Please provide an overview of Gem Diamonds’ performance in 2021 and the external environment against which this performance took place?

For the second year running, COVID-19 cast a shadow over our business. While a series of different shaped lockdowns caused intermittent disruption to our operations, the experience gained during the prior year enabled the management team to adapt more effectively to the ongoing impact of the pandemic. Response protocols were refined enabling work to continue safely if employees became ill, a successful vaccination programme was implemented, and numerous risk-based adjustments were made to work procedures to ensure operational stability and that employee health was maintained.

In the area of operational safety however, we saw a disappointing deterioration in our performance in the first half of the year. The management team responded swiftly and took immediate action to address the situation with the result that in the second half we demonstrated a sharp turnaround of our safety performance. Globally, the pandemic has disrupted traditional leadership engagement and frequent isolation has had an adverse impact on the mental health of many, leading to a widespread deterioration in industry safety. The Board remains absolutely committed to the principle of zero-harm and is supportive of the actions taken by management to return the safety performance back to the long-term trend of solid year-on-year improvement.

Operationally, the gradual easing of COVID-19 restrictions contributed to enhanced production stability which was supported by a steady recovery in the diamond market. As a result, we were pleased to report an improvement in both EBITDA and cash flow {by year end – over the prior year?} and were also able to make progress on the sale of the Ghaghoo mine in Botswana. In December, we announced a new package of banking facilities, including our first sustainability-linked financing arrangement, highlighting the Group’s commitment to advancing its ESG agenda.

Ethical conduct is a topical issue, how does the culture at Gem Diamonds support the company’s ethical commitments?

Since the Company’s establishment it has operated according to firm ethical principles which continue to act as the foundation of the business. As a Board, we believe that demonstrable adherence to the highest standards of ethical behaviour is pivotal to how we create trust with all our stakeholders.

Our ethical principles are set out in a code of conduct that makes it very clear to everyone working in, and with, the business how we expect them to behave. We recognise that in some circumstances ambiguity can arise and therefore we have developed a further set of statements and policies to address specific areas such as modern slavery, bribery and corruption, human rights abuse and conflicts of interest.

During the year we refreshed and reassessed the efficacy of these statements and policies and reissued them across the organisation. Employees and contractors alike have been asked to reaffirm their commitment to the values that these statements espouse.

Finally, we encourage a culture of transparency and openness in tackling incidents of fraud or other wrongdoing. We have a rigorous internal audit system and an anonymous whistle-blowing platform to enable anyone to alert us to any improper activity, all examples of which are immediately investigated.

What risks currently pose the greatest threat to the Company from a sustainability perspective?

While the risk of climate change has been understood for several decades the need for urgent global action to mitigate its impact has recently accelerated very rapidly and is now a top priority for all energy intensive businesses. Our Letšeng mine in Lesotho necessarily uses a considerable amount of energy in both the mine and the processing plant and work is underway to identify every possible avenue to lower this energy intensity. The Board has embraced a science-based approach to tackling climate change and during the year adopted the TCFD framework against which we will endeavour to track and report the financial impact on our business of this existential global challenge.

At Letšeng we process approximately 6 million tonnes of ore per annum and once the diamonds have been removed, we place this material into a tailings storage facility. Storage of this material clearly presents a risk but in the light of recent catastrophic tailings dam failures we have moved quickly to supplement our existing robust control systems and processes with all of the recommendations arising from the Global Industry Standard for Tailings Management.

We have a moral as well as an economic imperative to continue to pursue sustainable growth in our operations. The Government of the Kingdom of Lesotho is a 30% shareholder in the Letšeng mine and they expect to see economic activity continuing as far into the future as possible. Our relationships across government and wider society determine our ability to secure skills, to work productively and to secure our licence to operate, and as such are crucial in underpinning the sustainability of our business.

These relationships have been particularly important during the COVID-19 pandemic, and I believe the constructive way we have worked with government to mitigate its impact across the country has built trust and served to deepen understanding of the contribution we make to the Lesotho economy.

As you mentioned, a highlight for the year was the formal adoption of the TCFD framework. How does the Board consider the future risks and opportunities related to climate change and how do you ensure that they are integrated into the Company’s strategy?

Climate change is a global concern, and one that is becoming increasingly acute.

We operate in a remote and pristine part of the world, and we have always been very sensitive to the impact that we have on the wider environment around our operations. Our attentions are firmly focused on what we can do, and how we need to prepare for the anticipated transition to a low-carbon economy. These considerations have moved to the centre of Board decision making.

We embrace a pragmatic approach, which is underpinned by scientific insight and during 2021 we conducted our first scenario analysis to understand the potential impact of several different climate-change scenarios. These scenarios will inform the practical actions that we can take to lower our energy and water usage and improve the sustainability of our business.

From a water management and a biodiversity point of view, we have a relatively small footprint that is well understood and carefully controlled. The greatest opportunity for us is in energy management and the focus in the short term is to both reduce energy consumption at all levels across the business and to investigate longer-term opportunities to generate power from renewable solar and wind sources.

We have set up a TCFD Adoption Steering Committee which feeds through to the Audit Committee, Sustainability Committee and on up to the Board. This has improved communication and decision making around these issues.

During the year we were very pleased to announce the appointment of Rosalind Kainyah MBE as an independent non-executive director from 1 May 2021. Rosalind has been helping companies on their ESG improvement journeys for many years and brings a wealth of knowledge and experience in this field.

Finally, are there any acknowledgements that you would like to share?

First and foremost, I would like to thank everyone who works at Gem Diamonds and at the Letšeng mine for the dedication and resilience they have shown during a second year of COVID-related disruption. Employees and contractors alike have continued to work hard to support the business despite often considerable dislocation to their own and their families’ lives.

I would like to thank our board for the diligence and commitment they have shown during the year and for the wisdom and insight they have brought, particularly to the complex sustainability agenda we are pursuing. I again welcome Rosalind Kainyah to the board and I specifically wish to thank Johnny Velloza, who stepped down in April 2021, for the very valuable contribution he made to the company in both executive and non-executive capacities and we are pleased he remains a strategic advisor to us all.

I would like to thank our government partners who remain very supportive of our work, and who provide the regulatory and political frameworks that enable the Letšeng mine to operate safely and constructively. Finally, I would like to thank our local community leaders with whom we are constantly engaging to ensure that our social and outreach programmes are efficient, effective and appropriately targeted. We regard the success of these programmes as a central part of our sustainability efforts and pivotal to the creation of long-term mutual trust and respect.

So, as 2022 unfolds, we look forward to working closely with all our stakeholders as we strive to continue to conduct our business responsibly, to provide attractive returns to shareholders and to contribute actively to the local communities who host our operations.