2014 Half Year Results Presentation 20 August 2014
Disclaimer 2 No statement in this presentation is intended as a profit forecast or profit estimate The following presentations are confidential and are being made only to, and are and no statement in the presentation should be interpreted to mean that earning per only directed at, persons to whom such presentations may lawfully be share for the current or future financial years would necessarily match or exceed the communicated (“relevant persons”) . Any person who is not a relevant person historical published earnings. The presentations also contain certain non-IFRS should not act or rely on these presentations or any of their contents. financial information. The Group’s management believes these measures provide Information in the following presentations relating to the price at which relevant valuable additional information in understanding the performance of the Group or investments have been bought or sold in the past or the yield on such investments the Group’s businesses because they provide measures used by the Group to assess cannot be relied upon as a guide to the future performance of such investments. performance. However, this additional information presented is not uniformly These presentations do not constitute an offering of securities or otherwise defined by all companies, including those in the Group’s industry. Accordingly, it constitute an invitation or inducement to any person to underwrite, subscribe for or may not be comparable with similarly titled measures and disclosures by other otherwise acquire securities in any company within the Group. Neither this companies. documentation nor the fact of its distribution nor the making of the presentation Additionally, although these measures are important in the management of the constitutes a recommendation regarding any securities. This presentation if for business, they should not be viewed in isolation or as replacements for or information purposes only. alternatives to, but rather as complementary to, the comparable IFRS measures The presentations contain forward-looking statements which are subject to risk and such as revenue and other items reported in the consolidated financial statements. uncertainties because they relate to future events. These forward-looking The distribution of this presentation or any information contained in it may be statements include, without limitation, statements in relation to the Group’s restricted by law in certain jurisdictions, and any person into whose possession any projected growth opportunities. Some of the factors which may cause actual results document containing this presentation or any part of it comes should inform to differ from these forward-looking statements are discussed in certain slides of themselves about, and observe such restrictions. the presentation and others can be found by referring to the information contained under the heading “Principle risks and uncertainties” in “The Strategic Report” in Information in this presentation is correct as at 19 August 2014 our Annual Report for the year ended 2013. The Annual Report can be found on our website (www.gemdiamonds.com).
Agenda 3 2014 Half year results highlights Diamond market Operational overview Group financial performance Outlook
2014 Half Year Results Highlights 4 REVENUE EBITDA US$149m up 54% US$62m up 87% 200 70 62 60 149 150 USD Millions 50 USD Millions 97 33 40 100 30 20 50 10 0 0 H1 2013 H1 2014 H1 2013 H1 2014 BASIC EPS FREE CASH FLOW US cents 14.28 up 129% US$86m up 89% 14.28 15 100 86 80 USD Millions 10 US Cents 60 6.23 46 40 5 20 0 0 H1 2013 H1 2014 H1 2013 H1 2014
Diamond Market 5 Strong prices in H1 2014 expected to continue through H2 2014 Improved demand seen in the US and Japan; Letšeng rolling average US$ per carat continued strong demand in China and India Favourable medium to long-term 2 900 supply/demand fundamentals 2 747 2 700 2 543 Impact of sanctions on Russia 2 500 2 300 US$ per carat 2 100 1 900 1 700 1 500 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 6 month average US$ per carat 12 month average US$ per carat
Operational Overview Alan Ashworth
Group HSSE Performance 7 LTIFR 0.09 (2013 FY LTIFR 0.13) AIFR 2.81 (2013 FY AIFR 2.49) Ghaghoo was awarded a 4-star IRCA rating Zero major or significant stakeholder or environment incidents occurred Continued implementation of international Fully equipped clinic and ambulance at Letšeng best practice Establishment of a Ghaghoo Community Trust benefitting project affected communities Team building at Ghaghoo
Mineral Resource Management 8 Carats (millions) Grade (cpht) US$/ct Gross resources at Letšeng and Ghaghoo (incl. Reserves) 25.54 6.35 601 Letšeng Indicated Resource 3.23 1.73 2 086 Letšeng Reserve 2.26 1.71 2 045 Ghaghoo Indicated Resource 15.49 19.51 242 Ghaghoo Reserve 2.08 27.81 267 Letšeng 21 year Life of Mine open pit is wholly contained within the Reserve category Extension of indicated depth at Letšeng to 350m below mining face
Letšeng overview Alan Ashworth
Letšeng 10 Alluvial Ventures contract extended Carats recovered (000’s) 60 50 55 MMIC contract extension negotiated 40 42 30 Larger equipment commissioned 20 10 0 Satellite mix Carats recovered H1 2013 H1 2014 Ore tonnes treated (mT) Waste tonnes mined (mT) 4 12 10 9.9 10.0 3 3.0 3.2 8 2 6 4 1 2 0 0 Ore treated Waste mined H1 2013 H1 2014 H1 2013 H1 2014
Letšeng - optimising overall mining process 11 Increased recovery of valuable Letšeng +50 Carat Recoveries 250 100% Type II diamonds 200 80% Stone Size (Carats) Increasing Satellite contribution 150 60% Price performance against expected 1.20 100 40% 50 20% 1.10 Diamond protection initiatives 0 0% 1.00 2013 2013.2 2013.4 2013.6 2013.8 2014 2014.2 2014.4 2014.6 Export Number Type 1 Type 2 % Satellite 0.90 Type II - Significant Breakage Levels 100% 0.80 New crusher installation 80% Improving ore fragmentation 6 month moving average MCF 60% 40% 20% Downward trend in Type II breakage 0% 2013 2013.1 2013.2 2013.3 2013.4 2013.5 2013.6 2013.7 2013.8 2013.9 2014 2014.1 2014.2 2014.3 2014.4 2014.5 2014.6
Letšeng delivering exceptional diamonds in 2014 12 H1 2014 Average value per carat* US$2 747 Rough diamonds achieving > US$1.0m each 37 Rough diamonds achieving > US$20 000/ct 77 Rough diamonds achieving > US$60 000/ct 5 Rough diamonds > than 10.8ct 311 Three exceptional quality +100 carat diamonds (a 162.02ct, a 161.31ct and a132.55ct) achieved a total sales value of US$21.0m *Includes carats extracted for polishing at rough valuation. 162.02 carat type II, recovered in February 2014, sold for 198 carat type II, recovered in July 2014 US$11.1 million (US$68 687 per carat) in March 2014
Letšeng project review 13 Letšeng expansion/improvement programme Continued phased introduction of technologies to improve recovery, throughput and diamond breakage Coarse Recovery Plant No.2 Plant phase 1 upgrade Capital of Maloti 140.0m (US$13.2m) approved Capital of Maloti 50m (US$4.7m) approved To optimise the treatment of the high value, coarse Additional 250k tpa fraction Expected to further reduce diamond damage and improve XRT technology – ensure total recovery of type II diamonds liberation Security improvements Commissioning early 2015 Advanced diamond accounting On track for delivery Q2 2015 Incremental upgrade studies ongoing
Ghaghoo development overview Alan Ashworth
Ghaghoo development review 15 Phase 1 capital project completed on time and on budget Processing plant commissioned - 2 400 carats recovered as at end of June 2014 Development of first three production tunnels on Level 1 underway Drilling of 3rd ventilation hole underway First sale for Ghaghoo’s production scheduled before year end US$82.0m of the total capital budget spent as at 30 June 2014. Balance of US$14.0m to be spent in H2 2014
Sales, marketing and manufacturing overview Clifford Elphick
Sales, marketing and manufacturing 17 5 rough tenders in Period – rough sales of US$ 147.8m* Carats sold 53 799 377 carats extracted for manufacturing at a rough value of US$4.2m 2013 partnership diamonds sold in the Period for additional revenue to Letšeng of US$1.5m Ghaghoo preparation for sales in two jurisdictions – first sale expected in H2 2014 *Includes carats extracted for polishing at rough valuation
Financial performance Michael Michael
Group financial performance 19 US$ millions H1 2014 H1 2013 % Increase FY 2013 Revenue 96.5 212.8 148.9 54% (7.8) (18.5) Royalty and selling costs (13.4) (49.3) (103.1) Cost of Sales (67.2) Corporate expenses (6.2) (13.8) (6.1) Underlying EBITDA 33.2 77.4 62.2 87% (9.1) (17.3) Depreciation and Amortisation (7.9) (0.3) 0.5 Non cash and other items 0.6 Net finance cost (0.6) (1.6) (0.1) Profit before tax 23.2 59.0 54.8 136% (8.1) (20.8) Income tax (20.4) Profit after tax 15.1 38.2 34.4 128% 8.6 21.2 Attributable profit 19.7 129% Basic EPS (US cents) 14.28 6.23 129% 15.3
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