Presentation
Full Year 2012 12 March 2013
© 2013 GEM DIAMONDS LIMITED
1
Full Year 2012 Results
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persons”). Any person who is not a relevant person should not act or rely on
understanding the performance of the Group or the Group’s businesses because they
these presentations or any of their contents.
provide measures used by the Group to assess performance. However, this additional
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rather as complementary to, the comparable IFRS measures such as revenue and other
The presentations contain forward-looking statements which are subject to risk
items reported in the consolidated financial statements.
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” in “The Business Review” in our Full Year 2012 Results Announcement which can be found on our website (www.gemdiamonds.com). © 2013 GEM DIAMONDS LIMITED
Information in this presentation is correct as at 12 March 2013
2
Full Year 2012 Results
Strategy Progressed
Growth
Capital discipline Project Kholo optimised: • Reduced capex • Diamond damage reduction • Diamond security enhanced • New crushers Ghaghoo: • Plant and camp completed • Access decline advancing Underperforming assets exited • Chiri • Ellendale Expand manufacturing: • Volume to be increased • Generate revenue uplift © 2013 GEM DIAMONDS LIMITED
Value Creation
Sustainable Development
•
Record carats recovered and sold at Letšeng
•
4 Star in external SHE audit for all operations
•
Increased throughput and carats recovered and sold at Ellendale
•
32 months LTI-free at Ellendale in May 2012
•
Boreholes in Botswana operational
•
Extended resource at Letšeng
•
Bank facilities implemented US$50m
•
Wool & mohair project in Lesotho completed
•
Revenues materially affected by lower US$/ct at Letšeng
•
Bunuba Peoples Trust established
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Full Year 2012 Results
Diamond Market 2012 was a challenging year
2013 has seen improved demand as a result
Rough prices down 15%
of rough supply constraint
Factors – declining polished prices, Euro
Improved polished trading
crisis, liquidity
Supply/ demand imbalance
Q4 improvement in demand and prices 60 WWW Overall Rough Index
900
PolishedPrices Overall Index
50
Supply
800
Demand
40
700 600
30 500
20
400
Supply and Demand in US$ Billions
Supply Demand and future prices 1000
300
10 200 100
Source: WWW Diamond Forecasts Limited
Positive signs early in 2013, short term expected rough shortage should see some modest price rises perhaps accompanied by improving polished prices © 2013 GEM DIAMONDS LIMITED
2002
2004
2006
2008
2010
2012
2014
Source: WWW Diamond Forecasts Limited
2016
2018
2020
2022
2024
2026
2028
2030
0
Long term Increasing Supply – Demand imbalance set to drive prices upwards
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Full Year 2012 Results
Group HSSE Performance Lost time injury frequency rate 0.50
All injury frequency rate
0.45
4.90 4.80
0.40 0.30 0.30
0.25
4.60
0.20
4.50 4.40
0.10 0.00
4.30
0.00 2009
2010
2011
2012
Regrettably 3 fatalities and 5 other LTIs across the Group 1 000 days LTI-free at Kimberley in May 2012 4 Star ratings in external SHE audit for all operations Improving Group-wide AIFR of 4.45 Zero major community incidents Zero major environmental incidents CSI expenditure of US$0.6m Š 2013 GEM DIAMONDS LIMITED
4.70
4.20
2011
2010
2012
Corporate social Expenditure 1200 1000 800 600 400 200
2009
2010
2011
2012
5
Full Year 2012 Results
Operational Review – Letšeng
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Operational Review – Letšeng Carats recovered
Carats 140 000
Record carat production, 114 350 carats, up 2%
120 000
Recovered grade of 1.75 cpht, up 6%
100 000
Ramping up waste profile
80 000
Operational efficiencies
60 000 40 000
Continued focus on cost management
20 000
Project Kholo expansion review
2010
2011
Letseng Plants mt
AV plant
Tonnes treated
8.0
Study into the underground mining of the Satellite pipe completed
2012
20.0
6.0
15.0
4.0
10.0
2.0
5.0
0.0
0.0 2010
2011 Letseng plants
© 2013 GEM DIAMONDS LIMITED
2012 AV plant
Waste mined
mt
2010
2011 Letseng
2012
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Full Year 2012 Results
Letšeng Mining Area and Resource Extension
KSouth
K4
K6 SVK
KNorth
NVK
793 metres 828 metres
19 holes drilled in 2012 including 4 deep resource extension holes 226 metres added to the Satellite pipe and 317 metres added to Main pipe Mining in 2nd half of 2012 and 1st half of 2013 taking place only in the lower value Main pipe. © 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Letšeng - Project Kholo Update An update of Project Kholo announced in Dec 2012 Current status Development of Plant 3 on hold Replacement of secondary/tertiary crushers for Plants 1&2 (Q2 2013) •
Reduce diamond damage
Feasibility study underway for new stand alone Recovery Plant (Q2 2013) •
Latest (Kholo) technologies
•
Reduce diamond damage
•
Improve efficiencies
•
Improve security
Pre-Feasibility study into “Kholo Optimised” (Q4 2013) •
Phased introduction of “Kholo” principles/technologies
•
Increased tonnage
•
Reduce diamond damage
•
Increased liberation
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Letšeng – Addressing diamond damage Problem: High incidence of type II diamonds Brittle and prone to damage High level of damage through traditional crushers Immediate Solution: Studies done on Letšeng ore in Japan Liner configuration designed for Letšeng specific ore Improved nip angle and profile for better product Installation of Kawasaki Cybas i1200 crushers underway, to be completed by end Q2 2013 Expected Result / Further Opportunities Less damage = increased revenue Process modelling of the new crushers indicates far less damage Opportunity to reduce MCOS by 25% - better liberation © 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Letšeng – Upside Opportunities X-Ray transmissive technology Tested at Letseng to recover type II diamonds Results indicate 100% recovery Old recovery tailings re-treated and US$12 million revenue generated Will enable the mine to recover large high value diamonds early in the process – less damage Will replace coarse DMS – less opex Proposal completed by Q4 2013
Waste sorting Near infra-red (NIR) waste sorting test-work underway Initial results indicate viability of the process Has the potential to remove internal and external waste dilution (up to 25% in some facies) Test-work and proposal completed by Q4 2013
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Letšeng Expansion Scenarios
Increased production for the 10 mtpa and 7.5 mtpa scenarios start in 2016 The 10 mtpa and 7.5 mtpa scenarios include increased liberation in the carat profiles Optimising the various waste profiles remains an on-going work stream
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Operational Review – Ellendale
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Operational Review – Ellendale Carats recovered
Carats 200 000
Carat production 155 996cts, up 30%
150 000
Tonnes ore mined 4.67mt up 71%
100 000
Tonnes treated 4.17mt, up 34%
50 000
Disposed
2010
2011
of
to
Goodrich
Resources
US$15.3m
2012
Ellendale mt 5.0
Waste mined
mt
Tonnes treated
7.0 6.0
4.0
5.0
3.0
4.0
2.0
3.0 2.0
1.0
1.0 0.0
0.0 2010
2011 Ellendale
© 2013 GEM DIAMONDS LIMITED
2012
2010
2011 Ellendale
2012
for
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Full Year 2012 Results
Ghaghoo Mine Development
Š 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Ghaghoo Phase 1
Phase 1 production to commence mid-2014 Š 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Ghaghoo Mine Development
Objectives of Phase 1
To prove up key metrics: Grade US$ per carat Milling characteristics for improved liberation Mining conditions
Current Status
Strategic Options
Phase 1 underway
U/G - Double up
Total capex spent to end 2012: US$53m (capex budget: US$96m)
U/G - Maximum production
Decline advanced c.350 metres Plant construction 90% complete Production to commence mid 2014
Results from Phase 1 will provide updated valuation metrics and underpin future strategy Š 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Group Financial Performance
Market factors – significant impact on revenues Capital discipline to protect balance sheet Postive cashflows and profits from Letšeng and through sales and manufacturing divisions Underperforming assets exited Facilities implemented
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Group Financial Performance 2012 Before exceptional items*
2011 Before exceptional items*
% Change
Revenue
202.1
306.1
(34%)
Royalty and selling costs
(19.1)
(26.5)
Cost of Sales
(103.3)
(97.8)
Corporate expenses
(14.2)
(15.3)
Underlying EBITDA
65.5
166.5
(18.6)
(21.6)
Non cash and other items
2.8
5.6
Net finance income
1.3
2.1
Profit before tax
51.0
152.6
(18.4)
(52.9)
Profit for the period
32.6
99.7
(67%)
Attributable profit
17.1
61.5
(72%)
12
44
(72%)
US$ millions
Depreciation and Amortisation
Income tax
Basic EPS (US cents) *Excludes Kimberley Š 2013 GEM DIAMONDS LIMITED
(61%)
(67%)
19
Full Year 2012 Results
Group Financial Performance 2012 Before exceptional items
Exceptional items
Total
Revenue
202.1
-
202.1
Royalty and selling costs
(19.1)
-
(19.1)
Cost of Sales
(103.3)
-
(103.3)
Corporate expenses
(14.2)
-
(14.2)
Underlying EBITDA
65.5
-
65.5
(18.6)
-
(18.6)
Non cash and other items
2.8
-
2.8
Net finance income
1.3
-
1.3
-
(16.2)
(16.2)
51.0
(16.2)
34.8
(18.4)
-
(18.4)
32.6
(16.2)
16.4
Loss from discontinued operations
-
(70.3)
(70.3)
Recycling of FCTR on disposal of subsidiary
-
(48.4)
(48.4)
Profit/(loss) for the period
32.6
(134.9)
(102.3)
Attributable profit/(loss)
17.1
(134.9)
(117.8)
12
(98)
(85)
US$ millions
Depreciation and Amortisation
Impairments Profit before tax Income tax Profit/(loss) for the period
Basic EPS (US cents)
Š 2013 GEM DIAMONDS LIMITED
20
Full Year 2012 Results
SEGMENTAL PERFORMANCE US$ (millions)
Letšeng Diamonds
Kimberley Diamonds
2012
2011
2012
2011
Revenue
207.7
300.6
113.6
89.4
Royalty and selling costs
(16.7)
(24.5)
(6.9)
(5.6)
Cost of sales
(100.1)
(95.4)
(94.3)
(70.6)
90.9
180.7
12.4
13.2
EBITDA margin
43.8%
60.1%
10.9%
14.8%
Attributable profit/(loss)
46.1
89.1
(6.6)
3.1
Maloti 8.21
Maloti 7.26
A$0.97
A$0.97
EBITDA
Exchange rate – Average to US$ Unit costs (local currency)
Maloti
Australian Dollar
Direct cash costs (before waste) per tonne treated
108.24
88.84
16.89
19.02
Operating costs per tonne treated*
125.57
102.15
20.86
21.97
Waste cash cost per waste tonne mined
24.40
21.13
4.45
4.04
* Operating costs excludes royalty and selling costs and depreciation and mine amortisation and includes inventory, waste and ore stockpile adjustments © 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Sales and Manufacturing
Contribution to Group EBITDA of US$6.4m US$10.4m at rough value (US$1.2 m in 2011) in inventory on hand at year end. Unrealised profit for the year of US$5.4m (US$0.6 m in 2011)
Š 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Group Cash Reconciliation (US$m) 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0
33 (97) 100
(73)
(31) 159
© 2013 GEM DIAMONDS LIMITED
(14)
3
(9) 68
71
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Full Year 2012 Results
Group EBITDA Reconciliation (US$m)
Controllable
Non-controllable
200 10
180 160
86
140
3
120 25
6
100
21 12
180
14
80
1
60 40
98 78
20 0
* Includes Kimberley Diamond Company Š 2013 GEM DIAMONDS LIMITED
24
Full Year 2012 Results
Group Cash and Funding
Total Group cash on hand at December 2012: US$68m net of debt (US$63m attributable) of which US$51m is in the corporate office Working capital facility implemented 3 year facility of M250m (US$29.5m) with Standard Lesotho Bank, facility available for drawdown as from January 2012 3 year facility of US$20m signed with Nedbank Capital (division of Nedbank Ltd) in January 2013, available for immediate draw down As at 11 March 2013, no amounts are drawn down under either facility
Š 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Outlook Strong start to 2013 with prices up +10% Supply remains constrained Decrease diamond damage – new crushers Feasibility study on new recovery plant Complete access decline at Ghaghoo Corporate office cost alignment with current asset base
Š 2013 GEM DIAMONDS LIMITED
26
Full Year 2012 Results
Appendix 1 - Share Information Share prices and trading volumes Major Shareholders
15 Feb 2013
Graff Diamonds International Limited
15.12%
Lansdowne Partners Ltd
14.99%
Black Rock Inc.
11.37%
FIL Limited/FMR LLC
8.17%
Gem Diamonds Holdings Ltd
6.74%
Capital Group Companies Inc.
6.25%
Legal & General Investment Management Ltd
2.80%
Other Directors’ holdings
2.11%
Gem Diamonds Ltd is listed on the Main Board of the London Stock Exchange
Company officers
Shares in issue
138,267,181
Clifford Elphick
Chief Executive Officer
Share price (11th March 2013)
£1.63
Alan Ashworth
Chief Operating Officer
Market Capitalisation
£225m
Kevin Burford
Chief Financial Officer
Glenn Tuner
Chief Legal & Commercial Officer
© 2013 GEM DIAMONDS LIMITED
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Full Year 2012 Results
Appendix 2 – 2013 Guidance Letšeng Guidance
2013
Waste tonnes (Mt)excludes royalty, selling costs, depreciation and mine amortisation, 15 -but 17 Operating costsmined per tonne
1.
includes inventory, Ore treated (Mt) waste and ore stockpile adjustments. 6.5 – 7.0 2. Foreign exchange assumptions ZAR 8.50 to the US dollar (the Lesotho Maloti is pegged to the South African Carats rand). recovered (Kcts) 115 - 130
Carats sold (Kcts)
110 - 125
Direct cash costs (before waste) per tonne treated (Maloti)
115 - 130
Mining waste cash costs per tonne of waste mined (Maloti)
27 – 30
Operating costs* per tonne treated (Maloti)
140 - 170
Polished margin %
10 – 13%
Stay in business capital**(US$m)
13 - 15
*Operating costs per tonne excludes royalty, selling costs, depreciation and mine amortisation, but includes inventory, waste and ore stockpile adjustments. **Foreign exchange assumptions ZAR 8.50 to the US dollar (the Lesotho Maloti is pegged to the South African rand).
© 2013 GEM DIAMONDS LIMITED
Thank You
© 2013 GEM DIAMONDS LIMITED