01 Apr 2009

Gem Diamonds (LSE: GEMD), the diamond mining and marketing company, today announced annual financial results for the year ended 31st December 2008 and details of a £75 million (Approx US$107 million) Share Placing.

Clifford Elphick, Chief Executive Gem Diamonds commented:

"For the first eight months of 2008 the Group performed strongly in executing its ambitious three year growth plan based on strong rough diamond prices. However, the effect on the diamond market of the global economic crisis in the latter part of 2008 was significant and caused rough diamond prices to drop considerably. This necessitated a change in the growth strategy and resulted in the Group dramatically downscaling its development projects in the DRC, Angola and CAR and placing its cash consuming mining operations at Cempaka and the Ellendale 4 pipe on care and maintenance. These actions will ensure the Group is best placed to weather the current downturn.

"The Company has acted decisively to ensure it is appropriately positioned for the current economic climate. Our core assets continue to produce some of the world's largest and most precious diamonds for which there will always be demand. Following the proposed capital raising I am confident that we will emerge as one of the stronger players within the diamond sector over the medium to long term."

Shareholders and investors are referred to the announcement of the Group's proposed Placing released on RNS today, Wednesday 1 April 2009.

Rapid Response To Global Financial Crisis:

  • Revised strategy in response to economic crisis and fall in rough diamond prices
  • Non-cash generating operations and projects placed on care and maintenance or slow tracked
  • Substantial reduction in sustaining and expansionary capital expenditure at the operating mines
  • Significant reduction in central costs through salary reductions, cancellation of bonuses and recruitment freeze
  • Planned reductions in cash outflow of US$129.2 million in 2009 relative to 2008

Financial Performance:

  • Revenue up 94% to US$296.9 million in 2008 from US$152.7 million in 2007
  • EBITDA excluding impairment charges US$83.0 million in 2008 from US$73.5 million in 2007
  • Impairments to assets of US$546.5 million
  • Loss per share before exceptional items of US74 cents per share and after exceptional items of US884 cents per share
  • US$61.4 million of cash on hand

Operational Performance:

  • Letšeng production doubled, revenue grew 24% y-o-y. Letšeng remains the Group's core asset
  • Recovery and sale of 478 ct Light of Letšeng for US$18.4 million
  • Ellendale production ramp-up; price per carat grew 34%. Costs down from US$19.90 per tonne treated in 2007 to US$15.35 per tonne for 2008
  • Acquisition of the polishing and cutting operations of Calibrated Diamond Technology and the recruitment of the Matrix Diamond Technology executive

Capital Raising

  • Placing of 75 million shares at 100 pence per share to raise £75 million or approximately US$107 million
  • Placing at a discount of 33% to closing price on 31 March, 2009
  • Capital raising to eliminate all debt, provide additional working capital
  • Capital raising allows Group to sustain operations over a long period of uncertain diamond prices

Strategy / Outlook:

  • Trading conditions weakened further during January 2009, though the average Letšeng February 2009 tender achieved price was up 9.7% on January
  • Focus on generating maximum cash flow from the strongest producing assets - Letšeng and Ellendale 9 pipe
  • Seek out new routes to optimise diamond sales
  • The Group intends to emerge from the economic downturn with a strong balance sheet well positioned to capitalise on the opportunities that these markets present

Annual results for the year ended 31 December 2008 (211 Kb PDF)

For further information:
Gem Diamonds Limited

Clifford Elphick, Chief Executive Officer
Glenn Turner, Chief Commercial Officer
Tel: +44 (0) 203 043 0280

Richard Chetwode, Investor Relations
Tel: +44 (0) 203 043 0280
Mob: +44 (0) 759 0064 883

Gem Diamond Technical Services

Angela Parr, Media
Tel: +44 (0) 203 043 0280
Mob: +27 (0) 83 578 3885

Pelham PR

Candice Sgroi
Tel: +44 (0) 20 7337 1533
Mob: +44 (0) 7894 462 114

James Henderson
Tel: +44 (0) 20 7337 1501

About Gem Diamonds:

Gem Diamonds Limited (LSE: GEMD) is a global diamond company that has been pursuing a long term growth strategy through targeted acquisitions and the development of existing assets. Under current market conditions, the Company is focused on the development of its cash generative assets and has curtailed all non-essential capital and development expenditure.

The Company's portfolio comprises producing kimberlite and lamproite mines, development projects and exploration assets, as well as diamond beneficiation centres. Operations and projects are situated in Angola, Australia, Botswana, the Central African Republic, the Democratic Republic of Congo, Dubai, Lesotho, Mauritius and Indonesia.

With Letšeng's production of the world's most remarkable white diamonds and Ellendale's production of rare fancy yellow diamonds, Gem Diamonds is focused towards higher value diamonds. This segment of the market is expected to deliver attractive long term returns.