of US$214 million (2016: US$190 million).

Underlying pre-exceptional EBITDA (earnings before interest, tax, depreciation and amortisation) of US$49 million (2016: US$63 million).

Capital expenditure

of US$18 million (2016: US$11 million).

6.4 million production tonnes treated (2016: 6.9 million).


Numerous factors beyond the control of the Group may affect the price and demand for diamonds. This could ultimately impact the Group’s ability to generate cash flows and to fund operations and growth plans. In order to mitigate this risk, the Group continually monitors market conditions to identify trends that pose a threat or create opportunity for the Group. Based on existing market conditions, the Group has the ability to preserve cash balances through the flexibility in its sales processes and the ability to reassess its capital projects and operational strategies. In addition, the quality of Letšeng’s high-value production has been less susceptible to fluctuating market conditions.

Product security and theft prevention remain high priorities. Security measures are constantly reviewed and implemented to minimise this risk. State-of-the-art security infrastructure and technologies are invested in and supported through additional surveillance processes. A Diamond Recovery Protection Committee was established at Letšeng.


Focus in 2018 will be on capital and cash management discipline to remain cash generative. The implementation of various business efficiency and optimisation initiatives remains a key objective for the Group. For more information, refer to the Annual Report.


Material matters

Maintaining a strong revenue stream and managing costs

Our context

To meet our financial and social targets, we are committed to maximising the value achieved on rough and polished diamond sales. By maintaining a strong revenue stream and managing our costs carefully, we ensure our ongoing ability to contribute positively to the economies in which we operate.

Our approach

A proactive approach to managing costs and maximising revenue is vital to our sustainability. We are unable to influence the market prices for our diamonds; however, we make sure that those factors within our control are continually reviewed to offer the best product for sale. For instance, minimising diamond damage during the liberation process ensures we achieve higher prices for our diamonds. We update and optimise our mine plans and operational procedures to ensure efficient extraction and we continually strive to find ways to reduce our cost base.

Furthermore, we seek innovative ways to maximise the revenue we receive for our diamonds, including investing in downstream activities.

During 2017 Gem Diamonds embarked on a Business Transformation process aimed at enhancing operational efficiencies, improving performance, and controlling costs. This Transformation process aims to create sustainable value and sustainability forms a fundamental part of this. Improving process efficiencies and reducing wasteful practices will assist the Group in protecting the natural environment in which it operates as well as generate significant savings.

Our performance

  • Revenue of US$ 214 million (2016: US$190 million).
  • Our focus on cost reduction and optimisation at the operations continued during 2017.
  • Improvement in net cash position by US$ 15.6 million, from US$ 14.2 million net debt position in H1 2017 to a net cash position of US$ 1.4 million at year end.

Our context

The strength of our balance sheet is critical to the sustainability of our business. Gem Diamonds is committed to protecting the strength of our balance sheet through careful capital deployment, cash flow management and maintaining our relationships with funders.

Our approach

We remain committed to investing in appropriate capital projects to ensure future growth while managing debt levels to preserve our cash position and create value for our investors. We remain committed to investing in capital projects to enable long-term growth.

Our performance

  • Cash on hand of US$ 48 million, of which US$ 35 million was attributable to Gem Diamonds and US$ 0.2 million was restricted.
  • US$18 million in capital expenditure.
  • US$97 million cash generated from operations.

For more information, refer to the Chief Financial Officer’s Report in the Annual Report.

Our context

Given the controversial historic nature of the diamond industry, we understand the need to protect the premium brand of diamonds through embedding the highest standards of corporate governance and ethics in our organisation.

Our approach

We aim to supply our clients with rough and polished diamonds of the highest product integrity while meeting our responsibilities as an ethical and accountable organisation. We recognise that conflict diamonds and their role in perpetuating human rights abuses has been the greatest single threat to consumer confidence in diamonds over the past decade.

Gem Diamonds recognises the prevalence of the global trade in conflict diamonds. We are strongly opposed to this trade and the effects it has on political stability, human rights and the legitimate global diamond trade.

The Kimberley Process certification scheme aims to eliminate the global trade of conflict diamonds. We fully support the objectives of the Kimberley Process and adhere strictly to its provisions.

Every client is carefully vetted using anti-money laundering protocols and ‘know your client’ reviews to ensure that they are compliant with all regulatory requirements.

Our performance

  • All rough diamond exports are certified through the Kimberley Process certification scheme.
  • Fully compliant with all government regulations and relevant voluntary codes concerning product and service information and labelling.
  • Zero significant cases of bribery, corruption or anti-competitive behaviour have been brought against us to date.
  • Zero incidents of potential breach of confidentiality of clients (2016: zero).

For more information on how we ensure the integrity of our value chain, please see Governance and ethics section.

For more information, refer to the Annual Report.

Our context

The resources we extract are the primary basis of our value generation. However, theft is an inherent risk in the diamond industry. This means that our diamonds need to be protected at all times. From discovery and extraction through the cutting of rough diamonds and the entire supply chain requires focusing on both the meticulous care and secure handling of the product.

Our approach

When dealing with high-value products like diamonds, security and theft prevention are high priorities. Various risk management initiatives have been implemented at our high-risk facilities to ensure the safety and security of our clients, staff and product.

Specialists are regularly consulted to keep us up to date with the latest protection technology, as well as the assessing of our security risk management systems and implement improvements.

Our performance

  • Additional value protection measures are continually evaluated and implemented to address areas of vulnerability.
  • External consultants are used to benchmark our systems, processes, and practices against an internationally developed framework.
  • The effectiveness of our off-site surveillance function continues to grow in support of our security objectives.

Our context

Gem Diamonds is exposed to some risks and uncertainties that could have a material impact on our performance and long-term stability. The effective identification, management and mitigation of these uncertainties is a core focus of ours as they are key to achieving our strategic objectives. One of the key risks faced is the ongoing currency volatility in response to macro-economic uncertainty.

The resilience of our business in relation to changes in exchange rates is material to our viability and allows us to harness opportunities during economic flux.

We generate our revenue in US dollar, while our cost base is incurred in local currencies of the various countries within which it operates. The volatility of these currencies against the US dollar impacts our profitability.

Our approach

The impact of the exchange rates and fluctuations are closely monitored. Our policy is to hedge a portion of future diamond sales when weakness in local currencies indicates it to be appropriate. Such contracts are generally short term in nature.

Our performance

  • For more information, refer the Principal risks and uncertainties section of the Annual Report.