Chief Executive Officer's Review - Clifford Elphick
On behalf of the Gem Diamonds’ team, I am pleased to present our first online Sustainable Development Report. This report details our approach to managing the environmental, social and governance issues most material to our business during 2017.
Gem Diamonds is committed to doing business sustainably and ethically. Mining is inherently a long-term venture. It is only by making the appropriate choices today, for ourselves and our stakeholders, that we can leave a legacy of which we are proud. For Gem Diamonds, sustainable development is development that meets the needs of the present without compromising the future generations’ heritage and access to resources.
We integrate sustainability into our core business practices, working to create economic value for the Group while delivering ongoing benefits to all our stakeholders.
Our operating context
The global market for both rough and polished diamonds remained cautious in 2017. Ongoing financing challenges and the volatile macro-economic environment continued to negatively affect the middle diamond market.
While in the medium to long term, rough diamond prices are expected to be supported by favourable demand/supply fundamentals, the abovementioned difficulties continued to place our operations under pressure in 2017.
Review of 2017
Against this background, Gem Diamonds began transforming the business, identifying ways to operate with more efficiency in order to ensure the long-term sustainability of the business. Gem Diamonds seeks to deliver sustainable returns to our investors, while simultaneously optimising stakeholders benefits and minimising the operational impact upon the environment.
At Letšeng, the updated life of mine plan was implemented during the year with the objective of reducing waste tonnes mined and improving short-term cash flows. Mining progressed well against this plan and the improvement in the greater than 100-carat diamond recoveries at Letšeng was encouraging. During 2017, the frequency of large diamond recovery improved when compared to prior year, with 214 diamonds larger than 20 carats recovered, compared to 179 in 2017.
Letšeng’s large, high-quality goods continued to perform well. The demand and pricing for Letšeng’s large high-quality white rough diamonds remained robust, with an average price achieved of US$1 930 per carat.
As announced previously, at Ghaghoo the mine was successfully placed on care and maintenance during the year which resulted in significant cost optimisation.
The Group’s financial position remains solid with a cash balance of US$47.7 million (net cash US$1.4 million) and undrawn facilities of US$36.2 million as at 31 December 2017 underpinned by underlying EBITDA of US$48.6 million.
We continue to strive towards reaching our goal of zero harm to our employees, as well as receiving environments and our project-affected communities.
Behaviour-based safety continued to form the cornerstone of our health and safety management programme. During 2017, we worked with our employees to ensure that safety remains front of mind at all times. We are pleased to report zero fatalities once again. While this is a pleasing achievement, there is always room for improvement and regrettably, we recorded one lost time injury (LTI) during the year, resulting in a Group-wide lost time injury frequency rate (LTIFR) of 0.04.
We strive to create a lasting legacy wherever we operate through the contribution to local economies, the maximisation of local employment, local procurement and the development of sustainable corporate social investment projects. This year, we invested more than US$0.5 million in social corporate investment, despite the difficult operating context. It is pleasing to report that in a recent public speech, the Minister for Mines in Lesotho singled out the Letšeng mine for special commendation for tis contribution to the local communities.
In 2017, zero major stakeholder incidents were reported, and we continue to foster open, transparent and mutually respectful relationships with our project affected communities.
We successfully implemented a variety of environmental optimisation projects to continually reduce our resource consumption. Pleasingly, we can report that our operations have continued to remain free of significant environmental incidents in 2017 and continue to remain legally compliant with host country legislation.
Appreciation and closing
During the year ahead, we will continue to focus on ensuring Gem Diamonds remains an industry leader in sustainability practices. We are determined to maintain our high HSSE standards and to meet industry best practice standards. We will continue to drive our sustainability efforts in a way that is both responsible and economically viable.
I would like to thank every employee for their contribution to our success during the year. Our sincere thanks to our key stakeholders and their continued support during the year.
Chief Executive Officer