Half Year 2015 results 19 August 2015 Main pipe Satellite pipe The - - PowerPoint PPT Presentation

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Half Year 2015 results 19 August 2015 Main pipe Satellite pipe The - - PowerPoint PPT Presentation

Half Year 2015 results 19 August 2015 Main pipe Satellite pipe The Leteng mine - Lesotho Disclaimer 2 No statement in this presentation is intended as a profit forecast or profit The following presentations are confidential and are being


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Half Year 2015 results

19 August 2015 Satellite pipe Main pipe The Letšeng mine - Lesotho

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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
  • therwise constitute an invitation or inducement to any person to underwrite,

subscribe for or otherwise 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 our Annual Report for the year ended 2014. 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

  • r 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

  • ther

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 18 August 2015 2

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Agenda

Half Year 2015 highlights

Operations

HSSE

Sales, marketing and manufacturing

Financial results

Diamond market

Outlook

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SLIDE 4

Half Year 2015 highlights

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REVENUE

US$118 million

UNDERLYING EBITDA

US$46 million

BASIC EPS

10.69 US cents

CASH GENERATED BY OPERATIONS

US$71 million

97 116 149 122 118 50 100 150 200 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 USD Millions 33 44 63 41 46 20 40 60 80 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 USD Millions 46 69 86 67 71 20 40 60 80 100 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 USD Millions 6.23 9.15 15.30 9.76 10.69 2 4 6 8 10 12 14 16 18 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 US Cents

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SLIDE 5

Operations

Alan Ashworth

The Ghaghoo mine – processing plant The Letšeng mine – Satellite and Main pipes

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Letšeng operational overview

Alan Ashworth

Letšeng’s new Coarse Recovery Plant

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SLIDE 7

Letšeng operational overview

Strong operational performance

Production targets achieved

19 day shutdown for Plant 2 Phase 1 implementation*

Continual improvements:

Improved blasting technique

Larger mining fleet

Cost efficiencies

Power back up capacity

7 9.9 9.2 10.0 9.9 11.4

5 10 15

H1 2013 H2 2013 H1 2014 H2 2014 H1 2015

Waste tonnes mined (millions)

3.0 3.2 3.2 3.2 3.1* 0.0 1.0 2.0 3.0 4.0 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015

Ore treated (millions)

42 53 55 54 50*

  • 20

40 60 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015

Carats recovered '000s

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SLIDE 8

Letšeng operational overview

Optimised Life of Mine plan

Increased Satellite contribution - (1.65 mt in 2015; 2.0 mt from 2020 to 2031)

Optimal waste profile – (peak of 36 mtpa in 2024)

Steeper slope angles (resulting in less waste)

Improved NPV

8 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 and waste mined - millions

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

Satellite 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

Optimised Life of Mine plan: waste profile

Main pit waste Satellite pit waste

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Letšeng operational overview

Frequency of +100 carat recoveries

9 2 4 6 8 10 12 1 2 3 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 2011 2012 2013 2014 2015 +100 carats annually +100 carats per tender +100 ct diamonds per tender 12 month rolling frequency of +100cts

Letšeng +100 carat diamonds

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SLIDE 10

Coarse Recovery Plant

Capital - Maloti 140.0m (US$11.7m)

Optimising treatment of high value, coarse fraction

Commissioning commenced

First recovery – 52ct Type IIa

Security improvements; full body personnel X-ray 

Delivered on time and within budget

Plant 2 Phase 1 upgrade

Capital - Maloti 50.0m (US$4.3m)

Additional capacity of 250ktpa

Delivered on time and within budget

Project payback c.13 months

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Letšeng project update

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Ghaghoo operational overview

Alan Ashworth

Processing plant, sort house and tailings dump at Ghaghoo

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Ghaghoo - Progress

35 283 carats recovered in H1 2015

132 125 ore tonnes treated in H1 2015

Average grade 29 cpht for May and June (above 27 cpht reserve grade)

5 production tunnels completed

Slot tunnel completed between Tunnels 1 and 5 allowing retreat stoping to commence

825 metres developed in H1 2015 out of a total of 3 610 metres to date

First sale of 10 096 carats, achieved US$210 per carat

Second sale of 29 891 carats sold in July for US$165 per carat

13 diamonds >10 carats each recovered, the largest being a 48 carat diamond

12 Underground operations at Ghaghoo Processing plant at Ghaghoo

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Ghaghoo - Grade

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Diluted marginal

  • re

Higher grade

  • re

Proving up of grade achieved with potential upside

Grade improved to 29 cpht, above reserve grade

  • f 27 cpht

Mining mainly conducted in lower grade portion

  • f VKSE with dilution near margins – upside

5 10 15 20 25 30 35 40 1-Feb-15 3-Mar-15 2-Apr-15 2-May-15 1-Jun-15

Ghaghoo Grade Performance

Actual Grade Expected Grade 30 day rolling average

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SLIDE 14

Ghaghoo – Diamond price

Sale 1 achieved US$210 per carat

Sale 2 achieved US$165 per carat

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Proving up diamond price

+45¢ +30¢ +20¢ +15¢ 10.8¢ 10¢ 9¢ 8¢ 7¢ 6¢ 5¢ 4¢ 3¢ 10grn 8grn 6grn 5grn 4grn 3grn +11 +9 +7 +5 Diamonds per category interval

Ghaghoo diamond size frequency

Actual Size Frequency Expected Size Frequency +45¢ +30¢ +20¢ +15¢ 10.8¢ 10¢ 9¢ 8¢ 7¢ 6¢ 5¢ 4¢ 3¢ 10grn 8grn 6grn 5grn 4grn 3grn +11 +9 +7 +5 Price per category US$/carat

Ghaghoo diamond prices

Actual Price Curve Expected Price Curve

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SLIDE 15

Ghaghoo – Milling technology

Ghaghoo ore suitable for milling

Successful liberation of fine diamonds

Mill product to DMS 25% of headfeed

Very low diamond damage

15 Ghaghoo’s autogenous mill Successful liberation of fine diamonds through the mill

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SLIDE 16

Ghaghoo - Production ramping up

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Production ramping up

Challenging water and ground conditions

Development targeting flexibility and knowledge

Developing access to VK Main and CK kimberlite ore

  • representative sampling required across phases
  • 10 000

20 000 30 000 40 000 50 000 60 000 70 000 80 000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Tonnes per month

Ore tonnes treated

Actuals Forecast

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SLIDE 17

HSSE

Alan Ashworth

Re-vegetation rehabilitation trials at Letšeng

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SLIDE 18

No Lost Time Injuries

LTIFR 0.00 (2014 LTIFR 0.20)

AIFR 3.26 (2014 AIFR 3.01)

Invested US$0.4m in CSI initiatives

Zero major stakeholder or environment incidents

Continued implementation of international best practice in respect of environmental and social responsibility

HSSE

18 0.00 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 2011 2012 2013 2014 H1 2015

LTIFR

3.26

  • 0.50

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 2011 2012 2013 2014 H1 2015

AIFR

0.4

  • 0.2

0.4 0.6 0.8 1.0 1.2 2011 2012 2013 2014 H1 2015 USD Millions

CSI expenditure

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SLIDE 19

Group CSI initiatives

19 Classrooms and office donated to Pae la itlhatsoa School in Lesotho Lesotho community health workers Educational School tours at Ghaghoo New Xade Primary School donation ceremony in Botswana Kaudwane Primary school adopted by Ghaghoo Butha Buthe vegetable project in Lesotho

Lesotho Botswana

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SLIDE 20

Sales, marketing and manufacturing

Clifford Elphick

357ct Type IIa white diamond recovered in July 2015

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SLIDE 21

Sales, marketing and manufacturing

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Sales and Marketing

Robust prices achieved for Letšeng's high quality production - average of US$2 264 per carat, down 3% from H2 2014

Multiple marketing channels used to achieve maximum value - rough tender, partnering, manufacturing

13 rough diamonds achieved a value of greater than US$1.0 million each (vs.18 in H2 2014), including a top quality 108 carat Type IIa rough diamond sold for US$65 226 per carat

Two exceptional +300 carat Type IIa white diamonds recovered:

  • a 314 carat recovered in May 2015 and sold into a partnership arrangement in June 2015; and
  • a 357 carat recovered in July 2015 and expected to be sold in Q3 2015

Manufacturing

Extracted US$3.0m (at rough value) for manufacturing during H1 2015

Contributed US$3.3m to Group revenue in additional margin

314ct Type IIa white diamond recovered in May and sold into a partnership arrangement in June 2015

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SLIDE 22

Financial results

Michael Michael

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Financial results

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US$ millions H1 2015 H2 2014 % Variance (H1 2015 vs H2 2014) H1 2014 % Variance (H1 2015 vs H1 2014)

Revenue

118.0 122.0 (3%) 148.9 (21%)

Royalty and selling costs

(9.7) (11.3) (13.4)

Cost of sales

(56.1) (63.7) (65.8)

Corporate expenses

(6.1) (6.4) (6.2)

Underlying EBITDA

46.1 40.8 13% 63.5 (27%)

Depreciation and amortisation

(5.6) (7.5) (7.8)

Non cash and other items

0.2 3.5 0.5

Profit before tax from continuing operations

40.7 36.8 11% 56.2 (28%)

Income tax

(15.1) (14.6) (20.4)

Discontinued operations

0.7 1.4 (1.4)

Profit after tax

26.3 23.4 12% 34.4 (24%)

Attributable profit

15.4 13.5 14% 19.7 (22%)

Basic EPS (US cents) from continuing operations

10.69 9.76 9% 15.30 (30%)

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SLIDE 24

Financial results – Letšeng mining operations

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US$ millions

H1 2015 H2 2014 % Variance (H1 2015 vs H2 2014) H1 2014 % Variance (H1 2015 vs H1 2014)

Revenue

106.3 129.0 (18%) 147.8 (28%)

EBITDA

41.4 55.2 (25%) 68.6 (40%)

EBITDA margin

39% 43% 46%

Exchange rate – Average to US$

LSL11.92 LSL11.05 LSL10.70

Unit costs (local currency LSL)

H1 2015 H2 2014 % Variance (H1 2015 vs H2 2014) H1 2014 % Variance (H1 2015 vs H1 2014)

Direct cash costs (before waste) per tonne treated

142.60 142.43 0% 133.13 (7%)

Operating costs per tonne treated

209.33 211.69 1% 214.46 2%

Waste cash cost per waste tonne mined

25.84 23.50 (10%) 24.64 (5%)

H1 2015 H2 2014 % Variance (H1 2015 vs H2 2014) H1 2014 % Variance (H1 2015 vs H1 2014)

Average price per carat (US$)

2 264 2 338 (3%) 2 747 (18%)

Carats sold

46 961 55 164 (15%) 53 799 (13%)

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Financial results – Manufacturing

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US$ millions H1 2015 H2 2014 % Variance (H1 2015 vs H2 2014) H1 2014 % Variance (H1 2015 vs H1 2014)

Polished (gross value achieved)

14.5 5.4 13.6

Rough value of extraction

(11.3) (2.7) (11.2)

Margin – own extractions

3.2 2.7 8% 2.4 32%

Margin – 3rd party

0.1 0.3 0.4

Total margin

3.3 3.0 4% 2.8 15%

Direct manufacturing costs

(0.7) (1.0) (0.9)

EBITDA generated

2.6 2.0 2% 1.9 37%

Value of extracted inventory on hand at period end

6.9 15.0 4.9

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Group cash and funding

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Cash:

Group cash of US$83.8m (US$70.5m attributable to Gem Diamonds)

Net cash of US$49.6m after debt of US$34.2m

Funding:

Total Group facilities of US$77.1m of which US$40.6m is available for draw down at period end

184 98 91 84 111 74 28 23 15 11 6 2 7 7 41

  • 20

40 60 80 100 120 140 160 180 200 Cash December 2014 Letšeng cash generated Subtotal Waste costs capitalised Tax paid Investment Ghaghoo Investment in PPE Corporate costs Financial liabilities repaid Subtotal Investment in polished inventory Subtotal Dividends paid Cash June 2015 (including available facilities) US$ millions

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SLIDE 27

Diamond market

Clifford Elphick

A sample of Ghaghoo white diamonds

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SLIDE 28

Letšeng’s high value production remained resilient during H1 2015, achieving US$2 264* per carat

Inventory and liquidity concerns

Challenging market conditions had a negative effect on pricing achieved for Ghaghoo’s production

Medium to long term outlook remains strong

Reduced sales from De Beers and Alrosa

Diamond market

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2 264 2 304 1 500 1 900 2 300 2 700

Letšeng rolling average US$ per carat

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

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SLIDE 29

Diamond pricing

Letšeng price levels maintained due to resilience in +10.8 carat Type II diamonds

Ghaghoo - only two sales, has dropped in line with WWW Overall index

29 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 2011 2011.5 2012 2012.5 2013 2013.5 2014 2014.5 2015 2015.5 2016

Diamond Price Indices

WWW Large Index WWW Overall Index

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Outlook

Clifford Elphick

The access decline at Ghaghoo

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SLIDE 31

Outlook

Ghaghoo ramp up to full production

Continued operational efficiency, performance improvements and cost control

Difficult market conditions, but favourable market fundamentals remain; strong diamond market/prices anticipated over medium to long term

Capex discipline

Dividend

2015 guidance – no change

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Appendix 1 – Letšeng guidance for 2015 (unchanged from March 2015)

FY 2015 Waste tonnes mined (Mt) 22 - 24 Ore treated (Mt) 6.3 – 6.5 Carats recovered (Kct) 102 - 107 Carats sold (Kct) 102 - 107 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) 210 - 230 Stay in business capital (US$m) 8 – 10 Project capital2 (US$m) 13 - 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 Plant 2 Phase 1 upgrade and second phase feasibility studies. Exchange rates applied at Maloti 11.00.
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SLIDE 33

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 20 40 60 80 100 120 140 160 180 200 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15

Appendix 2 - Gem Diamonds capital structure

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Major shareholders as at 14 August 2015 Graff Diamonds International Limited 15.11% Lansdowne Partners Ltd 14.98% Gem Diamonds Holdings Limited 6.74% FMR LLC 5.84% BlackRock 4.34% Majedie Asset Management 3.99% Other Directors’ holdings 1.79%

Gem Diamonds shareprice 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 trading volume (last 6 months) 229k Clifford Elphick Chief Executive Officer Shares in issue 138 296 460 Alan Ashworth Chief Operating Officer Free float 76.34% Michael Michael Chief Financial Officer Share price (17 August 2015) £1.31 Glenn Turner Chief Legal and Commercial Officer Market capitalisation (millions) £181 / US$282

Volume (‘000) Price (GBp)

Source: FactSet as of 17 August 2015

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Thank you