Our business context
2018 was characterised by the recoveries of exceptional, high-quality diamonds at our Letsěng mine which, coupled with continued delivery on our Business Transformation objectives, has contributed to the Company's sustainable growth.
At Gem Diamonds, we are committed to driving business optimisation to shape the Group for long-term growth and profitability for the benefit of all our stakeholders. We believe that embedding sustainability principles into our core business practice is critical.
Our operating context
One of the key developments in the diamond market during 2018 was the announcement by De Beers that it would be entering the market for the manufacture and sale of synthetic diamonds for jewellery. The emerging synthetics market constitutes a small percentage of the diamond jewellery market and primarily impacts the sale of smaller stones.
The market has also seen several major diamond mines come on stream over the past two years. These mines generally produce smaller, lower-quality diamonds, which has resulted in a supply imbalance for these goods, further impacting on the prices achieved.The prices realised for Gem Diamonds large, high-quality rough diamonds, however, have remained robust during 2018. In fact, the five-carat and larger rough diamonds recovered at Gem Diamonds’ Letšeng mine produce some 85% of its revenue.
2018 was characterised by the recoveries of exceptional, high-quality diamonds at the Letšeng mine which, coupled with continued delivery on our Business Transformation objectives, has contributed to the Company’s sustainable growth.
From a Business Transformation perspective, the Company has set a target of achieving US$100 million in cost savings and efficiencies by 2021. While this has been an ambitious target, Gem Diamonds is on track to achieve this goal and to furthermore achieve a sustainable run-rate of US$30 million annually thereafter.
The Ghaghoo mine in Botswana was placed on care and maintenance in 2017 as a consequence of the subdued state of the diamond market for the category of diamonds produced at this operation. During the year, a formal sale process commenced, and further updates on this process will be provided in due course.
In terms of the Group’s sustainability performance, we continuously work to integrate sustainability best practice into our operations. In the critical area of health and safety, the Company maintained its record of zero fatalities during the year (the last fatal accident occurred in 2014). Gem Diamonds recorded four lost time injuries (LTIs) during the year and achieved a Group-wide lost time injury frequency rate (LTIFR) of 0.15. We reaffirm our commitment to zero harm, and continuously improve our processes and systems to avoid injuries. It is pleasing to note that during the year we retained the ISO 14001 certification at Letšeng and, in addition, received ISO 45001 certification.
We maintained positive community relations during 2018. We believe this is a direct result of our consultative approach in addressing the most pressing needs identified by our communities. Following the discovery of the Lesotho Legend diamond, Letšeng initiated the 910-Community Project with the stated goal of sharing with our project affected communities the benefits of this remarkable recovery. In addition, our other community projects are on track, and we work to continuously identify where we can best add value to this integral stakeholder group.
From an environmental perspective, we recorded zero reportable environmental incidents in 2018. We continue to focus on realising efficiencies to reduce our water and energy consumption, and it is pleasing to record that this was achieved during the year.
Appreciation and closing
In the year ahead, Gem Diamonds will continue to focus on our Business Transformation and optimisation journey. This will continue to unlock value for the business, our shareholders and our stakeholders as we realise efficiencies and deliver on our stated strategy. We will also persist in our efforts to ensure sustainability principles become deeply embedded in our business practices.
I would like to thank my fellow Board members for their wisdom and contribution during the year. Furthermore, I want to express my appreciation to the Government of Lesotho for their ongoing support, which enables the responsible extraction of diamonds from this unique resource to the benefit of all our stakeholders.
To each and every employee at Gem Diamonds, thank you for your contribution to our success during the year.
Chief Executive Officer