2010 Half Y ear Results 24 August 2010 1 Disclaimer The - - PDF document

2010 half y ear results
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2010 Half Y ear Results 24 August 2010 1 Disclaimer The - - PDF document

2010 Half Y ear Results 24 August 2010 1 Disclaimer The following presentations are being made only t o, and are only directed at, persons t o whom such present ations may lawfully be communicated ( relevant persons ). Any person


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SLIDE 1

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2010 Half Y ear Results

24 August 2010

Disclaimer

  • The following presentations are being made only t o, and are only directed at, persons t o whom such

present ations may lawfully be communicated (“ relevant persons” ). Any person who is not a relevant person should not act or rely on t hese present ations or any of t heir cont ent s.

  • Informat ion in the following presentations relating t o t he price at which relevant invest ment s have been

bought or sold in the past or t he yield on such invest ment s cannot be relied upon as a guide t o the future performance of such invest ment s. These presentations do not constitute an offering of securities or

  • t herwise const itute an invitat ion or inducement t o any person t o underwrite, subscribe for or ot herwise

acquire securit ies in any company wit hin t he Group.

  • The presentations cont ain forward-looking st atement s which are subj ect t o risks and uncertainties because

t hey relate t o fut ure event s. These forward-looking st atement s include, without limitat ion, st atement s in relation t o t he Group’ s proj ected financial result s of the 2010 financial year. S

  • me of the fact ors which may

cause actual result s t o differ from t hese forward-looking statement s are discussed in certain slides of t he present ation and others can be found by referring t o the information contained under the heading “ Key present ation and others can be found by referring t o the information contained under the heading “ Key Group risks 2009” in “ The Chief Financial Officer’ s review” in our Annual Report for t he year ended 2009. The Half-Year Financial Report and Annual Report can be found on our website (www.gemdiamonds.com).

  • The presentations also contain certain non-IFRS financial information. The Group’ s management believes

t hese measures provide valuable additional informat ion in understanding the performance of the Group or t he Group’ s businesses because t hey provide measures used by the Group t o assess performance. However, t his addit ional information presented is not uniformly defined by all companies, including those in t he Group’ s indust ry. Accordingly, it may not be comparable with similarly tit led measures and disclosures by

  • t her companies.
  • Addit ionally, although t hese measures are important in the management of the business, t hey should not be

viewed in isolation or as replacement s for or alternatives t o, but rather as complementary t o, the comparable IFRS measures such as revenue and other items report ed in the consolidated financial st at ements.

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SLIDE 2

2 H1 2010 Highlights

HIGHLIGHTS

  • Revenue of US

$103.9 million

  • EBITDA of US

$18.5 million

  • Attributable earnings of US

$3.0 million (1.72 US cents per share)

  • US

$108.3 million gross cash

  • No debt
  • Growth strategy through the development of existing assets and targeted

Growth strategy through the development of existing assets and targeted acquisitions

  • Continued recovery in prices for rough and polished diamonds
  • HS

S E: Company record of 2.8 million man hours LTI-free

3

Driving value - Building a growth strategy

S TRATEGY

  • Letšeng:

– Mine expansion – Minimising diamond damage – Focus on operational improvements – A new sales and marketing strategy

  • Ellendale

– Resource drilling to increase life of mine – Focus on operational improvements p p – Maximising revenue

  • Gope
  • External growth opportunities

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SLIDE 3

3 Market overview

OVERVIEW

H1 2009 H2 2009 H1 2010 H1 2009 H2 2009 H1 2010 Mine Supply Maj or fall in supply of rough diamonds Product ion st art s t o increase Product ion st ill below previous peak Cut t ing cent re st ocks - rough Rising st ocks S mall fall in st ocks Rough st ocks st ill falling Cut t ing cent re st ocks – polished S ubst antial rise in st ocks Polished st ocks st art t o fall Cont inued fall in st ocks Liquidit y Very lit t le liquidity More credit available Increasing credit available US ret ail S ubst antial fall in sales First signs of improvement at end 4t h qt r Dest ocking eases, sales slight ly up

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Japan ret ail S ubst antial fall in sales S ales cont inue t o fall S ales falling slight ly Europe ret ail S ubst antial fall in sales S ales slight ly up S ales slight ly up Asia ret ail (excl Japan) Weak sales Flat sales Encouraging sales growt h China ret ail S ales cont inue t o grow Increasing sales Increasing sales India ret ail Weak sales Increasing sales Increasing sales

Source: WWW and Gem Diamonds

ROUGH DIAMOND PRICES Q3 2008 – Q2 2010 – PER QUARTER AVERAGE

Diamond Prices

Letšeng ROM (adj ) Ellendale ROM (excl Tiffany yellows) Ellendale Tiffany yellow production

(US$ per ct) (US$ per ct) (US$ per ct)

2,159 2,708 2,616 2,414 2,428 2,500 2,545 2,633 86 119 102 110 142 146 2,571 2,139 ,017 1,496 1,709 1,893 1,753 1,713

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Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 36 38 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 1, Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10

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SLIDE 4

4 S elling a unique product

š DIAMOND S ALES Letšeng

  • H1 2010,

– US $58 724 per carat for a 27 carat white diamond – 35 individual diamonds over US $20 000 per carat – Circa 245 rough diamonds greater than 10.8 carats – 4 gem quality diamonds between 90 and 160 carats each were recovered in the first half of the year – New sales and marketing strategy Ellendale

  • Tiffany & Co.’ s Fancy Yellow campaign

– Japan: April 2010 – US A: S eptember 2010 – Australia: April/ May 2010

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Letšeng’ s large diamond frequency

LARGE DIAMOND FREQUENCY

  • Detailed analysis performed on all historical diamond recoveries
  • Increased confidence on underlying resource
  • Consistency of the large diamond frequency from the ore body
  • Consistency of the recovered grade of these larger diamonds since 2004

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SLIDE 5

5 HS S E

H1 2010 OPERATIONAL REVIEW

  • Achieved a company record 2.8 million man hours

without Lost Time Inj ury (LTI) at all of its operations

  • ver the past eight months since October 2009 and

still ongoing.

  • Both the Lost Time Inj ury Frequency Rate (LTIFR)

and S everity Rate (S R) are zero and S everity Rate (S R) are zero

  • All Inj ury Frequency Rate (AIFR) continues to remain

below both 2008 and 2009 levels for the year to date

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Letšeng, Lesotho

  • Appropriate mix of Main and S

atellite pipe mining H1 2010 OPERATIONAL REVIEW

Main Pipe

  • Appropriate mix of Main and S

atellite pipe mining

  • Build up of waste stripping in progress
  • Ongoing review of optimal mine plan
  • Both plants operating efficiently in excess of design

capacity

  • Continued focus on cost management

– Cash cost (excl waste costs) ML 70.62 per tonne treated (ML64.30 in H1 2009) – Waste cash cost ML23.75 per waste tonne moved (ML22.57 in H1 2009)

p S atellite Pipe

( ) Operational efficiency improvements

  • Phased introduction of larger rigid haul trucks
  • Improvements in blasting practises
  • Investigation into high volume X-ray recovery machines

Core Growth Workstreams

  • Production increase opportunities
  • Diamond damage minimisation

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SLIDE 6

6 Ellendale, Australia

C i d f H1 2010 OPERATIONAL REVIEW

E9 Pipe

  • Continued focus on cost management

– Cash cost (excl waste) AU$12.62 per tonne treated (AU$13.57 per tonne in H1 2009) – Waste cash cost AU$3.85 per waste tonne moved (AU$ 5.01 in H1 2009) Operational efficiency improvements

  • Alternative mining options
  • Plant ‘ up-time’ proj ect

Alternative mining system

Core Growth Workstreams

  • Resource Extension and Development Programmes;
  • Assessment of recommencing operations at Ellendale’ s

E4 pipe

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Gope, Botswana

H1 2010 OPERATIONAL REVIEW

  • Total contained resource: 20.5 million carats
  • Resource diamond price: US

$162 per carat

  • Resource in situ value: US

$31 per tonne

  • Two blue diamonds recovered from historical diamond

samples

  • Total in situ value of the resource: US

$3.3 billion Core Growth Workstreams Core Growth Workstreams

  • Underground mine
  • Updated study to be presented to Botswana

Government in August 2010

  • Mining Licence negotiations H2 2010

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Type IIb 0.48ct medium blue diamond

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SLIDE 7

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L tš i d ti

LETŠ ENG AND ELLENDALE 2010 FORECAS TS

Ell d l i d ti

2 4 6 8 10 12 14 16 20 000 40,000 60,000 80,000 100,000 120,000 140,000 160,000

Letšeng mine production

2 4 6 8 10 12 14 16 100 000 200,000 300,000 400,000 500,000 600,000 700,000 800,000

Tonnes (Mt) Carats recovered Tonnes (Mt) Carats recovered

Ellendale mine production

2 2007 2008 2009 2010 Forecast 20,000 2 2007 2008 2009 2010 Forecast 100,000

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Tonnes treated (Mt) Waste stripped (Mt) Carats recovered

Financial Results

H1 2010 FINANCIAL RES ULTS

  • Revenue of US

$103.9 million

  • EBITDA of US

$18.5 million

  • Profit before tax of US

$7.8 million

  • Effective tax rate of 29%
  • Attributable profit of US

$3.0 million and EPS 1.72 US cents per share

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p p

  • Cash generated by operations of US

$27.9 million (pre tax)

  • Cash of US

$108.3 million at period end

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SLIDE 8

8 Key Points

H1 2010 FINANCIAL RES ULTS

  • Cost efficiencies and cash conservation across the group
  • Unit costs
  • Central costs reduced by 15%

to US $5.6 million

  • Inflation
  • Exchange rate movement

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  • Price impact
  • Investment in rough diamonds for cutting and polishing of US

$1.7 million

  • Unrealised profit of US

$900k

US$ millions 6 months ended 30 June 2010 6 months ended 30 June 2009* 6 months ended 30 June 2009**

H1 2010 FINANCIAL RES ULTS

Income S tatement

2010 2009* 2009** Revenue 103.9 86.6 116.7 Royalty and selling costs (9.9) (8.6) (11.2) Cost of sales (69.9) (55.9) (72.8) Corporate expenses (5.6) (6.6) (6.6) EBITDA 18.5 15.5 26.1 Non Cash items Depreciation and amortisation (14.6) (10.9) (10.9) S hare based payments (0.8) (4.1) (4.1) Other income 2.6

  • Foreign exchange gain

0.8 7.7 7.7 g g g Net finance income/ (costs) 1.3 (0.7) (0.7) Profit before tax 7.8 7.5 18.1 Income tax (2.3) (0.9) (4.4) Profit from continuing operations 5.5 6.6 13.7 Profit/ (loss) from discontinuing operations 0.6 (5.3) (5.3) Profit for the period 6.1 1.3 8.4 Minority interests (3.1) (1.9) (5.1) Attributable profit/(loss) 3.0 (0.6) 3.3 **As reported *Adjusted on a like for like basis - excludes the one-off impact of the sale of rough and polished diamonds held over from 2008 and the one-

  • ff royalty payment received.

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SLIDE 9

9 S egmental Performance

H1 2010 FINANCIAL RES ULTS

H1 2010 H1 2009* H1 2010 H1 2009* Revenue (millions) 70.9 61.7 33.6 25.2 EBITDA 22 6 17 1 3 3 6 1 US$ millions Letšeng Diamonds Kimberley Diamonds Revenue 70.9 33.6 Cost of sales (40.5) (28.2) Royalt y and selling cost s (7.8) (2.1) EBITDA 22.6 3.3 EBITDA 22.6 17.1 3.3 6.1 17 * Adjusted on a like for like basis - excludes the one-off impact of the sale of rough and polished diamonds held over from 2008 and the

  • ne-off royalty payment received.

H1 2010 performance at 2009 forex rates

H1 2010 FINANCIAL RES ULTS US$ millions Actual H1 2010 Actual H1 2010

at 2009 forex rate**

Actual H1 2009* Revenue 103.9 103.9 86.6 EBITDA 18.5 34.0 15.5 Profit before tax 7.8 25.1 7.5 Profit for the period 6.1 24.0 1.3 Attributable profit/ (loss) 3.0 21.4 (0.6)

  • Avg. exchange rate (ZAR to US

$) 7.53 9.20 9.20

  • Avg. exchange rate (AU$ to US

$) 1.12 1.41 1.41

18 *Adjusted on a like for like basis - excludes the one-off impact of the sale of rough and polished diamonds held over from 2008 and the

  • ne-off royalty payment received.

**Adjusted on a like for like basis – actual H1 2010 results restated at 2009 exchange rates.

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SLIDE 10

10 Group Cash

H1 2010 FINANCIAL RES ULTS

28 10 (2) (6) (2) (8) (24) (2) 80 100 120 140 160 (US$m) 114 110 108 20 40 60 Group Cash 31 Dec 2009 Letseng - cash flow from operations Kimberley - cash flow from operations Care and maintenance proj ects Corporate costs Tax paid Property, plant & equipment Waste mining Group Cash pre investment in cutting & polishing inventory Cash applied to cutting & polishing inventory Group cash 30 June 2010 19

S trategy and Outlook

S TRATEGY AND OUTLOOK

  • Organic growth workstreams on track
  • Letšeng
  • Gope
  • Ellendale
  • Other growth opportunities pursued
  • Implementation of new sales and marketing strategy
  • Expansion of diamond manufacturing initiatives
  • Encouraging supply/ demand fundamentals remain

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