Full Y ear 2015 Results 15 March 2016 Disclaimer 2 The following - - PowerPoint PPT Presentation

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Full Y ear 2015 Results 15 March 2016 Disclaimer 2 The following - - PowerPoint PPT Presentation

Full Y ear 2015 Results 15 March 2016 Disclaimer 2 The following present ations are confident ial and are being made only to, and are No st atement in this present ation is intended as a profit forecast or profit estimate only directed at ,


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SLIDE 1

Full Y ear 2015 Results

15 March 2016

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SLIDE 2

Disclaimer

The following present ations are confident ial and are being made only to, and are

  • nly

directed at , persons to whom such presentat ions 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. Informat ion in the following present at ion relating to the price at which relevant investments have been bought or sold in the past or the yield on such invest ment s cannot be relied upon as a guide to the fut ure performance of such invest ments. This present at ion does not constitut e an offering of securities or

  • therwise

const itute an invitation or inducement to any person to underwrit e, subscribe for

  • r otherwise acquire securit ies in any company within the Group. Neither this

document at ion nor the fact of its distribution nor the making of t he presentat ion const itutes a recommendation regarding any securities. This present ation if for information purposes only. The present at ion contains forward-looking st atement s which are subj ect to risk and uncert ainties because they relat e to future event s. These forward-looking stat ements include, without limit ation, st atement s in relation to the Group’ s proj ect ed growth opportunities. Some of t he factors which may cause act ual results to differ from these forward-looking statement s are discussed in cert ain slides of t he presentat ion and others can be found by referring to the information contained under the heading “ Principal risks and uncertainties” in “ The Strategic Report ” in our Annual Report for the year ended 2015. The Annual Report can be found on our website (www.gemdiamonds.com). No st atement in this present ation is intended as a profit forecast or profit estimate and no statement in the present at ion should be int erpreted to mean that earning per share for the current or future financial years would necessarily match or exceed the historical published earnings. The present ation also contains certain non-IFRS financial informat ion. The Group’ s management believes these measures provide valuable additional information in underst anding the performance of the Group or the Group’ s businesses because they provide measures used by the Group to assess performance. However, this addit ional 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 import ant in the management of t he business, they should not be viewed in isolation or as replacement s for

  • r

alternatives to, but rather as complement ary to, the comparable IFRS measures such as revenue and other items reported in the consolidated financial statements. The distribut ion of t his presentation or any informat ion contained in it may be restricted by law in certain j urisdictions, and any person into whose possession any document cont aining this present at ion or any part of it comes should inform themselves about, and observe such restrictions. Information in this presentation is correct as at 14 March 2016

2

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SLIDE 3

Agenda

 Full year 2015 result s highlight s  Diamond market  Operat ional performance

HS S E

Let šeng

Ghaghoo

 S

ales, market ing and manufact uring

 Group financial performance  Invest ment proposit ion

3

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SLIDE 4

Full Y ear 2015 Results Highlights

4

REVENUE

US$249m

EBITDA

US$104m

BASIC EPS (pre exceptional items)

US cents 30

FREE CASH FLOW FROM OPERATIONS

US$14m

306 202 213 271 249 100 200 300 400 2011 2012 2013 2014 2015 167 67 80 106 104 54% 33% 37% 39% 42% 0% 10% 20% 30% 40% 50% 60% 50 100 150 200 2011 2012 2013 2014 2015 EBITDA MARGIN EBITDA 77

  • 51

21 61 14

  • 100
  • 50

50 100 2011 2012 2013 2014 2015 49 13 17 24 30 10 20 30 40 50 60 2011 2012 2013 2014 2015

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SLIDE 5

Diamond Market

Clifford Elphick Chief Execut ive Officer

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SLIDE 6

Diamond Market

 Diamond market for Letšeng’s high end

diamonds remained stable in an overall market subdued in 2015

 Slow down in Chinese retail demand  Inventory and liquidity concerns  Medium to long term market outlook

remains strong

 Reduced sales from De Beers and Alrosa leads

to firmer prices

 Improved outlook as 2016 starts to show

green shoots

6

0.60 0.80 1.00 1.20 1.40 1.60 1.80 2010 2011 2012 2013 2014 2015 2016 WWW Large Index WWW Overall Index

Diamond Price Indices

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SLIDE 7

Diamond Pricing

Letšeng

 Price levels maintained due to resilience in

+10.8 carat Type II diamonds Ghaghoo

 Weaker market impacted Ghaghoo production  Third sale at $150 per carat, down from $210

(February 2015) and $165 (July 2015), dropping in line with WWW Overall index

 First sale in 2016 achieved $160 per carat - up

6.7% from previous sale

7

Letšeng 6 and 12 Month Rolling $/ carat

  • 500

1 000 1 500 2 000 2 500 3 000 FY 2014 Q1 Q2 Q3 FY 2015 6 month 12 month

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SLIDE 8

Operational Performance

Alan Ashwort h Chief Operat ing Officer

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SLIDE 9

Group HSSE Performance

 Zero fatalities and Lost Time Inj uries  Group LTIFR 0.00 (2014 LTIFR 0.20)  Group AIFR 2.87 (2014 AIFR 3.01)  Zero maj or or significant Group-wide stakeholder or environment incidents occurred  Letšeng maintained 5-star IRCA rating for a second year  Ghaghoo maintained 4-star IRCA rating for a second year  Group invested US

$0.6m (2014 US $0.6m) in CS R initiatives

 The Group continued implementing international best practice in respect of environmental and social

responsibility

9

0.25 0.30 0.13 0.20 0.00 2011 2012 2013 2014 2015 4.54 4.45 2.49 3.01 2.87 2011 2012 2013 2014 2015 1.1 0.6 0.5 0.6 0.6 2011 2012 2013 2014 2015

LTIFR AIFR CSI

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SLIDE 10

Letšeng Operational Overview

10

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SLIDE 11

Letšeng Operational Overview

 S

t rong end t o 2015 - product ion t arget s achieved 

Waste mined –24.0 million tonnes

Ore treated – 6.7 million tonnes

1.9 million tonnes of S atellite pipe contribution in 2015

Carats recovered – 108 579

 Prices remain st able – FY 2015 US

$2 299 per carat 

Plant 2 Phase 1 upgrade – additional 250 000 tonnes p.a. being realised

Coarse Recovery Plant – addressing diamond damage and enhanced security

 Cont inual improvement s:

Cost efficiencies

Power back up capacity

Improved blasting techniques

11

17.4 19.1 19.9 24.0 2012 2013 2014 2015

Waste mined (tonnes millions)

6.6 6.3 6.4 6.7 2012 2013 2014 2015

Ore treated (tonnes millions)

114 95 109 109 2012 2013 2014 2015

Carats recovered (000’s)

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SLIDE 12

Letšeng Operational Overview

 Optimised Life of Mine plan  Increased Satellite contribution (1.9 mt 2015)  Optimal waste profile – peak of 36 mtpa (2024)  Steeper slope angles (resulting in less waste)  Improved NPV

12

20 40 60 80 100 120 1 2 3 4 5 6 7 8

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

Carats recovered ‘ 000s Tonnes treated - millions

S atellite pipe Main pipe Carats recovered 5 10 15 20 25 30 35 40

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

Waste Tonnes mined - millions

Main pit waste S atellite pit wast e

Optimised Life of Mine plan : tonnes treated and carats recovered profile Optimised Life of Mine plan : waste profile

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SLIDE 13

2 4 6 8 10 12 14 1 2 3 4

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2011 2012 2013 2014 2015 100 carats annually 100 carats per month +100 cts per month Annual Frequency of +100cts

Letšeng Operational Overview

13

Frequency of +100 carat recoveries

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SLIDE 14

Ghaghoo Operational Overview

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SLIDE 15

Ghaghoo Operational Overview

 Phase 1 obj ectives achieved  Grade remains steady and ahead of Reserve  Recovered grade of 28.0 cpht in 2015  Reserve grade of 27.8 cpht  Surge bin successfully commissioned in January 2016 –

daily throughput of 2 000 tonnes achieved

 Water fissure  Level 1 sealed and mined t hrough  Level 2 sealed  Long t erm sust ainable solut ion in place 

Premature caving and sand ingress

 No inj uries or propert y damage  Long t erm plans in place t o minimise dilut ion  Three sales concluded  Average $ per carat for 2015 - US $162

15

Underground operations at Ghaghoo Processing plant at Ghaghoo

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SLIDE 16

Ghaghoo Outlook

 Depressed diamond market impacted Ghaghoo

type production

 Prudent to downsize in current market conditions  Optimising production levels to:

 Reduce cash burn  Targeting approx. 300 000 tonnes for 2016

 Ghaghoo remains an important asset for the Group  Resource of 20m carats worth >US$4 billion in situ  Options being assessed to expand when diamond

prices improve

 First sale in 2016 achieved $160 per carat - up 6.7%

from previous sale

16

Parcel of Ghaghoo diamonds

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SLIDE 17

S ales, Marketing and Manufacturing

Clifford Elphick Chief Execut ive Officer

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SLIDE 18

Sales, Marketing and Manufacturing

Sales and marketing

 Good prices achieved for Letšeng's high quality

production - average of US$2 299 per carat in 2015

 36 rough diamonds achieved a value of greater

than US$1.0 million each

 Two +300 carat exceptional quality Type IIa

rough diamonds sold Manufacturing

 336 carats extracted at a rough value of

US$4.6 million for manufacturing during 2015

 Uplift achieved >20%

18 357ct white diamond which was sold for US $ 19.3 million

108.51 carat diamond achieved US $65,226 per carat

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SLIDE 19

Group Financial Performance

Michael Michael Chief Financial Officer

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SLIDE 20

Group Financial Performance

20

US $ millions 2015 Actual Results Exceptional items Pre Exceptional items 2015 2014 % Variance Revenue

249.5 249.5 270.8 (8%)

Royalt y and selling cost s

(21.9) (21.9) (24.7)

Cost of S ales

(112.4) (112.4) (127.7)

Corporat e expenses

(11.7) (11.7) (12.4)

Underlying EBITDA

103.5 103.5 106.0 (3%)

Depreciat ion and amort isat ion

(10.4) (10.4) (14.8)

Non cash and ot her it ems

15.4 9.6 5.8 4.0

Net finance income

0.1 0.1 0.2

Profit before tax from continuing operations

108.6 9.6 99.0 95.4 14%

Income t ax

(31.6) (31.6) (35.0)

Discont inued operat ions

0.6 0.6

  • (2.5)

Profit after tax

77.6 10.2 67.4 57.9 34%

Attributable profit

52.0 10.2 41.8 33.2 36%

Basic EPS (US cents)

37.6 7.4 30.2 24.0 57%

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SLIDE 21

Financial Performance – Letšeng Mining Operations

21

US$ millions 2015 2014 % Variance Revenue 236.3 276.8

  • 15%

EBITDA 101.9 123.5

  • 17%

EBITDA margin 43% 45% 2015 2014 % Variance Average price per carat (US $) 2 299 2 540

  • 9%

Carat s sold 102 778 108 963

  • 6%

Unit costs (US$) % Variance Direct cash cost s (before wast e) per t onne t reat ed 11.40 12.70

10%

Operat ing cost s per t onne t reat ed 16.50 19.64

16%

Wast e cash cost per wast e t onne mined 2.20 2.22

1%

Exchange rate –Average to US$ Malot i 12.78 Malot i 10.85 18% Unit costs (local currency - Maloti) % Variance Direct cash cost s (before wast e) per t onne t reat ed 145.64 137.75 6% Operat ing cost s per t onne t reat ed 210.84 213.08

  • 1%

Wast e cash cost per wast e t onne mined 28.08 24.07 17%

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SLIDE 22

Corporate Costs

 Continued focus on cost reduction whilst

upholding appropriate  governance and  assurance systems

 Costs down to US

$11.7m in 2015

 Costs have reduced by 24%

since 2011

 Low end of the cost curve

22

Corporate costs (US$ millions)

15.3 14.2 13.8 12.4 11.7 2011 2012 2013 2014 2015

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SLIDE 23

Group Cash and Funding

Cash

 Group cash of US$85.7m (US$71.7m attributable)  Net cash of US$55.3m after debt of US$30.4m

Funding

 Total Group facilities of US$85m of which US$51m is available for draw down

23

99 93 86 111 165 61 39 25 24 12 12 4 6 7 16

  • 50

100 150 200 250 300

Cash December 2014 Letšeng - cash generat ed Wast e cost s capit alised Tax paid Invest ment - Ghaghoo Invest ment - PPE Dividends to minority int erest holders Corporat e costs Financial liabilities repaid Subt ot al Invest ment in polished invent ory Subt ot al Dividends paid Cash December 2015 (including available facilities)

US$ millions

Group Cash Reconciliation

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SLIDE 24

Clifford Elphick Chief Execut ive Officer

Investment Proposition

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SLIDE 25

Investment Proposition

25

Gem Diamonds has a unique set of diamond assets and a strong Balance Sheet Long term fundamentals for diamonds are strong Letšeng is a world class diamond mine

 Produces the highest value diamonds

(US$2 299 per carat in 2015)

 Is a long life asset  Is strongly profitable and cash flow

generative

 Further upside through diamond breakage

reduction, improved large recoveries and increased ore from the Satellite pipe Ghaghoo mine is an important growth asset

 Ready to ramp up when market conditions

allow

 Temporary reduction in production protects

the Balance Sheet

 100%

  • wnership

 20m carats worth >US$4 billion in situ  20 years of mining lease remaining

Cash flow generative and strong profitability even in current market conditions Strong Balance Sheet with net cash of US$55 million & further US$51 million undrawn facilities Ordinary and special dividends proposed for 2015 Attractive EV:EBITDA multiple

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SLIDE 26

Thank you

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SLIDE 27

500 1 000 1 500 2 000 2 500 20 40 60 80 100 120 140 160 180 200

01 January 2015 01 March 2015 01 May 2015 01 July 2015 01 S eptember 2015 01 November 2015 01 January 2016

Thousands

Volume (000s) Price

Annexure 1 - Gem Diamonds capital structure

27

Major shareholders as at 11 March 2016 Graff Diamonds Int ernat ional Limit ed 15.11% Lansdowne Part ners Lt d 14.98% Gem Diamonds Holdings Limit ed 6.74% Maj edie Asset Management 5.28% BlackRock 4.47% FMR LLC 4.18% Ot her Direct ors’ holdings 1.79%

Gem Diamonds share price performance since 1 January 2015

Gem Diamonds Limited is listed on the Main Board of the London Stock Exchange LSE: GEMD Company officers Daily average t rading volume (last 12 mont hs) 213.6k Clifford Elphick Chief Execut ive Officer S hares in issue 138 269 811 Alan Ashwort h Chief Operat ing Officer Free float 56.3% Michael Michael Chief Financial Officer S hare price (11 March 2016) £1.01 Glenn Turner Chief Legal and Commercial Officer Market capit alisat ion (millions) £140 / US $200

S

  • urce: Fact S

et as of 06 March 2015

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SLIDE 28

Annexure 2 – Letšeng 2016 Guidance

28

FY 2016 Waste tonnes mined (Mt) 29 – 32 Ore treated (Mt) 6.8 – 7.0 Carats recovered (Kct) 107 – 109 Carats sold (Kct) 107 – 110 Direct cash costs (before waste) per tonne treated (Maloti) 145 – 155 Mining waste cash costs per tonne of waste mined (Maloti) 28 – 30 Operating costs per tonne treated1 (Maloti) 200 – 220 Stay in business capital (US$m) 8 – 10

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SLIDE 29

Annexure 3 - Diamond Market

 The US market remains the most important

market for diamonds (over 40%

  • f demand) and

continues to grow strongly

 China has been a strong growth market for

diamonds (2009-2014 CAGR of 18% ). Longer term, the shift in the economy from construction to consumption combined with favourable demographic trends should support strong continued growth

 India is an important global j ewellery market

which has embraced diamonds in recent years

29

Rest of World India China Gulf Japan US

Polished Diamonds Sales by Geography

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SLIDE 30

Annexure 4 - Global Diamond Producers

30 S

  • urce: www.paulzimnisky.com (2016)

As of February 1, 2016

  • Est. production in 2016

Mine Location Revenue US Millions Carats Per Carat Jwaneng Bot swana $2 048 10 500 000 $195 Jubilee Russia $966 9 200 000 $105 Diavik Canada $805 7 000 000 $115 Orapa Bot swana $760 8 000 000 $95 Debmarine Namibia Namibia $700 1 400 000 $500 Cat oca Angola $553 6 500 000 $85 Ekat i Canada $520 5 100 000 $102 Grib Russia $450 4 500 000 $100 Argyle Aust ralia $420 16 800 000 $25 Nyurbinskaya Russia $405 4 500 000 $90 Almazy-Anabara Placers Russia $396 4 400 000 $90 Udachnaya (Pit % UG) Russia $360 4 000 000 $90 Int ernat ional Russia $360 4 000 000 $90 Aikhal Russia $297 3 300 000 $90

Letsěng

Lesotho $249 110 000 $2 264 Vict or Canada $248 550 000 $451 Venet ia S

  • ut h Africa

$240 2 000 000 $120 Nizhne-Lenskoye Placers Russia $234 2 600 000 $90 Karowe Bot swana $221 350 000 $631 Mir Russia $198 2 200 000 $90 Nyurba Placers Russia $198 2 200 000 $90 Finsch S

  • ut h Africa

$185 2 400 000 $77 Marange (A) Zimbabwe $158 3 500 000 $45 Gahcho Kue Canada $149 1 000 000 $149 Bot uobinskaya Russia $135 1 500 000 $90 Karpinskogo-1 Russia $108 1 200 000 $90 Mining Area 1 LOR Namibia $96 180 000 $533 Elizabet h Bay Namibia $96 180 000 $533 Koidu S ierra Leone $90 300 000 $300 Voorspoed S

  • ut h Africa

$78 650 000 $120