Thursday, 31 August 2023

Gem Diamonds Limited

Half Year 2023 Results

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Half Year Results for the six months ended 30 June 2023 (the "Period").

FINANCIAL RESULTS:

· Revenue of US$71.8 million (H1 2022: US$100.0 million)

· Underlying EBITDA of US$8.4 million (H1 2022: US$20.9 million)

· Cash on hand of US$7.3 million as at 30 June 2023 (US$6.2 million attributable to Gem Diamonds)

· The Group has unutilised facilities of US$72.9 million

· Loss per share of 0.7 US cents (H1 2022: earnings per share of 2.7 US cents)

OPERATIONAL RESULTS:

Letšeng

· Zero fatalities and one lost time injury

· Recovered 50 601 carats (H1 2022: 55 157 carats)

· Waste tonnes mined of 4.8 million tonnes (H1 2022: 6.3 million tonnes)

· Ore treated of 2.5 million tonnes (H1 2022: 3.0 million tonnes)

· Average value of US$1 373 per carat achieved (H1 2022: US$1 745 per carat)

Safety performance

The organisational safety culture maturity strategy, that commenced in 2021 to improve safety performance at Letšeng, has been fully executed and led to an improved safety performance during the Period. Letšeng recorded zero fatalities and one LTI during the Period (2022: three), resulting in an improved LTIFR and AIFR of 0.09 (2022: 0.13) and 0.57 (2022: 0.7), respectively.

Diamond market

The global rough diamond market has experienced a downturn in 2023. A decrease in the number of large, high-value diamonds recovered, combined with market pressure has negatively impacted the average dollar per carat and revenue achieved during the Period.

Operational performance

Increasing grid electricity interruptions caused a reduction in volumes of ore processed. In addition, higher than expected internal basalt dilution in certain domains of ore that was treated impacted throughput. To mitigate the impact of internal basalt dilution, improve plant stability and large diamond recoveries, in the latter part of Q2 2023, an operational decision to open crusher gaps and to slow throughput in the processing plant was implemented.

TCFD and Climate

Following the adoption of the TCFD recommendations, the Group committed to a carbon emissions (Scope 1 and 2) reduction target of 30% by 2030. Improving energy-use efficiency and reducing the consumption of diesel and electricity remain top priorities, while appropriate alternative low-carbon and renewable energy sources are being considered.

Commenting on the results today, Clifford Elphick, Chief Executive Officer of Gem Diamonds, said:

"The downturn in the rough diamond market together with increased grid electricity interruptions which increased operating costs, negatively impacted our financial results for the Period.

Our focus remains on stabilising our plants to improve large diamond recoveries and to critically review all operational and capital expenditure."

The Company will host a live audio webcast presentation of the half year results today, 31 August 2023, at 9:30 GMT. This can be viewed on the Company's website: www.gemdiamonds.com.

The page references in this announcement refer to the Half Year Report 2023, which can be found on the Company's website: www.gemdiamonds.com.

The Gem Diamonds Limited LEI number is 213800RC2PGGMZQG8L67

FOR FURTHER INFORMATION:

Gem Diamonds Limited

ir@gemdiamonds.com

Celicourt Communications

Mark Antelme / Felicity Winkles

Tel: +44 (0) 208 434 2643

ABOUT GEM DIAMONDS:

Gem Diamonds is a leading global diamond producer of high value diamonds. The Company owns 70% of the Letšeng mine in Lesotho and is currently in the process of selling its 100% share of the Ghaghoo mine in Botswana. The Letšeng mine is famous for the production of large, top colour, exceptional white diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.

INTERIM BUSINESS REVIEW

OVERVIEW

The Group presents its results for the six months ended 30 June 2023 (the Period), achieving an underlying EBITDA from continuing operations of US$8.4 million (H1 2022: US$20.9 million) and an attributable loss of US$1.0 million (H1 2022: profit of US$3.8 million).

The global economic backdrop for the Period remained challenging despite easing inflationary pressures in major economies at the start of 2023. Ongoing geopolitical tensions and domestic challenges in key markets are slowing the return to sustained growth. The World Bank downgraded its global real GDP forecast for 2023 to 2.1%1 from 3.1% in 2022, and has warned that global growth is projected to slow significantly amid high inflation, tight monetary policy and more restrictive credit conditions.

The global rough diamond market has experienced a downturn in 2023. A decrease in the number of large, high-value diamonds recovered, combined with market pressure has negatively impacted the average dollar per carat and revenue achieved during the Period. Revenue decreased by 28% to US$71.8 million compared to US$100.0 million in H1 2022, achieving an average price of US$1 373 per carat (H1 2022: US$1 745 per carat) from the sale of 52 163 carats (H1 2022: 57 075 carats).

The Group ended the Period with a cash balance of US$7.3 million (31 December 2022: US$8.7 million) and drawn down facilities of US$9.3 million (31 December 2022: US$5.4 million), resulting in a net debt position of US$2.0 million (31 December 2022: net cash of US$3.3 million) and unutilised available facilities of US$72.9 million (31 December 2022: US$82.6 million).

Increasing grid electricity interruptions caused a reduction in volumes of ore processed. In the first six months of the year there was only one day without load shedding by Eskom, the South African grid electricity provider, from which the mine sources its power. Letšeng experienced 180 days of load shedding in the Period compared to a total of 205 days of load shedding for the full year 2022.

Waste tonnes mined during the Period were 4.8 million tonnes (H1 2022: 6.3 million), in accordance with the mine plan. Ore tonnes treated were 2.5 million tonnes (H1 2022: 3.0 million), and 50 601 carats were recovered (H1 2022: 55 157). The decrease in ore tonnes treated and carats recovered is mainly due to the expiry of the Alluvial Ventures (AV) contract on 30 June 2022, which contributed 0.4 million tonnes and 4 409 carats in H1 2022. Two greater than 100 carat diamonds were recovered during the Period; one of these was sold in the Period and the second will be sold in September.

In March, Letšeng embarked on a programme to critically review its operational structures and requirements, primarily to optimise its operations and drive its objective to reduce operating costs. The workforce element of this right-sizing programme was completed in June, and the focus will now be on further optimisation of the current operations by implementing efficiencies and identifying opportunities to further reduce costs.

As part of this process, a number of changes were made in the senior leadership structure at Letšeng. Kelebone Leisanyane retired from his position as CEO of Letšeng at the expiration of his contract at the end of June 2023. He was succeeded by Motooane Thinyane, previously the Head of Operations. Thinyane has been a senior manager and executive of Letšeng for the past eight years. He has a deep understanding and appreciation of Letšeng's business and its challenges, employees, stakeholders and communities, and also possesses the necessary technical skills and experience of diamond mining in Lesotho. An important part of his role will be spearheading the identification and implementation of appropriate alternative energy solutions. Gideon Scheepers has been appointed to the position of Operations Director. Gideon was most recently the general manager and executive director at the Mothae diamond mine in Lesotho. He has 32 years of extensive experience in diamond mining and related processes, many of these in the Lesotho diamond mining industry. The leadership and management at Letšeng is well-equipped to ensure that the mine continues to conduct its operations safely, efficiently and effectively in the best interest of all stakeholders.

The safety of our workforce remains a top priority. The critical control management strategy that commenced in 2021 to mature the organisational safety culture at Letšeng has been fully executed. This concerted effort has led to an improved safety performance, with an all injury frequency rate (AIFR) of 0.57 recorded during the Period - the lowest number recorded in the past 10 years.

In support of our continued focus on sustainability and maintaining our social licence to operate, we are proud that Gem Diamonds won the Junior ESG Award 2023 for "Water" at the Investing in African Mining Indaba in February. The award was given in recognition of the Group's commitment to improving access to clean water for local communities and its innovative and effective systems for preventing and mitigating water pollution.

We continue to work towards our 2023 objectives of improving operational energy efficiencies and reducing carbon emissions as set out in our decarbonisation strategy and the three-year Task Force on Climate-related Financial Disclosures (TCFD) adoption roadmap. For more details, refer to Our Approach to Climate Change Half-Year Report available on our website at www.gemdiamonds.com.

LOOKING AHEAD

We continue to identify and implement initiatives to improve operational efficiency and reduce our energy consumption - while investigating alternative energy sources - with the aim of mitigating the impact of the significant increase in operating costs experienced over the past 18 months and reducing our carbon footprint.

1 https://www.worldbank.org/en/publication/global-economic-prospects

OPERATIONS REVIEW: LETŠENG

H1 2023 IN REVIEW

• Zero fatalities and one lost time injury (LTI)

• Zero significant or major environmental or social incidents

• Recovered two diamonds greater than 100 carats (H1 2022: three)

• Achieved an average price of US$1 373 per carat (H1 2022: US$1 745 per carat)

• The highest price achieved was US$282 889 per carat for a 6.63 carat pink diamond

SUSTAINABILITY

The organisational safety culture maturity strategy that commenced in 2021 to improve safety performance at Letšeng, has been fully executed and led to an improved safety performance during the Period, as tabled below. Group and operational leadership remain committed to proactively leading safety-focused improvement through regular engagements with the workforce.

Our focused Corporate Social Responsibility Investment (CSRI) strategy and initiatives support our social licence to operate and our commitment to the UN Sustainable Development Goals. The Group has continued its tertiary education scholarships to enhance skills related to geology, metallurgy, engineering and emergency medical care in Lesotho. There are currently seven active scholarships. Letšeng's community dairy project and sponsored egg circles are proving successful and we continue to work towards ensuring the sustainability of both these projects. The construction of additional classrooms at two primary schools in the surrounding area were also completed during the Period.

Following the adoption of the TCFD recommendations, the Group committed to a carbon emissions (Scope 1 and 2) reduction target of 30% by 2030. Improving energy-use efficiency and reducing the consumption of diesel and electricity remain top priorities, while appropriate alternative low-carbon and renewable energy sources are being considered. Operational initiatives implemented during the Period, such as shorter hauling distances, steeper slopes and the replacement of existing lighting infrastructure with energy-efficient equipment, have resulted in a reduction in energy consumption of 29% compared to H1 2022. For more details, refer to Our Approach to Climate Change Half-Year Report available on our website at www.gemdiamonds.com.

Gem Diamonds has implemented its Group residue storage facility (RSF) management policy and has aligned its RSF standard with the ICMM Global Industry Standard on Tailings Management (GISTM). The Group has established appropriate governance structures at both operational and Group levels to provide oversight and assurance of continued safe and responsible management of our RSFs.

PRODUCTION OVERVIEW

1 Carats per hundred tonnes.

Waste mining decreased by 23% to 4.8 million tonnes from 6.3 million tonnes in H1 2022, in accordance with the 2023 mine plan. The lower waste tonnes were mainly due to lower ore treatment targets. 2.5 million ore tonnes were treated (H1 2022: 3.0 million tonnes), a decrease of 0.5 million tonnes. The decrease is mainly due to the 0.4 million tonnes that were treated by third-party processing contractor Alluvial Ventures (AV) in H1 2022 prior to the expiry of their contract on 30 June 2022. The remaining 0.1 million tonnes were due to increasing grid electricity interruptions which reduced the volumes of ore processed. In addition, higher than expected internal basalt dilution in certain domains of ore that was treated impacted throughput. An operational decision to open crusher gaps and to slow throughput in the processing plant was implemented in H2 2023 to enhance plant stability, improve large diamond recoveries and more effectively treat ore blocks with higher levels of internal basalt dilution.

Letšeng recovered 50 601 carats (H1 2022: 55 157 carats). The decrease in volume of recoveries during the Period is mainly due to the absence of the AV contribution to carats recovered, which was 4 409 carats in H1 2022.

The overall grade for H1 2023 was 2.05 cpht (H1 2022: 1.83 cpht), representing an increase of 12%. This was driven by the expiry of the AV contract, whose older technology pan-plant recovered at a lower grade, and a higher contribution of higher-grade Satellite Pipe material, which accounted for 51% of material treated during the Period (H1 2022: 46%). The grade for the material treated during the Period is in line with the expected reserve grade.

Frequency of large diamond recoveries

The average price achieved during the Period was US$1 373 per carat (H1 2022: US$1 745 per carat). 52 163 carats were sold, generating rough diamond revenue of US$71.7 million (H1 2022: 57 075 carats at a value of US$99.6 million). The lower revenue is mainly attributed to the lower number of diamonds greater than 10.8 carats recovered during the Period, as well as a downturn in the rough diamond market negatively impacting rough diamond prices.

The highest price achieved was US$282 889 per carat for a 6.63 carat pink diamond, this being the third-highest price achieved to date for a Letšeng diamond. 12 diamonds sold for more than US$1.0 million each, generating revenue of US$21.0 million (H1 2022: 15 diamonds sold for more than US$1.0 million each, generating revenue of US$25.8 million).

RIGHT-SIZING OF LETŠENG

A change in the operational requirements, as well as pressure on operating expenses and rough diamond prices, required the operation to critically review all aspects of its business to ensure it operates optimally and with effective cost management to secure its sustainability.

A right-sizing programme commenced at Letšeng in March 2023 and the workforce element of the programme was completed in June. A total of 327 positions were affected at Letšeng and its contractors during this phase of the programme, which aimed at more effectively and efficiently aligning the workforce to operational requirements.

The further optimisation of operations to ensure efficiency and effective cost control management is a top priority and will include a review of all operational contracts.

CAPITAL PROJECTS

The newly constructed modules for the replacement primary crushing area (PCA) at Letšeng have been completed. Commissioning of the modules commenced mid-July 2023.

The underground feasibility study to assess the viability of an earlier shift to underground mining of the Satellite Pipe has progressed as planned and will inform the trade-off decision between further open-pit cut-backs and underground mining. 

The construction of a 300 kilolitre bioremediation plant for run-off water treatment has commenced and is expected to be completed in Q4 2023.

GHAGHOO

The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem Diamonds is discussing various alternatives with affected stakeholders, including the potential closure of the mine.

GROUP FINANCIAL PERFORMANCE

H1 2023 IN REVIEW

• Revenue achieved of US$71.8 million (H1 2022: US$100.0 million)

• Underlying EBITDA1 of US$8.4 million (H1 2022: US$20.9 million)

• Attributable loss of US$1.0 million (H1 2022: profit of US$3.8 million)

* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.

1 Including waste stripping amortisation costs but excluding depreciation and mining asset amortisation.

2 Underlying earnings before interest, tax, depreciation and mining asset amortisation (EBITDA) as defined in Note 6, Underlying earnings before interest, tax, depreciation and mining asset amortisation (underlying EBITDA) of the condensed notes to the consolidated interim financial statements.

The Group generated an underlying EBITDA2 of US$8.4 million (H1 2022: US$20.9 million). The loss attributable to shareholders was US$1.0 million (H1 2022: profit of US$3.8 million), equating to a loss per share of 0.7 US cents (H1 2022: profit per share of 2.7 US cents) on a weighted average number of shares in issue of 141.6 million (H1 2022: 142.1 million shares).

Revenue

The Group's revenue of US$71.8 million was mainly generated by the sale of 52 163 carats at an average price of US$1 373 per carat. The additional US$0.1 million revenue was generated from a premium on the sale of polished diamonds in accordance with the agreement with two diamond manufacturers who supply polished diamonds to some of the world's premium luxury brands.

Costs

The Group closely manages its costs and preserves cash resources to maintain appropriate liquidity. Operating expenses continue to be negatively impacted by the volatile global economic environment and the ever-increasing frequency of grid electricity interruptions in South Africa, which increases the reliance on diesel-powered generators and, as a consequence, diesel consumption.

OPERATING EXPENSES

Fuel prices remain a significant expense, with increased consumption for the use of diesel-powered generators during load shedding, although prices stabilised at around LSL18.50 per litre in the Period from a high in excess of LSL20.00 per litre in mid-2022.

The right-sizing of Letšeng that was completed in June 2023 affected 327 positions at Letšeng and its contractors. Total severance payments amounted to LSL23.2 million, of which LSL15.1 million was already provided for at December 2022 in terms of normal leave and severance pay provisions.

Total direct cash costs at Letšeng, including waste, decreased marginally to LSL1 040.8 million from LSL1 076.0 million in H1 2022. Additional once-off expenses relating to the right-sizing, such as the severance payments discussed above and related consulting fees, together with higher levels of inflation and increased diesel consumption due to load shedding, negated the expected decrease in costs from lower waste mining volumes.

2 Non-cash accounting charges include waste stripping cost amortised, inventory and ore stockpile adjustments, and the impact of adopting IFRS 16 Leases, and exclude depreciation and mining asset amortisation.

Direct cash costs in H1 2023 were LSL296.54 per tonne treated compared to LSL238.04 in H1 2022, which included the impact of AV tonnes and costs. The AV contract expired on 30 June 2022, resulting in a reduction of 0.4 million ore tonnes being treated in H1 2023 when compared to H1 2022. On a like-for-like basis (excluding the impact of AV), the H1 2022 costs increase to LSL262.06 per tonne treated, resulting in a year-on-year increase of 13%. The 13% increase in unit costs is driven by the additional costs mentioned above and a 4% reduction in tonnes processed through the Letšeng plants.

CORPORATE EXPENSES

Corporate office costs are incurred to provide expertise in all areas of the business to realise maximum value from the Group's assets. These costs are incurred by the Group through its technical and administrative offices in South Africa (in South African rand) and head office in the UK (in British pounds).

General corporate costs were US$5.2 million (H1 2022: US$5.0 million). The increase was mainly due to structural changes in the senior leadership and consulting fees related to reviewing new business opportunities, set off by the weaker South African rand and British pound against the US dollar.

GHAGHOO

The Ghaghoo Diamond Mine in Botswana remains on care and maintenance and Gem Diamonds is discussing various alternatives with affected stakeholders, including the potential closure of the mine. The care and maintenance costs of US$0.8 million (H1 2022: US$1.0 million) are included in other operating expenses. The decrease in cash costs is mainly due to the favourable exchange rate.

EXCHANGE RATE IMPACTS

While revenue is generated in US dollars, the majority of operational expenses are incurred in the relevant local currency of the operational jurisdictions. Local currency rates for the Lesotho loti (LSL) (pegged to the South African rand) and Botswana pula (BWP) weakened significantly against the US dollar compared to H1 2022, which decreased the Group's US dollar reported costs and increased local currency cash flow generation.

The LSL closed 11% weaker against the US dollar at the end of the Period compared to 31 December 2022. This resulted in a decrease in the US dollar reported values in the Interim Consolidated Statement of Financial Position. Selected totals of the Interim Consolidated Statement of Financial Position and key asset drivers are tabled below.

Taxation

The forecast effective tax rate for the full year is 62.3% (31 December 2022: 33.8%) and has been applied to the actual results. This rate is the result of profits generated by Letšeng being taxed at 25%, deferred tax assets not being recognised on losses incurred in non-trading operations, and the effect of the overseas foreign tax rate differential. The increase in the tax rate compared to 2022 is due to the lower profits generated by Letšeng.

There has been no change to the amended tax assessment that was issued to Letšeng by the Revenue Services Lesotho (RSL) in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act, 1993. There has therefore been no change in judgement applied and the accounting treatment compared to that disclosed in the 2022 Annual Report and Accounts.

Going concern

The projections of the Group's current and expected profitability, considering reasonable possible changes in operations, key assumptions and inputs, indicate that the Group will be able to operate as a going concern for the foreseeable future. Refer to the financial statements on page 9.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group's principal risks and uncertainties, both current and emerging, that could have a material financial, operational and compliance impact on its performance and long-term growth, are presented in the Annual Report and Accounts for 2022 (pages 36 to 42). The Group's principal risks as presented in the Annual Report and Accounts for 2022 remain unchanged in the medium to long term and take into consideration current market and operational conditions of the Group's operations and global markets. The Group's risk management strategy aims to manage Group risk in such a way as to minimise threats and maximise opportunities.

The assessment of emerging risks is embedded within the risk framework of the Group. Any emerging risks identified are reported to and considered by the Board. The potential for future carbon tax liabilities, including the Carbon Border Adjustment Mechanism in the European Union, is being monitored through the Group's climate change-related governance and risk management structures. 

The Group continues to monitor and manage areas of unpredictability, in particular the immediate and evolving impact of excessive and increased power outages and diesel consumption and the current downturn in prices being experienced in the rough diamond market.

Clifford Elphick

Chief Executive Officer

30 August 2023

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEAR REPORT AND FINANCIAL STATEMENTS

PURSUANT TO DISCLOSURE AND TRANSPARENCY RULES (DTR) 4.2.10

The Directors confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting and that the Half-Year Report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

(a)  an indication of important events that have occurred during the first six months of the financial year and their impact on this condensed set of financial statements; and

(b)  material related-party transactions in the first six months of the year and any material changes in the related-party transactions described in the Gem Diamonds Limited Annual Report 2022.

The names and functions of the Directors of Gem Diamonds Limited are listed in the Annual Report for the year ended 31 December 2022.

For and on behalf of the Board

Michael Michael

Chief Financial Officer

30 August 2023

* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.

1 Unaudited.

INTERIM CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2023

1 Unaudited.

1 Unaudited.

2 Audited.

1  Other reserves relate to Foreign currency translation reserves and Share-based equity reserves. Refer Note 16, Issued share capital and reserves for further detail.

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2023

The condensed consolidated interim financial statements for the six months ended 30 June 2023 (the Period) have been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed consolidated interim financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's Annual Financial Statements for the year ended 31 December 2022. The Condensed financial statements are unaudited and do not constitute statutory accounts as defined in section 434 of the Companies Act, 2006. The financial information for the year to 31 December 2022 included in this report was derived from the statutory accounts for the year ended 31 December 2022, a copy of which has been delivered to the Registrar of Companies. The auditor's report on these accounts was unqualified, did not include a reference to any matters to which the auditor drew attention by way of an emphasis of matter and did not contain a statement under sections 498(2) or (3) of the Companies Act, 2006.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 1 to 3. The financial position of the Group, its cash flows and liquidity position are described in the Group Financial Performance on pages 4 to 7. The Group's net debt at 30 June 2023 was US$2.0 million (31 December 2022: net cash of US$3.3 million) and with its undrawn facilities of US$72.9 million (31 December 2022: US$82.6 million), its liquidity (defined as net cash and undrawn facilities) of US$70.9 million (31 December 2022: US$85.9 million) remains strong. The Group's Revolving Credit facilities, which total US$69.7 million when fully unutilised, mature on 22 December 2024. In addition, there is a US$5.3 million general banking facility with no set expiry date, but is reviewed annually. For further information on these facilities, refer Note 18, Interest-bearing loans and borrowings.

After making enquiries which include reviews of forecasts and budgets, timing of cash flows and sensitivity analyses, and considering the continued impact of the Russian invasion of Ukraine on consumable and commodity prices on both the wider macro-economic environment (including demand for the Group's products and realised prices) and the Group's operations and production levels, the Directors have a reasonable expectation that the Group and the Company have adequate financial resources without the use of mitigating actions to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing this half-year report and accounts of the Group.

2.2    Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's Annual Financial Statements for the year ended 31 December 2022.

New accounting pronouncements, principally minor amendments to existing standards, also became effective on 1 January 2023 and have been adopted by the Group. The adoption of these new accounting pronouncements has not had a significant impact on the accounting policies, methods of computation or presentation applied by the Group.

Amendments to standards

Standards issued but not yet effective

The standards, amendments and improvements that are issued, but not yet effective, up to the date of issuance of the Group's consolidated interim financial statements are listed in the table below. The standards, amendments and improvements have not been early adopted and it is expected that, where applicable, these standards and amendments will be adopted on each respective effective date. The impact of the adoption of these standards cannot be reasonably assessed at this stage.

3.    SEGMENT INFORMATION

For management purposes, the Group is organised into geographical units as its risks and required rates of return are affected predominantly by differences in the geographical regions of the mines and areas in which the Group operates or areas in which operations are managed. The below measures of profit or loss, assets and liabilities are reviewed by the

Board of Directors. The main geographical regions and the type of products and services from which each reporting segment derives its revenue from are:

· Lesotho (diamond mining activities);

· Belgium (sales, marketing and manufacturing of diamonds);

· BVI, RSA, UK and Cyprus (technical and administrative services); and

· Botswana (diamond mining activities), ceased to be classified as a discontinued operation held for sale at 31 December 2022. Refer Note 15, Assets held for sale.

Management monitors the operating results of the geographical units separately for the purpose of making decisions about resource allocation and performance assessment.

Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), which was classified as a discontinued operation held for sale and disclosed separately as the discontinued operation segment in prior years, has ceased to be classified as a discontinued operation held for sale on 31 December 2022. Refer Note 15, Assets held for sale. The 30 June 2022 comparative segment information has been restated to re-present the previous discontinued operation segment as the Botswana segment as part of the Group's continuing operations.

Segment performance is evaluated based on operating profit or loss. Intersegment transactions are entered into under normal arm's length terms in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment results include transactions between segments. Those transactions are eliminated on consolidation.

Segment revenue is derived from mining activities, polished diamond manufacturing margins and diamond analysis and manufacturing services.

The following tables present revenue from contracts with customers, profit/(loss) for the Period, EBITDA and asset and liability information from operations regarding the Group's geographical segments:

1 Unaudited.

2 Audited.

3 No revenue was generated in BVI and Cyprus.

4 This includes the adjustment to align the forecast effective tax rate for the full year, to the actual results for the Period. Refer Note 8, Income tax expense.

5 Calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing and credit underwriting fees). Refer Note 18, Interest-bearing loans and borrowings.

Included in revenue for the Period is revenue from one customer who individually contributed 10% or more to total revenue. This revenue in total amounted to US$10.3 million (30 June 2022: US$12.5 million from one customer) arising from the sales reported in the Belgium segment.

Segment assets and liabilities do not include deferred tax assets and liabilities of US$5.5 million and US$77.1 million respectively (31 December 2022: deferred tax asset US$6.0 million, deferred tax liabilities US$82.0 million).

Total revenue for the Period is lower than that of the prior period. Although the volume of carats sold of 52 163 carats was only 9% lower than the prior period (57 075 carats), the $ per carat achieved of US$1 373 was 21% lower than the prior period (US$1 745 per carat). The lower revenue is mainly attributed to the lower number of diamonds greater than 10.8 carats recovered during the Period, as well as a downturn in the rough diamond market negatively impacting rough diamond prices.

* Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), previously reported as the discontinued operation segment in prior periods, ceased to be classified as a  
discontinued operation held for sale at 31 December 2022 and the comparative segment information has been restated to re-present the previous discontinued operation segment as  the Botswana segment. Refer Note 15, Assets held for sale.

1 Unaudited.

2 No revenue was generated in BVI and Cyprus.

3 This includes the adjustment to align the forecast effective tax rate for the full year, to the actual results for the Period. Refer Note 8, Income tax expense.

1 Unaudited.

The revenue from the sale of goods mainly represents the sale of rough diamonds, for which revenue is recognised at the point in time at which control transfers.

The revenue from partnership arrangements of US$0.1 million (2022: US$0.3 million) represents the additional uplift from partnership arrangements for which revenue is recognised when the significant constraints are lifted or resolved and the amount of revenue is guaranteed. At Period end 2 082 carats (2022: 527 carats) have significant constraints in recognising revenue relating to the additional uplift.

No revenue was generated from joint operation arrangements during the current or prior period.

* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.

1 Unaudited.

6.  UNDERLYING EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND MINING ASSET AMORTISATION (UNDERLYING EBITDA)

Underlying EBITDA is shown, as the Directors consider this measure to be a relevant guide to the operational performance of the Group and excludes such non-operating costs and income as listed below. The reconciliation from operating profit to underlying EBITDA is as follows:

* The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation at 31 December 2022. Refer Note 15, Assets held for sale.

1 Unaudited.

7.  SEASONALITY OF OPERATIONS

The Group's sales environment with regard to its diamond sales is not materially impacted by seasonal and cyclical fluctuations. The mining operations may be impacted by seasonal weather conditions. Appropriate mine planning and ore stockpile build-up ensures that operations can continue during adverse weather conditions.

1 Unaudited.

2  This relates to a refund due to Gem Diamonds Limited from Revenue Services Lesotho for withholding tax overpaid on dividends in prior periods, following an amendment to the Double Tax Agreement between the United Kingdom and the Kingdom of Lesotho. The receivable has been recognised as part of Other Receivables. Refer Note 13, Receivables and other assets.

The forecast effective tax rate for the full year is 62.3% (31 December 2022: 33.8%) and has been applied to the actual results.

The effective tax rate is above the Lesotho statutory tax rate of 25% primarily as a result of deferred tax assets not recognised on losses incurred in non-trading operations and the effect of the overseas foreign tax rate differential. The increase in the tax rate compared to 2022 is due to the lower profits generated by Letšeng.

There was no dividend proposed on the 2022 full-year results or paid during the current Period. 

The Directors intend on applying a similar dividend policy in the current year on the 2023 full year results as has been adopted previously. The dividend policy is dependent on the results of the Group's operations, its financial position, cash requirements, future prospects, profits available for distribution and other factors deemed to be relevant at that time.

10.    PROPERTY, PLANT AND EQUIPMENT

During the Period, the Group invested US$4.6 million (30 June 2022: US$2.4 million) into property, plant and equipment, of which US$4.5 million (30 June 2022: US$2.3 million) related to Letšeng.

Letšeng's capital spend was incurred mainly on the completion of the construction of the PCA of US$2.1 million (30 June 2022: US$1.9 million) and the Underground Feasibility Study of US$0.9 million.

Letšeng further invested US$19.8 million (30 June 2022: US$26.6 million) in deferred stripping costs which were capitalised. Amortisation of the deferred stripping asset (waste stripping cost amortisation) of US$17.8 million (30 June 2022: US$21.9 million) was charged to the Interim Consolidated Statement of Profit or Loss during the Period. The amortisation is directly related to the areas that were mined during the Period and their associated waste to ore strip ratios.

Depreciation and amortisation of US$2.4 million (30 June 2022: US$3.4 million) was charged to the Interim Consolidated Statement of Profit or Loss during the Period.

In addition to the above, foreign exchange movements on translation affecting property, plant and equipment decreased the asset balances by US$27.9 million (30 June 2022: US$7.5 million decrease).