TIDMGEMD
RNS Number : 0117V
Gem Diamonds Limited
31 October 2017
31 October 2017
GEM DIAMONDS LIMITED
Q3 2017 Trading Update and Board Changes
Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds" or the
"Company" or the "Group") provides the following Trading Update
detailing the Group's operational and sales performance for the
Period from 1 July 2017 to 30 September 2017 ("Q3 2017" or the
"Period").
Letšeng:
-- Recovered 30 774 carats during the Period, up 23% from 24 999 carats in Q2 2017
-- Achieved an average price of US$ 2 397 per carat for the July
tender, making it the highest achieved US$ per carat for a tender
since September 2015
-- Achieved an average price of US$ 1 858 per carat for the
Period, up 4% from US$ 1 779 per carat in H1 2017
-- Recovered six diamonds greater than 100 carats in the nine months to September 2017
-- 24 Diamonds sold for more than US$ 1.0 million each
generating revenue of US$ 56.9 million in the nine months to
September 2017
-- Zero Lost Time Injuries (LTI) for the Period. It is pleasing
to report that Letšeng has been LTI free for over 365 days to
date
Ghaghoo:
-- Following the conditional offer for the Ghaghoo mine
announced at the interim results, discussions and due diligence are
continuing
Efficiency and cost reduction review:
-- US$ 20 million of annualised and once-off efficiency and cost
reduction initiatives have been identified, an increase of US$ 5
million over the figure announced at the interim results, and are
now being implemented
-- As part of its strategic focus on reducing diamond breakage,
the Company has been working in collaboration with leading experts
from The University of Johannesburg for the deployment of
innovative technologies. These technologies are designed to reduce
breakages through identifying diamonds within kimberlite prior to
the crushing process; and liberating diamonds through electrical
pulse technologies.
Financial:
-- The Group had US$ 25.4 million cash on hand at the end of the
Period of which US$ 19.1 million is attributable to Gem Diamonds,
an increase on 30 June 2017 (US$ 20.0 million and US$ 16.1 million
respectively)
-- US$ 37.3 million of available facilities have been drawn
down, of which US$ 25.0 million relates to the Ghaghoo facility,
resulting in a reduced net debt position of US$ 11.8 million at the
end of the Period (H1 2017 - net debt of US$ 14.2 million). The
Group had US$ 42.2 million worth of undrawn and available
facilities at Period end.
Gem Diamonds' CEO, Clifford Elphick commented:
"The market for Letšeng's high-quality diamonds has remained
firm over the Period with the July tender achieving nearly US$ 2
400 per carat. It is pleasing to see carats recovered during the
Period up by 23% over the prior period.
The group-wide efficiency and cost reduction review is
progressing well and has already identified annual and once off
cost savings of US$ 20 million, which is an increase of US$ 5
million over the figure announced at the time of our interim
results. In addition, a number of innovative diamond identification
and liberation technology initiatives are being actively pursued
and I look forward to updating the market on further progress
during Q4."
1. Diamond Market
The strong demand for Letšeng's large high-quality white rough
diamonds has continued.
2. Letšeng
Q2 2017 Q3 2017 QoQ Q3 2016 YoY
% Change % Change
------------------------- ---------- ---------- ---------- ---------- ----------
Waste stripped (tonnes) 7 192 744 7 685 084 7% 6 626 385 16%
------------------------- ---------- ---------- ---------- ---------- ----------
Ore treated (tonnes) 1 511 631 1 634 741 8% 1 612 728 1%
------------------------- ---------- ---------- ---------- ---------- ----------
Carats recovered 24 999 30 774 23% 24 388 26%
------------------------- ---------- ---------- ---------- ---------- ----------
Grade recovered (cpht) 1.65 1.88 14% 1.51 24%
------------------------- ---------- ---------- ---------- ---------- ----------
The mining of waste continues to progress well and there are low
risks associated with the future exposure of kimberlite ore.
Letšeng treated a total of 1.3 million tonnes of ore during the
Period, 61% of which was sourced from the Main pipe, and 39% from
the Satellite pipe. The balance of the ore (0.3 million tonnes) was
treated through the Alluvial Ventures contractor plant, which was
sourced from the Main pipe and low-grade stockpiles. The higher ore
tonnes treated was due to improved plant availability. The
stability of the plants has improved. Despite the improved
availability, a crack has been identified in the scrubber shell in
Plant 2, which is being closely monitored. A decision has been
taken to reduce the amount of material being fed into this plant to
reduce the stress on the scrubber. This reduced feed rate will be
maintained until a new scrubber shell is installed, which is
planned for February 2018. As a consequence, guidance for tonnes
treated for 2017 has been reduced marginally between 6.5 to 6.6
million tonnes.
During the Period, 30 774 carats were recovered at a grade of
1.88 cpht against an expected reserve grade of 1.84 cpht. The core
drilling programme to improve confidence in the geology at depth,
including volume, grade, and revenue inputs of the resource has
commenced and is progressing well.
Guidance
In line with the revised mine plan, the waste tonnes for the
year is expected to be lower than original guidance, positively
impacting cash flow.
Guidance for ore tonnes treated has been revised marginally
downwards due to the planned reduced feed rate at Plant 2 as
explained above. Notwithstanding the lower tonnages forecast,
management has implemented various initiatives at Letšeng to ensure
carats recovered and sold remain within original guidance. In
addition to this, management has increased the contribution from
the higher-grade higher-value Satellite pipe material to 2.2m
tonnes, up 22% from previous guidance.
As a consequence, unit cost guidance is also revised. Operating
costs per tonne treated(2) are expected to increase as a result of
the higher amortisation charge associated with the increased
contribution from Satellite pipe material. The remaining impact of
the unit cost increase is as a consequence of reduced tonnages for
the year.
The revised full-year guidance is set out below:
FY 2017 FY 2017
Original Revised
Guidance Guidance
-------------------------------------- ---------- ----------
Waste stripped (Mt) 30 - 32 29 - 30
-------------------------------------- ---------- ----------
Ore treated (Mt) 6.8 - 7.0 6.5 - 6.6
-------------------------------------- ---------- ----------
Satellite pipe ore contribution
(Mt) 1.8 2.2
-------------------------------------- ---------- ----------
Carats recovered (Kct) 110 - 114 unchanged
-------------------------------------- ---------- ----------
Carats sold (Kct) 108 - 112 unchanged
-------------------------------------- ---------- ----------
Direct cash costs (before waste) 155 - 165 unchanged
per tonne treated (Maloti)(1)
-------------------------------------- ---------- ----------
Operating costs per tonne treated(2)
(Maloti) 240 - 250 270 - 275
-------------------------------------- ---------- ----------
Mining waste cash costs per
tonne of waste mined (Maloti) 31 - 32 32 - 34
-------------------------------------- ---------- ----------
Stay in business capital (US$
million) 21 - 23 16 - 18
-------------------------------------- ---------- ----------
(1) Direct cash costs represent all operating costs, excluding
royalty and selling costs
(2) Operating costs include waste stripping costs amortised,
inventory and ore stockpile adjustments, and excludes
depreciation
Letšeng rough diamond sales
Q3 2016 Q3 2017 YoY H1 2017 YTD
% change
---------------------------- -------- -------- ---------- -------- -------
Carats sold 26 656 25 909 -3% 49 930 75 839
---------------------------- -------- -------- ---------- -------- -------
Total value (US$ millions) 40.4 48.1 19% 88.8 137.0
---------------------------- -------- -------- ---------- -------- -------
Achieved US$/ct(*) 1 516 1 858 23% 1 779 1 806
---------------------------- -------- -------- ---------- -------- -------
Two tenders have been held in the Period with a total of 25 909
carats sold for US$ 48.1 million, achieving an average price of US$
1 858(*) per carat (H1 2017 - US$ 1 779(*) per carat).
Contributing to the achieved US$ per carat was a 7.87 carat pink
diamond which achieved US$ 202 222 per carat, making it the second
highest price per carat achieved by a Letšeng rough diamond. A
55.58 carat white diamond achieved US$ 61 778 per carat, making it
the highest price per carat achieved for a Letšeng rough white
diamond for the year to date. The 126.75 carat diamond recovered in
July achieved US$ 56 402 per carat during the Period while the
115.29 carat diamond recovered in September will be sold in Q4.
(*) Includes carats extracted at rough value for polishing.
3. Ghaghoo
As previously announced, the Board received a conditional offer
for the Ghaghoo mine in August. Discussions and due diligence are
ongoing.
The 13 021 carats on hand were sold during Q3 2017, achieving an
average price of US$ 175 per carat.
4. Business Efficiency
The business efficiency and optimisation programme has
progressed well with US$ 20 million of annualised and once-off
efficiency and cost reduction initiatives identified, which are now
being implemented. This represents an increase of a further US$ 5
million since early guidance was provided at the interim results.
The key areas contributing to the expected savings and efficiencies
are mining and processing improvements. These initiatives include
projects to improve plant availability, steepening slope angles and
contract renegotiations. In addition, a plan is currently being
implemented to materially reduce the Company's office footprints in
the UK, South Africa and Lesotho. The aircraft associated with the
Ghaghoo mine has been sold.
The previously announced updated Letšeng Life of Mine plan is
expected to reduce cash outflow from early 2018, primarily as a
result of a significant reduction in the volume of waste mined.
5. Innovation
As previously communicated, Gem is focused on reducing diamond
breakage to optimise revenue and increase the value created for our
shareholders. The Company continues to consider the deployment of
innovative technologies designed to reduce breakages through
identifying diamonds within kimberlite prior to the crushing
process and the liberation of diamonds through electrical pulse
technologies in collaboration with leading experts from The
University of Johannesburg.
The technology effectively scans ore prior to crushing and, in
trials conducted to date, has already been proven to clearly
identify diamonds within kimberlite. The technology will also
reduce processing costs by materially reducing the volume of
material run through the crushing process thus lowering the cost
per tonne of material processed.
6. Directors
It was with great sadness that the Company announced, on 27
October, the passing away of its non-executive director Mr Mike
Salamon.
In order to maintain the appropriate balance of non-executive
directors to executive directors for corporate governance reasons
and also in order to downsize the Company's Board of directors in
keeping with the ongoing efficiency and cost programme, the Company
announces that executive director Mr Glenn Turner has offered to
step off the Board after the upcoming November Board meeting, which
has been accepted.
This will result in the Board comprising three non-executive
directors, including the Chairman, and two executive directors. Mr
Turner will continue to be a key executive of the Company and the
Company Secretary.
In addition, non-executive director Gavin Beevers who has served
for nearly 11 years on the Board has indicated that he will not be
standing for re-election next year. A replacement non-executive
director for Mr Beevers will be announced shortly.
7. Health, Safety, Social and Environment (HSSE)
There were no Lost Time Injuries (LTI) during the Period,
resulting in a Group-wide Lost Time Injury Frequency Rate (LTIFR)
of 0.00 for the Period. The Group-wide All Injury Frequency Rate
(AIFR) for the Period was 1.88 which is an improvement on 2016's
rate of 1.93. It is pleasing to report that Letšeng achieved 365
LTI free days on 9 October 2017.
No major or significant community or environmental incidents
have occurred across the Group during the Period.
FOR FURTHER INFORMATION:
Gem Diamonds Limited
Susan Wallace, Company Secretarial department
ir@gemdiamonds.com
Celicourt Communications
Mark Antelme / Jimmy Lea
Tel: +44 (0) 207 520 9261
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67.
ABOUT GEM DIAMONDS:
Gem Diamonds is a leading global diamond producer of high value
diamonds. The Company owns 70% of the Letšeng mine in Lesotho and
100% of the Ghaghoo mine in Botswana. The Letšeng mine is famous
for the production of large, top colour, exceptional white
diamonds, making it the highest dollar per carat kimberlite diamond
mine in the world. www.gemdiamonds.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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