2014 Half Year Results Presentation 20 August 2014 Disclaimer 2 - - PowerPoint PPT Presentation

2014 half year results presentation
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2014 Half Year Results Presentation 20 August 2014 Disclaimer 2 - - PowerPoint PPT Presentation

2014 Half Year Results Presentation 20 August 2014 Disclaimer 2 No statement in this presentation is intended as a profit forecast or profit estimate The following presentations are confidential and are being made only to, and are and no


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2014 Half Year Results Presentation

20 August 2014

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SLIDE 2

Disclaimer

The following presentations are confidential and are being made only to, and are

  • nly directed at, persons to whom such presentations may lawfully be

communicated (“relevant persons”). Any person who is not a relevant person should not act or rely on these presentations or any of their contents. Information in the following presentations relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. These presentations do not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or

  • therwise acquire securities in any company within the Group. Neither this

documentation nor the fact of its distribution nor the making of the presentation constitutes a recommendation regarding any securities. This presentation if for information purposes only. The presentations contain forward-looking statements which are subject to risk and uncertainties because they relate to future events. These forward-looking statements include, without limitation, statements in relation to the Group’s projected growth opportunities. Some of the factors which may cause actual results to differ from these forward-looking statements are discussed in certain slides of the presentation and others can be found by referring to the information contained under the heading “Principle risks and uncertainties” in “The Strategic Report” in

  • ur Annual Report for the year ended 2013. The Annual Report can be found on our

website (www.gemdiamonds.com). No statement in this presentation is intended as a profit forecast or profit estimate and no statement in the presentation should be interpreted to mean that earning per share for the current or future financial years would necessarily match or exceed the historical published earnings. The presentations also contain certain non-IFRS financial information. The Group’s management believes these measures provide valuable additional information in understanding the performance of the Group or the Group’s businesses because they provide measures used by the Group to assess

  • performance. However, this additional information presented is not uniformly

defined by all companies, including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, although these measures are important in the management of the business, they should not be viewed in isolation or as replacements for or alternatives to, but rather as complementary to, the comparable IFRS measures such as revenue and other items reported in the consolidated financial statements. The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it comes should inform themselves about, and observe such restrictions. Information in this presentation is correct as at 19 August 2014 2

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Agenda

 2014 Half year results highlights  Diamond market  Operational overview  Group financial performance  Outlook

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2014 Half Year Results Highlights

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REVENUE

US$149m up 54%

EBITDA

US$62m up 87%

BASIC EPS

US cents 14.28 up 129%

FREE CASH FLOW

US$86m up 89%

97 149 50 100 150 200 H1 2013 H1 2014 USD Millions 33 62 10 20 30 40 50 60 70 H1 2013 H1 2014 USD Millions 6.23 14.28 5 10 15 H1 2013 H1 2014 US Cents 46 86 20 40 60 80 100 H1 2013 H1 2014 USD Millions

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Diamond Market

 Strong prices in H1 2014 expected to

continue through H2 2014

 Improved demand seen in the US and Japan;

continued strong demand in China and India

 Favourable medium to long-term

supply/demand fundamentals

 Impact of sanctions on Russia

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Letšeng rolling average US$ per carat

2 747 2 543 1 500 1 700 1 900 2 100 2 300 2 500 2 700 2 900

Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

6 month average US$ per carat 12 month average US$ per carat US$ per carat

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Operational Overview

Alan Ashworth

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Group HSSE Performance

 LTIFR 0.09 (2013 FY LTIFR 0.13)  AIFR 2.81 (2013 FY AIFR 2.49)  Ghaghoo was awarded a 4-star IRCA rating  Zero major or significant stakeholder or

environment incidents occurred

 Continued implementation of international

best practice

 Establishment of a Ghaghoo Community

Trust benefitting project affected communities

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Fully equipped clinic and ambulance at Letšeng Team building at Ghaghoo

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Mineral Resource Management

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Carats (millions) Grade (cpht) US$/ct Gross resources at Letšeng and Ghaghoo (incl. Reserves) 25.54 6.35 601 Letšeng Indicated Resource 3.23 1.73 2 086 Letšeng Reserve 2.26 1.71 2 045 Ghaghoo Indicated Resource 15.49 19.51 242 Ghaghoo Reserve 2.08 27.81 267

 Letšeng 21 year Life of

Mine open pit is wholly contained within the Reserve category

 Extension of indicated

depth at Letšeng to 350m below mining face

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Letšeng overview

Alan Ashworth

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Letšeng

 Alluvial Ventures contract extended  MMIC contract extension negotiated  Larger equipment commissioned  Satellite mix

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9.9 10.0 2 4 6 8 10 12 Waste mined

Waste tonnes mined (mT)

H1 2013 H1 2014 42 55 10 20 30 40 50 60 Carats recovered

Carats recovered (000’s)

H1 2013 H1 2014 3.0 3.2 1 2 3 4 Ore treated

Ore tonnes treated (mT)

H1 2013 H1 2014

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Letšeng - optimising overall mining process

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Increased recovery of valuable Type II diamonds Downward trend in Type II breakage

0% 20% 40% 60% 80% 100%

50 100 150 200 250

2013 2013.2 2013.4 2013.6 2013.8 2014 2014.2 2014.4 2014.6

Stone Size (Carats)

Export Number

Letšeng +50 Carat Recoveries

Type 1 Type 2 % Satellite

Increasing Satellite contribution Diamond protection initiatives

0% 20% 40% 60% 80% 100%

2013 2013.1 2013.2 2013.3 2013.4 2013.5 2013.6 2013.7 2013.8 2013.9 2014 2014.1 2014.2 2014.3 2014.4 2014.5 2014.6

Type II - Significant Breakage Levels

New crusher installation Improving ore fragmentation

0.80 0.90 1.00 1.10 1.20

Price performance against expected

6 month moving average MCF

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Letšeng delivering exceptional diamonds in 2014

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H1 2014 Average value per carat* US$2 747 Rough diamonds achieving > US$1.0m each 37 Rough diamonds achieving > US$20 000/ct 77 Rough diamonds achieving > US$60 000/ct 5 Rough diamonds > than 10.8ct 311 Three exceptional quality +100 carat diamonds (a 162.02ct, a 161.31ct and a132.55ct) achieved a total sales value of US$21.0m

*Includes carats extracted for polishing at rough valuation.

162.02 carat type II, recovered in February 2014, sold for US$11.1 million (US$68 687 per carat) in March 2014 198 carat type II, recovered in July 2014

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Letšeng expansion/improvement programme

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Letšeng project review

Continued phased introduction of technologies to improve recovery, throughput and diamond breakage

Capital of Maloti 140.0m (US$13.2m) approved

To optimise the treatment of the high value, coarse fraction

XRT technology – ensure total recovery of type II diamonds

Security improvements

Advanced diamond accounting

On track for delivery Q2 2015

Capital of Maloti 50m (US$4.7m) approved

Additional 250k tpa

Expected to further reduce diamond damage and improve liberation

Commissioning early 2015

No.2 Plant phase 1 upgrade Incremental upgrade studies ongoing Coarse Recovery Plant

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Ghaghoo development overview

Alan Ashworth

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Ghaghoo development review

 Phase 1 capital project completed on time and

  • n budget

 Processing plant commissioned - 2 400 carats

recovered as at end of June 2014

 Development of first three production tunnels

  • n Level 1 underway

 Drilling of 3rd ventilation hole underway  First sale for Ghaghoo’s production scheduled

before year end

 US$82.0m of the total capital budget spent as

at 30 June 2014. Balance of US$14.0m to be spent in H2 2014

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Sales, marketing and manufacturing overview

Clifford Elphick

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Sales, marketing and manufacturing

 5 rough tenders in Period – rough sales of

US$ 147.8m*

 Carats sold 53 799  377 carats extracted for manufacturing at a

rough value of US$4.2m

 2013 partnership diamonds sold in the Period

for additional revenue to Letšeng of US$1.5m

 Ghaghoo preparation for sales in two

jurisdictions – first sale expected in H2 2014

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*Includes carats extracted for polishing at rough valuation

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Financial performance

Michael Michael

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Group financial performance

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US$ millions H1 2014 H1 2013 % Increase FY 2013 Revenue 148.9 96.5 54% 212.8 Royalty and selling costs (13.4) (7.8) (18.5) Cost of Sales (67.2) (49.3) (103.1) Corporate expenses (6.1) (6.2) (13.8) Underlying EBITDA 62.2 33.2 87% 77.4 Depreciation and Amortisation (7.9) (9.1) (17.3) Non cash and other items 0.6 (0.3) 0.5 Net finance cost (0.1) (0.6) (1.6) Profit before tax 54.8 23.2 136% 59.0 Income tax (20.4) (8.1) (20.8) Profit after tax 34.4 15.1 128% 38.2 Attributable profit 19.7 8.6 129% 21.2 Basic EPS (US cents) 14.28 6.23 129% 15.3

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Letšeng financial performance

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US$ millions H1 2014 H1 2013 % Increase FY 2013 Rough tender sales 147.8 81.9 198.8 Polished margin 2.4 4.8 5.4 Total Revenue 150.2 86.7 73% 204.2 Royalty and selling costs (14.4) (7.8) (19.0) Cost of sales (64.8) (47.3) (99.2) EBITDA 71.0 31.6 125% 86.0 EBITDA margin 47% 36% 42% Exchange rate – Average to US$ Maloti 10.70 Maloti 9.21 Maloti 9.65 Unit costs (local currency) Maloti % Variance Maloti Direct cash costs (before waste) per tonne treated 133.13 125.02 6% 128.68 Operating costs per tonne treated 214.46 140.61 53% 152.92 Waste cash cost per waste tonne mined 24.64 25.00 (1%) 26.12

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Sales, marketing and manufacturing financial performance

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US$ millions H1 2014 H1 2013 % Variance FY 2013 Polished (gross value achieved) 13.6 28.3 29.6 Rough value of extraction (11.2) (23.5) (24.2) Polished margin 2.4 4.8 (50%) 5.4 Direct manufacturing costs (0.9) (1.4) (1.8) EBITDA generated (net value add) 1.5 3.5 (57%) 3.6 Net value add over rough value 13% 15% (10%) 14% Value of extracted inventory on hand at Period end 4.9 1.1 2.9

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Group cash generated

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103 98 114 71 102 1 16 (26) (17) (6) (11) (11) (5) 20 40 60 80 100 120 140 160 180 200 (US$m)

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Group cash and funding

 Cash: 

Group cash of US$114m (US$98m attributable to Gem Diamonds)

Net cash of US$98m after debt of US$16m

 Funding:

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Facility Term Lender Expiry/ Renegotiation Amount (US$ millions) Drawn down (US$ millions) Available (US$ millions) GDL revolving credit facility 3 years Nedbank Jan 2016 20

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Ghaghoo facility 9 months/ 6 years* Nedbank Oct 2014/ Oct 2020 25 16 9 Letšeng revolving credit facility 3 years* Standard Lesotho Nov 2014/ Nov 2017 23

  • 23

Letšeng project facility for Coarse Recovery Plant 3 years Standard Lesotho and Nedbank June 2017 13

  • 13

Total 81 16 65

*These facilities are currently being renegotiated for extension with the lenders

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Outlook

 Continued operational efficiency and performance improvements  Delivery of Coarse Recovery Plant project  Delivery of No.2 Plant - Phase 1 upgrade  Refining longer term mine plans, including optimising waste stripping profiles to maximise value  Anticipated strong diamond market/prices  Ghaghoo Phase 1 production build up  First Ghaghoo sale  Shareholder dividend

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Appendix 1 – Capital and corporate structure

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Major shareholders as at 15 August 2014 Graff Diamonds International Limited 15.12% Lansdowne Partners Ltd 14.99% FIL Limited/FMR LLC 9.58% Gem Diamonds Holdings Ltd 6.74% Capital Group Companies Inc. 5.51% BlackRock 4.96% Other Directors’ holdings 2.11%

Gem Diamonds shareprice performance, up 42% year to date

Gem Diamonds Limited is listed on the Main Board of the London Stock Exchange LSE: GEMD Company officers Daily average trading volume (last 12 months) 239 145 Clifford Elphick Chief Executive Officer Shares in issue 138 202 787 Alan Ashworth Chief Operating Officer Free float 76.5% Michael Michael Chief Financial Officer Share price (19 August 2014) £2.08 Glenn Turner Chief Legal and Commercial Officer Market capitalisation (millions) £287 / US$477

200 400 600 800 1 000 1 200 1 400 1 600 25 50 75 100 125 150 175 200 225 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Volume (‘000) Price (GBp)

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Appendix 2 – Updated resource and reserve statement as at 1 Jan 2014

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Letšeng

Category Classification Tonnes (millions) Grade (carats/100T Carats (millions) Average diamond price (US$/carat) Reserves Probable 131.9 1.71 2.26 2 045 Resources Indicated 187.1 1.73 3.23 2 086 Inferred 106.8 1.67 1.78 2 051 Total Resource at Letšeng (inclusive of reserves) 293.9 1.71 5.01 2 073

Ghaghoo

Category Classification Tonnes (millions) Grade (carats/100T) Carats (millions) Average diamond Price US$/carat Reserves Probable 7.5 27.81 2.08 267 Resources Indicated 79.4 19.51 15.49 242 Inferred 28.8 17.52 5.04 239 Total Resources at Ghaghoo (inclusive of reserves) 108.2 18.98 20.53 241

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Appendix 3 – FY 2014 Guidance

Letšeng guidance for full year 2014 FY2014 Waste tonnes mined (Mt) 18 - 20 Ore tonnes treated (Mt) 6.3 - 6.5 Carats recovered (Kct) 95 - 100 Carats sold (Kct) 97 - 103 Direct cash costs (before waste) per tonne treated (Maloti) 127 -135 Mining waste cash costs per tonne of waste mined (Maloti) 24 -28 Operating costs per tonne treated1 (Maloti) 190 - 220 Stay in business capital (US$m) 6- 10 Project capital2 (US$m) 12 - 15

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  • 1. Operating costs per tonne excludes royalty, selling costs, depreciation and mine amortisation, but includes inventory, waste and ore stockpile

adjustments.

  • 2. Letšeng project capital includes the coarse recovery plant and the first phase Plant 2 upgrade.