Full year results for the period ending 31 December 2012

Back

12 Mar 2013

Gem Diamonds Limited (the Company) is pleased to announce its Full Year results for the period ending 31 December 2012.

The Company has demonstrated strong operational performance with record carat production and increased recovered grade at Letšeng as Gem Diamonds strives towards realising maximum value from its portfolio of assets.

The Company remains focused on optimising and streamlining its core operations and has undergone a restructuring of its asset base to refocus capital and management resources on its key assets. Gem Diamonds will continue to monitor its cash flow and will focus on lower capex opportunities to deliver improved returns to shareholders.

FINANCIAL RESULTS

2012 financial performance was impacted by substantially lower realised diamond price during the period:

  • Revenue  of US$202 million (US$306 million in 2011)*
  • Underlying EBITDA of US$66 million (US$167 million in 2011)*
  • Attributable net profit of US$17 million (before exceptional items) (US$62 million in 2011)*
  • Basic EPS of 12US cents (before exceptional items) (44 US cents in 2011)
  • Cash on hand of US$68 million (net after debt) (US$159 million as at 31 December 2011)

*Restated for the impact of the disposal of Kimberley Diamonds which has been disclosed under Discontinued Operations in Exceptional Items

OPERATIONAL HIGHLIGHTS 

Robust operational performance and record carat production at Letšeng underpins the quality of the asset and supports near and long term plans to optimise this asset and grow production:

  • Letšeng’s second successive record carat production of 114 350 carats, an increase of 2% from the record production of 2011
  • Letšeng recovered grade of 1.75 carats per hundred tonnes, up from 1.65 carats per hundred tonnes in 2011
  • 134 diamonds were sold or valued at greater than US$20 000 per carat. These diamonds, which comprise 3% of the carats exported, averaged US$35 400 per carat and included an 11 carat blue diamond sold in September 2012 for US$2.17 million ( US$186 943 per carat.) highlighting the quality of Letšeng as a producer of exceptional high value diamonds
  • 647 rough diamonds greater than 10.8 carats in size were recovered in 2012
  • Development of Phase 1 of Ghaghoo continues as planned with the surface infrastructure complete and with the processing plant substantially complete

CORPORATE HIGHLIGHTS 

2012 was a year of transformation for Gem Diamonds as the Company refocused its management and cash resources through a consolidation of its asset portfolio and revision of the investment programme to target high value accretive and disciplined capex opportunities:

  • Disposal of the Ellendale mine to Goodrich Resources for US$15.4 million
  • Formal exit from the Company’s participation in the Chiri project in Angola
  • Revision of capital expenditure on Project Kholo  to focus on key workstreams to streamline and optimise operations:
    • Four new crushing units ordered and to be installed at Letseng to reduce diamond damage
    • 3 new CAT 777 trucks brought to site at Letseng which will add to the overall mining capacity and in particular to waste stripping in 2013
  • The sales and marketing and manufacturing strategies continue to return positive results

OUTLOOK

  • Focussed on enhancing cash flows in 2013 through the streamlined implementation of Project Kholo, effective cost management and improved margins in a rising rough market
  • Begin to realise initial value and benefits from Project Kholo during 2013 through the implementation of key work-streams
  • Continue to progress Ghaghoo Phase One, targeting first ore in H2 2014
  • 2013 started positively with strong improvements in rough prices as demand increased on fears of short term rough supply shortages.
  • Long term outlook for the diamond industry remains robust with growth forecast expected to continue in the Asian markets accompanied with expected improvements in the US market. Long term supply constraints anticipated to exert further upward pressure on diamond prices
Commenting on the results today, Clifford Elphick, Chief Executive Officer of Gem Diamonds, said:

“Although 2012 was a challenging year for the diamond mining industry and for Gem Diamonds, it is pleasing to see that 2012 was a strong operational year for the Group, with a second successive record carat production at Letšeng, our flagship asset. Moreover, the disposal of underperforming assets will result in a more focused management team, confident on improving returns to shareholders in the coming years.”

The Company will be hosting an analyst presentation on its full year results today, which will take place at 9.30am at Holborn Bars. A live audio webcast of the presentation will be available on the Company’s website: www.gemdiamonds.com

For further information: 
Gem Diamonds Limited

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

Sherryn Tedder, Investor Relations 
Tel: +27 (0) 11 560 9600 
Mob: +27 83 943 4505

Pelham Bell Pottinger

Charles Vivian / James MacFarlane 
Tel: +44 (0) 207 337 1500861 3232

About Gem Diamonds: 

Gem Diamonds is a leading producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho as well as the Ghaghoo mine, currently in development 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. Since Gem Diamonds’ acquisition of Letšeng in 2006, the mine has produced four of the top twenty largest white gem quality diamonds recorded.

Gem Diamonds has a growth strategy based on the expansion of the Letšeng mine and the development of the Ghaghoo mine, while maintaining its strong balance sheet. The Company seeks to maximise revenue and margin from its rough diamond production by pursuing cutting, polishing and sales and marketing initiatives further along the diamond value chain. With favourable supply/demand dynamics expected to benefit the diamond industry over the medium to long term, particularly at the high end of the market, this strategy positions the Company well to generate attractive returns for shareholders in the coming years.

12 Mar 2013 Full Year results for the period ending 31 December 2012 (654KB PDF)