GEM DIAMONDS - Full Year 2012 Result Presentation

Presentation

Full Year 2012 12 March 2013

© 2013 GEM DIAMONDS LIMITED

1

Full Year 2012 Results

Disclaimer The following presentations are being made only to, and are only directed at,

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

persons to whom such presentations may lawfully be communicated (“relevant

management believes these measures provide valuable additional information in

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

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

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.

investments. These presentations do not constitute an offering of securities or

Additionally, although these measures are important in the management of the business,

otherwise constitute an invitation or inducement to any person to underwrite,

they should not be viewed in isolation or as replacements for or alternatives to, but

subscribe for or otherwise acquire securities in any company within the Group.

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

4

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

7

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

9

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

10

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

11

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

12

Full Year 2012 Results

Operational Review – Ellendale

© 2013 GEM DIAMONDS LIMITED

13

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

14

Full Year 2012 Results

Ghaghoo Mine Development

Š 2013 GEM DIAMONDS LIMITED

15

Full Year 2012 Results

Ghaghoo Phase 1

Phase 1 production to commence mid-2014 Š 2013 GEM DIAMONDS LIMITED

16

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

17

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

21

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

22

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

23

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

25

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

27

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