Financial and operational
We strive to take a holistic view of business performance and integrate sustainability into our activities. We believe that in addition to generating fair returns to our shareholders, this approach ensures our social licence to operate by delivering sustainable value to all our stakeholders.
RELATED SUSTAINABILITY PRINCIPLES
- PRIORITISING THE DEVELOPMENT AND WELL-BEING OF OUR EMPLOYEES
- UPHOLDING BUSINESS INTEGRITY
- OPTIMISING SOCIO-ECONOMIC BENEFIT
- IMPROVING RESOURCE USE EFFICIENCIES
A SNAPSHOT OF OUR PERFORMANCE
-
US$182 million in revenue
(2018: US$267 million).
-
US$41 million underlying EBITDA (earnings before interest, tax, depreciation and amortisation).
(2018: US$82 million underlying
pre-exceptional EBITDA). -
US$10 million in capital expenditure
(2018: US$23 million).
-
6.7 million production tonnes treated
(2018: 6.5 million).
Related UN SDGs
For more information on our approach to integrating the 17 SDGs into our business operations, please see our UN SDG Framework (Working towards global goals).
Our challenges
- Diamond prices are driven by the supply/demand dynamics between the rough diamonds produced and consumer demand for the resulting cut and polished diamonds. Various factors impacting this are beyond our control and may affect the price of our rough diamonds. While Letšeng’s large ultra-high-quality diamonds have historically been less vulnerable, the price for larger high-quality diamonds came under pressure during 2019.
- Product security and theft prevention remain high priorities.
- Minimising loss of revenue as a result of diamond damage.
- Cost of production as a result of mining at deeper levels within both pits.
Our future
The focus in 2020 remains on maximising value from our current operation. This involves driving Business Transformation (BT), and the next phase of this initiative – continuous improvement (CI) – to achieve the US$100 million target by the end of 2021 and sustainable US$30 million per-annum savings thereafter. For more information, refer to the Annual Report.
Material matters
Maintaining a strong revenue stream and managing costs
Our context
The Group has recently faced short and medium-term price pressures, challenging operational conditions and rising costs related primarily to deeper mining, continued waste stripping and longer haul distances during a period of escalating fuel prices. These factors have, in recent years, placed growing pressure on margins and cash flow.
Our approach
While 2019 was a year of good operational performance and progress on our BT initiatives and other strategic objectives, revenue and EBITDA declined due to weaker diamond prices. Furthermore, Letšeng transitioned into a new cutback during the year and the planned lower contribution of the higher-value Satellite pipe ore negatively impacted both price and volume of carats sold.
Our performance
- US$182 million in revenue (2018: US$267 million).
- Our focus on cost reduction and optimisation at the operations continued during 2019 through our BT initiative. The programme is on target to realise the planned cumulative benefits of US$100 million by the end of 2021 with US$54 million realised to date. Gem Diamonds’ position as a safe and low-cost producer strengthens the Company’s resilience and sustainability, as well as our ability to create value for our stakeholders.
- Net debt position of US$10.2 million compared to a net cash position of US$17.5 million in 2018.
Maintaining balance sheet strength
Our context
Through careful capital deployment, prudent cash-flow management and strong relationship management with our funders, we strive to protect and strengthen our balance sheet.
Our approach
Strict investment criteria are applied when assessing possible capital projects. All investments must support long-term growth while managing debt levels to preserve our cash position and create value for our investors.
Our performance
- Cash on hand of US$11 million, of which US$9 million was attributable to Gem Diamonds and US$0.1 million was restricted.
- US$10 million in capital expenditure.
- US$55 million in cash generated from operations.
- US$22 million of available facilities had been drawn down, with undrawn and available facilities of US$70 million.
For more information, refer to the Chief Financial Officer’s Report in the Annual Report.
Protecting the premium brand of diamonds
Our context
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. Given this context, 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 are committed to supplying rough and polished diamonds to our clients with assurance of the highest product integrity.
We are strongly opposed to the global trade in conflict diamonds and the effects it has on political stability, human rights and the legitimate global diamond trade. The Kimberley Process certification scheme aims to eliminate this trade. 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 our strict anti-money laundering and anti-bribery and corruption policies/requirements .
Our performance
- All rough diamond exports are certified through the Kimberley Process certification scheme.
- We are 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 (2018: Zero).
- Zero incidents of potential breach of confidentiality of clients (2018: Zero).
- For more information on how we ensure the integrity of our value chain, please see our Governance and ethics section.
For more information, refer to the Annual Report.
Ensuring product security
Our context
Security and theft prevention are fundamental risk-management considerations when dealing with high-value products such as diamonds. From mining and extraction through to the sale of our product, we ensure meticulous care and secure handling of our diamonds.
Our approach
The safety and security of our clients, staff and product are of paramount importance to us, and we continue to invest in risk mitigation and management at our facilities.
Our operations are required to fully assess and understand their risk profile in this regard. In addition, we regularly engage specialists to keep us up to date with the latest protection technology and philosophies. We ensure the assessment of our security risk-management systems and implement improvements to address identified vulnerabilities.
Our performance
- Additional product protection measures are continually evaluated and implemented to address areas of vulnerability.
- External consultants are used to benchmark our systems, processes, and practices against internationally developed philosophies and standards.
- The effectiveness of our off-site surveillance function continues to grow in support of our security objectives.
- During the year, security audits were undertaken and the necessary actions implemented to address areas of identified vulnerability in our systems and procedures.
Mitigating risks posed by global economic movements
Our context
Like any other business, Gem Diamonds’ operations are exposed to risks and uncertainties that could potentially have an adverse impact on the Group. Ongoing currency volatility remains a challenge as we generate our revenue in US dollars, while our cost base is incurred in local currencies of the various countries within which we operate. The volatility of these currencies against the US dollar impacts our profitability. 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.
Furthermore, numerous factors beyond the control of the Group may affect the price and demand for diamonds. These factors include international economic and political trends, as well as consumer trends. Even though the medium to long-term demand is forecast to outpace supply, in the short term the prevailing climate of global economic uncertainty and liquidity constraints within the diamond sector are causing pressure in rough diamond pricing. These trends directly affect Gem Diamonds’ cash flows and our ability to fund operations, projects and growth plans.
Our approach
We closely monitor the impact of the exchange rates and fluctuations thereof. When appropriate, we apply currency hedges to a portion of future diamond sales with contracts that are generally short term in nature.
Ensuring flexibility in our sales processes and utilising multiple sales and marketing channels, along with increased viewing opportunities, assists in addressing the challenge of price and demand fluctuations. We also continue to assess our capital projects and operational plans to align these endeavours with market conditions and to preserve cash balances.
Our performance
For more information, refer to the principal risks and uncertainties section of the Annual Report.