2010 Half Y ear Results 24 August 2010 1 Disclaimer • The following presentations are being made only t o, and are only directed at, persons t o whom such present ations may lawfully be communicated (“ relevant persons” ). Any person who is not a relevant person should not act or rely on t hese present ations or any of t heir cont ent s. • Informat ion in the following presentations relating t o t he price at which relevant invest ment s have been bought or sold in the past or t he yield on such invest ment s cannot be relied upon as a guide t o the future performance of such invest ment s. These presentations do not constitute an offering of securities or ot herwise const itute an invitat ion or inducement t o any person t o underwrite, subscribe for or ot herwise acquire securit ies in any company wit hin t he Group. • The presentations cont ain forward-looking st atement s which are subj ect t o risks and uncertainties because t hey relate t o fut ure event s. These forward-looking st atement s include, without limitat ion, st atement s in relation t o t he Group’ s proj ected financial result s of the 2010 financial year. S ome of the fact ors which may cause actual result s t o differ from t hese forward-looking statement s are discussed in certain slides of t he present ation and others can be found by referring t o the information contained under the heading “ Key present ation and others can be found by referring t o the information contained under the heading “ Key Group risks 2009” in “ The Chief Financial Officer’ s review” in our Annual Report for t he year ended 2009. The Half-Year Financial Report and Annual Report can be found on our website (www.gemdiamonds.com). • The presentations also contain certain non-IFRS financial information. The Group’ s management believes t hese measures provide valuable additional informat ion in understanding the performance of the Group or t he Group’ s businesses because t hey provide measures used by the Group t o assess performance. However, t his addit ional information presented is not uniformly defined by all companies, including those in t he Group’ s indust ry. Accordingly, it may not be comparable with similarly tit led measures and disclosures by ot her companies. • Addit ionally, although t hese measures are important in the management of the business, t hey should not be viewed in isolation or as replacement s for or alternatives t o, but rather as complementary t o, the comparable IFRS measures such as revenue and other items report ed in the consolidated financial st at ements. 2 1
HIGHLIGHTS H1 2010 Highlights • Revenue of US $103.9 million • EBITDA of US $18.5 million • Attributable earnings of US $3.0 million (1.72 US cents per share) • US $108.3 million gross cash • No debt • Growth strategy through the development of existing assets and targeted Growth strategy through the development of existing assets and targeted acquisitions • Continued recovery in prices for rough and polished diamonds • HS S E: Company record of 2.8 million man hours LTI-free 3 S TRATEGY Driving value - Building a growth strategy • Letšeng: – Mine expansion – Minimising diamond damage – Focus on operational improvements – A new sales and marketing strategy • Ellendale – Resource drilling to increase life of mine – Focus on operational improvements p p – Maximising revenue • Gope • External growth opportunities 4 2
OVERVIEW Market overview H1 2009 H1 2009 H2 2009 H2 2009 H1 2010 H1 2010 Mine Supply Maj or fall in supply of Product ion st art s t o Product ion st ill below rough diamonds increase previous peak Cut t ing cent re st ocks - rough Rising st ocks S mall fall in st ocks Rough st ocks st ill falling Cut t ing cent re st ocks – polished S ubst antial rise in st ocks Polished st ocks st art t o Cont inued fall in st ocks fall Liquidit y Very lit t le liquidity More credit available Increasing credit available US ret ail S ubst antial fall in sales First signs of improvement Dest ocking eases, sales at end 4 t h qt r slight ly up Japan ret ail S ubst antial fall in sales S ales cont inue t o fall S ales falling slight ly Europe ret ail S ubst antial fall in sales S ales slight ly up S ales slight ly up Asia ret ail (excl Japan) Weak sales Flat sales Encouraging sales growt h China ret ail S ales cont inue t o grow Increasing sales Increasing sales India ret ail Weak sales Increasing sales Increasing sales 5 Source: WWW and Gem Diamonds ROUGH DIAMOND PRICES Q3 2008 – Q2 2010 – PER QUARTER AVERAGE Diamond Prices Letšeng ROM (adj ) Ellendale ROM Ellendale Tiffany yellow (excl Tiffany yellows) production (US$ per ct) (US$ per ct) (US$ per ct) 2,571 146 142 2,708 2,633 2,616 2,545 2,500 2,428 2,414 2,139 119 2,159 110 1,893 1,753 102 1,713 1,709 1,496 86 ,017 1, 36 38 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 6 3
DIAMOND S ALES S elling a unique product Letšeng š • H1 2010, – US $58 724 per carat for a 27 carat white diamond – 35 individual diamonds over US $20 000 per carat – Circa 245 rough diamonds greater than 10.8 carats – 4 gem quality diamonds between 90 and 160 carats each were recovered in the first half of the year – New sales and marketing strategy Ellendale • Tiffany & Co.’ s Fancy Yellow campaign – Japan: April 2010 – US A: S eptember 2010 – Australia: April/ May 2010 7 LARGE DIAMOND FREQUENCY Letšeng’ s large diamond frequency • Detailed analysis performed on all historical diamond recoveries • Increased confidence on underlying resource • Consistency of the large diamond frequency from the ore body • Consistency of the recovered grade of these larger diamonds since 2004 8 4
H1 2010 OPERATIONAL REVIEW HS S E • Achieved a company record 2.8 million man hours without Lost Time Inj ury (LTI) at all of its operations over the past eight months since October 2009 and still ongoing. • Both the Lost Time Inj ury Frequency Rate (LTIFR) and S and S everity Rate (S everity Rate (S R) are zero R) are zero • All Inj ury Frequency Rate (AIFR) continues to remain below both 2008 and 2009 levels for the year to date 9 H1 2010 OPERATIONAL REVIEW Letšeng, Lesotho Main Pipe p • • Appropriate mix of Main and S Appropriate mix of Main and S atellite pipe mining atellite pipe mining • Build up of waste stripping in progress • Ongoing review of optimal mine plan • Both plants operating efficiently in excess of design capacity • Continued focus on cost management – Cash cost (excl waste costs) ML 70.62 per tonne treated (ML64.30 in H1 2009) – Waste cash cost ML23.75 per waste tonne moved S atellite Pipe (ML22.57 in H1 2009) ( ) Operational efficiency improvements • Phased introduction of larger rigid haul trucks • Improvements in blasting practises • Investigation into high volume X-ray recovery machines Core Growth Workstreams • Production increase opportunities • Diamond damage minimisation 10 5
H1 2010 OPERATIONAL REVIEW Ellendale, Australia E9 Pipe • C Continued focus on cost management i d f – Cash cost (excl waste) AU$12.62 per tonne treated (AU$13.57 per tonne in H1 2009) – Waste cash cost AU$3.85 per waste tonne moved (AU$ 5.01 in H1 2009) Operational efficiency improvements • Alternative mining options Alternative mining system • Plant ‘ up-time’ proj ect Core Growth Workstreams • Resource Extension and Development Programmes; • Assessment of recommencing operations at Ellendale’ s E4 pipe 11 H1 2010 OPERATIONAL REVIEW Gope, Botswana • Total contained resource: 20.5 million carats • Resource diamond price: US $162 per carat • Resource in situ value: US $31 per tonne • Two blue diamonds recovered from historical diamond samples • Total in situ value of the resource: US $3.3 billion Core Growth Workstreams Core Growth Workstreams • Underground mine • Updated study to be presented to Botswana Government in August 2010 Type IIb 0.48ct medium blue • Mining Licence negotiations H2 2010 diamond 12 6
LETŠ ENG AND ELLENDALE 2010 FORECAS TS L tš Letšeng mine production i d ti Ell Ellendale mine production d l i d ti Tonnes (Mt) Carats recovered Tonnes (Mt) Carats recovered 16 160,000 16 800,000 14 140,000 14 700,000 12 120,000 12 600,000 10 100,000 10 500,000 8 80,000 8 400,000 6 60,000 6 300,000 4 40,000 4 200,000 2 2 20,000 20 000 2 2 100 000 100,000 0 0 0 0 2007 2008 2009 2010 2007 2008 2009 2010 Forecast Forecast Tonnes treated (Mt) Waste stripped (Mt) Carats recovered 13 H1 2010 FINANCIAL RES ULTS Financial Results • Revenue of US $103.9 million • EBITDA of US $18.5 million • Profit before tax of US $7.8 million • Effective tax rate of 29% • Attributable profit of US p $3.0 million and EPS 1.72 US cents per share p • Cash generated by operations of US $27.9 million (pre tax) • Cash of US $108.3 million at period end 14 7
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