Financial and operational

We approach business performance holistically by integrating sustainability principles into our daily activities. We ensure our social licence to operate to generate fair returns for our shareholders and 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$190 million in revenue
    (2019: US$182 million)
  • US$53 million underlying earnings before interest, tax, depreciation and amortisation (EBITDA)
    (2019: US$41 million underlying
    pre-exceptional EBITDA)
  • US$2 million in capital expenditure
    (2019: US$10 million)
  • 5.4 million production tonnes treated (2019: 6.7 million)

Related UN SDGs

We launched the first rolling three-year cycle to embed the SDGs into our systems, processes and decision-making during the year. We are committed to the following six SDGs:



For more information on our approach to integrating these SDGs into our business operations, refer to our 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 resultant cut and polished diamonds. Some 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 at the start of the COVID-19 pandemic. However, prices recovered and remained robust by the end of 2020;
  • Product security and theft prevention remain high priorities owing to the high value of diamonds;
  • Our Type II diamonds are more brittle and therefore susceptible to damage during the mining and recovery process; and
  • The cost of production due to mining at deeper levels in both pits is higher.

Our future

Our drive to reduce costs, lower overheads, streamline systems and improve efficiencies strengthened our performance in 2020. Our ability to operate effectively and efficiently through the COVID-19 pandemic reflects the resilience of our business model and our leadership team and the quality of our diamonds – the strong base established in 2020 positions us well for 2021.

We plan to build on this momentum and leverage the cost management and operational performance opportunities created by our Business Transformation (BT) and continuous improvement (CI) programmes. This will ensure our cost disciplines support improved cash positions in the coming years. In addition, we plan to unlock the commercial potential in the pioneering work done to reduce diamond damage and to advance the use of blockchain technology.

Our focus in 2021 will be to maximise value for our current operations. This includes ensuring the continued sustainability of the BT initiatives to achieve the US$100 million target by the end of 2021. For more information, refer to the Annual Report.

Material issues

Maintaining a strong revenue stream and managing costs

Our context

The operating context remains challenging, and, as such, it is essential for us to ensure business continuity throughout the pandemic. This will help us generate strong revenues and protect the viability of our operations, ultimately enabling us to create shared value for our stakeholders. In addition to revenue generation, our success as a business depends on our ability to optimise our operations and to effectively manage costs.

Our approach

To maintain strong revenue generation, we continue investing in leading technology to minimise diamond damage during recovery, ensuring our tender process remains active, operating according to our mine plan, and maintaining high safety standards. Following the Government of Lesotho’s national lockdown to curb the spread of COVID-19 and consequent 30-day shutdown of operations at Letšeng, regulations allowed Letšeng to restart operations under its strict COVID-19 testing and safety protocols.

The average price of US$1 908 per carat achieved for the year demonstrated the strong demand for Letšeng's high-value, quality and large diamond production. Further, we recovered 16 diamonds greater than 100 carats and 34 diamonds were sold for more than US$1.0 million.

From a cost perspective, we continued implementing our BT initiatives across the organisation. The targeted US$100 million in incremental revenue, productivity improvements and cost savings over the four-year period to end-2021 remains on target. Preserving cash flow was a focus area given 2020’s economic conditions.

In addition to the efficiencies realised through our BT initiatives, cost reduction and deferment measures to preserve cash and improve liquidity to ensure the sustainability of the business, including:

  • All operational and financial management initiatives and planned capital expenditure were re-evaluated to minimise cash outflow;
  • Cost reduction and deferment measures at Letšeng included negotiating with contractors to manage services and costs during the 30-day shutdown and subsequent ramp-up period to full production;
  • Temporary salary reductions were implemented across the Group, ranging from 20% at executive level to 15% and 10% across various salary bands;
  • Waste mining was significantly reduced during the second quarter to preserve cash before resuming in July;
  • We increased the proportion of ore treated from the high-value Satellite pipe and strategically reduced processing throughput to improve plant stability through a more consistent feed rate with the aim of increasing recoveries and overall grade; and
  • Dewatering was suspended at the Ghaghoo mine, which is on care and maintenance, realising further savings through the renegotiation of key contracts and reduced fuel consumption on site and other ancillary costs.

For more information, refer to the balancing capital allocation in uncertain times section in Annual Report.

Our performance

  • US$190 million in revenue (2019: US$182 million);
  • Six tenders held during 2020 (2019: eight); and
  • Revised operational guidance metrics for 2020 were achieved.

Our context

Mining is a long-term, capital-intensive industry that requires sufficient cash and debt facilities to ensure daily operational requirements are met to enable capital projects.

Our approach

We strive to protect and strengthen our balance sheet through selective capital deployment, prudent cash flow management and strong relationship management and transparency with our funders. Further, we apply strict investment criteria when assessing possible capital projects. All investments are assessed against long-term growth goals and current debt levels to preserve our cash position and create value for our shareholders.

Our performance

  • Cash on hand of US$50 million (2019: US$11 million). US$36 million was attributed to Gem Diamonds;
  • US$2 million in capital expenditure (2019: US$10 million);
  • US$56 million in cash generated from operations (2019: US$55 million); and
  • US$15 million of available facilities were drawn down (2019: US$22 million), with undrawn and available facilities of US$61 million (2019: US$70 million).

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

Our context

Diamonds are often one of the most expensive and emotional purchases for consumers. However, conflict diamonds and the role they play in human rights abuses threatens consumers’ confidence in and perception of diamonds. This, coupled with changing consumer preferences and product substitution, increases the popularity of synthetic diamonds. 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 and investing in and implementing cutting-edge technology to build consumer confidence. Responsible business practices are incorporated into every step of our production journey. This ensures that our diamonds are equally ethical, as they are beautiful. We also work with relevant industry organisations to ensure the premium brand of natural diamonds is protected.

We are vehemently opposed to the global trade in conflict diamonds and the effects it has on political stability, human rights and the legitimate global diamond trade. Our diamonds are exported in accordance with the requirements of the Kimberley Process. This Kimberley Process promotes the ethical sale of rough diamonds from non-conflict jurisdictions. This positively impacts diamond value negating the large-scale negative consequences such as reputational damage, human rights violations and conflict that are associated with diamonds not mined responsibly and exported according to the process.

We ensure that our diamonds reach the market through recognised legal and ethical channels, all Gem Diamonds' clients undergo a screening process and trade with us is by invitation only. During the screening process, potential clients are vetted using internal anti-money laundering protocols and 'know your client' reviews to ensure compliance with regulatory requirements. The Group is also incorporating blockchain technology in our marketing activities to create greater transparency in the supply chain and bring retail customers closer to the source of their diamond.

Our performance

  • All rough diamond exports are certified through the Kimberley Process certification scheme;
  • We fully comply 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 were brought against us to date (2019: zero); and
  • Zero incidents of potential breach of client confidentiality (2019: zero).

For more information on how we ensure the integrity of our value chain, please refer to the Annual Report.

Our context

Security and theft prevention are inherent risk management considerations owing to the high value of diamonds. From mining and extraction through to selling our product, we ensure the meticulous care and secure handling of our diamonds, supported by the highest standards of ethical conduct to protect the premium brand of our products.

Our approach

The safety and security of our employees, clients and product are of paramount importance to us. As such, we continue investing 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 with 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.

Mining and metals companies have a responsibility to respect the human rights of the communities in which they operate and the people they employ. The use and activities of security personnel with regard to product security is a particular focus area of human rights. We continuously strive to uphold the highest standards by applying good practice guidelines and providing rigorous training programmes for employees.

Our performance

  • We continuously evaluate and implement additional product protection measures to address areas of vulnerability;
  • Our external consultants benchmark our systems, processes and practices against internationally developed philosophies and standards;
  • The effectiveness of our off-site surveillance function continues growing to support our security objectives; and
  • During the year, we conducted security audits, and the necessary actions were implemented to address identified areas of vulnerability in our systems and procedures.

Our context

Like any other business, Gem Diamonds’ operations are exposed to global risks and uncertainties that could potentially have an adverse impact on the Group. These include but are not limited to political instability, financial market uncertainty, the impact of COVID-19 and its resultant economic downturn, the financial implications of climate change and the effect of currency volatility.

The diamond industry is affected by several factors beyond its control, including the price and demand for diamonds, supply disruptions due to COVID-19, inventory levels as well as changing consumer preferences and product substitution. Even though the medium to long-term demand is forecast to outpace supply, these issues directly affect Gem Diamonds’ cash flows and our ability to fund operations, projects and growth plans in the short term.

Our approach

The Group takes a proactive approach to the effective identification, management and mitigation of the risks and uncertainties it is exposed to. These risks, if not appropriately managed and mitigated, could result in financial, operational and compliance impacts on the Group’s performance, reputation and long-term growth. Our comprehensive risk management framework combines top-down and bottom-up approaches with appropriate governance and oversight. The framework is detailed in the principal risks and uncertainties section of the Annual Report.

Our performance

For more information, refer to the principal risks and uncertainties section of the Annual Report.