Sustainability is vitally important in today’s corporate world. At Gem Diamonds, we recognise the interdependent relationship between delivering a robust operational performance and our ability to make a meaningful, long-lasting impact. We believe that embedding sustainability principles into our core business practice is critical.

During the Group’s organisational purpose workshops held in 2019, we uncovered that this belief is already embedded in the thinking of our people. Community support and the sustainability of our impact are an inherent part of our organisational purpose – to which our people have aligned their own purpose as employees. Moreover, employees noted in these workshops that the Company’s efforts to support meaningful sustainability initiatives positively impacted their motivation and gave purpose to their daily tasks.

A highlight of 2019, of which we are very proud, was the fact that we managed to sustainably reduce our mining costs to a level that we believe is best in class. This reflects exceptionally well on the continued success of our Business Transformation (BT) programme, initiated in 2017 (for more detail, see question below on Business Transformation). We remain on target to achieve our cumulative US$100 million four-year BT target to 2021, achieving this feat despite the conditions under which we mine, which present significant logistical challenges.

Allied to the BT programme, and its evolution to ensure the sustainability of implemented initiatives and to evoke a culture of continuous improvement, we commenced with the Continuous Improvement (CI) programme at Letšeng.

The recovery of large exceptional diamonds significantly impacts our sustainability. A key focus for our business is therefore to ensure not only the recovery of these diamonds, but also that we minimise any damage through our mining and treatment processes. A considerable amount of work took place during the year to achieve these outcomes. Although it's early days, we've already seen an improvement in the diamonds recovered, and these projects hold great promise for further improvements in 2020 and beyond.

Throughout the year, US$10 million was invested towards capital projects that strengthened the operation’s position in order to sustainably extract value from our Letšeng resource. Improvements in the quality of our drilling and blasting practices allowed us to successfully implement steeper pit slope angles in both pits. This initiative significantly increased the value of our resource by decreasing waste mining through the life of the mine. In prioritising value over volume in the processing plants, improvements in maintenance planning allowed for more consistent feed through, enhanced process stability and increased plant uptime and reliability.

In addition, our ability to properly understand our resource impacts on the sustainability of our business. A better understanding of our resource will have a direct effect on the sustainable success of the Company and the benefits we can ultimately share with our stakeholders. This is accomplished through our mineral reserves management programme, according to which we map our resource and the optimal way in which to mine it. Extensive work has been conducted in this area during the year, which we believe will bear fruit for years to come.

Lesotho is a micro-economy by global standards, and while that presents challenges to its residents from a socio-economic standpoint, it also means that the impact of interventions by companies such as Gem Diamonds has the potential of an outsize impact, with our Letšeng mine being one of the most significant contributors to Lesotho’s GDP.

We have, in the past, typically invested in our corporate social investment (CSI) initiatives as a function of the dividends paid out by Letšeng. But, during 2019, as part of the mine-lease-renewal process, we committed to an annual CSI amount of at least M5 million. This commitment has entrenched our investment in CSI initiatives as a strategic part of our business planning and day-to-day operations.

Given our focus on long-term sustainability and demonstrable impact, this annual CSI commitment assists with our forward planning and is a positive development for the expansion of our CSI and community development programmes.

Directly related to this, a comprehensive needs analysis will be conducted in the communities surrounding Letšeng in 2020, and the results will inform an expanded five-year cycle of community investment projects. This is a development that we look forward to with anticipation.

We continue to explore bioremediation as a means of reducing nitrate levels as part of our water management strategy. Bioremediation uses naturally occurring organisms to break down pollutants such as nitrates into less toxic substances, creating less waste than more costly methods such as reverse osmosis. A detailed design of our bioremediation plant will commence in 2020.

Our Letšeng mine is remote, and yet there are three other mines in the area, resulting in intense competition for skills and talent. Although we are 98% localised at Letšeng, there remains certain skills and levels of experience, particularly for more senior roles, that are difficult to find in any single country.

We recognise that to build the calibre of employee we want at Gem Diamonds, more than on-the-job training is required. We want our employees to get a sense of context for the work they're doing, to be able to experience best-practice in mines internationally, and to have the kind of operational experience that allows them to think more broadly than their individual role.

In response, a development programme was put forward that incorporates activities designed to build on our employees’ experience. It's a model that we're piloting – encouraging international site visits and training that emphasises global best practice, as well as supporting development in terms of our people’s careers.

In a challenging economic context, our BT process has been a critical optimisation tool to ensure the ongoing sustainability of the business.

The BT process identified savings and efficiencies of US$100 million over four years from 2018, and, to date, we have achieved over 50% of our stated target. To ensure we remain on track, we have a dedicated CI team and progress is consistently tracked and monitored.

The transition from BT to CI throughout the Group is in progress. CI focuses on behavioural strategies to enable companies to sustain efficiencies by unlocking the inherent capabilities of employees at all levels to implement CI best practices, build effective teams and drive incremental improvements. The CI process builds on the success of the BT process to entrench business optimisation and sustainability.

Our employees have been central to the BT process, from idea generation through planning and final implementation of initiatives. During the planning, we insisted on initiative owners providing business cases for each employee-suggested programme. We provided our employees with the support and training necessary to effectively identify, plan and execute on their initiatives.

Apart from building a framework for continuous monitoring and evaluation of the programme, this planning process contributed to upskilling, training, and empowering our employees, as well as facilitating the shift in our culture to one of continuous business optimisation. It gave our people the confidence and drive to suggest initiatives for consideration and, if viable, implementation. Overall, the BT programme has given our employees an enhanced sense of their potential and contribution to the long-term success of the Group as a whole. (Please see our case study for more information.)

I believe that our continued efforts to remain best-in-class from a cost management perspective allows us to remain sustainable in challenging market conditions and puts us in an advantageous position to respond to opportunities as these conditions improve.

While we hope for a cessation of the drought in 2020, the unpredictability of atypical and catastrophic weather patterns is in itself an issue requiring more co-ordinated planning. In this regard, the Group is assessing our water management with the aim of increasing recycled water usage in the processing practice while reducing other categories of water usage on-site.

A forward-looking initiative that holds great promise is the institution of a blockchain-type tracking system that will demonstrate each diamond’s provenance at every stage of the value chain, from mine to point of sale. It will allow our customers to see for themselves not only that our diamonds are produced ethically, but ultimately the positive impact on our communities and environment.

I want to thank all our stakeholders and the Board – particularly Johnny Velloza – for the support that they've given me through the year; Mike Brown as HSSE Chairman; and Gavin Beevers for his invaluable contribution in the first half of the year.

I would also like to thank our staff and management on-site, who continue to do fantastic work in remote and challenging circumstances.