|
17 128
|
16 745
|
|
Ore stockpile
|
11 553
|
5 053
|
|
Consumable stores
|
8 952
|
8 572
|
|
|
37 633
|
30 370
|
Inventory is carried at the lower
of cost or net realisable value.
There were no write-downs to net
realisable value recorded in the current year. In the prior year,
lower grade (highly diluted) ore stockpile inventory at Letšeng was
written down by US$1.5 million to net realisable
value.
Part of the ore stockpile was
historically treated by Alluvial Ventures, the third-party plant
contractor. This contract expired during the previous year and the
plant was dismantled, resulting in the stockpiles being treated at
a slower rate, causing the overall increase in the balance. Refer
Note 1.2.11, Inventories.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
14.
|
CASH AND SHORT-TERM
DEPOSITS
|
|
|
|
Cash on hand
|
3
|
4
|
|
Bank balances
|
5 101
|
6 006
|
|
Short term bank deposits
|
11 399
|
2 711
|
|
|
16 503
|
8 721
|
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 2023, the Group had
US$45.9 million (31 December 2022: US$82.6 million) of undrawn
facilities, representing LSL180.0 million (US$9.8 million) (31
December 2022: LSL450.0 million (US$26.5 million)) and ZAR120.0
million (US$6.6 million) (31 December 2022: ZAR300.0 million
(US$17.6 million)) of the three-year secured revolving working
capital facility at Letšeng, ZAR100.0 million (US$5.5 million) (31
December 2022: ZAR100.0 million (US$5.9 million) of the Letšeng
general banking facility, and US$24.0 million (31 December 2022:
US$30.0 million) of the Company's three-year secured revolving
credit facility. In the prior year there was also an amount of
ZAR43.5 million (US$2.6 million) undrawn facility relating to the
PCA project facility which had been fully drawn down in the current
year. For further details on these facilities, refer Note 16,
Interest-bearing loans and borrowings.
15. ISSUED
SHARE CAPITAL AND RESERVES
Share capital
|
|
|
|
|
|
|
|
31 December 2023
|
31 December 2022
|
|
|
Number
of shares
'000
|
US$'000
|
Number
of shares
'000
|
US$'000
|
|
Authorised - ordinary shares of
US$0.01 each
|
|
|
|
|
|
As at year end
|
200 000
|
2 000
|
200 000
|
2 000
|
|
Issued and fully paid balance at
beginning of year
|
140 923
|
1 410
|
140 515
|
1 406
|
|
Allotments during the
year
|
287
|
3
|
408
|
4
|
|
Number of ordinary shares
outstanding at end of year
|
141 210
|
1 413
|
140 923
|
1 410
|
|
Treasury shares
|
(1 520)
|
(1 157)
|
(1 520)
|
(1 157)
|
|
Balance at end of year
|
139 690
|
256
|
139 403
|
253
|
Share premium
Share premium comprises the excess
value recognised from the issue of ordinary shares above its par
value.
Other reserves
|
|
|
|
|
|
|
Foreign
currency
translation
reserve
|
Share-
based
equity
reserve
|
Total
|
|
|
US$'000
|
US$'000
|
US$'000
|
|
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)
|
|
As at 1 January 2022
|
(233 276)
|
6 579
|
(226 697)
|
|
Other comprehensive loss
|
(12 691)
|
-
|
(12 691)
|
|
|
|
|
|
|
Share capital issue
|
-
|
(4)
|
(4)
|
|
Share-based payment
expense
|
-
|
253
|
253
|
|
Transfer to (accumulated
losses)/retained earnings
|
-
|
(30)
|
(30)
|
|
As at 31 December 2022
|
(245 967)
|
6 798
|
(239 169)
|
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:
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
Currency
|
US$'000
|
US$'000
|
|
Average rate
|
ZAR/LSL to US$1
|
18.45
|
16.37
|
|
Year end
|
ZAR/LSL to US$1
|
18.29
|
17.02
|
|
Average rate
|
Pula to US$1
|
13.36
|
12.37
|
|
Year end
|
Pula to US$1
|
13.39
|
12.75
|
Share-based equity
reserves
For details on the share-based
equity reserve, refer Note 26, Share-based payments.
Capital management
For details on capital management,
refer Note 25, Financial risk management.
Treasury shares
During the previous year, 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 the prior year.
16. INTEREST-BEARING LOANS AND
BORROWINGS
Gem Diamonds Limited provides
security for both the Letšeng Diamonds and Gem Diamonds Limited RCF
facilities over its bank accounts domiciled in the United Kingdom
(US$1.4 million) (31 December 2022: US$4.6 million) and over its
70% shareholding in Letšeng Diamonds, refer Note 30. Material
partly owned subsidiary.
The interest-bearing loans and
borrowings subject to the US$ three-month LIBOR rate transitioned
to a Secured Overnight Financing Rate (SOFR) effective from 1
January 2023, in line with the IBOR phase 2 Amendments which became
effective in
2021. The South African JIBAR rates
are yet to transition to alternative benchmark rates at the
reporting period end. The interest-bearing loans and borrowings
that remain subject to the South African JIBAR rate include the
LSL132.0 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 2023 and their
carrying amounts and maturities as at 31 December 2023 are
disclosed in the note below.
|
|
|
|
|
|
|
|
Effective interest rate
|
Maturity
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
|
Non-current
|
|
|
|
|
|
LSL450.0 million and ZAR300.0
million bank loan facility
|
Central Bank of Lesotho rate + 3.25%
and South African JIBAR + 3.05%
|
|
-
|
-
|
|
Credit underwriting fees
|
|
22 December 2024
|
-
|
(327)
|
|
US$30.0 million bank loan
facility
|
Term SOFR + 5.26%
(2022: London US$ three-month LIBOR
+ 5.00%)
|
22 December 2024
|
-
|
-
|
|
Credit underwriting fees
|
|
|
-
|
(225)
|
|
ZAR132.0 million project debt
facility
|
South African JIBAR +
2.50%
|
31 May 2027
|
5 156
|
4 922
|
|
|
|
|
5 156
|
4 370
|
|
Current
|
|
|
|
|
|
LSL30.0 million insurance premium
finance
|
3.55%
|
Repaid 1 April 2023
|
-
|
719
|
|
ZAR2.5 million insurance premium
finance
|
3.55%
|
Repaid 1 April 2023
|
-
|
60
|
|
LSL10.9 million insurance premium
finance
|
3.55%
|
Repaid 1 May 2023
|
-
|
262
|
|
LSL30.0 million insurance premium
finance
|
4.20%
|
1 April 2024
|
671
|
-
|
|
ZAR2.5 million insurance premium
finance
|
4.30%
|
1 April 2024
|
55
|
-
|
|
LSL12.4 million insurance premium
finance
|
4.20%
|
1 April 2024
|
278
|
-
|
|
ZAR132.0 million project debt
facility
|
South African JIBAR +
2.50%
|
31 May 2027
|
2 062
|
534
|
|
LSL450.0 million and ZAR300.0
million bank loan facility
|
Central Bank of Lesotho rate + 3.25%
and South African JIBAR + 3.05%
|
|
24 632
|
-
|
|
Credit underwriting fees
|
|
22 December 2024
|
(175)
|
-
|
|
US$30.0 million bank loan
facility
|
Term SOFR + 5.26%
(2022: London US$ three-month LIBOR
+ 5.00%)
|
22 December 2024
|
6 000
|
-
|
|
Credit underwriting fees
|
|
|
(112)
|
-
|
|
|
|
|
33 411
|
1 575
|
LSL450.0 million and ZAR300.0
million (US$41.0 million) bank loan facility at Letšeng
Diamonds
The Group, through its subsidiary
Letšeng Diamonds, has a LSL450.0 million and ZAR300.0 million
(US$41.0 million) three-year revolving credit facility jointly with
Nedbank Lesotho Limited, Standard Lesotho Bank Limited, First
National Bank of Lesotho Limited, Firstrand Bank Limited (acting
through its Rand Merchant Bank division) and Nedbank Limited
(acting through its Nedbank Corporate and Investment Banking
division).
The facility is secured and expires
on 22 December 2024, and has therefore been recorded as a current
liability. The facility has a 24-month extension option which can
be exercised at any time up to 21 September 2024, being three
months before expiry, and is subject to credit approval by the
lenders at the extension date. 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%. At year end LSL270.0 million (US$14.8 million) and
ZAR180.0 million (US$9.8 million) had been drawn down resulting in
LSL180.0 million (US$9.8 million) and ZAR120.0 million (US$6.6
million) remaining available. At 31 December 2022, there were no
drawdowns on these facilities.
The remaining balance of the credit
underwriting fees capitalised is US$0.2 million (31 December 2022:
US$0.3 million). The capitalised fees are amortised and accounted
for as finance costs within profit or loss over the period of the
facility.
US$30.0 million bank loan facility
at Gem Diamonds Limited
This facility is a secured
three-year 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.
The facility is secured and expires
on 22 December 2024, and has therefore been recorded as a current
liability. The facility has a 24-month extension option which can
be exercised at any time up to 21 September 2024, being three
months before expiry, and is subject to credit approval by the
lenders at the extension date.
At year end US$6.0 million
(31 December 2022: nil) had been drawn down resulting in
US$24.0 million (31 December 2022: US$30.0 million) remaining
available. The remaining balance of the credit underwriting fees
capitalised is US$0.1 million (31 December 2022: US$0.2 million) at
year end. The capitalised fees are amortised and accounted for as
finance costs within profit or loss over the period of the
facility.
The US$-based interest rate for
this facility at 31 December 2023 was 10.65% (31 December 2022:
8.67%) which comprises term SOFR plus a 0.26% credit adjustment
spread and 5.00% margin (31 December 2022: US$ three-month LIBOR
plus 5.00% margin).
Total interest for the year on this
interest-bearing RCF was US$0.9 million (31 December 2022: US$1.1
million).
The facility includes an additional
US$20.0 million accordion option for Gem Diamonds, 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$7.2
million) project debt facility at Letšeng Diamonds
This loan is an unsecured project
debt facility which was signed jointly with Nedbank Limited and the
ECIC on 29 November 2022 to fund the replacement of the primary
crushing area (PCA) at Letšeng. The loan is repayable in equal
quarterly payments commencing in March 2024. The total project debt
facility initially available on the effective date (29 November
2022) was ZAR136.4 million (US$7.5 million), which is the
amount that was previously disclosed at 31 December 2022.
Utilisation of the project debt facility amounted to
ZAR132.0 million (US$7.2 million) at the end of the
availability period on 29 November 2023 and the remaining available
balance expired on the same date. This loan expires on 27 May
2027.
The South African rand-based
interest rates for the facility at 31 December 2023 was 10.90%
which comprises JIBAR plus 2.50%.
Total interest for the year on this
interest-bearing loan was US$0.7 million (31 December 2022: US$15.6
thousand). The interest has been capitalised as part of the
qualifying PCA asset included within the plant and equipment asset
class within Note 8, Property, plant and equipment. The PCA asset
was successfully commissioned in November 2023.
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 May 2023. The total interest paid during the
current year relating to these liabilities was LSL0.3 million
(US$16.2 thousand).
In June, 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 third 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$70.5 thousand) of
which LSL1.0 million (US$54.2 thousand) was paid during the
year.
In July, the Group through its
subsidiary Letšeng Diamonds, entered into a LSL12.4 million (US$0.7
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 LSL5.2 million
(US$0.3 million) remains outstanding. The funding is repayable in
10 monthly instalments, payable in advance. Total interest on this
funding is LSL0.5 million (US$27.1 thousand) of which LSL0.4
million (US$21.6 thousand) was paid during the year.
Other facilities
Letšeng Diamonds has a
ZAR100.0 million (US$5.5 million) general banking facility
with Nedbank Limited (acting through its Nedbank Corporate and
Investment Banking division) which is reviewed annually. During the
year the facility was utilised from time to time based on cash flow
requirements, but repaid in full at year end.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
17.
|
LEASE LIABILITIES
|
|
|
|
Non-current
|
3 786
|
6 021
|
|
Current
|
2 164
|
1 877
|
|
Total lease liabilities
|
5 950
|
7 898
|
|
|
|
|
|
Reconciliation of movement in lease
liabilities
|
|
|
|
As at 1 January
|
7 898
|
4 824
|
|
Additions
|
1 132
|
5 287
|
|
Interest expense
|
497
|
666
|
|
Lease payments
|
(2 589)
|
(2 512)
|
|
Derecognition of lease
|
(519)
|
-
|
|
Foreign exchange
differences
|
(469)
|
(367)
|
|
As at 31 December
|
5 950
|
7 898
|
Lease payments comprise payments in
principle of US$2.1 million (31 December 2022: US$1.8 million) and
repayments of interest of US$0.5 million (31 December 2022: US$0.7
million).
During the year, the Group
recognised variable lease payments of US$31.6 million (31 December
2022: US$39.5 million), which consist of mining activities
outsourced to a mining contractor, prior to the transition to
insourcing of mining activities effective 1 December 2023. Total
costs incurred for the year amounted to US$31.6 million (31
December 2022: US$39.5 million) of which US$21.9 million (31
December 2022: US$28.4 million) were capitalised to the Stripping
Asset. Refer Note 1.2.6, Property plant and equipment, Note 1.2.26,
Critical accounting estimates and judgements, Equipment and service
lease, Note 4, Operating profit and Note 8, Property, plant
and equipment.
During the year, the lease contract
for blasting services at Letšeng was renegotiated resulting in the
recognition of new associated right-of-use assets and lease
liabilities. The original contract was cancelled and all associated
assets and liabilities were derecognised.
During the prior year, a new lease
contract for backup power generating equipment at Letšeng was
entered into. This lease contains residual value guarantees of
US$37.7 thousand (31 December 2022: US$42.5 thousand) which
represents the cost to decommission and return the power generating
equipment to the supplier at the end of the lease term. Refer Note
9, Right-of-use assets for details on new leases entered into and leases derecognised
during the year.
No rental expenses from short-term
leases were incurred by the Group during the year (31 December
2022: US$61.8 thousand).
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
18.
|
TRADE AND OTHER PAYABLES
|
|
|
|
Non-current
|
|
|
|
Severance pay
benefits1
|
1 494
|
2 169
|
|
|
|
|
|
Current
|
|
|
|
Trade payables2,3
|
15 761
|
10 888
|
|
Accrued expenses2
|
4 066
|
5 884
|
|
Leave benefits
|
498
|
625
|
|
Royalties2
|
2 679
|
1 936
|
|
Withholding
taxes2
|
224
|
230
|
|
Other
|
128
|
145
|
|
|
23 356
|
19 708
|
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.
2 These amounts are both interest and non-interest bearing and
are settled in accordance with terms agreed between the
parties.
3 Included in the current year amount is US$9.7 million
relating to the remaining portion of the purchase price for the
mining fleet and support equipment purchased in terms of the
insourcing of the mining activities. Post period end, this amount
was settled. Refer Note 1.2.26, Critical accounting estimates and
judgements.
Royalties consist of a levy payable
to the Government of the Kingdom of Lesotho on the value of
diamonds sold by Letšeng. Withholding taxes mainly consist of taxes
payable on dividends and other services to the Revenue Services
Lesotho.
The carrying amounts above
approximate fair value.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
19.
|
INCOME TAX
(RECEIVABLE)/PAYABLE
|
|
|
|
Reconciliation of movement in income
tax (receivable)/payable
|
|
|
|
As at 1 January
|
(2 268)
|
(1 191)
|
|
Payments made during the
year
|
(1 596)
|
(8 435)
|
|
Refunds received during the
year
|
-
|
1 187
|
|
Current income tax charge
|
909
|
6 054
|
|
Authorised offset - VAT
receivable1
|
(897)
|
-
|
|
Foreign exchange
differences
|
139
|
117
|
|
As at 31 December
|
(3 713)
|
(2 268)
|
|
Split as follows
|
|
|
|
Income tax receivable
|
(4 631)
|
(2 323)
|
|
Income tax payable
|
918
|
55
|
|
1 VAT receivable from
Revenue Services Lesotho (RSL) of US$0.9 million (LSL16.6 million)
was offset against provisional tax payments due to RSL during the
year. This offset has been authorised by RSL. No offset took place
in the prior year.
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
20.
|
PROVISIONS
|
|
|
|
Rehabilitation provisions
|
14 170
|
15 387
|
|
|
|
|
|
Reconciliation of movement in
rehabilitation provisions
|
|
|
|
As at 1 January
|
15 387
|
11 202
|
|
Additions - Ghaghoo
|
-
|
3 654
|
|
Decrease in provision -
Ghaghoo
|
(354)
|
(573)
|
|
Other movements - Letšeng
|
(1 342)
|
858
|
|
Unwinding of discount
rate
|
1 484
|
1 284
|
|
Foreign exchange
differences
|
(1 005)
|
(1 038)
|
|
As at 31 December
|
14 170
|
15 387
|
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 at Letšeng, management
used a discount rate of 11.4% (31 December 2022: 11.5%), estimated
rehabilitation timing of 16 years (31 December 2022: 13 years) and
an inflation rate of 7.2% (31 December 2022: 7.0%). Although the
Letšeng rehabilitation quantum increased from the prior year mainly
driven by the completion of the PCA and 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, together with a
weakening 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 new solar solution installation,
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 at Ghaghoo, management
used a discount rate of 6.0% (31 December 2022: 6.0%), estimated
rehabilitation timing of 5 years (31 December 2022: 5 years) and an
inflation rate of 4.8% (31 December 2022: 4.8%). The decrease in
the provision at Ghaghoo is mainly attributable to cost saving
measures implemented by management since the previous reporting
date and the removal of certain camp site costs from the prior year
cost estimate following discussions with the Ministry of Minerals
and Energy and the Department of Mines of Botswana as mentioned
above.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
21.
|
DEFERRED TAXATION
|
|
|
|
Deferred tax assets
|
|
|
|
Lease liabilities
|
1 122
|
1 590
|
|
Accrued leave
|
111
|
141
|
|
|
|
|
|
Other
|
-
|
-
|
|
Tax losses1
|
1 822
|
-
|
|
|
6 814
|
5 994
|
|
Deferred tax liabilities
|
|
|
|
Property plant and
equipment
|
(79 537)
|
(79 021)
|
|
Right of use assets
|
(966)
|
(1 347)
|
|
Prepayments
|
(55)
|
(84)
|
|
Unremitted earnings
|
(1 578)
|
(1 578)
|
|
|
(82 136)
|
(82 030)
|
|
|
|
|
|
Net deferred tax
liability
|
(75 322)
|
(76 036)
|
|
|
|
|
|
Reconciliation of net deferred tax
liability
|
|
|
|
|
|
|
|
Movement in current
period:
|
|
|
|
- Accelerated depreciation for tax
purposes
|
(5 326)
|
(5 321)
|
|
|
|
|
|
- Unremitted earnings
|
-
|
1 604
|
|
- Prepayments
|
29
|
102
|
|
- Provisions
|
(205)
|
779
|
|
- Deferred tax asset raised on tax
losses1
|
1 822
|
-
|
|
|
|
|
|
|
|
|
|
- Foreign exchange
differences
|
4 475
|
4 186
|
|
As at 31 December
|
(75 322)
|
(76 036)
|
1 Deferred tax assets were recognised on tax losses incurred by
Letšeng during the current year as management believe Letšeng will
generate future taxable income against which the losses can be
utilised.
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$110.5 million (31 December 2022: US$134.3
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$208.5 million (of which US$155.7 million relates to Gem
Diamonds Botswana) (31 December 2022: US$223.4 million, of
which US$175.8 million related to Gem Diamonds Botswana) 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. Letšeng has no
unrecognised deferred tax losses (31 December 2022: nil). The net
decrease from the prior period is as a result of a total estimated
tax loss for which no deferred tax assets have been recognised of
US$8.2 million, offset by tax assessment updates and forex
movements.
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$2.0 million ((31 December 2022: US$1.8 million) and if
not utilised, will expire as indicated in the table
below:
|
|
|
|
2023
|
2022
|
|
US$ '000
|
US$ '000
|
Utilisation required within one
year
|
350
|
82
|
Utilisation required between one
and two years
|
415
|
338
|
Utilisation required between two
and five years
|
1 217
|
1 404
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
Notes
|
|
US$'000
|
US$'000
|
|
22.
|
CASH FLOW NOTES
|
|
|
|
|
|
22.1
|
Cash generated by
operations
|
|
|
|
|
|
|
Profit before tax for the
year
|
|
|
5 684
|
30 432
|
|
|
Adjustments for:
|
|
|
|
|
|
|
Depreciation and amortisation
excluding waste stripping
|
|
|
5 423
|
6 588
|
|
|
Depreciation on right-of-use
assets
|
4, 9
|
|
1 892
|
1 818
|
|
|
Waste stripping cost
amortised
|
4
|
|
39 194
|
36 285
|
|
|
Finance income
|
5
|
|
(617)
|
(413)
|
|
|
Finance costs
|
5
|
|
5 313
|
4 502
|
|
|
Unrealised foreign exchange
differences
|
|
|
(2 001)
|
(1 911)
|
|
|
Loss/(profit) on disposal and
scrapping of property, plant and equipment
|
3
|
|
22
|
(195)
|
|
|
Gain on derecognition of
leases
|
9
|
|
(30)
|
-
|
|
|
Environmental rehabilitation
adjustment
|
3
|
|
(354)
|
-
|
|
|
Write-down of inventories to net
realisable value
|
|
|
-
|
1 556
|
|
|
Bonus, leave and severance
provisions raised
|
|
|
1 292
|
3 182
|
|
|
Share-based payments
|
|
|
332
|
253
|
|
|
Impairment of assets
|
4
|
|
-
|
702
|
|
|
|
|
|
56 150
|
82 799
|
|
22.2
|
Working capital
adjustment
|
|
|
|
|
|
|
Increase in inventory
|
|
|
(10 157)
|
(3 747)
|
|
|
Decrease/(increase) in
receivables
|
|
|
1 444
|
(1 465)
|
|
|
Decrease in payables
|
|
|
(6 897)
|
(4 677)
|
|
|
|
|
|
(15 610)
|
(9 889)
|
|
22.3
|
Cash flows from financing
activities (excluding lease liabilities)
|
|
|
|
|
|
|
As at 1 January
|
|
|
5 945
|
11 044
|
|
|
Net cash generated/(used) in
financing activities
|
|
|
30 113
|
(7 734)
|
|
|
- Financial liabilities
repaid
|
|
|
(45 103)
|
(17 627)
|
|
|
- Financial liabilities
raised
|
|
|
75 216
|
9 893
|
|
|
Interest paid
|
|
|
(3 719)
|
(2 263)
|
|
|
Non-cash movements
|
|
|
6 228
|
4 898
|
|
|
- Interest accrued
|
|
|
3 065
|
2 263
|
|
|
- Interest capitalised to property,
plant and equipment
|
|
|
654
|
-
|
|
|
- Amortisation of credit
underwriting fees
|
|
|
265
|
284
|
|
|
- Financial liabilities
raised 1
|
|
|
2 434
|
2 654
|
|
|
- Foreign exchange
differences
|
|
|
(190)
|
(303)
|
|
|
|
|
|
|
|
|
|
As at 31 December
|
16
|
|
38 567
|
5 945
|
|
|
|
|
|
|
|
|
| |
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.
|
|
|
|
|
|
2023
|
2022
|
|
|
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 agreement, including
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
|
218
|
187
|
|
- After one year but not more than
five years
|
1 000
|
847
|
|
- More than five years
|
628
|
809
|
|
|
1 846
|
1 843
|
|
Equipment and service
lease
|
|
|
|
Until 1 December 2023, the Group had
entered into lease arrangements for the provision of loading,
hauling and other transportation services payable at a fixed rate
per tonne of ore and waste mined; power generator equipment payable
based on a consumption basis; and rental agreements for various
mining equipment based on the fleet utilised. All lease payments
relating to this lease were variable in nature. A portion of the
lease payment was expensed in the Consolidated statement of profit
or loss and the portion relating to waste removal/stripping costs
was capitalised to the waste stripping asset in the proportions
referred to under the estimate and judgements applied to the
Capitalised stripping costs (deferred waste). Refer Note 1.2.26,
Critical accounting estimates and judgements.
This lease was early terminated,
effective 1 December 2023 in terms of the transition to insourced
mining and therefore there are no commitments associated with this
lease as at 31 December 2023. During the year, variable lease
payments of US$31.6 million (31 December 2022: US$39.5 million)
relating to this lease, were paid. Refer Note 1.2.26, Critical
accounting estimates and judgements, and Note 17., Lease
liabilities.
|
|
|
|
- Within one year
|
-
|
32 645
|
|
- After one year but not more than
five years
|
-
|
32 514
|
|
|
-
|
65 159
|
|
Multi-aggregate protection
policy
|
|
|
|
The Group, through its subsidiary
Letšeng entered into a LSL140.0 million (US$7.7 million)
Multi-aggregate Protection Insurance Policy with the Lesotho
National Insurance Group (LNIGC) in October 2021. The policy has a
tenure of 4 years and 9 months and consists of five premium
payments each payable annually in advance.
As at 31 December 2023 the Group has
committed to settle the two remaining premium payments, 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
|
1 640
|
1 763
|
|
- After one year but not more than
five years
|
1 640
|
3 526
|
|
|
3 280
|
5 289
|
|
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
|
80
|
68
|
|
- After one year but not more than
five years
|
42
|
103
|
|
|
122
|
171
|
|
Capital expenditure
|
|
|
|
Approved but not contracted
for
|
3 645
|
8 676
|
|
Approved and contracted
for
|
643
|
5 999
|
|
|
4 288
|
14 675
|
The main capital expenditure
approved relates to the replacement of screens in Plant 1 and Plant
2 and the scrubber in Plant 1 at a combined cost of US$1.5 million;
and investment in continued residue storage extension of US$0.8
million. Other smaller capital expenditure, all at Letšeng, relates
to the continued construction of the bioremediation plant of US$0.3
million, the balance of the investment in the new PCA of
US$0.2 million and new investment in energy saving projects of
US$0.3 million. The expenditure is expected to be incurred over the
next 12 months.
In the prior year, the main capital
expenditure approved consisted mainly of the investment in the new
PCA at Letšeng of US$2.6 million and the Underground Feasibility
Study of US$4.5 million. During the current year, the new PCA was
successfully commissioned in November 2023. Part of the Underground
Feasibility Study was completed at a total cost of U$1.8
million.
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 has
operations. In certain specific transactions, however, the relevant
third party or authorities could have a different interpretation of
those laws and regulations that could lead to contingencies or
additional liabilities for the Group. Having consulted professional
advisers, the Group has identified possible disputes approximating
US$0.5 million (December 2022: US$0.3 million) relating mainly
to labour matters.
The Group monitors possible tax
claims within the various jurisdictions in which the Group
operates. It is noted that tax legislation is highly complex and
subject to interpretation of the application of the law. It is
common for tax authorities to review tax returns, and in some
instances, disputes may arise over the interpretation and
application of the prevailing tax legislation. Due to the
complexity of the legislation, significant judgment is required to
determine any effects of uncertainties in accounting for and
disclosure of income taxes. Uncertain tax positions that have been
determined as being probable within the Group have been provided
for and are disclosed to such an extent that such disclosure does
not prejudice the Group. Refer Note 1.2.26, Critical accounting
estimates and judgements and Note 6., Income tax expense. While it is
difficult to predict the ultimate outcome in some cases, the Group
does not anticipate that there will be any material impact on the
Group's results, financial position or liquidity.
|
|
|
|
24.
|
RELATED PARTIES
|
|
|
|
Related party
|
Relationship
|
|
Jemax Management (Proprietary)
Limited
|
|
|
Government of the Kingdom of
Lesotho
|
Non-controlling interest
|
Refer Note 1.1.2, Operational
information, for information regarding shareholding in
subsidiaries.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
|
Compensation to key management
personnel (including Directors)
|
|
|
|
Share-based equity
transactions
|
|
|
|
Short-term employee
benefits
|
|
|
|
Post-employment benefits (including
severance pay and pension)
|
|
|
|
|
|
|
|
Fees paid to related
parties
|
|
|
|
Jemax Management (Proprietary)
Limited
|
|
|
|
Royalties paid to related
parties
|
|
|
|
Government of the Kingdom of
Lesotho
|
|
|
|
Lease and licence payments to
related parties
|
|
|
|
Government of the Kingdom of
Lesotho
|
|
|
|
Sales to/(purchases from) related
parties
|
|
|
|
Jemax Management (Proprietary)
Limited
|
|
|
|
Amount included in trade payables
owing to related parties
|
|
|
|
Jemax Management (Proprietary)
Limited
|
|
|
|
Amounts owing to related
party
|
|
|
|
Government of the Kingdom of
Lesotho
|
|
|
|
|
|
|
|
Government of the Kingdom of
Lesotho
|
|
|
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 2023, the Group had
US$45.9 million (31 December 2022: US$82.6 million) of undrawn debt
facilities and continues to have the flexibility to manage the
capital structure more efficiently by 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, 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
2023 and 31 December 2022.
There has been no change in the
assumptions or method applied from the prior year.
Sensitivity analysis
At year-end, Letšeng had US$2.5
million (2022: US$40.4 thousand) cash on hand held in US$. If the
US dollar had appreciated/(depreciated) by 10% against the LSL, the
Group's profit before tax and equity at 31 December 2023 would have
been US$0.3 million higher/(lower) (31 December 2022: US$3.4
thousand).
(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 2023, the
Group had no forward exchange contracts outstanding (31 December
2022: 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 (2022: 100 basis points) during the year, profit
before tax and equity would have been US$0.2 million (lower)/higher
31 December 2022: US$0.1 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.
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 2023 and 31 December 2022 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$45.9 million at year end
(2022: US$82.6 million)). The Group's facilities expire in December
2024. The current facility agreements have a two-year renewal
option subject to lender approval. Management will commence the
process of renewal or extension in the second quarter of
2024.
The table below summarises the
maturity profile of the Group's financial liabilities at 31
December based on contractual undiscounted payments.
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
|
Floating interest rates
|
|
|
|
Interest-bearing loans and
borrowings
|
|
|
|
- Within one year
|
35 037
|
2 317
|
|
- After one year but not more than
five years
|
5 913
|
8 805
|
|
Total
|
40 950
|
11 122
|
|
Lease liabilities
|
|
|
|
- Within one year
|
2 487
|
2 332
|
|
- After one year but not more than
five years
|
3 650
|
6 161
|
|
- After five years
|
448
|
448
|
|
Total
|
6 585
|
8 941
|
|
Trade and other payables
|
|
|
|
- Within one year
|
23 356
|
19 708
|
|
- After one year but not more than
five years
|
1 494
|
2 169
|
|
Total
|
24 850
|
21 877
|
26. SHARE-BASED PAYMENTS
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'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 profit or loss
|
332
|
253
|
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 (ie 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 (ie 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
|
24 287
|
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 six awards where options are still outstanding.
All the awards were issued on the
same basis as the 2007 LTIP.
LTIP 2017 Award - April 2023
award
On 21 April 2023, 250 860
nil-cost options were granted to certain key employees of the
Company. In addition, 809 195 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 integrates annual bonus awards with awards under the
LTIP. The options which vest in tranches of one-third per annum
commencing on 21 April 2024, are exercisable between the respective
vesting dates and 21 April 2033. 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 new 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; and
· the
awards are subject to malus and clawback.
To Executive Directors as a bonus
share award:
· 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 have a two-year holding period from the respective vesting
dates and are exercisable for 10 years from the award date;
and
· the
awards are subject to malus and clawback.
The following table reflects
details of all the awards within the 2017 LTIP that remain
outstanding:
|
|
|
|
|
|
|
|
LTIP
|
LTIP
|
LTIP
|
LTIP
|
LTIP
|
LTIP
|
|
April
|
April
|
June
|
March
|
March
|
July
|
|
2023
|
2022
|
2020
|
2019
|
2018
|
2017
|
Number of options granted - Nil
value
|
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
|
21 April 2024
|
4 April 2023
|
9 June 2023
|
20 March 2022
|
20 March 2021
|
4 July 2020
|
Options outstanding
|
1 060 055
|
888 221
|
323 267
|
244 582
|
236 154
|
48 642
|
Dividend yield (%)
|
-
|
-
|
-
|
-
|
-
|
2.00
|
Expected volatility
(%)1
|
n/a
|
n/a
|
47.00
|
43.00
|
40.00
|
40.21
|
Risk-free interest rate
(%)2
|
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
|
Exercise price (US$)
|
nil
|
nil
|
nil
|
nil
|
nil
|
nil
|
Exercise price (GBP)
|
nil
|
nil
|
nil
|
nil
|
nil
|
nil
|
Weighted average share price
(US$)
|
0.34
|
0.74
|
0.39
|
1.20
|
1.35
|
1.24
|
Fair value of nil value options
(US$)
|
0.34
|
0.74
|
0.39
|
1.20
|
1.35
|
1.11
|
Fair value of nil value options
(GBP)
|
0.27
|
0.58
|
0.31
|
0.90
|
0.96
|
0.86
|
Fair value of market value options
(US$)
|
-
|
-
|
0.19
|
0.58
|
0.74
|
0.72
|
Fair value of market value options
(GBP)
|
-
|
-
|
0.15
|
0.44
|
0.53
|
0.56
|
Model used
|
n/a
|
n/a
|
Monte Carlo
|
Monte Carlo
|
Monte Carlo
|
Monte Carlo
|
|
|
|
|
|
|
|
1 Expected volatility was based
on the average annual historic volatility of the Company's share
price over the previous three years.
2 The relevant risk-free interest rate
is taken from a UK Treasury Bond issued which closely matches the
lifetime of the option.
The following table illustrates the
number ('000) and movement in the outstanding share options during
the year:
|
|
|
|
2023
|
2022
|
|
US$'000
|
US$'000
|
Outstanding as at 1
January
|
2 648
|
2 453
|
Granted during the year
|
1 060
|
1 007
|
Exercised during the
year1
|
(253)
|
(394)
|
Forfeited
|
(630)
|
(418)
|
Outstanding as at 31
December
|
2 825
|
2 648
|
Exercisable as at 31
December
|
1 244
|
635
|
1 Options were exercised regularly throughout the
year. The weighted average share price during the year was £0.21
(US$0.26) (2022: £0.45 (US$0.55)).
The weighted average remaining
contractual life for the share options outstanding as at 31
December 2023 was 7.7 years (2022: 7.6 years).
The weighted average fair value of
the share options outstanding as at 31 December 2023 was US$0.40
(2022: US$0.48).
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 2023 was £0.13 (US$0.17)
(2022: £0.33 (US$0.39)). The shares outstanding at the end of the
year are as follows:
|
|
|
|
2023
|
2022
|
|
US$'000
|
US$'000
|
Outstanding as at 1
January
|
10
|
10
|
Exercised during the year
|
-
|
-
|
As at 31 December
|
10
|
10
|
Exercisable as at 31
December
|
10
|
10
|
27. FINANCIAL INSTRUMENTS
Set out below is an overview of
financial instruments, other than the current portions of the
prepayment disclosed in Note 12, Receivables and other assets,
which do not meet the criteria of a financial asset.
|
|
|
|
|
|
2023
|
2022
|
|
Notes
|
US$'000
|
US$'000
|
Financial assets at amortised
cost
|
|
|
|
|
|
|
|
Receivables and other
assets
|
12
|
6 869
|
6 421
|
Total
|
|
23 372
|
15 142
|
Total non-current
|
|
4 487
|
2 916
|
Total current
|
|
18 885
|
12 226
|
Financial liabilities at amortised
cost
|
|
|
|
Interest-bearing loans and
borrowings
|
16
|
38 567
|
5 945
|
Trade and other payables
|
18
|
24 850
|
21 877
|
Total
|
|
63 417
|
27 822
|
Total non-current
|
|
6 650
|
6 539
|
Total current
|
|
56 767
|
21 283
|
The carrying amounts of the
Group's financial instruments held approximate their fair
value.
There were no open hedges at year
end (2022: nil).
|
|
|
|
|
|
2023
|
2022
|
|
|
US$'000
|
US$'000
|
28.
|
DIVIDENDS DECLARED AND
PROPOSED
|
|
|
|
Declared dividends on ordinary
shares
|
|
|
|
Final ordinary cash dividend for
2022: nil (2021: 2.7 US cents per share)
|
-
|
3 771
|
There were no dividends proposed
in 2022.
In the prior year, the 2021
declared dividend was approved on 8 June 2022 and a final cash
dividend of 2.7 US cents per share was paid to shareholders on 21
June 2022.
29. EVENTS
AFTER THE REPORTING PERIOD
The deferred consideration payable
of US$9.7 million relating to the insourcing of the mining
activities at Letšeng was settled post period end. US$9.3 million
was paid in January 2024, and the retainer of US$0.4 million which
was withheld for equipment under repair at the effective date was
settled in early March 2024. Refer Note 18 Trade and other
payables.
No other fact or circumstance
has taken place between the end of the reporting period and the
approval of the financial statements which, in our opinion, is of
significance in assessing the state of the Group's affairs or
requires adjustments or disclosures.
30. MATERIAL PARTLY OWNED
SUBSIDIARY
Financial information of Letšeng
Diamonds, a 70% held subsidiary which has a material
non-controlling interest, with the remaining 30% being held by the
Government of the Kingdom of Lesotho, is provided below. This
information is based on amounts before intercompany
eliminations.
|
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
US$'000
|
US$'000
|
|
Name
|
Country of incorporation and
operation
|
|
|
|
Letšeng Diamonds (Proprietary)
Limited
|
Lesotho
|
|
|
|
Accumulated balances of material
non-controlling interest
|
|
68 543
|
69 822
|
|
Profit allocated to material
non-controlling interest
|
|
3 981
|
9 786
|
|
Summarised statement of profit or
loss for the year ended 31 December
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties and selling
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
16 861
|
42 266
|
|
Income tax expense
|
|
(3 590)
|
(9 647)
|
|
Profit for the year
|
|
13 271
|
32 619
|
|
Total comprehensive
income
|
|
13 271
|
32 619
|
|
Attributable to non-controlling
interest
|
|
3 981
|
9 786
|
|
Dividends paid to non-controlling
interest
|
|
-
|
(10 549)
|
|
Summarised statement of financial
position as at 31 December
|
|
|
|
|
Assets
|
|
|
|
|
Non-current assets
|
|
|
|
|
Property, plant and equipment,
deferred tax assets, intangible assets and receivables and other
assets
|
|
320 186
|
317 550
|
|
Current assets
|
|
|
|
|
Inventories, receivables and other
assets, and cash and short-term deposits
|
|
60 711
|
39 231
|
|
Total assets
|
|
380 897
|
356 781
|
|
Non-current liabilities
|
|
|
|
|
Interest-bearing loans and
borrowings, trade and other payables, provisions, lease liabilities
and deferred tax liabilities
|
|
101 278
|
104 118
|
|
Current liabilities
|
|
|
|
|
Interest-bearing loans and
borrowings, trade and other payables and lease
liabilities
|
|
51 144
|
19 923
|
|
Total liabilities
|
|
152 422
|
124 041
|
|
Total equity
|
|
228 475
|
232 740
|
|
Attributable to:
|
|
|
|
|
Equity holders of parent
|
|
159 932
|
162 918
|
|
Non-controlling interest
|
|
68 543
|
69 822
|
|
Summarised cash flow information for
the year ended 31 December
|
|
|
|
|
Operating cash inflows
|
|
43 548
|
74 793
|
|
Investing cash outflows
|
|
(56 827)
|
(59 928)
|
|
Financing cash
inflows/(outflows)
|
|
22 543
|
(36 387)
|
|
Foreign exchange
differences
|
|
1 848
|
(475)
|
|
Net increase/(decrease) in cash and
cash equivalents
|
|
11 112
|
(21 997)
|
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 2023 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 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 2023 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 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 (ie 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 2023.
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 2023.
Signature, discovery, and
production bonuses
There were no payments of this
nature to governments for the year ended 31 December
2023.
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
2023.
Cash flow basis
Payments reported are on a cash
flow basis and may differ to amounts reported in the Gem Diamonds
Limited 2023 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$109 632 (£86 000), are disclosed in
this report. All payments below this threshold have been
excluded.
Reporting currency
The payments to government have
been reported in US dollar.
Payments made in currencies other
than US dollar were translated at the relevant annual average
exchange rate for the year ended 31 December 2023.
Summary report
|
|
|
|
|
|
Operation
|
Country
|
Taxes
US$'000
|
Royalties
US$'000
|
Licence fee
US$'000
|
Total US$'000
|
Letšeng Diamonds (Proprietary)
Limited
|
Lesotho
|
2 418
|
13 072
|
180
|
15 670
|
Total
|
|
2 418
|
13 072
|
180
|
15 670
|
|
|
|
|
|
|
Lesotho
Letšeng Diamonds (Proprietary)
Limited
|
|
Taxes
US$'000
|
Royalties
US$'000
|
Licence fee
US$'000
|
Total US$'000
|
Revenue Services Lesotho
|
|
2 418
|
-
|
-
|
2 418
|
Government of the Kingdom of
Lesotho
|
|
-
|
13 072
|
180
|
13 252
|
Other
Other than the taxes, royalties and
licence fees disclosed above, there were no other payments to
governments for the year ended 31 December 2023, but Letšeng
Diamonds (Proprietary) Limited (a subsidiary of Gem Diamonds
Limited) has a mining contract (which has been in place since
2006), with Matekane Mining Investment Corporation. Letšeng
Diamonds (Proprietary) Limited understands that Matekane Mining
Investment Corporation is wholly or majority indirectly owned and
controlled by Ntsokoane Samuel Matekane, who became Prime Minister
of the Kingdom of Lesotho in October 2022. An early termination of
the agreement was reached effective 1 December 2023, eleven months
ahead of the expiry date of October 2024, which resolved any
potential conflicts of interest.