Thursday, 14 March 2024

Gem Diamonds Limited

Full Year 2023 Results

Gem Diamonds Limited (LSE: GEMD) ("Gem Diamonds", the "Company" or the "Group") announces its Full Year Results for the year ending 31 December 2023 (the "Period").

FINANCIAL RESULTS:

· Revenue of US$140.3 million (US$188.9 million in 2022)

· Underlying EBITDA of US$15.2 million (US$43.7 million in 2022)

· Profit for the year of US$1.6 million (US$20.2 million in 2022)

· Attributable loss of US$2.1 million (profit of US$10.2 million in 2022)

· Loss per share of 1.5 US cents (earnings per share of 7.3 US cents in 2022)

· Cash on hand of US$16.5 million as at 31 December 2023 (US$12.3 million attributable to Gem Diamonds)

OPERATIONAL RESULTS:

Let?eng

· Carats recovered of 109 656 (106 704 carats in 2022)

· Waste tonnes mined of 8.8 million tonnes (10.2 million tonnes in 2022)

· Ore treated of 5.0 million tonnes (5.5 million tonnes in 2022)

· Average value of US$1 334 per carat achieved (US$1 755 in 2022)

· The highest dollar per carat achieved for a white rough diamond during the year was US$36 399 per carat

Safety performance

Let?eng's safety performance in 2023 was excellent with zero fatalities (2022: zero), two LTIs (2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our lowest AIFR on record of 0.67 (2022: 0.70).

Financial performance

The turbulent global economic conditions from the previous year continued into 2023 with high inflation, interest rate hikes and slow overall economic growth in major economies which impacted the diamond market. The pressure experienced on the diamond market significantly impacted rough and polished diamond prices which resulted in a 26% decrease in revenue. Despite the implementation of numerous cost containment measures, EBITDA decreased by 65%.

Operational performance

Significant changes were made to management, workforce and operating methodologies at Let?eng and Ghaghoo in 2023 to meet the challenges of lower revenues and increasing costs. The implementation of a number of initiatives in H2 2023 to slow down the rate at which ore is fed into the treatment plants significantly improved overall stability which materially improved the consistency of higher daily overall plant utilisation.

TCFD and Climate

The Group concluded the final phase of its three-year TCFD roadmap in 2023. The Group achieved a 26% reduction of its scope 1 and scope 2 carbon emissions compared to its target of a 30% reduction by 2030.

Resource & Reserve Statement

Following an in-depth resource development programme that involved extensive core resource drilling, pit surface mapping, 3D-modelling, and petrography, the Group has concluded its NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement which will be available on the Group's website at www.gemdiamonds.com.

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

"2023 was a challenging year globally with surging inflation and interest rate increases in major economies, two international conflicts and a subdued overall global economic outlook which had a significant negative impact on the diamond industry. Our financial results suffered primarily as a result of a decrease in revenue because of lower diamond prices. We have relentlessly focused on cost control measures, enhanced operational efficiencies, rigorous evaluation of capital projects and the deferment of non-essential longer-term projects.

We are proud of our excellent safety performance in 2023 which is a testament to the focus and dedication of our workforce to mature the organisational safety culture, a programme that commenced in 2021.

We also released Let?eng's 2024 Resource and Reserve statement today, the result of a lot of hard work over the past number of years. We will continue to optimise our mine plan to ensure sustainable returns for our stakeholders.

The pressure on the diamond market has persisted into 2024, although there have been some signs of price recovery. We are cautiously optimistic that prices will stabilise and that there will be some growth towards the end of 2024."

The Company will host a live audio webcast of the full year results today, 14 March 2024, at 9:00 GMT. If you would like to attend the webcast please register here: 2023 Full Year results webcast

The page references in this announcement refer to the Annual Report and Accounts 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

Kiki Constantopoulos, Company Secretary

ir@gemdiamonds.com

Celicourt Communications

Mark Antelme / Felicity Winkles

Tel: +44 (0) 207 777 6424

ABOUT GEM DIAMONDS:

Gem Diamonds is a leading global producer of high value diamonds. The Company owns 70% of the Let?eng mine in Lesotho. The Let?eng mine is famous for the production of large, exceptional white

diamonds, making it the highest dollar per carat kimberlite diamond mine in the world.

CHAIRPERSON'S STATEMENT

The Board steered the Group through another challenging year in the face of the global cost-of-living crisis, international conflicts and the resultant downturn in the natural diamond market.

Dear shareholders,

On behalf of the Board of Directors, I am pleased to share with you the Gem Diamonds Annual Report and Accounts for 2023, which outlines the Group's performance over the past year and highlights some of our focus areas for the year ahead.

We entered 2023 with the ongoing Russian invasion of Ukraine and the cost-of-living crisis which saw global economies grappling with accelerating inflation, rising interest rates and continued supply chain challenges. The slowdown of global economic growth in 2023 was further impacted by the conflict in Gaza that began in October 2023, and in early 2024, the attacks launched by Yemen's Houthi rebels on cargo vessels in the Red Sea.

The diamond industry suffered in the face of these challenges. Demand and prices for rough and polished diamonds exhibited material weakness and, as reported by some of the world's major diamond producers, declined year-on-year by as much as 40% in certain categories of diamonds.

The past four years, starting with the COVID-19 pandemic, have been difficult for our business, with the result that our workforce, their families and the wider communities within which we operate have all had to adapt to the new economic environment. The resilience and fortitude they have displayed has been inspiring and commendable.

At Let?eng, the impact of a wide array of operating costs rising at a rate markedly higher than inflation put enormous strain on the business. In particular, the fact that Let?eng is reliant on South African grid electricity supplier Eskom, which is currently plagued with poor operating performance leading to frequent load shedding, resulted in a sharp rise in our use of more expensive diesel-powered generators. These higher input costs, combined with a 26% decrease in revenue due to lower diamond prices, led to EBITDA reducing by 65% compared to 2022. Management moved swiftly to address these external challenges by tightening cost controls even further and by taking a range of tough decisions to align the organisational structure with the market conditions. The financial results are discussed in the CFO Review on page 34 and the financial statements are available from page 118.

Let?eng performed well operationally, especially in the second half of the year, with ore throughput in the plants being steady and consistent. The COO review on page 41 contains the full details of Let?eng's operational performance during 2023.

The sale, closure and/or handover options for Ghaghoo continue to be actively managed while the site is being appropriately maintained and safeguarded, and we will continue to support management through this process.

We are pleased to report that there were no major or significant environmental or social incidents reported at any of our operations during the year.

GOVERNANCE MATTERS IN 2023

The Governance section from page 62 provides full details of all corporate governance matters relevant to the Group in 2023.

I can report that there were no changes to the makeup of the Board of Directors during 2023, and that the current governance structure is aligned with the independence requirements of the UK Corporate Governance Code and is fully representative with respect to both gender and minority groups.

The findings from the external Board evaluation concluded at the end of 2022 were reviewed. It is encouraging that the report was complimentary of the functioning of the Board, offering only minor improvement opportunities which we implemented during 2023.

In line with past practice, Gem Diamonds was again able to derive 99% of the workforce at Let?eng from within Lesotho. Increasing female representation in our workforce remains a priority, and we have implemented various initiatives in local communities and schools to create awareness of the many possible careers that exist within the mining sector, and to promote Let?eng as an employer of choice for women.

Shareholders will be aware that Matekane Mining Investment Company (Proprietary) Limited (MMIC) has held the contract to conduct mining operations at the Let?eng mine since 2005. In October 2022, Mr Sam Matekane (the ultimate owner of MMIC) was elected as the new Prime Minister of Lesotho. In order to avoid any potential conflicts of interest between Mr Matekane's political appointment and his business with Let?eng, we concluded a mutually agreed early termination of the mining services agreement and all mining activities were taken over by Let?eng. I would like to take this opportunity to thank both the Prime Minister and Let?eng's management for the professionalism with which this important transition was undertaken.

The financial and operational details of this transaction are included in the CFO Review on page 34 and the COO Review on page 41.

THE BOARD'S PRIORITIES IN 2023

· Considering the way forward for the Let?eng orebody, including the finalisation of the 2024 Resource and Reserve Statement

· Overseeing the implementation of initiatives to improve the maturity of the Group's organisational safety culture

· Overseeing the execution of the Group's decarbonisation strategy and the completion of its TCFD adoption roadmap

· Advancing efforts to sell or exit the Ghaghoo mine in Botswana, which remains on care and maintenance

· Implementing the opportunities identified by the external Board evaluation concluded in 2022

· Considering external growth opportunities

IMPROVEMENT IN SAFETY PERFORMANCE AND CULTURE

We regard the safety and health of our employees as our single most important priority, and I am very pleased to report that in 2023 Let?eng reported its best All Injury Frequency Rate on record at 0.67. We would like to congratulate and thank Let?eng's management and workforce for this notable accomplishment. The Board would like to express its gratitude for the effort and commitment that was applied to drive forward the various initiatives that were developed following the 24-hour stop-for-safety shutdown in June 2021. We recognise that it requires relentless focus and close attention to detail to achieve these results. Despite this achievement we all appreciate the need to remain constantly vigilant and alert to existing and new hazards and risks, and to continue to build a mature and collaborative safety culture where employees and management actively look out for each other's safety and health at all times.

The COO Review on page 41 contains full details of Let?eng's safety performance during 2023.

THE FUTURE DEVELOPMENT OF LET?ENG

With the Let?eng open pit mine progressing deeper every year, the Board carefully considered the future development of Let?eng's orebodies during 2023. An underground study carried out during the year indicated that underground mining of the Satellite pipe is not currently an economically viable option and we therefore continue with optimising open pit mining at Let?eng.

Following an in-depth resource development programme that involved extensive core resource drilling, pit surface mapping, 3D modelling, and petrography, we have concluded our NI 43-101 Technical Report. The report contains Let?eng's 2024 Resource and Reserve Statement and will be published on the Group's website at www.gemdiamonds.com.

Refer to the COO Review for more details on the underground study on page 44 and the 2024 Resource and Reserve Statement on page 45.

DECARBONISATION STRATEGY

During 2023 we made notable progress on our decarbonisation strategy with the Group completing its three-year TCFD adoption roadmap as planned. At the beginning of 2023, we also announced that our decarbonisation target would be a commitment to reduce our Scope 1 and Scope 2 carbon emissions by 30% (as measured against our 2021 emissions) by 2030.

Our primary focus is now on identifying and implementing ways to reduce our energy usage and at the same time searching for ways to lower our dependence on the unreliable and high-carbon grid electricity supplied by Eskom. We continue to actively investigate alternative large-scale, long-term energy solutions that will not only underpin the sustainability of the business but also contribute to offsetting the wider suite of climate change risks. The energy consumption of the Group in 2023 is detailed in the Climate change report on page 51.

COMMUNITY AND GOVERNMENT ENGAGEMENT

The Lesotho Government is a significant shareholder in the Let?eng mine and we seek at all times to maintain sound and constructive relationships with government departments and officials. Accordingly, I am very pleased that during the past year we were able work constructively with the new government following the elections in Lesotho in late 2022. Honest communication with all stakeholders is crucial, and has been particularly so during the political and economic challenges of recent years. Their ongoing support will be tremendously important as we seek to steer Let?eng's operations through the current period of challenging market conditions.

We consider all stakeholders' concerns and inform them about our business and the broader political, social and operational environment that we require in order to thrive. This dialogue is conducted through a range of stakeholder engagement forums which meet regularly and which routinely pass details of the issues discussed to the Board for its consideration.

LOOKING TO THE FUTURE

At the time of writing, it would seem that many of the challenges we faced during 2023 will be evident again during the coming year - a difficult economic environment with slow economic growth impeded by several international conflicts. The prospect of declining inflation and early indications of a reduction in interest rates in major economies suggest a stabilisation of the global economy towards the end of 2024. Until then, we will have to remain resilient through effective cost control and delivery of further operational efficiencies.

We will define the future development pathway for the Let?eng orebody based on the 2024 Resource and Reserve Statement, and we will communicate widely and consult as necessary with all relevant stakeholders.

Our exit from the Ghaghoo mine remains a priority, and negotiations are continuing with the Government of Botswana on closure, handover and/or rehabilitation should a sale not be possible.

The Group's revolving credit facilities are expiring at the end of 2024, and we will actively oversee the extension of these facilities with the Group's lenders.

We will stay abreast of developments in the diamond market and respond appropriately by selling Let?eng's rough diamonds through appropriate channels and available diamond centres in order to achieve the highest obtainable market prices.

APPRECIATION

On behalf of the Board, I would like to thank every single person who has contributed to the Group's performance in 2023, especially our executive and senior management for steering the Group through a very challenging year. We thank our employees, contractors, community partners, the Government of the Kingdom of Lesotho and our shareholders for their ongoing support. I also wish to thank my fellow Directors for their commitment and valuable contributions during 2023.

Harry Kenyon-Slaney

Chairperson

13 March 2024

RISK MANAGEMENT

HOW WE APPROACH RISK

The Group's risk management framework, which is fully integrated with strategic and operational planning, aims to identify, manage and respond to the Group's risks and uncertainties. The framework combines top-down and bottom-up approaches with appropriate governance and oversight.

Risk management framework

EMERGING RISKS

The Group risk framework includes an assessment of emerging risks, which considers those risks that:

· are likely to materialise or impact over a longer timeframe than existing risks;

· do not have much reference from prior experience; and

· are likely to be assessed and monitored against vulnerability, velocity and preparedness when determining likelihood and impact.

The current emerging risks that are being monitored by the Group are:

· lab-grown diamonds attracting a larger market share;

· generational shifts in consumer preferences; and

· future workforce (automation, skills for the future, etc).

VIABILITY STATEMENT

The Board has assessed the viability of the Group over a period significantly longer than 12 months from the approval of the financial statements, in accordance with the UK Corporate Governance Code. The Board considers three years from the financial year end to be the most relevant period for consideration for this assessment, given the Group's current position and the potential impact on the Group's viability of the principal risks documented on pages 21 to 26.

While the Group maintains a full business model, based predominantly on the life of mine plan for Let?eng, the Group's annual business and strategic planning process also uses a three-year time horizon. This process is led by the CEO and CFO and involves all relevant functions including operations, sales and marketing, finance, treasury and risk. The Board participates in the annual review process through structured Board meetings and annual strategy review sessions. A three-year period provides sufficient and realistic visibility in the context of the industry, the environment in which the Group operates, and the current short-term mine plan, even though the life of mine, the mining lease tenure and available estimated reserves exceed three years.

The business and strategic plan reflects the Board's best estimate of the Group's prospects. The Board evaluated several additional scenarios to assess the potential impact on the Group by quantifying their financial impact and overlaying this on the detailed financial forecasts in the plan.

The Board's assessment of the Group's viability focused on the critical principal risks categorised within the strategic, external and operational risk types, together with the effectiveness of the potential mitigations that management reasonably believes would be available to the Group over this period.

GROUP FACILITIES

The Group has access to US$71.0 million in RCFs when fully available. Of these RCFs, US$37.8 million was utilised at the end of the year. The Group's RCFs mature on 22 December 2024. The existing facility agreement includes an option to extend the facilities for a period of 24 months (subject to lender approval). The Group may also decide to renew these facilities for a potentially longer period of 36 months. These facilities have been in place since 2011 and have been renewed on three previous occasions through expanding the lender group and increasing the overall facility amount. In addition, there is a general banking facility of US$5.5 million with no set expiry date, but which is reviewed annually by the lenders. This facility was fully available at the end of the year.

ROUGH DIAMOND MARKET

Demand and prices for rough and polished diamonds exhibited material weakness and declined year-on-year by as much as 40% in certain categories of diamonds, as reported by some of the world's major diamond producers. The offloading of large, high-value polished diamonds by other producers has had a detrimental effect on the top end of the diamond market. All of these factors placed severe pressure on rough and polished diamond prices during 2023.

RISING COSTS

At Let?eng, the impact of a wide array of operating costs rising at a rate markedly higher than inflation put strain on the business. In particular, the fact that Let?eng is reliant upon South African grid electricity supplier Eskom, which is currently plagued with poor operating performance leading to frequent load shedding, resulted in a rise in the use of more expensive diesel-powered generators. The price of diesel also remains high which has a direct impact on costs due to the large volumes of diesel used in the loading and hauling of ore and waste tonnes. The Group strives to mitigate these rising costs through stringent cost control and efficient mining, evidenced through the recent right-sizing and insourcing initiatives.

CLIMATE CHANGE

The Board is cognisant of the risks presented by climate change and conscious of the need to minimise carbon emissions. A Group-specific climate change scenario analysis has been conducted whereby the short to medium and longer-term physical risks were assessed. The short to medium-term impacts fall within the viability period. The physical risks identified for Let?eng, such as drought, strong winds, extreme precipitation and cold, are similar to its current operating conditions. The operation is therefore well geared to manage these conditions within its current and medium-term operational activities, cost structure and business planning. Additional cash investment required in the event of these short to medium-term physical risks materialising has been assessed as low with no material impact on the current operations and viability of the Group.

In terms of transitional risks, as users of grid-supplied and fossil fuel energy, the short-term focus is on improving energy efficiencies in our operational processes and reducing the use of fossil fuels. Options are being assessed in the context of the size, nature and location of the Group's operations, the required investment and the expectations of our main stakeholders. Any material investment during the viability period is considered unlikely. Due to uncertainty around the cost and timing of implementation of carbon-related taxes, the impact of such taxes on the Group's operations and cash flows has been excluded from the viability assessment and scenario stress testing. Management and the Board will continue to assess these impacts as the information becomes more certain. The Group has adopted a carbon-pricing model that will be used to responsibly assess the potential financial impact of future projects. The Group has also adopted a decarbonisation strategy that is aimed at reducing potential future carbon tax liabilities.

STRESS TESTS

The scenarios tested considered the Group's revenue, EBITDA1, cash flows and other key financial ratios over the three-year period. The scenarios included the compounding effect of the factors below and were applied independently of each other. In addition, the scenarios assumed the successful extension of the current RCFs.

In the diamond industry, aggressive overstocking post-COVID-19 led to high inventory levels resulting in an inevitable oversupply of polished diamonds. Given China's importance as a consumer of polished diamonds, the sluggish growth of its economy contributed to the decrease in demand, which was exacerbated by slow economic growth in other important consumer markets such as the US and the rest of Asia. There is evidence of below market sales of large, high-value polished diamonds by certain manufacturers that has had a detrimental effect on the top end of the diamond market. These factors have placed severe pressure on rough and polished diamond prices during 2023.

The manufacturing of lab-grown diamonds has continued to double every year since 2015 and is forecast to reach 20 million carats in 2024. Although lab-grown diamonds have increased in availability and popularity due largely to their favourable price point, we have not seen it impact the demand for Let?eng's large, high-value diamonds; these goods are on the opposite side of the spectrum when it comes to value and quality. Lab-grown diamonds have taken the place of other natural diamond look-alikes such as cubic zirconia and moissanite, and are regarded as consumer goods, not investments. Lab-grown diamonds can be compared to what "fast fashion" is to the premium clothing industry. In order to clearly differentiate them from natural diamonds, and avoid any confusion of the two by consumers, it is notable that the French Government recently ruled that these diamonds may only be referred to as "synthetic".

The Let?eng mine continued to grapple with increased operating costs, mainly because of inflation and higher diesel consumption due to Eskom's continued load shedding, which increased its reliance on diesel-powered generators. Considering these challenges, there was no choice but to relentlessly focus on cost control measures, enhance operational efficiencies, rigorously evaluate capital projects against measurable returns, and defer non-essential longer-term projects.

As reported in our Half-year Report 2023, a further right-sizing programme commenced at Let?eng in March 2023 and the workforce element of the programme was completed in June. The programme was aimed at more effectively and efficiently aligning the workforce to operational requirements.

Let?eng concluded the early termination of the mining services agreement with MMIC on 1 December. It is pleasing to report the smooth transition to owner mining, which included the transfer of all relevant equipment and employees to Let?eng. Employment was effective 1 February 2024 and MMIC employees remained on contract until this date. The process was well managed by senior management, and we are already seeing significant benefits from this transaction, both financially and operationally. The full details of the transaction are included in the CFO Review on page 34.

Several changes were made to the senior leadership structure at Let?eng. Kelebone Leisanyane retired from his position as CEO of Let?eng at the expiration of his contract at the end of June. We would like to thank Kelebone for his valuable contribution during his tenure as CEO. He was succeeded by Motooane Thinyane, previously the Head of Operations. Motooane has been a senior manager and executive of Let?eng for the past eight years. An important part of his role will be spearheading the identification and implementation of appropriate alternative energy solutions. Gideon Scheepers was appointed to the position of Operations Director. Gideon has 32 years of extensive experience in diamond mining and related processes, many of these in the Lesotho diamond mining industry.

Glenn Turner, the Chief Commercial and Legal Officer of the Group, retired at the end of April. Glenn's expertise and leadership was invaluable to the Group over the past 16 years. I have worked with Glenn for many years both at De Beers and subsequently at Gem. We have relied heavily on him as an experienced and deeply trusted colleague. His sound judgement, legal knowledge and commercial experience have helped steer the Group through challenging times and his absence will leave a huge gap. We wish him all the best with this new chapter in his life.

We continue to work well with the newly elected Lesotho Government. Three new non-Executive Directors appointed by the Lesotho Government joined the Let?eng Board during the year. We welcome them and look forward to their valuable contribution and support while we navigate a challenging macro-economic and operating environment. We would also like to thank the outgoing Directors for their dedication and commitment during the time they served on the Let?eng Board.

We concluded the implementation of our TCFD adoption strategy in 2023 and are actively working towards our decarbonisation target of a 30% reduction in Scope 1 and 2 emissions by 2030 (measured against our 2021 footprint). We are pleased to report that in 2023 we achieved a 26% reduction against the 2021 baseline of our decarbonisation target.

Let?eng's underground pre-feasibility study was completed during the year and the results show that underground mining in the Satellite pipe is not currently economically viable. These options for both the Main and Satellite pipes may be revisited when macro-economic and diamond market conditions improve. Let?eng will therefore, on current and foreseeable economics, continue with open pit mining and pursue mine plan optimisation options to ensure maximum value for all stakeholders.

Our NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement will be published following an in-depth resource development programme over the past number of years. The detailed documents will be available on the Group's website at www.gemdiamonds.com.

Refer to the COO Review for more details on the underground study on page 44 and the 2024 Resource and Reserve statement on page 45.

EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS

We have operated safely, responsibly and efficiently during the year with an ongoing focus on cost containment and control and enhancing operational efficiencies. Production stabilised and volumes of ore treated increased in H2 2023 compared to H1 2023, with the implementation of targeted initiatives to improve plant stabilisation and increase diamond recoveries.

Five diamonds greater than 100 carats were recovered during the year. Exceptional sales during the year included a 7 carat pink diamond that was sold for US$282 889 per carat, the third-highest dollar per carat achieved for a Let?eng diamond. In addition, three large high-quality Type IIa white diamonds of 58 carats each were sold for US$36 399 per carat, US$34 441 per carat and US$34 252 per carat, respectively.

We have an effective, transparent and competitive tender sales process in Antwerp. The limited supply agreement that was concluded in 2022 with two important diamond manufacturing customers who supply polished diamonds to some of the world's most premium luxury brands has continued. These diamonds are polished to precise specifications required by the brands and additional value is realised for the Group. This is a further step in the Group's strategy of focused delivery of top-quality diamonds to promote Let?eng as an exceptional diamond brand, Lesotho as the origin and therefore to achieve premium prices for its diamonds.

The operational performance of the Let?eng mine is discussed in more detail in the COO Review on page 41.

The challenging macro-economic environment and downturn in the diamond market resulted in pressure on rough diamond prices, which had a direct and significant impact on our financial results. The average price achieved decreased to US$1 334 per carat compared to US$1 755 per carat in 2022. The lower prices achieved resulted in total revenue of US$140.3 million and underlying EBITDA1 of US$15.2 million. The Group ended the year in a net debt2 position of US$21.3 million.

Full details of the Group's financial performance are included in the CFO Review on page 34.

1 Refer Note 4, Operating profit on page 147 or the definition of non-GAAP (Generally Accepted Accounting Principles) measures.

2 Net debt is a non-GAAP measure and calculated as cash and short-term deposits less drawn down bank facilities (excluding insurance premium financing).

WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE

One of our proudest accomplishments in 2023 was the Group's safety performance. There were no fatalities for the fourth consecutive year, two LTIs (2022: three), and we achieved an overall AIFR of 0.67 (2022: 0.70), our lowest AIFR on record. The drive to mature the organisational safety culture since June 2021 has yielded positive results of which we are very proud. We will continue to entrench a workplace safety culture founded on individual responsibility, mutual care and collaboration.

We adhere to the highest environmental management standards. We are proud to report that Gem Diamonds' work in sustainable water treatment and community water initiatives during 2022 was recognised by the award in the Water category conferred by the Mining Indaba Sustainability Committee Junior ESG Awards Committee in February 2023.

In order to improve the quality of water from the mine, we introduced two small-scale mobile bioremediation plants in 2023. Results from these plants indicate an effective reduction in nitrates in the water flowing through these plants. Construction of a ?300 kilolitre per day plant was completed in December 2023 and commissioned in February 2024.

Our residue storage facility management process aligns with the ICMM's GISTM. Our residue storage and freshwater facilities are subject to regular inspections by external experts. These professional external reviews, together with the internal governance, management, monitoring and reporting processes, ensure that our residue storage and freshwater dam management is both effective and closely monitored.

In 2023, we adopted two additional UN SDGs, being Zero Hunger and Climate Action. Our CSI activities are focused on supporting infrastructure development, education and health while assisting and stimulating small businesses. In 2023, we supported small agricultural operations including those in egg, vegetable and dairy production, provided scholarships for tertiary education, and constructed classrooms at schools. From 2016 to 2023 the Group invested US$4.8 million in sustainable CSI initiatives.

In 2023, Let?eng contributed a total of US$15.5 million (LSL285.8 million) to the Lesotho fiscus in the form of taxes and royalties alone. We are proud of our contribution to this developing economy and our position as a significant taxpayer and employer.

PREPARING FOR THE FUTURE

In 2024, we aim to deliver the business plan approved by the Board. This includes achieving our financial and operational targets with a focus on cost control measures and improved operational efficiencies. Every single contract, capital project and expense is being interrogated and scrubbed for absolute necessity. We will continue to focus on our safety performance by maintaining the cadence of safety interventions, critical control management, visual safety leadership and communication with the workforce.

The increase in load shedding and consequent reliance on diesel-powered generators with their associated costs have intensified our need to identify and implement alternative energy solutions for the short, medium and long term. The criteria for these solutions are that they must be renewable, reliable and reduce costs. We are making progress on this important workstream.

Our capital plans include funding for projects that will sustain growth and value creation. The planned capital-intensive projects in 2024, although not financially significant, include recovery plant and sort house enhancements, the required extension of the Patiseng coarse residue storage facility to align its capacity with future mining activities, and necessary screen replacements in both the treatment plants.

Now that the NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement will be published, we will carefully consider our long-term mine plan to ensure the delivery of sustainable value for all stakeholders.

OUTLOOK

Pressure on the diamond market has persisted into 2024, although there have been some signs of price recovery at the top and bottom end. We are cautiously optimistic that prices will stabilise and that there will be some growth towards the end of 2024. Global economic growth outlooks for major economies and important diamond consumer markets such as the US and China remain uncertain. It is worth noting that almost half of the global population is expected to participate in national elections during 2024, which will likely cause further economic and geopolitical uncertainty.

It is pleasing to note that the global luxury market continued to grow in 2023 and remains poised to expand further in 2024. The luxury market appears well positioned to cope with economic turbulence, with a larger and more resilient consumer base.

In the medium to long term, rough diamond prices should be supported by favourable demand and supply fundamentals, with a projected further decrease in natural rough diamond supply. This dynamic of rising demand and constrained supply is expected to benefit high-quality rough diamonds in particular. The fundamentals that underpin our business are sound and strongly position Gem Diamonds for success.

APPRECIATION

I would like to thank the Board for their support and commitment in 2023. We are grateful for our workforce and appreciate the dedication required to deliver the safety performance we saw in 2023. We also appreciate their commitment to delivering our strategic goals and to living our values. I would like to thank our customers for their continued trust in Let?eng's diamonds, and our shareholders for their support. Finally, I would like to thank the Government of the Kingdom of Lesotho for their support and open and transparent communication. We look forward to a productive 2024.

Clifford Elphick

Chief Executive Officer

13 March 2024

CHIEF FINANCIAL OFFICER'S REVIEW

The financial performance of the Group in 2023 was disappointing, driven by a downturn in the diamond market that resulted in lower diamond prices achieved.

The turbulent global economic conditions from the previous year continued into 2023 with high inflation, interest rate hikes and slow overall economic growth in major economies. The continued Russian invasion of Ukraine and the recent conflict in Gaza further impacted the global economy and specifically the diamond market. Locally, the ever-increasing load shedding by the South African grid electricity supplier, Eskom, put pressure on the operating environment and costs. These factors had a significant impact on diamond prices achieved and costs incurred during the year, resulting in lower EBITDA compared to 2022. This necessitated a renewed focus on cost containment and improvement in operational efficiencies.

Operationally, Let?eng performed in line with expectations despite several challenges posed by high rainfall and increased electricity supply disruptions (refer to the COO Review on page 41). The pressure experienced on the diamond market significantly impacted rough and polished diamond prices and resulted in an average price of US$1 334 per carat for the year, with revenue from the sale of rough diamonds of US$139.4 million. In addition, US$0.9 million of margin uplift was generated, bringing total revenue for the year to US$140.3 million.

Underlying EBITDA decreased to US$15.2 million from US$43.7 million in 2022. The Group reported a loss attributable to shareholders for the year of US$2.1 million, equating to a basic loss per share of 1.5 US cents on a weighted average number of shares in issue of 139.5 million.

The Group ended the year with a cash balance of US$16.5 million and drawn down facilities of US$37.8 million, resulting in a net debt position of US$21.3 million and available undrawn facilities of US$45.9 million.

Summary of financial performance

Refer to the full annual financial statements from page 118.

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

2 Underlying EBITDA as defined in Note 4, Operating profit of the notes to the consolidated financial statements.

Revenue

Revenue decreased 26% compared to 2022, mainly due to lower prices achieved as a result of a downturn in the diamond market and a decrease of 3% in carats sold (104 520 carats compared to 107 498 in 2022). Rough diamond revenue of US$139.4 million (2022: US$188.6 million) was generated at Let?eng, achieving an average price of US$1 334 per carat (2022: US$1 755 per carat).

Additional revenue is generated through an arrangement with two diamond manufacturing customers to supply polished diamonds to some of the world's most premium luxury brands, and other partnership arrangements. These

agreements allow the Group to share in the margin uplift on the sale of polished diamonds. In 2023, additional revenue of US$0.9 million (2022: US$0.3 million) was generated from these arrangements.

Insourcing of the mining activities

Matekane Mining Investment Company (Proprietary) Limited (MMIC) has been the provider of mining services to Let?eng since 2005. Following the election of Mr Sam Matekane (the ultimate owner of MMIC) as Prime Minister of Lesotho in October 2022, Let?eng carefully considered its options to resolve the potential conflict of interest created by being in a business relationship with a politically exposed person.

Effective 1 December 2023, Let?eng reached an agreement with MMIC to early terminate the mining services contract, 11 months ahead of its scheduled contractual end date of 31 October 2024, and insourced these activities. Let?eng acquired the mining fleet and support equipment that was used exclusively for Let?eng, and offered employment to those MMIC employees working exclusively for Let?eng, in line with operational requirements. Employment was effective 1 February 2024 and MMIC employees remained on contract until this date.

The total purchase price, which was determined with the assistance of external third-party valuators, was US$22.7 million. Payment terms were agreed whereby US$13.0 million was paid on the effective date, US$9.3 million was paid in January 2024, and a retainer of US$0.4 million was withheld for equipment under repair at the effective date and subsequently settled in early March 2024.

The full purchase price was capitalised to the statement of financial position and the fleet and equipment will be depreciated over the useful life of each asset based on the available production hours. The financial results for the year include one month of depreciation on the acquired fleet.

This transition to owner mining creates further opportunities for Let?eng to maximise mining efficiencies, reduce costs through eliminating contractor margins, and manage mining procurement directly, and enables further flexibility in the planning and execution of its mining activities. All these factors will contribute to a more efficient and cost-effective operation. The full benefit of the insourcing of the mining activities will be seen from 2024 onwards.

Expenditure

Energy costs

The increased load shedding by Eskom in 2023, which impacted 335 days of the year (compared to 205 in 2022), has necessitated an increase in diesel usage due to Let?eng's reliance on diesel-powered generators to operate the treatment plants uninterruptedly. This increase was partially set off by a decrease in diesel usage for mining activities due to lower volumes mined (refer to the COO Review on page 41) and the full year benefit of previously implemented lower-energy consumption initiatives.

The net impact was a 0.1 million litre increase in diesel consumption compared to the prior year. The average cost per litre of diesel decreased by 2% from 2022. Overall, it resulted in a 1% decrease in diesel costs, in local currency, to LSL336.0 million (US$18.2 million) from LSL340.6 million (US$20.8 million) in 2022.

Grid electricity usage decreased due to increased load shedding during the year. The marginal 3% decrease in cost to LSL54.9 million (US$3.0 million) was set off by a 7.9% rate increase.

Overall energy costs, including diesel and electricity, amounted to LSL390.9 million (US$21.2 million) in 2023 (2022: LSL397.0 million, US$24.3 million), a 2% decrease from 2022 in local currency. Energy costs as a percentage of direct cash costs remained unchanged at 27%, and the energy cost per tonne treated increased by 8% from LSL72.09 in 2022 to LSL77.79 in 2023, driven by lower volumes of tonnes treated.

Total capital expenditure (excluding waste stripping) was US$30.4 million during the year (2022: US$11.9 million). The increase in 2023 was mainly due to the acquisition of the mining fleet and support equipment from MMIC for US$22.7 million, as detailed on page 35. The replacement of the PCA and the underground study that commenced in 2022 were completed. Three bioremediation plants were constructed, with the large-scale, ?300 kilolitre per day plant being commissioned in February 2024.

Cash on hand

The Group ended the year with cash on hand of US$16.5 million (2022: US$8.7 million) and net debt of US$21.3 million, which was a decrease in net cash of US$24.6 million year on year. Group cash generated by operations was US$56.1 million before capital and waste investment of US$57.1 million.

Loans and borrowings

The Group-wide debt facilities for Let?eng (LSL450.0 million and ZAR300.0 million) and Gem Diamonds (US$30.0 million), which were concluded in December 2021 for an initial three-year period, are due to expire in December 2024. The process to extend or renew the revolving credit facilities will commence in Q2 2024.

Let?eng has a ZAR100.0 million (US$5.5 million) general banking facility with Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division) reviewed annually. The facility was utilised from time to time during the year and was fully repaid by year end.

The funding partners to the existing facilities are Nedbank, Standard Bank and Firstrand Bank (through their respective operations). Nedbank's portion of the funding, totalling US$29.9 million, is a sustainability-linked loan (SLL), an innovative structure that links the margin and resultant interest rate on the SLL to the Group's ESG performance. The margin on the SLL will decrease subject to the Group meeting certain carbon reduction and water conservation KPIs that are aligned with the Group's sustainability strategy. These KPIs are assessed at the end of every financial year.

The two KPIs included for the SLLs both need to be met at each measurement date before the margin reduction on these loans becomes effective. At 31 December 2023, both the carbon emission and water conservation KPIs were met and therefore the margin reduction is expected to apply to any outstanding balance on these facilities in 2024.

In 2022, Let?eng implemented a four-and-a-half-year facility agreement with Nedbank for the replacement of the PCA for an amount of ZAR136.4 million (US$8.0 million). The facility is underwritten by the Export Credit Insurance Corporation of South Africa (ECIC). At the end of the availability period on 30 November 2023, an amount of LSL132.0 million (US$7.2 million) was utilised and the remaining balance expired. Quarterly repayments of this facility will commence from Q1 2024 until May 2027.

At year end, the Group had utilised facilities of US$37.8 million, resulting in a net debt position of US$21.3 million and available facilities of US$45.9 million. Gem Diamonds, the Company, ended the year with US$6.0 million of its facility drawn down (2022: nil) and US$24.0 million available. Let?eng ended the year with US$24.6 million (2022: nil ) of its revolving credit facility utilised and US$16.4 million available.

Summary of loan facilities as at 31 December 2023

Let?eng's insurance claim relating to diesel theft, which was identified in 2021, was settled during the year and is included in other operating income in the financial results. The business interruption claim for insured losses arising out of the COVID-19-related shutdown in 2020, where the mine was required to be placed on care and maintenance, is ongoing and we hope to receive an appropriate settlement in 2024.

Share-based payments

The share-based payment charge for the year was US$0.3 million (2022: US$0.3 million). At the AGM on 2 June 2021, shareholders approved the 2021 Remuneration Policy, which included the introduction of a post-termination shareholding, an employee pension alignment plan, as well as the new Gem Diamonds Incentive Plan (GDIP) for Executive Directors. On 21 April 2023, 1 060 055 nil-cost options were granted to certain key employees and Executive Directors under the GDIP. Refer to Note 26, Share-based payments on page 167 for more detail.

TAXATION

The Group applies all relevant principles in accordance with prevailing legislation in assessing its tax obligations. The Group's effective tax rate was 72.0%. Most of the Group's taxes are incurred in Lesotho, which has a corporate tax rate of 25%. The effective tax rate is above the Lesotho corporate tax rate mainly due to deferred tax assets not recognised on losses incurred in other operations, the impact of the alignment of foreign tax at different rates, partially offset by withholding tax overpaid in prior periods and refunded in full by the Revenue Services Lesotho (RSL) during the year. Refer to Note 6, Income tax expense on page 148 for more detail.

The Group continues to pursue a long-standing legal matter relating to an amended tax assessment that was issued to Let?eng by the RSL in December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. We expect to pursue this matter in the courts in 2024. We have sought senior legal counsel and their advice indicates good prospects for success. Refer to the accounting treatment for this matter, Note 1.2.26, Critical accounting estimates and judgements for further detail.

OUTLOOK

In light of the many external macro-economic factors negatively impacting our business, we have renewed our focus on cost containment measures, tightening capital allocation decision-making and enhancing operational efficiencies. The insourcing of the mining activities is expected to deliver significant savings. A key focus for 2024 will be the extension or renewal the Group's facilities which expire on 22 December 2024.

Michael Michael

Chief Financial Officer

13 March 2024

CHIEF OPERATING OFFICER'S REVIEW

The overall operational performance of the Group in 2023 was pleasing, driven by a focus on safety and operational efficiency.

Market conditions and the continuing pressure on revenue in 2023, coupled with the ever-rising cost of operating, including longer hauling distances due to deeper pits, and increased load shedding, necessitated a reinforcement of our focus on operational efficiencies and cost containment, while at all times ensuring that we meet our production targets safely, responsibly and sustainably.

The challenges of lower revenues and increasing costs are not always within our control. To meet these challenges head-on however, we made significant changes to management, workforce and operating methodologies at Let?eng and Ghaghoo in 2023. This required a direct focus on operating more efficiently to reduce, or at the very least contain, those operational costs that are within our control.

The implementation and integration of sustainability initiatives at our operations over the past few years, in particular our focus on reducing energy consumption and associated costs, positioned the Group well to navigate a difficult financial year in 2023. This is evident in reduced costs and decarbonisation related to waste mining in particular, and the successful implementation of several other energy-efficiency initiatives. In 2023, we recorded a 26% decrease in our Scope 1 and 2 emissions and a 25% decrease in diesel consumption-related emissions when compared to our 2021 baseline carbon emission footprint.

One of our proudest achievements in 2023 is our safety performance. The health and safety of our workforce remains paramount, and it is very pleasing to reap the rewards of a three-year safety campaign that started with a 24-hour stop-for-safety in June 2021. Achieving our lowest all injury frequency rate (AIFR) on record is testament to our commitment to achieving a zero harm operation and the relentless focus of leadership, management and each employee to achieve this.

We have also completed the NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement, which will be available on the Group's website at www.gemdiamonds.com.

PERFORMANCE

Safety

The Group's safety culture is founded on our commitment to zero harm and our strong belief that all injuries can be prevented. Let?eng's safety performance in 2023 was of the highest standard, with zero fatalities (2022: zero), two LTIs (2022: three), an improved LTIFR of 0.10 (2022: 0.13) and our lowest AIFR on record of 0.67 (2022: 0.70). Our improved safety performance does not happen by chance but is a direct result of the relentless effort and commitment of executive leadership and operational management in the implementation of the organisational safety maturity strategy. This strategy addresses critical safety risks, enhances safety-specific leadership visibility, and engages with the workforce to implement engineering and behaviour-focused controls to more specifically prevent safety incident reoccurrences. A focused safety programme was guided by independent subject matter experts and included mentoring senior management on best practice safety leadership and successfully implementing a critical control management strategy.

The safety of our workforce remains our highest priority and we will continue to build on the organisational safety maturity at our operations, which is founded on and entrenched in a safety culture of visible safety-focused leadership, individual responsibility and accountability, mutual care and collaboration.

Operations

1 Includes carats produced from the Let?eng plants and the coarse and fines tailings treatment plants.

Operationally, 2023 was a year of two halves. Following a positive start in Q1 2023, Let?eng faced numerous challenges and changes in Q2 2023, culminating in the finalisation of the right-sizing programme and a change in senior management in June 2023. Operational challenges at Let?eng during this period included high rainfall, instability in the performance of the treatment plants and continued load shedding by Eskom, which resulted in poor overall treatment efficiencies and increased reliance on more expensive diesel generators to power operations. An intensified focus on the identification and implementation of initiatives to optimise and improve operational performance and efficiencies and to significantly reduce costs commenced in Q3 2023, resulting in a marked improvement in operational performance seen in H2 2023 compared to H1 2023.

The implementation of a number of initiatives to slow down the instantaneous rate at which ore is fed into the treatment plants significantly improved overall stability. This in turn materially improved the consistency of higher daily overall plant utilisation. The newly built Primary Crushing Area (PCA), which was commissioned in Q4 2023, further contributed to the improved performance by providing the plant with a consistent feed of well-fragmented ore. The initial benefit of these initiatives when comparing H2 2023 to H1 2023 is set out in the table below:

· purchase of the mining fleet and equipment in the transition to owner mining.

Details of overall costs and capital expenditure incurred at Let?eng are included in the CFO Review on page 34.

The planned capital spend at Let?eng for 2024 includes necessary modifications and upgrades to the recovery plant and final sort, the development of the next phase of the Patising coarse tailings extension project to ensure future capacity, and other smaller projects, including necessary upgrades to storage facilities, Plant 1 scrubber shell replacement and resource drilling.

Enhancing operational efficiencies

A change in operational requirements, together with significant pressure to further reduce operating expenses in line with challenging market conditions and lower rough diamond prices, required Let?eng to critically review all aspects of its business to maximise operational efficiency and effectively control costs to ensure continued business sustainability.

The right-sizing programme at Let?eng, which affected a total of 327 positions, including contractors, was completed in June. The programme was aimed at more effectively and efficiently aligning the workforce to operational requirements. In addition, a number of changes were made to the management team at Let?eng, including the appointment of Gideon Scheepers to the position of Operations Director. Gideon has 32 years of extensive experience in diamond mining, treatment and related processes, and following his appointment in June, drove the implementation of significant improvements at the operation in H2 2023, particularly in mining, treatment and site management.

A smooth transition to owner mining was concluded in Q4 2023 (refer to the CFO Review on page 35), with no interruption to production or mining activities. In addition to an immediate decrease in operating costs, there is room to further improve operational efficiencies as Let?eng management now has direct control over its mining fleet and execution of the mine plan. This will also assist in reducing "day-works" costs for other necessary projects around site, including concurrent rehabilitation.

The management of the recovery plant was brought in-house from Minopex to ensure direct control and management over what is arguably the most important part of the treatment process along with the final sort.

In addition, a revision to the catering and housekeeping contract on site resulted in the housekeeping and laundry activities being insourced, with the contractor providing the catering services only for the remainder of the contract term.

All operational contracts are undergoing rigorous reviews to ensure optimisation, efficiency and effective cost control management as a top priority.

Large diamond recoveries

In 2023, Let?eng recovered five diamonds greater than 100 carats (2022: four), including three high-quality Type IIa white diamonds of 120.43 carats, 117.47 carats and 112.46 carats, respectively. A total of 131 greater than 100 carat diamonds have been recovered at Let?eng since 2006, and we are pleased to report that three more greater than 100 carat diamonds have been recovered to date in Q1 2024. Total diamonds recovered greater than 10 carats decreased by 5% year on year, mostly in the 10 to 20 carat and 60 to 100 carat size categories. The lower number of diamonds in the larger categories can be primarily attributed to the resource domains that were mined in both the Satellite and Main pipes in 2023. 22 diamonds sold for over US$1.0 million each in 2023, generating revenue of US$40.8 million.

Diamond sales

Eight large and four small rough diamond tender viewings were held in Antwerp during the year.

A total of 104 520 carats were sold in 2023 (2022: 107 498) and Let?eng generated rough diamond revenue of US$139.4 million (2022: US$188.6 million) at an average price of US$1 334 per carat (2022: US$1 755). The significant challenges experienced in the diamond market, discussed in the CEO Review on page 30, coupled with the reduced volume of large high-value diamonds in 2023, were the primary factors behind the lower average price and revenue achieved in 2023.

The Group supports the GIA's blockchain technology to inform and assure consumers about the ethical and socially supportive footprint of our diamonds. Blockchain technology can link the source of rough diamonds to the final polished diamonds, thereby proving their authenticity, provenance and traceability, and supporting ethical sourcing and processing in the diamond value chain.

Underground study

A conceptual desktop study for an underground mining operation in the Satellite pipe post the current Cut 5 West (SC5W) open pit cutback was completed in November 2021. The outcome indicated potential for underground mining and recommended that a comprehensive Underground Feasibility Study be undertaken to confirm the feasibility thereof to most optimally and economically extend the life of mine for the Satellite pipe. The objective of the proposed study was to upgrade the desktop study to the confidence level of a feasibility study and to develop a transition model for an underground operation once the life of the Satellite pit reached maximum depth achievable through the current open pit mining. The study commenced in mid-2022 to (i) assess the viability of an earlier shift to underground mining of the Satellite pipe, and (ii) inform the trade-off between an underground mining option and the next open pit cutback in the Satellite pipe Cut 6 West (SC6W) post the completion of SC5W in 2024/5.

The project focused on the viability of the mining block within the indicated resources zone of the Satellite pipe, but also included the assessment of additional levels, to the point where the project no longer added positive financial returns. Following numerous iterations of the mining strategy, a three-level sub-level retreat was identified with the caving method as the most efficient and appropriate underground mining method for the available ore within the Satellite pit. To improve the economic viability of the mine, the study focused on several optimisation strategies, particularly with regards to mining costs. A detailed analysis of the cost breakdown was conducted to identify areas of potential savings and to explore alternative contracting models.

The economic viability and performance of the underground operation was determined through developing a detailed financial model founded on the results derived from the study and other available information. Unfortunately, at a mid-point review held in June 2023, the preliminary analysis at that time revealed a negative net present value of such an underground project in the Satellite pipe. Further sensitivity analysis was conducted in H2 2023 to ascertain the impact on project value due to potential variability in significant value drivers such as capital expenditure, diamond selling prices and operating costs. Following this analysis and a further review of capital expenditure and operating costs in particular, it was clear that the underground project for the extension of life of the Satellite pipe was not economically viable under current macro-economic conditions and the current state of the diamond market. The study was therefore halted at a pre-feasibility level to avoid spending unnecessarily on further geotechnical and hydro-technical drilling work at this time. Underground mining for both the Main and Satellite pipes may again be reconsidered should macro-economic and diamond market conditions improve.

In the meantime, various strategies to optimise open pit mining activities in both the Satellite and Main pits are continually being investigated and implemented as appropriate. A steeper conventional concept for C6W in the Satellite pit, which will significantly reduce the strip ratio, is currently under review.

Resource and Reserve Statement

Following the publication of Let?eng's 2015 SAMREC Mineral Resource and Reserve Statement, efforts were focused on improving confidence in the geological models and the predictability of the large +100 carat Type II diamonds, which contribute materially to Let?eng's value.

Initial petrography and microdiamond studies in the latter part of 2015 suggested that the geological complexity in both the Main and Satellite pipes may have been greater than that reflected in the broader resource categories at the time. What set out as an exercise to better understand the internal variability of the existing resource domains in the Main pipe (KMain, K6 and K4) and Satellite pipe (NVK and SVK), transformed into a comprehensive drilling and resource development programme spanning eight years and culminating in a new appreciation of the complexity within the Let?eng orebodies, as reflected in the current Resource and Reserve Statement.

The 2024 Mineral Resource and Reserve Statement was prepared in line with the Canadian Institute of Mining, Metallurgy and Petroleum's (CIM) Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines dated November 2019, and the Definition Standards for Mineral Resources and Mineral Reserves published May 2014, and is reported in accordance with the Canadian Securities Administrators' National Instrument 43-101 Standards of Disclosure for Mineral Projects.

Let?eng's 2024 Mineral Resource Statement is informed by a suite of geological studies that (i) enabled differentiation between the various known and newly recognised kimberlite domains, (ii) delineated the internal boundaries between the kimberlite domains, and (iii) characterised them in terms of their diamond populations, volumes, tonnages, grades and value.

The 2024 Resource and Reserve Statement and NI 43-101 Technical Report is based on an extensive drilling and resource development programme that commenced in 2015 and was completed in 2023 and included the following workstreams:

· Three phases of additional diamond core drilling: 2017-2020 (31 drillholes, 8 386 metres), 2021-2022 (24 drillholes, 8 640 metres) and 2022-2023 (8 drillholes, 2 235 metres).

· Petrographic analysis and mineral chemistry conducted between 2015 and 2023 in both the Satellite and Main pipes.

· Microdiamond analysis: initial studies in late 2015 followed by more detailed studies in 2019-2020.

· Discrete sampling, production and updated sales data was analysed for diamonds recovered from the dominant domains within each pipe.

· In-pit mapping data of internal and external domain contacts.

· 3D geological models for both the Satellite and Main pipes were updated.

· Updated Size Frequency Distributions (SFD) for each domain.

· As-built survey of the open pit topography as of 31 December 2023.

The Reserve Statement has been prepared on a Life of Mine plan including SC6W on current slope angles (refer to page 47). An opportunity to optimise this plan with a steeper conventional concept is discussed below on page 48.

The NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement will be available on the Group's website at www.gemdiamonds.com.

Let?eng's 2024 Resource and Reserve Statements are set out in the tables below (Note: the tables and accompanying notes below are presented as a direct extraction from the NI 43-101 Technical Report):

Notes:

1. The effective date of the Mineral Resource Statement is 31 December 2023. The QP for the estimate is Cliff Revering, P.Eng., an employee of SRK Consulting (Canada) Inc.

2. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. All numbers have been rounded to reflect accuracy of the estimate.

3. Mineral Resources are inclusive of in-situ Mineral Reserves and are exclusive of all mine stockpile material.

4. Mineral Resources are quoted above a +2.00 mm square-mesh bottom cut-off and have been factored to account for diamond losses within the smaller sieve classes.

5. Inferred Mineral Resources are estimated on the basis of limited geological evidence and sampling, sufficient to imply but not verify geological grade and continuity. They have a lower level of confidence than that applied to an Indicated Mineral Resource and cannot be directly converted into a Mineral Reserve.

6. Average diamond value estimates are based on diamond sales data to the end of 2023 provided by Gem Diamonds Ltd.

7. Mineral Resources have been estimated with no allowance for mining dilution and mining recovery.

1. The effective date of the Mineral Reserve Statement is 31 December 2023. The QP for the estimate is Dr Anoush Ebrahimi, P. Eng., an employee of SRK Consulting (Canada) Inc.

2. Figures have been rounded to the appropriate level of precision for reporting.

3. Due to rounding, some columns or rows may not compute exactly as shown.

4. Grades quoted as recovered and dry, pre-acid wash.

5. The Mineral Reserves are stated as in?situ dry metric tonnes.

6. K1A Grouping includes K1A, RFW-K1S: K1AS and RFW-K1S: XENO-BSLT.

7. K1B Grouping includes K1B-1, RFW-K1S: K1B-1s, K1B-2 and RFW-K1S: K1B-2.

8. The Mineral Reserves were prepared under the guidelines of the CIM, for reporting under NI 43?101.

9. Average diamond value estimates are based on diamond sales data to the end of 2023 provided by Gem Diamonds Ltd.

10. Modifying factors for mining recovery of 88% and waste dilution of 12% applied on pipe contact blocks.

11. Probable Mineral Reserves were derived from Indicated Mineral Resources.

12. Mineral Reserves are inclusive of Mineral Resources.

13. There are no known legal, political, environmental, or other risks that could materially affect the Probable Mineral Reserves.

14. Stockpiles comprise surface loose stocks of material including high-value, low-value and highly diluted kimberlite contact ore. Stockpiles of low-value and highly diluted kimberlite contact ore will be processed at the end of life of open pit mining.

15. The Mineral Reserves reported in this table are attributable solely to the ore to be mined (and processed or stockpiled for later processing) from the open pit mining operations at Let?eng Mine.

Long-term mine plan

Let?eng's long-term mine plan has incorporated all relevant attributes of the 2024 Resource and Reserve Statement discussed above. The previous long-term mine plan was predicated on SC5W being completed in 2024 at an extraction rate of 3.0 million tonnes of Satellite ore per annum. The extraction rate of Satellite ore from the SC5W cutback has been revised down in 2024 to c.2.0 million tonnes with the remaining c.0.9 million tonnes of ore from this cutback to be mined out by Q2 2025. Cost containment, the potentially unsafe conditions created when mining above SC5W before ore extraction is complete, and the opportunity to finalise the study of a steeper conventional concept for SC6W to avoid unnecessary waste stripping on the conventional slope angles, has necessitated that the commencement of waste stripping in SC6W be pushed out, from Q1 2024 to Q3 2025.

In addition, the anticipated ore from SC6W has been reduced, as instantaneous triple and double benches on the kimberlite basalt contact areas around the pipe had to be removed from the updated pit design. The strategy of transitioning from basalt to kimberlite was revised in the 2024 mine plan to include flatter angles around the basalt/kimberlite contact areas. The revised strategy was in response to the latest geological mapping results, which revealed the curvature and dip of the pipe contact not supporting the double and triple benching previously planned along the pipe contact. Consequently, about 1.3 million tonnes of ore of the previous SC6W mine plan can no longer be accessed safely.

During the annual review of the long-term mine plan in the first half of 2023, it was observed that the in-situ revenue per tonne for certain ore domains in the Main pipe had decreased, impacting the economics of the final cutbacks in the Main pit (MC4). The latest pit optimisation model indicated a smaller MC4 than in the previous long-term mine plan. MC4 West was therefore redesigned in line with this outcome, which resulted in reduced waste required to be mined and an estimated 10.0 million tonnes of ore no longer being economically viable to extract. The 2024 mine plan was updated to include the revised waste and ore volumes for MC4W, thereby reducing the previously published mine plan by approximately two years from 2040 to 2038.

The long-term mine plan has also been updated using the latest resource models discussed above. For most of the ore domains, except K2 (Main pipe) and NVK (Satellite pipe), the indicated and inferred resource interface levels were shallower than in the 2015 resource models. This resulted in some ore that was included as indicated in the previous mine plan now being excluded in line with the mineral reserves declaration rules. Pending possible further upgrade of the inferred resources in both the Main and Satellite pipes, the revised final pit shell has been designed to include only indicated resources with minimal inferred resources being included. This has shortened the updated life of mine plan by an additional two years, from 2038 to 2036/7. Refer to the updated long-term mine plan in the graph below.

The updated long-term mine plan includes SC5W, MC4E, a smaller MC4W and SC6W (each based on current slope angles) and an updated plant throughput rate to life of mine of 5.3 million tonnes per annum. Waste stripping of the SC6W cutback is currently scheduled to commence in 2025 with ore estimated to be available from end 2030 at an extraction rate of 2.5 million ore tonnes per annum thereafter.

Life of Mine optimisation projects

Steeper conventional pit concept in Satellite C6W

Slope steepening carried out at Let?eng in a safe and responsible way has had a significant positive effect on the economic value of open pit mining by reducing the stripping ratio. An initiative to introduce a steeper conventional design in the basalt of SC6W cutback commenced pit designs of a steeper slope concept with the final cutback commencing from within the current SC5W pit have been completed. The slope design has been approved by independent slope design experts in Q4 2023 and the requisite support design and costs are being analysed to fully evaluate the factor of safety, economics and overall feasibility of the concept. Results of this study are expected to be completed by Q3 2024. In the event that we are able to safely execute the steeper conventional concept in SC6W, with the benefit of significantly reduced waste, the above long-term mine plan adopted in our 2024 Reserve Statement will be amended accordingly.

Upgrading inferred resource

The updated long-term mine plan shown in the graph above could be extended by an additional two years (c.12.5 million tonnes) without any incremental stripping of waste by upgrading the inferred resource in the Main pipe to indicated resource. Once upgraded, the ore could then confidently be included in the long-term mine plan with no incremental stripping of waste, given the flexibility that has been incorporated in the current final pit design.

Ghaghoo

We remain committed to exiting the Ghaghoo Diamond Mine in Botswana, which has been on care and maintenance since March 2017. In the absence of a sale, closure and/or handover options are being actively pursued and affected stakeholders have been widely consulted.

The site is being well maintained in a safe and responsible manner. Employees on site have consistently demonstrated adherence to safety protocols and environmental regulations, with no instances of activities causing any disturbance to the environment being reported, and we are pleased to report that there were no LTIs recorded at Ghaghoo in 2023.

In preparation for possible closure or partial closure and handover to government, extensive site clean-up and partial rehabilitation activities commenced in H1 2023. This has been carried out in a cost-effective manner and included the removal and sale of a significant amount of scrap metal and other redundant infrastructure and materials. The salvage values received for these contributed significantly to the cost of the clean-up project. At the end of 2023, a solar power solution was implemented to power the necessary camp and reverse osmosis water plant requirements. The solar plant was fully commissioned from 1 January 2024 and has completely replaced the existing diesel generator power supply. Securing long-term power supply for the Ghaghoo operation allows for the site to be handed over without additional diesel generator associated costs, and also supports the immediate rehabilitation and decarbonisation objectives of the Group.

OUR PLANS FOR 2024

We have several operational objectives for 2024. These include:

· Optimising and improving the long-term mine plan of Let?eng with particular focus on the SC6W cutback.

· Further enhancing operational efficiencies and reducing overall operating costs.

· Investing in appropriate renewable and/or alternative energy sources. Providing a consistent source of power for the mine operations remains a challenge at Let?eng. In the meantime, the focus remains on reducing power consumption throughout the Group, and low energy-usage alternatives continue to be investigated and implemented.

DIRECTORS' REPORT

The Directors are pleased to submit the financial statements of the Group for the year ended 31 December 2023.

As a British Virgin Islands-registered company, Gem Diamonds Limited (company registration number: 669758) is not required to conform with the Companies Act, 2006. However, the Directors have elected to conform to the requirements of the Companies Act, 2006.

Accordingly, Directors must present a Strategic Report and a Directors' Report to inform shareholders of the Group's performance and prospects and help them evaluate whether the Directors performed their fiduciary duty. The 2023 Annual Report and Accounts discloses how the Directors have performed their duty to ensure the Group's continued success and sustainability, in line with the Companies Act, 2006.

In line with Disclosure Guidance and Transparency Rules (DTR 4.1.5R(3) and DTR 4.1.8R), the required content of the Management Report can be found in the Strategic Report, the Performance Review and the Directors' Report, the Governance section and other sections of the 2023 Annual Report and Accounts, indicated by a reference.

The Strategic Report can be found on pages 2 to 62. This will provide the shareholders with a balanced assessment of the Group's business including a description of its principal risks and uncertainties. It may not be relied upon by anyone, including the Company's shareholders, for any other purpose.

Forward-looking statements

The Strategic Report and other sections of this report contain forward-looking statements. Forward-looking statements, by their nature, involve several risks, uncertainties and future assumptions because they relate to events and/or depend on circumstances that may or may not occur in the future. The actual results and outcomes may differ materially from those expressed or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in the Strategic Report will be realised. Statements about the Directors' expectations, beliefs, hopes, plans, intentions and strategies are subject to change and are based on expectations and assumptions about future events, circumstances and other factors which are, in many instances, outside the Company's control.

The information in the Strategic Report was prepared based on the knowledge and information available to the Directors at the time of its preparation. The Company is under no obligation to update or revise the Strategic Report during 2024. The expectations set out in the forward-looking statements are reasonable but may be influenced by several variables which could cause actual results or trends to differ materially. Forward-looking statements need to be read in context with actual historic information provided. The Company's shareholders are cautioned not to place undue reliance on the forward-looking statements. Shareholders should note that the Strategic Report has not been audited.

CORPORATE GOVERNANCE

DTR 7.2 requires certain information to be included in a corporate governance statement set out in the Directors' Report. The Group has an existing practice of issuing a separate Corporate Governance Code Compliance Report as part of its Annual Report and Accounts. The information required by the Disclosure Guidance and Transparency Rules and the UK Financial Conduct Authority's Listing Rules (LR 9.8.6) is located on pages 2 to 113.

DIRECTORS

The Directors, as at the date of this report, are listed on pages 179 to 181 together with their biographical details. Details of the Directors' interests in shares and share options of the Company can be found on page 111.

Directors who held office during the year and date of appointment

Appointment and re-election of Directors

The Board's formal Selection and Appointment Policy ensures that the procedure for appointing new Directors is formal, rigorous and transparent, and appointments are made on merit, against objective criteria. The Nominations Committee makes appointments based on merit while considering diversity (of gender, social and ethnic background), cognitive and personal strengths and specialist skill sets.

The Articles of Association (82) provide that a third of Directors retire annually by rotation and, if eligible, offer themselves for re-election. However, in accordance with the Code, all the Directors retire at the AGM and, subject to being eligible, offer themselves for re-election.

Payments for loss of office due to change of control

The basis for payments for loss of office to Executive Directors due to a change in control can be found on page 100.

PROTECTION AVAILABLE TO DIRECTORS

By law, the Directors are ultimately responsible for most aspects of the Group's business dealings. This means they face potentially significant personal liability under criminal or civil law, or the UK Listing, Prospectus and Disclosure and Transparency Rules, and face a range of penalties including private or public censure, fines and/or imprisonment. In line with normal market practice, the Group understands that it is in its best interests to protect its Board members from the consequences of innocent error or omission. This allows the Group to attract prudent individuals to act as Directors.

The Group maintains, at its expense, a Director and Officer's liability insurance policy to provide indemnity, in certain circumstances, for the benefit of Directors and other Group employees.

Refer to the Corporate Governance statement on page 72 for further details.

DIRECTORS' INTERESTS

No Director had, at any time during the year, a material interest in any contract of significance in relation to the Company's business. The interests of Directors in the shares of the Company are included on page 111.

SUPPLIERS AND CUSTOMERS

We engage extensively with suppliers and contractors to ensure alignment, mutual understanding and the sustainability of all parties. The early termination (by mutual agreement) of the mining services contract and subsequent insourcing thereof was concluded in December 2023.

We have sound relationships with our customers. We interact with customers regularly in the normal course of business and at tenders. We continued to hold regular diamond tender viewings in Antwerp during the year. We were able to rely on the loyal customer base for support during the year while the diamond market was under significant pressure. The agreement entered in 2022 with two diamond manufacturing customers to supply polished diamonds to some of the world's most premium luxury brands remained in effect in 2023.

Refer to our stakeholder relationships section on pages 14 to 17 for more details on our engagement with suppliers, contractors and customers.

RESULTS AND DIVIDENDS

The Group's attributable loss after taxation amounted to US$2.1 million (2022: profit of US$10.2 million).

The Group's detailed financial results are set out in the financial statements on pages 118 to 173.

The Board is not proposing a dividend based on the 2023 financial results due to the volatility in the current economic outlook, the Group's available cash resources and the current business outlook.

The Group's dividend policy sets the appropriate dividend each year, and considers:

· The Group's cash resources.

· The level of free cash flow and earnings generated during the year.

· Expected funding commitments for future capital projects.

The Board will consider special dividends in the event of significant diamond recoveries and will consider further share buyback programmes if appropriate.

GOING CONCERN

The Group business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report on pages 2 to 62. The financial position of the Group, its cash flows and liquidity position are described in the Strategic Report on pages 34 to 40. In addition, Note 1.2.2, Note 25 and Note 27 to the financial statements include the Group's going concern policy and its objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to credit and liquidity risk.

The Directors have a reasonable expectation that the Group has adequate financial resources to continue operations for the foreseeable future. This follows a review of forecasts, budgets, timing of cash flows, the likely successful renewal of its debt facilities, various cost-reduction initiatives, sensitivity analyses and the uncertainties disclosed in this report. For this reason, the Directors continue to adopt the going concern basis in preparing the Annual Report and Accounts of the Group.

VIABILITY STATEMENT

In accordance with provision 30 of the 2018 UK Corporate Governance Code, the Directors have assessed the prospects of the Group over a period longer than the 12 months required by the "going concern" provision. The viability statement, aligned with Provision 31 of the UK Corporate Governance Code 2018, is included in the Strategic Report on page 27.

SUBSEQUENT EVENTS

Refer to Note 29 of the financial statements for details of events subsequent to the reporting date.

SHARE CAPITAL AND VOTING RIGHTS

Details of the authorised and issued share capital of the Company, including the rights pertaining to each share class, are set out in Note 15 to the financial statements.

As at 13 March 2024, there were 139.7 million fully paid ordinary shares of US$0.01 each in issue and listed on the official list maintained by the Financial Conduct Authority in its capacity as the UK Listing Authority. In addition, the Company holds 1.5 million shares as treasury shares acquired during the share buyback programme that was launched in 2022. These treasury shares are not entitled to dividends and have no voting rights.

The Company has one class of ordinary shares. Shareholders have the right to receive notice of and attend, speak and vote at any general meeting of the Company. Shareholders may be present in person (or, being a corporation, by representative) or by proxy at a general meeting. Every shareholder present in person (or, being a corporation, by representative) or by proxy will have one vote in respect of every ordinary share they hold. The appointment of a proxy to vote at a general meeting must be received no less than 48 hours before the meeting's appointed time.

Shareholders have the right to participate in dividends and other distributions according to their respective rights and interests in the profit of the Company.

No shareholders have any special rights with regard to the control of the Company. The Company is not aware of any agreements between shareholders which may result in restrictions on transfers or voting rights, save as mentioned below.

There are no restrictions on the transfer of ordinary shares other than:

· As set out in the Company's Articles of Association.

· Certain restrictions may from time to time be imposed by laws and regulations.

· Pursuant to the Company's share dealing code whereby the Directors and employees of the Company require approval to deal in the Company's ordinary shares.

At the AGM held in June 2023, the Board noted the proportion of the votes cast against the resolution referring to the authority of Directors to allot shares (Resolution 12 passed with 69.5% of participating shareholders voting in favour). The CEO met the significant shareholder who voted against Resolution 12 to discuss their voting policy, and although the shareholder has a standing position on these resolutions, the Board will regularly consider its approach to this matter. The resolution reflected UK-listed company market practice, and the Board considers the flexibility afforded by the authority to allot shares to be in the best interest of the Company.

At the same AGM, shareholders authorised the Company to make on-market purchases of up to 14 121 018 of its ordinary shares, representing approximately 10% of the Company's issued share capital at that time. In 2022, the Company purchased 1 520 170 of its ordinary shares, which are being held as treasury shares and may be used to settle ESOP and GDIP awards.

At the 2024 AGM, shareholders will be requested to renew this authority. The Directors continue to consider various options and keep the authorisation under regular review. The 2024 Notice of AGM will set out the details regarding exercising voting rights and proxy appointments.

MAJOR INTERESTS IN SHARES

Details of the major interests (at or above 3%) in the issued ordinary shares of the Company are set out in the Strategic Report on page 15.

ARTICLES OF ASSOCIATION

Any proposed amendments to the Articles of Association of the Company need to be approved by shareholders by special resolution.

RESOURCE DEVELOPMENT

The NI 43-101 Technical Report containing Let?eng's 2024 Resource and Reserve Statement will be available on the Group's website at www.gemdiamonds.com. The COO Review on page 45 provides more detail on this.

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY

Read more about the Group's 2023 Sustainability Performance, including CSI investment, community participation and environmental management, in our Sustainability Report 2023 which is available at www.gemdiamonds.com.

POLITICAL DONATIONS

The Group made no political donations during 2023.

TCFD, CARBON EMISSIONS AND ENERGY CONSUMPTION SUMMARY

Information on the Group's decarbonisation strategy, adoption of the TCFD recommendations, carbon footprint and energy consumption in 2023 can be found in the Sustainability and Climate Change reports on pages 49 and 51 respectively.

By order of the Board

Harry Kenyon-Slaney

Non-Executive Chairperson

13 March 2024

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL REPORT AND FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with International Financial Reporting Standards (IFRS). Having taken advice from the Audit Committee, the Board considers that this report and financial statements taken as a whole, are fair, balanced and understandable and that they provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

The Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that the Group faces.

PREPARATION OF THE FINANCIAL STATEMENTS

In preparing the Group financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS;

· state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the Group financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose, with reasonable accuracy at any time, the financial performance, the financial position and cash flow of the Group. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm that the financial statements, prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position at year end and profit or loss for the year then ended of the Group and the undertakings included in the consolidation taken as a whole. In addition, suitable accounting policies have been selected and applied consistently.

Information, including accounting policies, has been presented in a manner that provides relevant, reliable, comparable and understandable information, and additional disclosures have been provided when compliance with the specific requirements in IFRS have been insufficient to enable users to understand the financial impact of particular transactions, other events and conditions on the Group's financial position, cash flow and financial performance. Where necessary, the Directors have made judgements and estimates that are considered reasonable and prudent.

The Directors of the Company have elected to comply with the Companies Act, 2006, in particular the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2013 of the United Kingdom pertaining to Directors' remuneration which would otherwise only apply to companies incorporated in the UK.

Michael Michael

Chief Financial Officer

13 March 2024

INDEPENDENT AUDITOR'S REPORT

To the Shareholders of Gem Diamonds Limited

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Opinion

We have audited the consolidated financial statements of Gem Diamonds Limited and its subsidiaries ('the Group') set out on pages 123 to 173, which comprise the consolidated statement of financial position as at 31 December 2023, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2023, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRS").

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors' Code of Professional Conduct for Registered Auditors ("IRBA Code") and other independence requirements applicable to performing audits of financial statements of the Group and in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits of the Group and in South Africa. The IRBA Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in relation to this matter. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matter below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

· Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

· Conclude on the appropriateness of management's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Ernst & Young Inc.

Director - Philippus Dawid Grobbelaar

Registered Auditor

Chartered Accountant (SA)

13 March 2024

102 Rivonia Road

Sandton

Private Bag X14

Sandton

2146

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023